LAW & ECONOMICS: PATENT – SETTLEMENTS – REVERSE PAYMENT – ECONOMIC ANALYSIS

Should Reverse Payment Patent Settlements Be Prohibited per se?

Valérie Meunier and Jorge Padilla give their view on the way reverse payment patent settlements (RPPSs) should be assessed by competition authorities. From an economic viewpoint, the authors raise pro-competitive effects RPPS may have on consumer welfare and consider that a per se prohibition is unfit for the assessment of such practices. A case by case analysis would be more suited to avoid false positives and would allow to better take into account effects on competition and consumer welfare.

1. Using the same competition test and counterfactual that has been used in the economic literature that is often cited to justify intervention against virtually all reverse payment patent settlements (RPPSs), we conclude that (1) RPPSs can benefit consumers and, therefore, it is wrong to presume that RPPSs are necessarily anticompetitive; (2) it is also incorrect to presume that RPPSs are by their very nature injurious to competition; (3) such a presumption is unjustified even for those involving reverse payments in excess of the originator’s expected litigation costs; (4) there is therefore no justification for treating RPPSs as per se illegal; (5) a case-by-case assessment of the effects on competition and consumer welfare of an RPPS that uses the expected date of entry as the

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Jorge Padilla, Valérie Meunier, Should Reverse Payment Patent Settlements Be Prohibited per se?, September 2016, Concurrences Review Nº 3-2016, Art. N° 80086, www.concurrences.com

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