Can reverse payments in patent settlements constitute criminal cartel conduct?

It is a well-established and universally accepted principle of competition law that a payment by one competitor to another competitor not to enter a market is anticompetitive, and in Australia since 2010 a criminal offence. In the US over the past decade, drug companies, the Federal Trade Commission (FTC) and class action applicants have battled the question of whether this established principle of competition law applies in the context of a settlement of a patent dispute. The answer is now clearly and unequivocally yes.

Recent decisions of the US Supreme Court and the director-general of competition in the EU have confirmed that reverse payments in patent settlements are subject to competition law and are potentially anticompetitive. If the Australian Federal Court were to follow these two clear decisions, then a reverse payment could constitute criminal cartel conduct under the Competition & Consumer Act (CCA), in addition to potentially constituting an anticompetitive agreement.

Therefore, such settlements are at risk of criminal sanctions, pecuniary penalties and damages claims by private parties including class actions…

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