Impax Laboratories, Inc. v. Federal Trade Commission

Because settlement agreements that permit a “generic manufacturer to enter [a] patentee’s market prior to the patent’s expiration” increase competition, lower prices, and redound “to the consumer’s benefit,” this Court in FTC v. Actavis, Inc., 570 U.S. 136 (2013), explicitly “decline[d]” “to hold that reverse payment settlement agreements are presumptively unlawful”; instead, “the FTC must prove its case as in other ruleof-reason cases,” and courts must ensure that the inquiry is not “too abbreviated to permit proper analysis” into what matters most: a settlement’s actual effects on competition. Id. at 158-60. Despite these clear instructions, the Fifth Circuit here adopted an abbreviated form of review under which patent settlements effectively are conclusively unlawful anytime they convey “valuable consideration” from the brand to the generic—which is just another way of saying they contain a large reverse payment—and “replace[] the ‘possibility of competition [during the patent term] with the certainty of none’”—which is true of all patent settlements. App.17-18. Even more, and creating a textbook split with the Third Circuit, the Fifth Circuit held that the strength of the patents at issue is categorically irrelevant to the inquiry even when (as here) the patents have been deemed valid and infringed in separate litigation. The questions presented are: 1. Whether the presence of a “reverse payment” that exceeds a patentee’s saved litigation costs and the value of any services provided by a patent challenger suffices to render a patent settlement unlawful, despite this Court’s holding to the contrary in Actavis.