The Supreme Court’s Actavis Decision, Or Why Pay-for-Delay Litigation Just Got More Active
In this case, the Supreme Court considered an arrangement by which brand firm Solvay paid generics Watson (now Actavis) and Paddock roughly $30 to $40 million to delay entering the market with generic versions of testosterone gel. The Eleventh Circuit upheld the activity, concluding that “absent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.” The court explained that “[p]atent holders have a ‘lawful right to exclude others from the market’” and that a patent “conveys the right to cripple competition.”
The Supreme Court reversed the Eleventh Circuit, concluding that, while a valid patent allows a patentee to charge “higher-than-competitive” prices, “an invalidated patent carries with it no such right.” The Court recognized the policy encouraging settlements. But for five reasons, it found that that policy did not dictate immunity for pay-for-delay settlements.