On April 17, 2013, the United States Federal Trade Commission (FTC) issued an Order Denying Petition to Quash Civil Investigative Demand in the Matter of Jerk, LLC. This means that an investigation started by the FTC will now proceed and Jerk.com will either need to challenge the FTC in court or they will need to turn over the requested files and information. The hammer seems to be coming down on Jerk.com, which should make an awful lot of tormented, harassed and cyber-bullied people quite happy.

About Jerk.com

Jerk, LLC operates Jerk.com, a social networking website that collects and displays profiles, which include photographs, names, ages, email and physical addresses, telephone numbers, and opinions. Information on the website includes, among other things, information that is publicly available on other Internet sites and newly created user-generated content. Jerk.com encourages users to add personal information to profiles and to rate the profiled individuals as either “jerks” or “saints.”

In my first installment on Paragraph IV Certifications under Hatch-Waxman, I explored the basics of this “beast.”  See A Primer on Paragraph IV Certifications: Into the Belly of the Hatch-Waxman Beast Part 1.  In my second installment on Paragraph IV Certifications under Hatch-Waxman, I discussed one of the more litigated “trouble spots” for Paragraph IV Certifications, namely the “carve out” cases.  See Carve Outs: Into The Belly of the Hatch-Waxman Beast Part 2.  In my third and final installment, I’ll focus on probably the most contentious “trouble spot,” namely Hatch-Waxman “reverse payment” cases, now before the Supreme Court in FTC v. Watson Pharmaceuticals[1] (renamed as FTC v. Actavis, Inc.) for which oral argument was recently heard.  So let’s strap on our safety belts one last time, and dive back into the “belly” of this Hatch-Waxman “beast” to look at “reverse payment” cases.

“Reverse payment” cases are an outgrowth of a key feature I noted in my first article on the basics of Paragraph IV Certifications:  the filing of an Abbreviated New Drug Application (ANDA) by the generic drug maker with a Paragraph IV Certification is treated as a technical act of patent infringement.[2]  After receiving notice of the Paragraph IV Certification, the patent owner/NDA holder has 45 days to bring suit, otherwise the FDA can move forward on approving the ANDA.[3]  Conversely, if the patent owner/NDA holder does bring an infringement suit within the prescribed 45 day period, the FDA cannot approve that ANDA for 30 months, unless the patent(s) that are the subject of the Paragraph IV Certification are earlier deemed invalid or not infringed in that suit.[4]

In my first installment on Paragraph IV Certifications under Hatch-Waxman, I explored the basics of this “beast.”  See A Primer on Paragraph IV Certifications: Into the Belly of the Hatch-Waxman Beast Part 1  .  And as promised, in this second installment, I’ll now focus on one of the more litigated “trouble spots” for Paragraph IV Certifications, namely the “carve out” cases.  (In my third and final installment, I’ll talk about the other “trouble spot,” namely Hatch-Waxman “reverse payment” cases, which is now before the Supreme Court in the 11^th Circuit case of FTC v. Watson Pharmaceuticals, renamed as FTC v. Actavis, and for which oral argument was recently heard.)  So strap on your safety belts again, and let’s dive back into the “belly” of Hatch-Waxman Paragraph IV Certification “beast” to look at “carve outs.”

“Carve outs” essentially involve a situation where there is an FDA approved drug for which the generic drug maker seeks to market that drug, again through an Abbreviated New Drug Application (ANDA), but instead for an FDA approved use, where also that FDA approved use is unpatented.  While these “carve outs” also involve the filing of a Paragraph IV Certification, there is a slight but important twist in that Certification:  inclusion of what is called a “section viii statement”[1] that the generic drug maker “is not seeking approval for a method of use that is claimed in the patent.”[2]  When submitting the “section viii statement,” the generic drug maker must also provide a proposed label that removes or “carves out” the claimed method of use.[3]  The FDA will then approve this “carve out” statement only if:  (1) there is no overlap between the proposed label submitted by the generic drug maker and a use described in the Orange Book; and (2) removing the information about the claimed method of use from the label doesn’t render the drug less safe or effective.[4]

Yet another busy month has passed since our last stop here at IPWatchdog. So let’s recap some of the more interesting developments. The last few weeks, in fact, have been bookended by concern over a batch of diabetes drugs and links to pancreatitis, but also pre-cancerous cellular changes in the pancreas.

First, a study in JAMA Internal Medicine indicated the drugs can double the risk of developing pancreatitis, an issue that has plagued these meds for years. Insurance records for more than 2,500 diabetics between 2005 and 2008 were examined and found patients hospitalized with pancreatitis were twice as likely to have taken the drugs than a control group that did not have pancreatitis. The study did not examine other meds, such as Novo Nordisk’s Victoza, that were not available at that time.

The issue raised questions about whether the results might alter treatment practice by physicians. Of course, the drug makers issued statements standing by the safety of their medicines, while acknowledging the risks have been detected in the past. The American Association of Endocrinologists and the American Diabetes Association issued a joint statement noting the analysis was a retrospective study, not a prospective, randomized controlled clinical trial.

