Supreme Court in Actavis: analyse reverse-payment settlements' anticompetitive effects case by case

In a much-anticipated decision, the Supreme Court in FTC v Actavis held 5−3 that reverse-payment settlements of Hatch-Waxman Act litigation are neither immune from antitrust liability nor presumptively unlawful, but rather must be analysed under the rule-of-reason standard on a case-by-case basis.

In choosing the traditional antitrust standard, the decision rejected all lower-court approaches to these settlements and resolved a split between the Third Circuit — which had held such agreements presumptively unlawful — and the Eleventh, Second and Federal Circuits, which essentially had immunised the agreements as long as they fell within the exclusionary scope of the underlying patent.

Acknowledging that application of the rule of reason might require antitrust trial courts in some cases to determine the validity of the underlying patent, the court stated that such an occurrence should be rare because the size of the reverse payment can function as a ‘workable surrogate for the patent’s weakness’ (Slip Op. 19). Thus, the court directed trial judges to weigh the anticompetitive effects of a particular reverse payment by reference to ‘its size, its scale in relation to the payor’s anticipated future litigation costs, its independence from other services for which it might represent payment and the lack of any other convincing justification’ (Slip Op. 20)…

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