I write a lot about the tension between IP and antitrust laws. Patents give their owners what amounts to a legal monopoly, but only for a defined period of time, and only if the patents are valid and enforceable. The monopoly ends when the patent expires, or when a court determines that it shouldn't have been issued in the first place.

Except when you're a brand-name drug maker and you pay generic-drug rivals to drop suits challenging your patents. That's one of the ways brand-name drug manufacturers fortify their monopoly power and keep lower-cost versions of their products off the market.

The Federal Trade Commission has been railing against such deals -- known as pay-for-delay settlements or reverse payments -- for years. FTC Chairman Jon Leibowitz said last July that pay-for-delay arrangements cost consumers $3.5 billion a year in higher drug prices. President Obama's newly-released 2013 budget includes a proposal authorizing the FTC to block reverse-payment deals, but previous legislative efforts to end pay-for-delay settlements have foundered. So has litigation by the FTC and private plaintiffs claiming the deals violate antitrust laws. Last March, despite the urging of 30 states and consumer groups, the U.S. Supreme Court refused to take up the issue, declining to review a decision by the 2nd U.S. Circuit Court of Appeals. That 2nd Circuit decision upheld the dismissal of an antitrust case against Bayer and a generic-maker Bayer paid not to challenge its patent on the antibiotic Cipro. The Cipro case had been considered the best chance for pay-to-delay opponents to end the practice through litigation, so the Justices' denial of certiorari was a serious blow to their cause.

A promising state-court antitrust case, by a group of California residents and non-profits, also challenged Bayer reverse-payments to keep generic Cipro off the market -- and also seemed to be going nowhere. A San Diego Superior Court judge certified a class against Bayer and several generic drug manufacturers, but then a different judge granted a summary judgment motion by the defendants. In October 2011, California's Fourth District Court of Appeal upheld the lower court ruling, concluding that reverse payments are not illegal under the state's antitrust law, known as the Cartwright Act.

There's no automatic right of review by the California Supreme Court, so the Fourth District's decision could have been the end of the story. Plaintiffs lawyers from Lieff Cabraser Heimann & Bernstein; Zwerling Schachter & Zwerling; and Krause Kalfayan Benink & Slavens nevertheless petitioned the state high court for review. "This appeal presents issues of vital importance to the people of California," said the plaintiffs' fiery petition, filed last December. "The claims focus on Bayer's $398.1 million payoff to Barr and others for the explicit purpose of preventing Barr from entering the market and selling Cipro at low prices. With prescription drug prices continuing their unchecked rise, drug companies owning prescription drug patents must not be permitted to suppress competition by buying off their would-be rivals."

The California Attorney General supported the bid for Supreme Court review in a Jan. 13 letter. Deputy AG Cheryl Johnson asserted that pay-to-delay deals will cost Californians $4.2 billion over the next 10 years unless the Supreme Court remedies the erroneous conclusions of the lower appeals court.

On Wednesday, according to Lieff Cabraser's Joseph Saveri, the state Supreme Court agreed to hear the case. That's certainly no guarantee the high court will interpret the law differently than other judges have, but it's the best legal news pay-for-delay opponents have gotten in a while.

I left a message for Bayer counsel Peter Bensinger of Bartlit Beck Herman Palenchar & Scott, who referred me to a Bayer spokesperson. Bayer sent an email statement: "The decision of the appeals court ... is entirely consistent with the rulings of the Federal Courts of Appeal for the 2nd and Federal Circuits, both of which also upheld similar rulings on the very settlement at issue in California," it said. "Subsequently, on February 15, 2012, the Supreme Court of California agreed to review the ruling of the California State Appeals Court. Bayer believes that the decisions of the trial and appellate courts are correct and will vigorously defend those decisions before the Supreme Court of California."

(Reporting by Alison Frankel)

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