The Federal Trade Commission filed an amicus brief in the U.S. District Court for the District of New Jersey explaining that brand name drug manufacturers may improperly use restricted drug distribution programs to impede generic competition.

The FTC filed the brief in the matter of Actelion Pharms Ltd. v. Apotex Inc. (Case No. 1:12-cv-05743), which involves allegations that Actelion Pharmaceuticals has prevented Actavis, Apotex, and Roxane from offering competing generic versions of Actelion’s brand drug products, Tracleer and Zavesca, by precluding them from obtaining samples of those drug to perform necessary testing.

In order to receive approval from the Food and Drug Administration, generic firms are required to conduct bioequivalence testing to demonstrate that a generic formulation is therapeutically equivalent to the brand drug.  This testing requires access to a limited amount of the brand product. Tracleer (bosentan) is used to treat pulmonary arterial hypertension and Zavesca (miglustat) is used to treat type 1 Gaucher disease, a disorder in which the body does not produce enough of an enzyme to break down fatty substances.

The Federal Trade Commission is cracking down on affiliate marketers that allegedly bombarded consumers with hundreds of millions of unwanted spam text messages in an effort to steer them towards deceptive websites falsely promising “free” gift cards.

In eight different complaints filed in courts around the United States, the FTC charged 29 defendants with collectively sending more than 180 million unwanted text messages to consumers, many of whom had to pay for receiving the texts. The messages promised consumers free gifts or prizes, including gift cards worth $1,000 to major retailers such as Best Buy, Walmart and Target. Consumers who clicked on the links in the messages found themselves caught in a confusing and elaborate process that required them to provide sensitive personal information, apply for credit or pay to subscribe to services to get the supposedly “free” cards.

“Today’s announcement says ‘game over’ to the major league scam artists behind millions of spam texts,” said Charles A. Harwood, Acting Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to rooting out this deception and stopping it. For consumers who find spam texts on their phones, delete them, immediately. The offers are, in a word, garbage.”

On December 20, 2012, I interviewed Paul Ryan. Not Congressman Paul Ryan, but rather the Paul Ryan that is the CEO of Acacia Research Corporation. See part 1 of my interview with Paul Ryan.

What you think of Ryan and Acacia is almost entirely dependent upon the side of the aisle on which you sit; namely whether you are an innovator or a practicing entity. Even more specifically, those who are innovators but don’t have a voice loud enough to be heard by practicing entities are likely to believe that Ryan and Acacia are the answer to their prayers. Those practicing companies that simply want to make a product and sell it without regard to the underlying patents that might be in place are likely to believe Ryan and Acacia are the poster children for everything wrong with the patent system.

My own opinion is this: independent inventors and small businesses that innovate get trampled. They are ignored by larger entities. Acacia Research is a publicly traded company and opens it books to the full extent required by the Securities and Exchange Commission. There is no mystery about their business model, and there is no doubt that when they partner with a patent owner that patent owner will have a voice that will be heard loud and clear by all those who might be infringing.

But you can decide for yourself. Without further ado, here is the culmination of the interview with Paul Ryan.

In Fiscal Year (FY) 2012, the number of potentially anticompetitive patent dispute settlements between branded and generic drug companies increased significantly compared with FY 2011, jumping from 28 to 40, according to a new Federal Trade Commission staff report.  The study also found that in nearly half of these settlements, branded firms may have used the promise that they would not develop or market an authorized generic (AG) as a payment to stall generic drug firms from marketing a competing product.

The Federal Trade Commission upheld an Administrative Law Judge’s decision that the marketers of POM Wonderful 100% Pomegranate Juice and POMx supplements deceptively advertised their products and did not have adequate support for claims that the products could treat, prevent, or reduce the risk of heart disease, prostate cancer, and erectile dysfunction, and that they were clinically proven to work.

The Commission issued an Opinion upholding Chief Administrative Law Judge D. Michael Chappell’s May 2012 Initial Decision that the POM marketers made false or deceptive advertising claims.

The Commission Opinion found that the POM marketers made deceptive claims in 36 advertisements  and promotional materials challenged at trial after issuing a September 2010 administrative complaint – going beyond Judge Chappell’s ruling, which found false or deceptive claims in only 19 of the challenged items.

Google Inc. has agreed to change some of its business practices to resolve Federal Trade Commission concerns that those practices could stifle competition in the markets for popular devices such as smart phones, tablets and gaming consoles, as well as the market for online search advertising.

Under a settlement reached with the FTC, Google will meet its prior commitments to allow competitors access – on fair, reasonable, and non-discriminatory terms – to patents on critical standardized technologies needed to make popular devices such as smart phones, laptop and tablet computers, and gaming consoles. In a separate letter of commitment to the Commission, Google has agreed to give online advertisers more flexibility to simultaneously manage ad campaigns on Google’s AdWords platform and on rival ad platforms; and to refrain from misappropriating online content from so-called “vertical” websites that focus on specific categories such as shopping or travel for use in its own vertical offerings.

