By Dennis Crouch
FTC v. Actavis, Inc. (Supreme Court 2013)
In a 5-3 Decision authored by Justice Breyer, the US Supreme Court has held that a rule-of-reason analysis applies to determine whether a reverse-payment patent settlement violates federal antitrust laws. The FTC had asked the court to go further and rule that reverse payments are presumptively unlawful. A major factual question going forward in patent-settlement antitrust cases will be whether the patentee settled its lawsuit in order to avoid testing a patent’s weakness. Without additional pro-competitive benefits, such a settlement can be deemed anticompetitive under a rule-of-reason.
The conservative dissent written by Chief Justice Roberts argued that patent rights should be seen as an exception to the antitrust laws and that a patentee should have the right to enforce its patents and to settle its patents without regard to the anti-competitive nature of any settlement.
The result here is that the antitrust implications should be considered for any major patent settlement. In addition, the decision opens the door further for antitrust action against patent enforcement entities willing to settle cases at rates below the likely litigation costs of the accused infringers.
As my law school antitrust professor Randy Picker notes on twitter, the decision admittedly does not offer any clear guidance for how the rule of reason will apply in cases moving forward. Picker writes: applying the “rule-of-reason [on] remand, with the patent overlay and Hatch-Waxman present, will be brutal.” The majority opinion says go-to-it: “We therefore leave to the lower courts the structuring of the present rule-of-reason antitrust litigation.”
Read the opinion: /media/docs/2013/06/12-416_m5n0.pdf