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Unpublished Paper
Antitrust Analysis After Actavis: Applying the Rule of Reason to Reverse Payments
ExpressO (2014)
  • Benjamin Miller
Abstract In F.T.C. v. Actavis, Inc. the Supreme Court resolved a circuit split regarding the proper evaluation of reverse payment settlements under federal antitrust law, holding that they must be evaluated under a rule of reason analysis. However, the Court simultaneously created significant uncertainty by declaring that the lower courts were responsible for structuring the analysis. While a few cases are currently in the pre-trial phase, the only decisions relating to reverse payments since Actavis have been rulings on pre-trial motions—there have been no decisions on the merits. Given the intricate intersection between antitrust and intellectual property principles in these cases, the issue of how courts will structure the analysis is an area of substantial interest and uncertainty. This Article examines the minimal guidance provided by the Supreme Court in Actavis and traditional factors considered in other rule of reason cases to identify what elements courts should consider. Lower courts should analyze certain traditional factors, such as the market power of the settling parties, whether there are less restrictive alternatives, and any proffered pro-competitive justifications. After analyzing the relevance of each of these factors, this Article discusses how that factor weighs for or against the permissibility of a reverse payment. This Article further finds that courts must also analyze two additional factors that are closely related to reverse payments: (1) the patent’s validity and (2) the size of the settlement payment. Without a valid patent, the parties’ agreement not to compete would be subject to per se antitrust condemnation. Therefore, this Article finds that courts should examine the validity of the underlying patent in a truncated proceeding. In addition, the size of the payment must be examined in light of the services that the parties claim are to be provided in return for the payment. However, given the unusual nature of reverse payment settlements, traditional antitrust price tests are inadequate to evaluate the anticompetitive nature of the payment. This Article thus proposes a novel test comparing the size of the payment that represents identifiable “services rendered” to the total payment and allows for a range of pro-competitive values. Only after weighing and balancing all of these factors can a trial court come to a determination whether a challenged settlement as a whole has a pro- or anti-competitive effect.
  • reverse payment,
  • FTC v. Actavis Inc.,
  • pay-for-delay,
  • Hatch-Waxman Act
Publication Date
August 9, 2014
Citation Information
Benjamin Miller. "Antitrust Analysis After Actavis: Applying the Rule of Reason to Reverse Payments" ExpressO (2014)
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