In FTC v. Actavis, the U.S. Supreme Court held that a settlement in a patent infringement case in which the patent holder pays money to the alleged infringer not to introduce its product into the market could violate the antitrust laws under the Rule of Reason. The Court rejected the scope-of-the-patent doctrine that had been adopted by most circuit courts, which held that reverse payment settlements were lawful so long as they did not restrain competition beyond the scope of the presumptively valid patent.
The FTC argued that in the context of drug patents, being challenged by generic drug manufacturers pursuant to the Hatch-Waxman Act, reverse payment settlements should be presumptively illegal. The parties, according to the Commission, should be required to demonstrate the pro-competitive nature of the settlement to survive an antitrust challenge. The Court refused to go that far. But it did allow plaintiffs to use the size of the payment as proof of anticompetitive effect. Moreover, the opinion is sufficiently vague that lower courts may adopt relatively light initial burdens for the plaintiff to show a prima facie case that a reverse payment settlement is anticompetitive. “As in other areas of law,” Justice Breyer wrote for the five-member majority, “trial courts can structure antitrust litigation so as to avoid, on the one hand, the use of antitrust theories too abbreviated to permit proper analysis, and, on the other, consideration of every possible fact or theory irrespective of the minimal light it may shed on the basic question—that of the presence of significant unjustified anti-competitive consequences.”