FTC v. Actavis, Inc. (12-416)
argument 12-416FTC v. Actavis, Inc.
Supreme Court of the United States
1h 0m
5 speakers
8 chapters
transcribed 4 days ago
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What is the legal question about reverse payments in patent settlements?
We'll hear argument next uh this morning in case twelve four four four four four four sixteen, the Federal Trade Commission Commission versus activists. Mr Stewart?
Mr Chief Justice, and may it please the court. As a general matter, a payment from one business to another in exchange for the recipient's agreement not to compete is a paradigmatic antitrust violation. The question presented here is whether such a payment should be treated as lawful when it is encompassed within the settlement of a patent infringement suit. The answer to that question is no. Reverse payments to settle hatch waxman suits are objectionable for the same reasons that payments not to compete are generally objectionable. They subvert the competitive process by giving generic manufacturers an incentive to accept a share of their rivals' monopoly profits as a substitute for actual competition in the market.
Why why are payments not to compete different from let's say um uh dividing a market. I mean suppose there's a lawsuit somebody challenging the validity of the patent. And the patentee agrees to allow uh the person challenging the patent to have uh exclusive uh exclusive uh rights to sell in the area.
Does that violate uh the antitrust laws? I mean there are really two differences between that that scenario and the one presented here. The first is that an exclusive license is expressly authorized by the Patent Act in Section two sixty one of Title thirty five. But but the second thing is
No that that that doesn't impress me. What else? The
second thing is what's
your second
The second thing is that an exclusive license doesn't give the the infringement defendant anything that it couldn't hope to achieve by prevailing in the lawsuit. That is, if the at least any right to compete that it wouldn't get by prevailing in the lawsuit. If the infringement defendant won, it would be able to to sell wherever it wanted to. Now there may be some.
That's that's what it it wants is money. But but the So instead of giving the license to compete, uh, you know, we'll short circuit the whole thing. Here's the money. Go away.
But the point here is that the money is being given as a substitute for earning mu profits in a competitive marketplace. That is, in the Hatchwaxman settlement context, by definition, we have a disagreement by parties as to the relative merits of the infringement and andor validity questions as to the patent infringement suit. The brand name is saying its patent is valid and infringed. The generic is saying either that the patent is infringed Valid or that its own conduct won't be infringing or both. And if the generic wins, it will be able to enter the market immediately. If the brand name wins, it will be able to keep the generic off until the patent expires. And so in that circumstance, a logical subject of compromise would be to agree upon an entry date in between those two endpoints, just as the parties to a damages action would be expected to settle the case by
the defendant agreeing to pay a portion of the money it would have to pay if it lost that's a natural subject of compromise. And we don't have a problem because
Mr Stoart, do you do you have a a case in which uh the patentee uh Acting within the scope of the patent. has nonetheless been held Liable under the antitrust laws, yes. Something that is done. Acting within the scope of the patent.
Yes, if you adopt respondents' conception of what it means to act within the scope of the patent, and let me explain. When respondents say that the restrictions at issue here are within the scope of the patent, what they mean is that the goods that are being restricted are arguably encompassed by the patent, and the restriction doesn't extend past the date when the patent expires. That's all they mean. And and if that were the exclusive test, uh the defendants in Masonite, in New Wrinkle, in Line Material, they would all have been off the hook because all of those cases involved restrictions on trade in patented goods during the period that the patent was in effect, and yet the court found antitrust liability in each of these.
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Chapters
8 chapters
1
What is the legal question about reverse payments in patent settlements?
0:02–8:36
2
How do exclusive licenses differ from reverse‑payment settlements?
8:36–16:10
3
Why does the FTC consider reverse payments per se unlawful?
16:10–24:47
4
What is the government’s proposed test for evaluating these settlements?
24:47–32:16
5
How do the parties’ assessments of patent strength affect settlement terms?
32:16–39:09
6
What role does the 180‑day Hatch‑Waxman exclusivity play in the analysis?
39:09–46:15
7
How might Congress or the courts adjust the rule if it creates anticompetitive effects?
46:15–53:23
8
What are the broader antitrust implications of allowing or prohibiting reverse payments?
53:23–1:00:59