Reverse Payment Patent Settlements in the European Union and the United States

Posted by Social Science Research Network

Reverse Payment Patent Settlements in the European Union and the United States Damien Geradin (George Mason University) & Douglas H. Ginsburg (U.S. Court of Appeals for the District of Columbia Circuit)

Abstract: In recent years, reverse patent settlement agreements — whereby a patent holder pays or gives other forms of value to an infringer in order to avoid or to settle patent litigation — have raised considerable debate in the pharmaceutical field in both the United States and the European Union, with the antitrust authorities and courts reaching different conclusions as to their compatibility with competition rules. In the United States, the Supreme Court addressed this matter in the Actavis case, in which it determined that reverse patent settlements should be assessed under the “rule of reason.” In contrast, the European Commission in its Lundbeck decision considered that reverse patent settlements were per object restrictions of EU competition law and therefore the effects of such agreements did not need to be analyzed. This decision is, however, being appealed before the General Court of the EU. In its more recent Servier decision, the Commission has modified its approach as, while it declared that the reverse patent settlements in question were per object restrictions, it also demonstrated that these agreements had anticompetitive effects. Against this background, we contrast the approaches taken in the US and the EU with respect to reverse patent agreements, and assess which approach makes the most sense. We also address a number of important questions, which are being looked at by lower courts in the US and may also be relevant in the EU.