Third Circuit Reverses Trend and Allows Reverse Payments Case To Go Forward in In Re K-Dur Antitrust Litigation

On July 16, 2012, in an opinion authored by Judge Sloviter, the Third Circuit issued its decision in the K-Dur "reverse payments" case, holding that although such settlements are not illegal per se, they are presumptively unlawful under the rule of reason. In so doing it rejected the approach adopted by the Second, Eleventh, and Federal Circuits, all of which have held that a settlement that does not restrain trade beyond what would result if the patent holder won the litigation is not unlawful, regardless of the existence of a reverse payment. Although the FTC was not a party to the case, in its amicus brief it urged the approach adopted by the Third Circuit, and the decision represents a long-sought win by the FTC, which has been frustrated by its uninterrupted string of defeats in federal court and its lack of success thus far convincing Congress to ban the practice. The Third Circuit's decision sets up a circuit split, and considering the Eleventh Circuit's recent refusal to rehear en banc FTC v. Watson Pharmaceuticals, Inc., one of the cases causing the split, a petition for certiorari in at least one of these cases appears inevitable.