Last summer, the Supreme Court held that so-called “pay for delay” settlements of pharmaceutical patent litigation, in which the branded company pays the allegedly infringing generic firm to “delay” its entry into the market, are subject to scrutiny under the antitrust laws. These “reverse payments,” in which the money flows from the patentee to the alleged infringer, might induce the generic firm to agree to abandon its challenge to the patent’s validity and accept a license with a later entry date than it would have absent the payment.
The decision, FTC v. Actavis, leaves many questions unanswered, including what constitutes a payment and just how large it must be to trigger antitrust concerns. Lower courts are just beginning to tackle these issues in the context of pharmaceutical patent settlements. However, the decision also raises broader questions for settlement of patent litigation generally. Every settlement involves an exchange of consideration and an agreement to end the patent litigation. Can’t it always be said that the consideration provided by the patent holder affects the defendant’s decision to drop its invalidity claim? Unless the license is unlimited in scope, doesn’t it always result in less competition than would have existed had the alleged infringer gone on to win the patent case? In short, does Actavis open settlements outside the pharmaceutical context to antitrust attack?