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Conference Call summarizes the roughly 15 percent of all non-pauper petitions that are the most likely candidates for certiorari. The Supreme Court’s jurisdiction is almost entirely discretionary, and justices in recent years have annually selected roughly 80 petitions from the approximately 7,500 that are filed. Conference Call is prepared by the law firms Akin Gump Strauss Hauer & Feld and Howe & Russell, which together publish the Supreme Court weblog. Tom Goldstein, who is the head of Supreme Court litigation for Akin Gump, selects the petitions from the docket of non-pauper petitions. Various attorneys for the firms then prepare summaries of the cases. If either firm is involved in a case mentioned in this column, that fact will be disclosed.
Since Congress passed the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, large pharmaceutical companies that pioneer major drugs and small labs that seek to market cheaper generic versions of those blockbuster products have frequently worked out what they describe as a mutually beneficial arrangement, in which the “pioneer” manufacturer pays the smaller lab to refrain from bringing the generic version to market. But now, in a dispute that may soon reach the Supreme Court, several groups are asking the Court to end such relationships once and for all. Hatch-Waxman was intended to ease the sting of high prices for successful patented drugs and make them more widely available by allowing small labs to file Abbreviated New Drug Applications, or ANDAs, for generic versions of patented drugs by using the safety and effectiveness studies submitted by the original drug manufacturer. To qualify for the program, however, the generic lab must show that the original drug’s patent is either expired or invalid. When generic labs opting for the latter route — known as “Paragraph IV certification,” after the section of the application attesting to the patent’s invalidity — file their ANDA, they automatically create a patent-infringement cause of action against them by the pioneer drug company. In return for imposing the burden of litigating that patent’s validity on a generic manufacturer, the Hatch-Waxman Act rewards it with a 180-day exclusivity period so that it can get a jump on other generic labs if the patent is declared invalid. If the pioneer company is insecure about the validity of its patent, it may simply choose to reach a “reverse settlement” with the generic entrant — i.e., it pays the generic manufacturer to drop the case and agree not to bring the generic version to market. An arrangement of this sort between pharmaceutical giant Zeneca and generic manufacturer Barr Laboratories is at the heart of a case up for consideration March 16 by the Court, Joblove v. Barr Labs (No. 06-830). At issue is the patent for tamoxifen, a drug used to treat breast cancer that has become the most widely used cancer drug in the world. Four months after Zeneca’s former parent company, Imperial Chemical Industries, obtained the patent for tamoxifen in 1985, Barr Labs filed an ANDA with the Food and Drug Administration, which it amended to make it a Paragraph IV ANDA in 1987. Zeneca responded with a patent infringement suit, which it lost at the district court level. After the district court declared its patent invalid, but before appeal, Zeneca settled with Barr, agreeing to pay Barr $21 million and grant it a nonexclusive license to sell Zeneca-manufactured tamoxifen in the United States. In exchange, Barr agreed not to market its own generic version of the drug until Zeneca’s patent expired in 2002, to drop the suit, to seek vacatur of the invalidity judgment, and, petitioners in the present case allege, to assert the 180-day exclusivity right against any other would-be generic entrants. Over the next decade, three generic labs tried unsuccessfully to file Paragraph IV ANDAs and defend the subsequent infringement suit, being estopped from relying on the original vacated invalidity judgment and unable to win such judgments themselves. Although these “reverse settlements” — in which the pioneer pays the generic entrant all the profits it could make from entering the market — make sense as bargains between the pioneer lab and the generic entrant, critics note that Hatch-Waxman’s goal was to benefit consumers by lowering drug prices and increasing the availability of patented drugs, not to transfer money to would-be generic entrants. Further, critics claim that these settlements amount to illegal extensions of patent monopolies in violation of the Sherman Act. The case that the Supreme Court will consider at its conference this week is the consolidation of approximately 30 lawsuits filed across the United States by various consumers and consumer groups challenging the legality of the Zeneca-Barr settlement on antitrust grounds. The groups allege that the settlement illegally extended Zeneca’s patent monopoly by enabling Zeneca to avoid the consequences of the invalidity judgment, avoid competition from Barr, and innoculate itself against further challenges by refusing the 180-day exclusivity incentive to all future generic entrants. The Eastern District of New York granted the defendants’ motion to dismiss, reasoning that