On June 17, 2013, in FTC v. Actavis, Inc., the Supreme Court reversed a ruling, which held that settlements that have the patentee paying the patent infringer to withdraw its patent challenge and not to infringe (i.e., reverse payments) are immune from the antitrust laws as long as the agreement not to infringe is within the scope of the patent.  The Supreme Court held that these agreements are subject to the rule of reason under § 1 of the Sherman Act and an inquiry into the patent’s validity is unnecessary to the analysis.  Rather, the size of the reverse payment alone can be used as a proxy for the strength or weakness of the patent.  A large reverse payment can be sufficient for the agreement to violate the rule of reason.  The Supreme Court noted that other ways to settle patent litigation, such as allowing the alleged infringer to market the infringing product after a delay but before the patent’s expiration, would pass muster under the rule of reason.  This decision is going to change the way brand name pharmaceutical companies settle patent disputes with generic drug manufacturers as those settlements frequently involve large reverse payments in exchange for the generic drug manufacturer staying out of the market.  The decision is linked here: FTC v. Actavis.

Author: Matthew S. Wild, Wild Law Group PLLC