The owner of a patent on a brand-name drug sues a competitor for infringing the patent. The parties settle. But the infringer doesn't pay. The patent-owner does. Why? In return for the competitor's agreement not to compete during the rest of the patent's term.
Four of our 13 courts of appeals held that such a "reverse payment" pact does not, as a matter of law, run afoul of federal antitrust law. Three others begged to differ. Yesterday, the U.S. Supreme Court agreed with the minority. Fed'l Trade Comm'n v. Actavis, Inc., No. 12-416 (U.S. June 17, 2013).
Blawgletter agrees with the FTC (and the D.C., Sixth, and Third Circuits) that courts shouldn't give a free antitrust pass to reverse-payment deals. The test by the Eleventh, Second, and Federal Circuits okayed such pacts so long as the patent-holder paid the generic competitor not to do things that might infringe the patent (assuming it didn't fall to an invalidity, unenforceability, or some other defense). As the Third Circuit noted, "the scope of the patent test does not subject reverse payment agreements to any antitrust scrutiny." Id. at 26