“The changes Google has agreed to make will ensure that consumers continue to reap the benefits of competition in the online marketplace and in the market for innovative wireless devices they enjoy,” said FTC Chairman Jon Leibowitz. “This was an incredibly thorough and careful investigation by the Commission, and the outcome is a strong and enforceable set of agreements.”

The Federal Trade Commission adopted final amendments to the Children’s Online Privacy Protection Rule that strengthen kids’ privacy protections and give parents greater control over the personal information that websites and online services may collect from children under 13.

The FTC initiated a review in 2010 to ensure that the COPPA Rule keeps up with evolving technology and changes in the way children use and access the Internet, including the increased use of mobile devices and social networking. The updates to the COPPA Rule reflect careful consideration of the entire record of the rulemaking, which included a public roundtable and several rounds of public comments sought by the agency.

“The Commission takes seriously its mandate to protect children’s online privacy in this ever-changing technological landscape,” said FTC Chairman Jon Leibowitz. “I am confident that the amendments to the COPPA Rule strike the right balance between protecting innovation that will provide rich and engaging content for children, and ensuring that parents are informed and involved in their children’s online activities.”

The Federal Trade Commission issued orders requiring nine data brokerage companies to provide the agency with information about how they collect and use data about consumers. The agency will use the information to study privacy practices in the data broker industry.

Data brokers are companies that collect personal information about consumers from a variety of public and non-public sources and resell the information to other companies. In many ways, these data flows benefit consumers and the economy; for example, having this information about consumers enables companies to prevent fraud. Data brokers also provide data to enable their customers to better market their products and services.

The nine data brokers receiving orders from the FTC are: 1) Acxiom, 2) Corelogic, 3) Datalogix, 4) eBureau, 5) ID Analytics, 6) Intelius, 7) Peekyou, 8) Rapleaf, and 9) Recorded Future.

For the past decade, appellate courts have wrestled with the issue of drug patent settlements. The question can be stated simply: Is it an antitrust violation for a brand-name drug company to pay a generic firm to drop its patent challenge and delay entering the market? But the answer is complex, straddling the intersection of patent law, antitrust law, and the Hatch Waxman Act.

In the past several years, the Second, Eleventh, and Federal Circuits have upheld these settlements (known as “reverse payment” agreements since the money flows from the patentee to the alleged infringer rather than the other way around). These courts have focused on the benefits of settling cases and the presumption of patent validity, and they have explained that payments fall within the “scope of the patent.” In contrast, the Third Circuit recently applied more aggressive scrutiny, rejecting the scope test and finding that payments for delay were “prima facie evidence of an unreasonable restraint of trade.” See Reverse Payment Home Run for Pharma Antitrust Enforcement.

The issue is pressing. The Federal Trade Commission has estimated that reverse-payment settlements cost consumers $3.5 billion each year. And the Third Circuit’s ruling teed up an unavoidable circuit split. It comes as no surprise then that on Friday, December 7, 2012, the Supreme Court (with Justice Alito recused) granted certiorari in the case of FTC v. Watson, which was decided by the Eleventh Circuit in April of 2012.

The Federal Trade Commission filed an amicus brief in the Federal Circuit Court of Appeals explaining that it is ordinarily inappropriate for a court to issue an injunction barring the sale of products incorporating standardized, patented technology when the patent holder has previously committed to license the patent on fair and reasonable terms.  This brief is the latest in a line of FTC actions and public statements raising concerns about the potentially anticompetitive effects of seeking an injunction for the use of a standard-essential patent (SEP).

The brief addresses this issue in the context of patent infringement claims that Motorola, Inc. has filed against Apple, Inc. regarding technologies used in iPhones and iPads that allegedly are covered by Motorola’s SEPs.  It concludes that a district court correctly applied the governing legal principles when it dismissed Motorola’s request for an injunction that could have blocked Apple from selling iPhones and iPads in the United States.

The brief explains how, in general, the owners of SEPs can use the threat of injunctions to distort competition by insisting on high royalties and other favorable licensing terms that they could not have credibly demanded before the standard was set.  This distortion is called “patent hold-up.”

An online advertising company agreed to settle Federal Trade Commission charges that it used “history sniffing” to secretly and illegally gather data from millions of consumers about their interest in sensitive medical and financial issues ranging from fertility and incontinence to debt relief and personal bankruptcy.

The FTC settlement order bars the company, Epic Marketplace Inc., from continuing to use history sniffing technology, which allows online operators to “sniff” a browser to see what sites consumers have visited in the past.  It also bars future misrepresentations by Epic and requires the company to destroy information that it gathered unlawfully.

“Consumers searching the Internet shouldn’t have to worry about whether someone is going to go sniffing through the sensitive, personal details of their browsing history without their knowledge,” said FTC Chairman Jon Leibowitz.  “This type of unscrupulous behavior undermines consumers’ confidence, and we won’t tolerate it.”