SCOTUS decides high-profile cases in term’s final weeks

The Supreme Court of the United States issued the final decisions of the 2012 term June 26. In addition to the Vance v. Ball State University ruling on the definition of “supervisor,” several of the decisions handed down during waning days of the term promise to have far-reaching impact.

Large ‘pay-to-delay’ payments may become history after U.S. Supreme Court ruling

A decision handed down by the Supreme Court of the United States June 17 could end the practice of pharmaceutical companies paying competitors very large sums to keep their generics off the market.

By a 5-3 decision in Federal Trade Commission v. Actavis, Inc., 12-416, the court reversed the 11th Circuit Court of Appeals and remanded to the lower court for further proceedings.

The U.S. Supreme Court essentially held that a patent does not always trump antitrust laws. It ruled that reverse payments to generic companies to settle patent litigation are not always illegal under antitrust laws. They can be illegal when the anti-competitive harm from such agreements outweighs their benefits.

The case focused on “pay-to-delay” agreements that are common in the pharmaceutical industry. Under these settlement agreements, the brand-name pharmaceutical company pays generic drug manufacturers to forgo challenging the patent and refrain from launching their low-cost generic products.

Associate Justice Stephen Breyer wrote the majority opinion in which Associate Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan joined. Chief Justice John Roberts filed a dissent joined by Associate Justices Antonin Scalia and Clarence Thomas. Associate Justice Samuel Alito did not participate.

Throughout the majority opinion, there are repeated references to the “large, unjustified,” and the “unexplained large” reverse payments. Although the ruling does not bar these payments, it indicates that such settlements could be found illegal if they are greatly in excess of the expenses of litigation and more in line with profits the generic company would have realized it if had entered the market.

This could create a chilling effect on this practice, according to Donald Knebel, a partner at Barnes & Thornburg LLP and senior adviser to the Center for Intellectual Property Research at Indiana University Maurer School of Law.

“It’s hard for me to believe that pharmaceutical companies will continue to make very large payment of this kind set out in this case with the knowledge now that the FTC can challenge the payment as violation of antitrust law,” Knebel said.

The case involved the reverse payment agreements that Solvay Pharmaceuticals entered into with Actavis Inc., Paddock Laboratories and Par Pharmaceutical. In 2000, Solvay had secured a patent for its drug, AndroGel, a topical testosterone product.

Subsequently, Actavis and Paddock filed abbreviated New Drug Applications for their own generic products. Par joined with Paddock. In 2006, the patent-litigation parties all settled.

Under terms of the settlement, the generic manufacturers agreed to delay bringing their products to market. And Solvay agreed to pay millions of dollars to each company.

While the parties said the payments were compensation for other services the generic manufacturers promised to perform, the FTC asserted the services had little value. Rather, the true point of the payment was to compensate the generics for agreeing not to compete.

The District Court dismissed the case and the 11th Circuit Court affirmed. However, the majority of justices disagreed, in part, that Solvay’s patent was not proven to be valid because the settlement ended the litigation.

Beyer pointed to United States v. Line Material Co., 333 U.S. 287, 308 (1948), that held a valid patent excludes all, except its owner, from the use of the protected process or product.

In his dissent, Roberts faults the majority’s reasoning.

“The majority today departs from the settled approach separating patent and antitrust law, weakens the protections afforded to innovators by patents, frustrates the public policy in favor of settling, and likely undermines the very policy it seeks to promote by forcing generics who step into the litigation ring to do so without the prospect of cash settlements.”

– Marilyn Odendahl

SCOTUS sends affirmative-action case back to 5th Circuit

A lawsuit claiming that a Texas university’s consideration of race in its admissions practices violates the Equal Protection Clause has been sent back to the 5th Circuit Court of Appeals. However, in its June 24 ruling on the suit filed by a Caucasian woman denied admission in 2008, the Supreme Court of the United States did not strike down the use of affirmative action by the university.

In a 7-1 holding in Abigail Noel Fisher v. University of Texas at Austin, et al., 11-345, the U.S. justices reversed the 5th Circuit’s affirmation of the University of Texas at Austin’s admissions plan because the Circuit Court did not hold the school to the “demanding burden of strict scrutiny” outlined in Grutter v. Bollinger, 539 U.S. 306 (2003), and Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 305 (1978)(opinion of Powell, J).

The admissions plan at issue was adopted in 2004 following decisions in Grutter and Gratz v. Bollinger, 539 U.S. 244 (2003), in which the school reverted to an explicit consideration of race.

The 5th Circuit held that Grutter required courts to give substantial deference to the university, both in the definition of the compelling interest in diversity’s benefits and in deciding whether its specific plan was narrowly tailored to achieve its stated goal.

