June 19, 2013

Supreme Court Requires Full Rule of Reason Analysis in So-Called “Reverse Payment” Settlements of Patent Litigation

Summary: The US Supreme Court in Federal Trade Commission v. Actavis, Inc., et al. planted the seeds for future complicated litigation over so-called “reverse payment” settlement of patent litigation when it rejected both sides’ arguments for clear presumptions, requiring instead a full rule of reason analysis of such settlements. Technically, the Court, in a 5-3 decision, reversed the Court of Appeals for the Eleventh Circuit’s ruling for the defendants, and the “scope of the patent” test earlier adopted by the Eleventh Circuit and others, in what the FTC and its supporters are claiming as a victory.  But the Court also rejected the FTC’s proffered approaches – a presumption of illegality based on the mere presence of the so-called “reverse payment” or a truncated “Quick Look” analysis.  As a result, the FTC in this case, and others like it, will have to prove that the challenged settlement was anticompetitive under a full Rule of Reason analysis, a requirement the agency and private plaintiffs may well find challenging.

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