In my final post on reverse settlements I want to offer three thoughts that are more directly related to the legal question of how to treat reverse settlements under antitrust law.
First, it strikes me as odd that we scrutinize reverse settlements of Paragraph IV challenges differently than settlements of patent suits of non-drug, even non-health products. As Einer acknowledges in his Texas Law Review piece, nearly all patent litigation affects market structure and thus both the level of competition and the amount of consumer welfare (Elhauge and Krueger 2012). In each of those cases, because the public is not party to the litigation, settlements between patent holders and alleged infringers will – in theory and perhaps in practice – tend to hurt consumers. (The monopoly-duopoly wedge that gives rise to the problem of reverse settlements is by no means unique to the drug market.) Yet my patent law colleagues tell me there is no systematic review of non-drug patent settlements as is being urged of drug settlements in the FTC v. Watson case. It seems that under the FTC view, drug patents would be treated more harshly than other patents. I am not sure why that should be the case under antitrust law.
Second, the critical question in the antitrust litigation is the baseline against which reverse settlements are judged. Reverse settlements are only problematic under antitrust law if they extend patent duration or scope beyond some baseline. Should that baseline be expected duration with full litigation and no settlement – as critics of reverse settlements urge – or something else? For expected litigation to be the baseline, one has to assume that Hatch-Waxman modifies patent law and that patent duration after litigation is what is now required. I am not sure these assumptions are appropriate.