The FTC has declared war on intellectual property rights, specifically patents. The FTC recently released a report that concluded patent laws are too generous -- meaning they protect patent holders rather than consumers. Some of the FTC's specific criticisms have merit, but ultimately it's Congress's job to decide what the patent laws are. But the FTC has never been an agency that waits for Congress to act. Thus, the Commission is already using its broad antitrust authority to go after patents they don't like. Yesterday this battle took a nasty turn.
In 1997, Schering-Plough, a drug company, sued two generic drug companies that allegedly infringed S-P's patents in developing a generic version of S-P's K-Dur 20 drug. These patent suits are routine in the pharmaceutical industry. At the urging of the trial judge, the companies settled their dispute. S-P made payments to the two competitors in exchange for agreements to defer introduction of the generic drugs. The court approved this deal, and that should have been the end of that.
In 2001, the FTC filed an administrative complaint, charging the deals violated the antitrust laws because they denied consumers immediate access to generic K-Dur 20. In June 2002, the administrative law judge assigned to the case dismissed the FTC staff's complaint on all counts. Today, nearly 18 months later, the five FTC commissioners unanimously reversed the judge and held the court-approved settlements were illegal.
You have to question the integrity of the decision making process. A neutral judge finds the FTC staff's arguments baseless. Then the five commissioners, political appointees having recently stated their personal agenda in opposition to intellectual property rights -- overrule the judge in favor of the position taken by staff appointed by the same commissioners. And we're supposed to tell the Iraqis how to try Saddam?
The timing of this decision is curious for another reason. Andrx Pharmaceuticals is currently fighting a class-action lawsuit challenging an agreement it made to settle patent litigation with Aventis. In this case, the Sixth Circuit held an interim settlement violated the antitrust laws. Andrx has filed a petition for review with the Supreme Court, and the plaintiffs must file a response by December 29. My group, the Center for the Advancement of Capitalism, is filing an amicus brief at Andrx's invitation. I have to think the FTC is trying to send a message with today's decision.