The Antitrust Division at the U.S. Department of Justice yesterday filed a brief that the Second Circuit asked for in a case involving "reverse payments" to settle a patent lawsuit. RPs let a brand name drug-maker delay or limit competition by a maker of a generic copycat. The brand name owner — who also holds a patent that relates somehow to the drug — sues the mimic for patent infringement but then settles by agreeing to pay the imitator! Hence the phrase "reverse payment".
The brief summarized its main thrust this way:
Private agreements that include reverse payments are properly evaluated under the antitrust rule of reason, which takes into account efficiency-related justifications as well as anticompetitive potential. The anticompetitive potential of reverse payments in the Hatch-Waxman context in exchange for the alleged infringer's agreement not to compete and to eschew any challenge to the patent is sufficiently clear that such agreements should be treated as presumptively unlawful under Section 1 of the Sherman Act. Defendants may rebut that presumption by providing a reasonable explanation of the payment, so that there is no reason to find that the settlement does not provide a degree of competition reasonably consistent with the parties' contemporaneous evaluations of their prospects of litigation success.
The brief went on to say that the test doesn't require proof of patent invalidity. The very fact of the reverse payments raises a presumption of illegality.