Patent INFRINGEMENT

FTC v. Watson Pharmaceuticals, Inc.

Solvay Pharmaceuticals, Inc. sued Watson Pharmaceuticals, Inc., a generic drug manufacturer, for infringement of Solvay’s patent for its drug AndroGel. In response, Watson argued that Solvay’s patent was invalid. Before a judgment, however, the parties settled the case. As part of the agreement, Solvay would pay Watson in exchange for Watson’s agreement to delay entering the market with a generic version of AndroGel. The FTC then brought an action against all of the parties to the AndroGel case, contending that the agreement amounted to an anticompetitive attempt to share in the profits afforded by a patent that, but for the settlement agreement, would have been invalidated in court. The District Court dismissed the FTC’s claims and the Court of Appeals affirmed. The Supreme Court’s decision in this case may determine whether agreements such as those in this case, commonly referred to as reverse payments, constitute unfair competition in violation of federal law.

Questions as Framed for the Court by the Parties: 

Federal competition law generally prohibits an incumbent firm from agreeing to pay a potential competitor to stay out of the market. See Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50 (1990). This case concerns agreements between (1) the manufacturer of a brand-name drug on which the manufacturer assertedly holds a patent, and (2) potential generic competitors who, in response to patent-infringement litigation brought against them by the manufacturer, defended on the grounds that their products would not infringe the patent and that the patent was invalid. The patent litigation culminated in a settlement through which the seller of the brand-name drug agreed to pay its would-be generic competitors tens of millions of dollars annually, and those competitors agreed not to sell competing generic drugs for a number of years. Settlements containing that combination of terms are commonly known as "reverse payment" agreements. The question presented is as follows:

Whether reverse payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).

Issue

Whether a payment by one company to keep a competitor from entering the market with an identical product is always prohibited, or whether such a payment is permissible where the company merely exercises its rights as the holder of a valid patent.

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Vernon Hugh Bowman v. Monsanto Company

Monsanto Company, a producer of herbicide resistant soybean seeds and technology, sued Vernon Hugh Bowman, a soybean farmer, for patent infringement.  Bowman replanted second-generation seeds, which were the product of seeds purchased from a licensed Monsanto technology distributor.  Monsanto argued that by planting the product of Monsanto’s herbicide resistant seeds instead of purchasing new ones, Bowman was in violation of the Technology Agreement for the seeds.  The Federal Circuit upheld a district court decision awarding Monsanto damages for violation of their patented technology, reasoning that Monsanto's herbicide resistant technology was covered by patent regardless of whether it was the original seed or a product of the original seeds. Bowman contends that Monsanto’s patent rights were exhausted once he bought the seeds and that use of progeny seeds is an expected use of the product.  Monsanto responds that in the case of self-replicating technologies the patent extends to the technology, here, the trait of herbicide resistance, rather than the seed itself. 

Questions as Framed for the Court by the Parties: 

Patent exhaustion delimits rights of patent holders by eliminating the right
 to control or prohibit use of the invention after an authorized sale. In this case, the Federal Circuit refused to find exhaustion where a farmer used seeds purchased in an authorized sale for their natural and foreseeable purpose--namely, for planting.                                      

The question presented is: Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?

Issue

May patent holders enforce their rights on the products of self-replicating technologies, such as replicating seeds, after an authorized sale or does the patent only apply to the original article?

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