Antitrust implications of patent settlements involving reverse payments: Defending a rebuttable presumption of illegality in light of some recent scholarship

* Professor of Law and Director of the Intellectual Property Program, University of Florida Fredric G. Levin College of Law. I would like to thank, for their comments and criticism, William Adkinson, Daniel Crane, Lyrissa Lidsky, Lars Noah, and other colleagues who attended a faculty workshop at the University of Florida at which I presented an earlier version of this paper. Any errors that remain are mine. 1 See Roger D. Blair 8c Thomas F. Cotter, Are Settlements of Patent Disputes Illegal Per Sel 47 Antitrust Bull. 491, 517-20 (2002); Thomas F. Cotter, Refining the "Presumptive Illegality " Approach to Settlements of Patent Disputes Involving Reverse Payments: A Commentary on Hovenkamp, Janis a? Lemley, 87 Minn. L. Rev. 1789 (2003). For other discussions, see David A. Balto, Pharmaceutical Patent Settlements: The Antitrust Risks, 708 PLI/Pat 89 (JuneJuly 2002); Joseph F. Brodley & Maureen O'Rourke, Preliminary Views: Patent Settlement Agreements, 16 Antitrust 53 (2002); Yee Wah Chin & Thomas G. Krattenmaker, Antitrust Update, 2 Mergers & Acquisitions TaxJ. 30, 37-38 (2001); Daniel A. Crane, Exit Payments in Settlement of Patent Infringement Lawsuits: Antitrust Rules and Economic Applications, 54 Fla. L. Rev. 747, 752 (2002); Richard J. Gilbert 8c Willard K. Tom, Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later, 69 Antitrust L.J. 43, 74-79 (2001); Herbert Hovenkamp et al., Anticompetitive Settlement of Intellectual Property Disputes, 87 Minn. L. Rev. 1719 (2003); Jonathan M. Lave, Responding to Patent Litigation Settlements: Does the FTC Have It Right Yeti, 64 U. Pitt. L. Rev. 201 (2002); Thomas B. Leary, Antitrust Issues in the Settlement of Pharmaceutical Patent Disputes, Prepared Remarks Before the Sixth Annual Health Care Antitrust Forum, Northwestern University School of Law, Nov. 3, 2000, available at www.ftc.gov/ speeches/leary/learypharma.htm; Thomas B. Leary, Antitrust Issues in the Settlement of Pharmaceutical Patent Disputes Part II, 34 J. Health L. 657 (2001); Kevin D. McDonald, Patent Settlements and Payments that Flow the "Wrong" Way: The Early History of a Bad Idea, 15 Antitrust Health Care Chron. (ABA Section of Antitrust Law Newsletter) 2, 12-13 (2002); M. Howard Morse, Settlement of Intellectual Property Disputes in the Pharmaceutical and Medical Device Industries: Antitrust Rules, 10 Geo. Mason L. Rev. 359 (2002); Maureen A. O'Rourke & Joseph F. Brodley, An Incentives Approach to Patent Settlements: A Commentary on Hovenkamp, Janis & Lemley, 87 Minn. L. Rev. 1767 (2003); Carl Shapiro, Antitrust Limits to Patent Settlements, 34 RAND