European Commission report shows decrease of potentially problematic patent settlements

On 5 July 2010, the Commission published its second report on the monitoring of patent settlements in the pharmaceutical sector.

The report shows that the number of patent settlements that may fall afoul the EU antitrust rules decreased to 10% of total patent settlements in the sector in the period July 2008 to December 2009 compared with 22% in the previous period.   The report further shows a substantial decrease in the value transferred in such settlements between pharmaceutical companies (so-called “originators”) and producers of generic products.  According to the Commission, this may suggests an increased awareness of the industry of which settlements might attract the watchdog interest, but other factors may have had an impact on such results (e.g. cyclical patent expiry and fluctuations in the amount of litigation).

Normally, patent settlements that may limit generic entry and entail a substantial value transfer from the originator to a generic company are seen as potentially problematic.  The report clarifies that, in this context, transfer of value is not limited to a direct monetary transfer but may take other forms (e.g. distribution agreements relating to a different product manufactured by the originator company or granting a license enabling the generic company to enter the market). However, even settlements which foresee no value transfer may be problematic in exceptional circumstances, e.g. settlements outside the exclusionary zone of the patents and/or the settlement agreements on a patent for which the patent holder knows that it does not meet the patentability criteria. [Gabriele Accardo]