12/07/2009 02:44:32 PM EST
DOJ Is Serious About Antitrust: Payments in Patent Settlements May Be Unlawful
The DOJ recently argued that the "reverse payment" settlements of patent litigation should be considered presumptively unlawful under federal antitrust laws. In a reverse payment, the plaintiff patent holder pays the defendant generic manufacturer for its agreement to honor the disputed patent and leave, or delay entry into, the relevant market. In this Analysis, Ben Mitchell, Saul Perloff, Layne Kruse, Darryl Anderson and William Pakalka discuss the DOJ's new stance against reverse payments. They write:
The DOJ's new stance against reverse payments, filed in an amicus brief on invitation from the Second Circuit, brings the DOJ in line with the FTC's views, ending a strong divide in the agencies' views over the legality and anticompetitive effects of such settlements. With this brief, the DOJ followed through on a promise made by Antitrust Division head Christine Varney in her confirmation hearings. The FTC and DOJ are now united in their commitment to police reverse payment agreements.
In the amicus brief filed July 6, 2009 in Arkansas Carpenters Health & Welfare Fund, et al. v. Bayer, AG, et al., No. 05-2851-CV, the DOJ argued that settlements including reverse payments are "presumptively unlawful" because of their "anticompetitive potential." In its view, such reverse payment agreements enable patent holders to simply pay competitors for an agreement not to compete by agreeing to drop the challenge to the patent's validity and by delaying entry into the market, both of which the DOJ alleges harm consumers who would otherwise benefit from potential price competition triggered by lower prices for generic drugs. . . .
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. . . [T]he DOJ made clear that, in its view, an antitrust defendant cannot satisfy the rule of reason if the settlement agreement does not allow for generic competition until patent expiration. If, on the other hand, the settlement provides for some degree of generic entry before patent expiration, then the DOJ would consider that a reverse payment agreement may be reasonable if it "preserved a degree of competition reasonably consistent with what had been expected if the infringement litigation went to judgment."