Antitrust and Unfair Competition Law

Competition: Fall 2015, Vol 24, No. 2

OFF-LABEL USE OF THE CARTWRIGHT ACT: WILL CIPRO REQUIRE STATE COURTS TO ASSESS FEDERAL PATENT VALIDITY IN PAY-FOR-DELAY CASES?

By Dylan M. Carson and Avril G. Love, Tucker Ellis LLP1

I. INTRODUCTION

In FTC v. Actavis, Inc., the United States Supreme Court subjected so-called reverse payment settlements in pharmaceutical patent litigation to rule of reason antitrust analysis under Section 1 of the Sherman Act.2 The Actavis decision, however, left it to lower courts to determine how best to perform that analysis. In May 2015, the California Supreme Court stepped into the breach with its decision in In re Cipro Cases I & II.3 The Cipro Court held that reverse payment settlements may be challenged under California’s primary antitrust statute, the Cartwright Act. In doing so, it attempted to fill in some of the blanks left by the Actavis decision on how to conduct a rule of reason analysis of reverse payment settlements.

The Cipro Court established (i) a four-part test for plaintiffs to present a prima facie case, (ii) how defendants can rebut that prima facie showing, and (iii) what plaintiffs must ultimately demonstrate to carry their burden of persuasion. Given the discretion left by the United States Supreme Court’s Actavis decision to formulate the applicable rule of reason test, it would not be surprising to see other courts use the Cipro decision to model their analysis in so-called pay-for-delay litigation under either federal or state antitrust law. What is more, given the relatively low burdens ofproof and persuasion Cipro places on plaintiffs and the significant burdens it places on defendants, California courts are likely to become even more of a hotbed for antitrust litigation arising from disputes around pharmaceutical patents and generic market entry.

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