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As former Justice Department political appointees in distinctly different administrations — Clinton (Bender) and Reagan (Fein) — we often disagree on legal matters, both politically and philosophically. But when it comes to the importance of the constitutional right to settle legal disputes in the high-stakes world of pharmaceutical-patent-infringement litigation, our views are the same.
In advocating settlements, we are in good company. Years before his election as president, lawyer Abraham Lincoln wrote: “Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses, and waste of time.”
There is good reason why settlements continue to be seen as a vital part of our adversarial legal system and the way in which the vast majority of legal disputes are resolved in this country. Settlements provide certainty to the parties, put an early end to potentially costly litigation, help relieve crowded court dockets and allow the parties to expend valuable resources elsewhere.
Settlements are of particular importance in patent-infringement litigation, especially for pharmaceutical products, where it can cost hundreds of millions of dollars to develop a new drug. A valid drug patent enables the drug innovator to recoup its investment and profit from the exclusive right to sell the new drug for a limited time without generic competition. The failure of a patent can make — or break — a company’s fortunes. Patent cases are notoriously expensive, unpredictable and time-consuming. It is not surprising that parties very frequently agree to settle their differences without litigating the issues to an uncertain conclusion.
Nearly 30 years ago, Congress enacted the Hatch-Waxman Act to promote the entrance of less expensive generic drugs into the marketplace by encouraging makers of generic drugs to challenge the validity of questionable drug patents. It is widely agreed that the act has been a tremendous boon to consumers, who have greatly benefited from lower-priced pharmaceuticals.
It is also widely agreed that the success of the act is in large part attributable to the resolution of some of these lawsuits via settlements. Approximately 25 percent to 30 percent of pharmaceutical patent litigation cases end in a settlement agreement between the brand drugmaker and generic drugmaker in which the latter is permitted to enter a market before the patent term expires and may receive other consideration as part of the settlement, such as a licensing agreement. In every one of these settlements, consumers gain access to the lower-priced generic before the end of the patent term. The generic equivalent for Lipitor, the most popular patented drug of all time, entered the market five years early through this type of settlement.
Nonetheless, some in Congress are now arguing for a virtual ban on patent settlements if they contain any form of consideration flowing to the generic-drug manufacturer. They want the law to presume that all such settlements are illegal and want to place an often prohibitive burden on the parties to prove that they have a right to settle.