Reverse Payments In Patent Settlements – "Pay For Delay"?

It is a well established principle of competition law that a payment by one competitor to another competitor in return for the second competitor staying out of the market is anti-competitive. Whether that principle applies in the context of settlement of patent disputes is an issue which has recently been examined on both sides of the Atlantic.

Both the US Supreme Court, in the case of FTC v Actavis, Inc and the European Commission (the "Commission"), in its investigation into the dealings of the pharmaceutical company Lundbeck, have now ruled that settlements of patent litigation proceedings which involve the patent owner paying consideration to the alleged infringer and result in delay to the entry to the market of competing generic drugs may lead to serious infringement of competition laws.