because the monopoly extension came within the patent context, it did not amount to an unreasonable restraint on trade. On appeal, the 2nd Circuit affirmed. In conflict with decisions by the 6th and 11th circuits in similar Hatch-Waxman cases, it declined to hold that reverse settlements are per se Sherman Act violations, and it agreed that nothing about the particular settlement constituted an illegal restraint on trade. The petitioners, represented by Patrick Cafferty of Miller, Faucher & Cafferty, argue in their cert petition that reverse settlements violate the Sherman Act and fly in the face of Congress’ intent for the Hatch-Waxman Act. Further, they urge, the Supreme Court needs to reconcile inconsistent standards being applied by various circuits on the issue. The respondents, represented by Arthur Golden of Davis Polk, & Wardwell, counter that there is no problem with the settlement because it was a resolution of a legitimate patent dispute that did not exceed the bounds of a monopoly granted by patent. Weighing in on the side of the petitioners as amici, a group of 41 professors, led by Mark Lemley of Stanford Law School, argue that what they term “exclusion payments” should be prohibited because they preserve monopoly profits in a manner that harms consumers, competition, and public health. Notably, just last term the Federal Trade Commission unsuccessfully asked the Court to consider the same issue in FTC v. Schering Plough. In that case, the solicitor general — in a brief filed at the Court’s invitation — recommended that certiorari be denied, explaining that the case was a poor vehicle for review of the antitrust issues involved. Here, by contrast, neither the FTC nor the Justice Department has weighed in on the issue before the Supreme Court. Thus, many eyes in the pharmaceutical and antitrust communities — business, governmental, and academic — will be watching to see whether the Supreme Court will agree to hear the case. We may know what the justices choose to do as early as March 19. — Sarah Rispin
OTHER CASES UP FOR REVIEW INCLUDE THE FOLLOWING: • 06-560, Avis Budget Group v. Cal. State Teachers’ Retirement System (CA9) Whether a secondary actor may be primarily liable under Section 10(b) of the Securities Exchange Act of 1934 for engaging in a “scheme to defraud” with the issuer, even where that secondary actor did not itself participate in making the challenged misstatements or omissions or engage in any act of “manipulation.” • 06-639, Detroit International Bridge Co. v. United States (CA6) Whether requiring courts to apply the interest rate set in the Declaration of Taking Act, to determine the compensation due when the government delays payment of just compensation for private property taken under the act, violates the just compensation clause and the separation of powers when applying the statutory interest rate would materially undercompensate the landowner. • 06-739, Kelley v. Bracewell (CA11) Whether a crop bailout payment received by a debtor pursuant to legislation enacted by Congress after the debtor’s filing for bankruptcy, but predicated entirely upon pre-petition events, is the property of the bankruptcy estate. • 06-797, U.S. Forest Service v. Earth Land Institute (CA9) Whether a preliminary injunction should have been ordered when the court relied on declarations filed by parties in the district court, rather than the administrative record, in order to determine whether respondents had shown a likelihood of success on the merits. • 06-837, Old Stone Corp. v. United States (CA Fed) Whether the Federal Circuit incorrectly held that the victim of a total contract breach, by making post-breach mitigation efforts, made an “election of remedies” that forfeited its remedy of restitution, where it did not receive and could not expect to receive any post-breach contract performance from the breaching party. • 06-839, Louisiana Health Service and Indemnity Co. v. Rapides Healthcare System (CA5) Whether the Employee Retirement Income Security Act pre-empts a state law that authorizes an action to collect benefits previously paid to a plan participant and establishes a remedy outside ERISA’s exclusive civil enforcement scheme, because the state law conflicts with the cause of action for benefits set forth in ERISA Section 502(a)(1)(B). • 06-901, Goetz v. John B. (CA6) Whether the prohibition against bias on the part of judicial and quasi-judicial officers applies to a court-appointed special master and experts whose findings of noncompliance with a consent decree are adopted and whose proposed remedial measures are provisionally ordered by the district court. • 06-961, Houk v. Joseph (CA6) Whether, in granting habeas corpus relief, the 6th Circuit misapplied settled rules that limit its role and authority and erroneously set aside reasonable state court determinations of fact. • 06-962, Xerox Corporation Retirement Income Guarantee Plan v. Miller (CA9) Whether ERISA permits a pension plan, when calculating an employee’s accrued pension benefit at retirement, to apply an offset for the benefits the employee receives before retirement from other sources by valuing those benefits in the same way as benefits due at retirement.

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