Supreme Court Subjects Reverse-Payment Settlements to Antitrust “Rule of Reason”: Resolving Circuit Split, Court Rejects “Exclusionary Scope of the Patent” Test But Holds Such Settlements Not Presumptively Illegal

Sullivan & Cromwell LLP - June 19, 2013

On June 17, 2013, the United States Supreme Court issued its decision in F.T.C. v. Actavis, Inc., et al., No. 12-416, 570 U.S. ___ (2013) (“Actavis”), addressing the antitrust treatment of so-called “reverse-payment” or “pay-for-delay” settlements—patent litigation settlements in which the patent owner makes a payment to the accused infringer, which agrees not to market its competing product for all or part of the remaining patent term. Such settlements are particularly common in resolving pharmaceutical patent litigation under the Hatch-Waxman statute. Rejecting both the “exclusionary scope of the patent” and the “presumptively unlawful” tests used in the various circuits, the Court held that reverse-payment settlements are not immune from antitrust liability and should be analyzed under the rule of reason.