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The Actavis Inference: Theory and Practice

By  |  February 10, 2015

Posted by Social Science Research Network

The Actavis Inference: Theory and Practice–  Aaron S. Edlin (University of California), C. Scott Hemphill (Columbia University), Herbert J. Hovenkamp (University of Iowa) & Carl Shapiro (University of California)

Abstract: In FTC v. Actavis, Inc., the Supreme Court considered “reverse payment” settlements of patent infringement litigation. In such a settlement, a patentee pays the alleged infringer to settle, and the alleged infringer agrees not to enter the market for a period of time. The Court held that a reverse payment settlement violates antitrust law if the patentee is paying to avoid competition. The core insight of Actavis is the Actavis Inference: a large and otherwise unexplained payment, combined with delayed entry, supports a reasonable inference of harm to consumers from lessened competition.