District Court Precludes Defense Based on Strength of Patent in FTC v. Cephalon “Reverse Payment” Litigation

Summary: In the first decision since FTC v. Actavis to address whether parties to a “reverse payment” antitrust case may litigate the strength of the patent at issue in the challenged settlement, the federal court in Philadelphia precluded a defendant from relying on the “strength of its patent, or litigation uncertainty and business risk” to defend its settlements against claims that they were unlawful “pay for delay” deals. The court relied heavily on the fact that it had previously found that the defendant had procured the patent by fraud on the patent office and rejected the FTC’s argument that Actavis precluded such defenses in all cases, signaling that there is likely a role for such defenses in appropriate circumstances.