Court Upholds FTC Rule for Pharma Patent License Transfers

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino,Wilson Sonsini Goodrich & Rosati

Last November, I wrote about a new Federal Trade Commission (FTC) rule which, in a change to long-standing policy, made the transfer of a license providing an exclusive licensee with “all commercially significant rights” over a patent within a therapeutic area reportable under the Hart-Scott-Rodino Act. In practice, this meant that licensing agreements which previously required only the signatures of the two parties, now required a waiting period and an FTC blessing.

Shortly before the rule was to become operative, the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry group representing biopharmaceutical researchers and biotechnology companies sued to block it. The group argued that the FTC had not observed the appropriate procedures under the Administrative Procedures Act and that the FTC lacked authority to issue an industry-specific rule rather than a rule of general application, among other claims.

In a lengthy opinion on May 30, 2014, Judge Beryl A. Howell of the United States District Court for the District of Columbia, sided with the FTC and tossed PhRMA’s claims, finding that the FTC had followed the correct processes, had a reasoned basis for creating and instituting this rule, and should be shown deference. This bottom line is this puts us right back to where the FTC hoped it would be back in November: the transfer of “all commercially significant rights” over a patent is a HSR-reportable event.

That’s the headline but there are at least two questions that result from the opinion worth pausing to consider. First, this rule continues to only apply to the pharmaceutical industry. There are virtually no other industries with HSR-specific rules applicable only to them. Does this mean the FTC plans to extend HSR-specific rules to other industries? Or is the pharma industry so important in its own right that proper antitrust enforcement demands a different set of rules? Only time will tell. More importantly, perhaps, the FTC has not defined the phrase “all commercially significant rights.” What are the contours of this definition? What’s included or excluded? How, if at all, will the FTC provide guidance to the pharma community? PhRMA has up to 60 days to appeal so this may not be the last word. Stay tuned.

Supreme Court Observations: CTS Corp. v. Waldburger

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Katharine Falahee Newman, Sidley Austin LLP

On Monday June 9, the U.S. Supreme Court ruled against a group of landowners, holding that Section 309 of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9658, does not preempt North Carolina’s ten-year statute of repose. See CTS Corporation v. Waldburger, et al., No. 13-339. In a 7-2 opinion authored by Justice Kennedy, the Court determined that while CERCLA preempts state statutes of limitations it does not prevent a state from barring a lawsuit via a statute of repose.

By reaching this result, the Court upholds a state’s right to provide a measure of finality to a potential tort defendant, who otherwise could face tort liability for contamination discovered decades after the defendant’s last contributing act. Of course, the ruling does not limit a defendant’s potential responsibility under CERCLA to perform or pay for a clean up to respond to the contamination—such CERCLA liability is not subject to a state statute of repose.

The case involved a group of property owners who purchased land on or near CTS Corporation’s former plant in Asheville, North Carolina. During plant operations between 1959 and 1989, CTS manufactured and disposed of electronics and stored various chemicals, including trichloroethylene (TCE) and cis-1,2-dichloroethane (DCE). In 1987, CTS sold the property, which was eventually divided by a subsequent owner and sold to various individuals. In 2009, the landowners discovered that their groundwater and land were contaminated and in 2011, they brought suit against CTS seeking damages, 24 years after CTS’s original property sale.

North Carolina’s statute of repose states that “no cause of action shall accrue more than 10 years from the last act or omission of the defendant giving rise to the cause of action.” N.C. Gen. Stat. Ann. § 1-52(16). Citing this law, CTS argued that because its last act occurred in 1987 when it sold the site, it could not be subject to the suit under state law and moved to dismiss. The District Court agreed and dismissed the case, but a divided panel of the U.S. Court of Appeals for the Fourth Circuit reversed, finding that Section 309, dealing with preemption of state law, was ambiguous and preempted the North Carolina statute of repose. Continue reading “Supreme Court Observations: CTS Corp. v. Waldburger”

EPA Right on Principle, Wrong on Approach with Clean Air Act Affirmative Defense for Malfunctions

DC CircuitGuest Commentary

by Christopher Sisk, a 2014 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

In his recent dissenting opinion in EPA v. EME Homer City Generation, LP, Justice Scalia lamented, “Too many important decisions of the Federal Government are made nowadays by unelected agency officials exercising broad lawmaking authority, rather than by the people’s representatives in Congress.” He’s right. All too often, American businesses like EME Homer City Generation bear the cost of the Environmental Protection Agency’s regulatory overreach, and the courts’ failure to rein it in. It is quite ironic, then, that one of the few times EPA has lost a court battle lately, it was actually attempting to cut businesses a break.

In that case, Natural Resources Defense Council v. EPA, an environmental activist group asked the D.C. Circuit to strike down a 2013 national emissions standard for cement manufacturers. Judge Kavanaugh, writing for the unanimous panel, upheld all but one part of the standard, rejecting only EPA’s attempt to create an affirmative defense against certain citizen suits under the Clean Air Act (CAA). As we will discuss below, however, the ruling did leave the door open for EPA to authorize such an affirmative defense by approving State Implementation Plans (SIP).

Recognizing the realities of an industrialized America, EPA sought to create an affirmative defense for unavoidable malfunctions that cause a facility to be temporarily out of compliance. While EPA requires facilities to be in continuous compliance with the CAA, it recognizes this expectation is not always possible to meet. Malfunctions happen, and may lead to excess pollution. EPA tried to protect facilities from overzealous environmental groups’ citizen suits in such situations, while retaining its own enforcement capability. Continue reading “EPA Right on Principle, Wrong on Approach with Clean Air Act Affirmative Defense for Malfunctions”