Debevoise & Plimpton

FTC expands the scope of reportable pharma patent licences under Hart-Scott-Rodino Act

The Federal Trade Commission (FTC) has announced revisions to the rules implementing the Hart-Scott-Rodino (HSR) Act that clarify and expand somewhat the types of patent licences in the pharmaceutical industry for which a filing must be made before such licences may become effective. The revised rules require a filing for a licence that gives the licensee ‘all commercially significant rights’, defined as the exclusive right ‘to use the patent in a particular therapeutic area (or specific indication within a therapeutic area)’, even if the licensor retains (i) the right to manufacture the product(s) covered by the patent solely for the licensee and/or (ii) ‘co-rights’ to assist the licensee in developing and commercialising the products covered by the patent.

The FTC describes the co-rights provision as merely codifying its existing application of the HSR rules, but it acknowledges that the inclusion of licences in which the licensor retains the right to manufacture exclusively for the licensee is an expansion of the existing filing requirements.

The HSR Act requires parties to certain acquisitions of voting securities, non-corporate interests and assets to submit a filing to the FTC and the Department of Justice and observe a waiting period (generally 30 days, unless terminated early or extended by the agencies), before consummating the reported transaction. An acquisition of a patent is clearly a potentially reportable transaction (if it satisfies certain size criteria), but the FTC has also required a filing for a patent licence that gives the licensee the right to use the patent commercially to the exclusion of all others, including the licensor, either for all uses or in a specific use or geographic area, because it has the same effect on competition as an outright acquisition of the patent. The exclusivity test was often described as the exclusive right to ‘make, use and sell’ a product under the patent…

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