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In December 2014 the European Commission published its 5th Report on the monitoring of patent settlement agreements in the EEA in respect of the period January to December 2013. The focus of the report was to gather some insight into the types of agreements being entered into between originator and generic companies and to identify the types of agreements that were resulting in a delay to generic entry to the market. While these types of agreements can potentially give rise to competition law issues the Report does clarify that there is no presumption of any legislative breach and that each case would require analysis of the merits and specific circumstances.

As part of the monitoring exercise and subsequent analysis the European Commission requested copies of all patent settlement agreements relevant for the EEA markets from 54 originator companies and from 63 generic companies. The results show a significant increase particularly since 2009 which the Report highlights is due to expiry of medicinal patents, a general increase in litigation in the market, a greater willingness for parties to enter settlement agreements and the introduction of new legislation. 

Portugal topped the table relating to the number of settlements per member state entering into more than double the amount of settlement agreements than any other country, while Ireland featured mid-table. This is due to the implementation of Portuguese Law 62/2011 which requires that any disputes concerning IP rights relating to medicines, including injunctive procedures, are to be settled by mandatory arbitration.

In categorising the types of patent settlement agreements the Report focused on three categories, (1) settlements without limitation of generic market entry; (2) settlements limiting generic entry without value transfer and (3) settlements limiting generic entry showing a value transfer from the originator to a generic. The agreements falling into category 3 were viewed as being potentially problematic from a competition law perspective but did only account for 8% of the agreements. Interestingly 45% of all agreements did not limit a generic company’s entry into the market and were negotiated on a "walk away" basis. In those agreements where a value transfer was occurring this primarily covered litigation costs and/or damages in order to avoid further litigation.

While the European Commission has indicated that it will continue to scrutinise settlement agreements that restrict generic entry and include a value transfer the purpose of this Report was merely to summarise the results of the monitoring exercise. It is likely that patent settlement agreements will sustain their popularity as a means of reducing the time and costs involved in pursuing litigation.