The US Court of Appeals for the District of Columbia Circuit held that companies in the pharmaceutical industry must comply with the Federal Trade Commission’s Hart-Scott-Rodino (HSR) reporting rules when making certain transfers of patent rights.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 was passed to establish notification and waiting requirements for large mergers and acquisitions. The main purpose of the Act is to make it easier for the US government to identify mergers and acquisitions likely to violate federal antitrust laws.
The Federal Trade Administration (FTC) has the authority to define terms and promulgate regulations needed to carry out the Act.
Regulated Transfers of Patent Rights
In the words of the DC Circuit, in 2013, the FTC clarified that
even if patent holders retain limited manufacturing rights or co-rights, transfers of patent rights within the pharmaceutical industry constitute reportable asset acquisitions if all commercially significant rights are transferred. [cite] Before the adoption of this Rule, the FTC had considered a transfer of patent rights to be a reportable asset acquisition only if all rights to make, use, and sell the patent were passed to the acquiring person. The FTC’s 2013 rulemaking action clarified that reportable asset requirements apply to transactions in the pharmaceutical industry in which the licensor transfers exclusive patent rights but retains limited manufacturing rights or co-rights to the patent. The FTC explained that the Rule focuses on the pharmaceutical industry because the agency had not found any other industry that relied on this type of patent transfer arrangement.
However, the FTC found that if other industries adopted the same kinds of exclusive patent licenses, these would potentially be reportable under the HSR Act.
Pharmaceutical Research and Manufacturers of America (“PhRMA”) challenged the FTC rule. The district court granted summary judgement to the FTC and the DC Circuit affirmed.
This is an important ruling for patent holders in the pharmaceutical industry. Patent holders should take these requirements into consideration when structuring their patent licensing transactions.
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Photo Attribution: “Assorted pharmaceuticals by LadyofProcrastination” by LadyofProcrastination – Flickr. Licensed under CC BY-SA 2.0 via Wikimedia Commons.