FTC’s Reporting Rule For Pharmaceutical Patent Transfers Upheld

On May 30, 2014, the U.S. District Court for the District of Columbia ruled in favor of the Federal Trade Commission (FTC) in a dispute with the Pharmaceutical Research and Manufacturers of America (PhRMA) regarding the Commission's authority to require the pharmaceutical industry to report certain transfers of exclusive patent rights under the Hart-Scott-Rodino (HSR) Act.

The dispute centered on a Final Rule promulgated by the FTC in November 2013. Patents are considered assets by the FTC and their transfer may be reportable. Some transactions provide for the transfer of certain exclusive patent rights without implicating the transfer of the patent in its entirety. The FTC maintains that the exclusive right to commercially use all or part of a patent is, in substance, identical to a full acquisition of the patent. The challenged rule was intended to clarify the circumstances when a transfer of exclusive rights to a pharmaceutical patent is considered a potentially reportable acquisition of an asset under the HSR Act.

PhRMA sued to have the new rule set aside. PhRMA contended in its complaint that the FTC lacked the statutory authority to issue rules that target a single industry, as opposed to rules of general effect. The trade organization also contended that the FTC failed to establish a rational basis for an industry-specific rule and that it failed to comply with legally required procedures in instituting the rule. PhRMA and the FTC both filed motions for...