US Supreme Court Rejection of the “Scope of the Patent” Test in FTC v. Actavis Has Wide-Ranging Implications

June 20, 2013

In FTC v. Actavis, Inc., the U.S. Supreme Court rejected the “scope of the patent” test that has been adopted by the majority of courts of appeals in reviewing antitrust challenges to “reverse payment” settlement agreements; the Court held that such agreements must be analyzed under the rule of reason. No. 12-416, 2013 WL 2922122, at *14 (June 17, 2013). Parties wanting to settle patent infringement lawsuits under the Hatch-Waxman Act framework will need to pay much closer attention to the value received by the patent holder in exchange for any payment. The settling parties now carry the burden to demonstrate—with precious little guidance from the Supreme Court—that any consideration exchanged in the settlement has legitimate business justifications that are consistent with the antitrust laws. Moreover, antitrust plaintiffs may try to use the Court’s rationale in Actavis in matters arising outside of the Hatch-Waxman framework, such as cases involving other types of patent licensing agreements.

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