“A plaintiff, of course, bears the burden of placing the validity of a university’s adoption of an affirmative action plan in issue. But strict scrutiny imposes on the university the ultimate burden of demonstrating, before turning to racial classifications, that available, workable race-neutral alternatives do not suffice,” Associate Justice Anthony Kennedy wrote.

The majority ordered the 5th Circuit to assess whether the school has offered sufficient evidence to prove that its admissions program is narrowly tailored to obtain the educational benefits of diversity.

Associate Justices Antonin Scalia and Clarence Thomas wrote concurring opinions. Associate Justice Ruth Bader Ginsburg dissented, and Associate Justice Elena Kagan did not participate in the case.

– Jennifer Nelson

Justices: DOMA unconstitutional; Prop 8 petitioners lacked standing

On the last day of the 2012 term, the Supreme Court of the United States handed down two highly anticipated decisions involving same-sex marriage. Couples in states that recognize same-sex marriage received a victory when the majority struck down Section 3 of the Defense of Marriage Act as unconstitutional.

The 5-4 decision is confined to only those in lawful marriages. Associate Justice Anthony Kennedy authored the majority decision, writing the Act is a deprivation of the equal liberty of persons protected by the Fifth Amendment.

The ruling in United States v. Windsor, executor of the Estate of Spyer, et al., 12-307, will entitle same-sex couples to equal treatment under federal law with regard to income taxes and Social Security benefits.

The decision involves New York resident Edith Windsor – who was in a legally recognized same sex-marriage with Thea Spyer – seeking to claim the federal estate tax exemption for surviving spouses after Spyer died in 2009. Windsor was barred from doing so by Section 3 of the Defense of Marriage Act, which excludes same-sex partners as spouses. Windsor ended up paying more than $360,000 in estate taxes and sought a refund.

The Department of Justice decided not to defend Section 3’s constitutionality, and the Bipartisan Legal Advisory Group of the House of Representatives intervened. The lower courts held the section is unconstitutional and that Windsor is entitled to a refund.

Chief Justice John Roberts and Associate Justices Antonin Scalia, Clarence Thomas, and Samuel Alito dissented.

Scalia wrote in a dissent that the June 26 decision cheated both sides, “robbing the winners of an honest victory, and the losers of the peace that comes from a fair defeat. We owed both of them better.”

In his dissent, Alito wrote, “To the extent that the Court takes the position that the question of same-sex marriage should be resolved primarily at the state level, I wholeheartedly agree. I hope that the Court will ultimately permit the people of each State to decide this question for themselves. Unless the Court is willing to allow this to occur, the whiffs of federalism in the today’s opinion of the Court will soon be scattered to the wind.”

The Supreme Court decided in Hollingsworth, et al. v. Perry, et al., 12-144, that the petitioners – proponents of Proposition 8 in California which defines marriage as between a man and woman – did not have standing to appeal the District Court’s ruling which said Prop 8 is unconstitutional. The 9th Circuit Court of Appeals concluded the petitioners did have standing and affirmed the District Court’s order on the merits.

“We have never before upheld the standing of a private party to defend the constitutionality of a state statute when state officials have chosen not to. We decline to do so for the first time here,” Chief Justice John Roberts wrote for the majority.

Associate Justices Anthony Kennedy, Clarence Thomas, Samuel Alito and Sonia Sotomayor dissented.

Indiana had authored an amicus brief in Windsor, which was joined by 16 states; Indiana co-authored with Virginia an amicus brief in Hollingsworth.

Indiana Attorney General Greg Zoeller released a statement saying, “While my office is duty bound to defend the authority of our state legislature and their decisions, I recognize that people have strongly held and vastly different views on the issue of marriage and ask that everyone show respect with civility to our Supreme Court and our constitutional system.  Regardless of the different views people may hold, marriage should be a source of unity and not division.”

Indiana Speaker of the House Brian Bosma, R-Indianapolis, said he’s confident the matter of same-sex marriage will come before the General Assembly and be placed on the ballot for voters to decide.

“I am disappointed the federal Defense of Marriage Act has been overturned. I am certainly pleased the Supreme Court has confirmed each state’s right to address the legal issue of what constitutes one of the most important institutions in our society,” he said. “As they have in 30 other states, Hoosiers should have the right to speak on this issue.”

Indiana Senate Democratic Leader Tim Lanane, D-Anderson, said it’s important that Indiana is a state that is welcoming to everyone, regardless of their sexual orientation.

“Study after study shows growing support for marriage equality for all Hoosiers. We must ensure that our policies reflect this evolving sentiment,” he said. “It is my hope that lawmakers can put this divisive debate behind them, and focus on the priorities that matter to every Hoosier family – a strong economy, good schools, and thriving local communities.”•

– Jennifer Nelson