Delayed entry settlements at the patent office

Hovenkamp, Erik; Lemus, Jorge

doi:10.1016/j.irle.2017.10.002

Cited by 8 publications

(3 citation statements)

References 8 publications

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“…The first is a so-called reverse 30 Pure delay settlements have become common in the pharmaceutical industry since pay-for-delay settlements were declared unlawful by the Supreme Court in 2013. See, e.g., Hovenkamp and Lemus [2018].…”

Section: Iii(ii)(e) Side Dealsmentioning

confidence: 99%

Antitrust Limits on Patent Settlements: A New Approach*

Hovenkamp

Lemus

2022

The J Industrial Economics

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Patent settlements between rivals restrain competition in many different ways. Antitrust requires that their anticompetitive effects are reasonably commensurate with the firms' expectations about (counterfactual) patent litigation. Because these expectations are private and non-verifiable, this standard is hard to administer; to date, it has been successfully applied only within a very narrow class of agreements. We show that it can be applied universally by policing the economic structure of the firms' contract. This approach determines whether settlement outcomes will be antitrust-compliant for any private beliefs the firms might have, thus avoiding the need to speculate about such beliefs. I. INTRODUCTIONALMOST ALL TRANSACTIONS OF PATENT RIGHTS, including ordinary licensing deals, are settlements in the sense that they are negotiated in the shadow of litigation: there is some probability that the patent would be deemed invalid (or noninfringed) by a court, in which case the patentee would have no right to exclude or restrain the other party's use of the invention. 1 Patent settlements between rivals ('horizontal settlements') have contributed to 'perpetual confusion and controversy since the inception of the [antitrust laws]' more than a century ago (Kaplow [1984]). In these deals, a patent monopolist and *We thank two anonymous referees, the Editor and discussants and participants at Northwestern's Searle Center,

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Section: Iii(ii)(e) Side Dealsmentioning

confidence: 99%

Antitrust Limits on Patent Settlements: A New Approach*

Hovenkamp

Lemus

2022

The J Industrial Economics

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“…Castanheira, Ornaghi, and Siotis (2019) demonstrate that generic entry typically lowers the quantity market share of the molecule losing exclusivity. Hovenkamp and Lemus (2018) empirically find that delayed entry settlements comprise a large majority of pharmaceutical settlements reached in the Patent Trial and Appeal Board and that nearly half of them were reached after the relevant patent claims were deemed “reasonably likely” to be invalid. The fact that higher industry profits may increase generic investment is also supported in the literature.…”

Section: Introductionmentioning

confidence: 99%

Reverse payments, patent strength, and asymmetric information

Manganelli

2020

Health Economics

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Reverse payments (pay‐for‐delay) are payments from an originator to a generic pharmaceutical producer to settle a potential litigation. In many jurisdictions, these payments are banned. This study shows that when the parties' investments are considered and the information about the patent strength is asymmetric, reverse payments increase both the possibility of generic entry and the litigation rate—both of which increase consumer surplus and do not necessarily delay generic entry. Reverse payments typically increase consumer surplus when the asymmetry between the parties is low, the competitiveness in the market is soft, and their size is small. Results suggest that a ban per se may be suboptimal.

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“…In Generation 3.0, brand firms exploit regulation in combination with pay-for-delay to prevent generics from entering the market. Similarly, Kesselheim and Darrow (2015) discuss current and emerging challenges with the Hatch-Waxman Act, whereas Hovenkamp and Lemus (2018) discuss how PTAB, a new venue to challenge the validity of a patent, has influenced firms' settlement decisions. Dickey et al (2009) shows that some of the conclusions in the analysis of pay-for-delay settlements change after including real-world complexities such as litigation costs, risk aversion, asymmetric information, time discounting, and cash constraints.…”

Section: Introductionmentioning

confidence: 99%

Pay-for-delay with Follow-on Products

Lemus

Temnyalov

2019

SSRN Journal

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We study pay-for-delay settlements between a patent holder and a challenger when the patent holder can introduce follow-on products. We show that ignoring follow-on products biases the inferred competitive harm of pay-for-delay settlements (the "Actavis inference"). The reason is that patent invalidation triggers an earlier introduction of follow-on products which changes pay-for-delay negotiation's payoffs relative to the case of no follow-on products. When follow-on products are ignored, we show that an inference based on a reverse payment over-estimates patent strength. If parties cannot use payments (as in pure-delay settlements), follow-on products may push the parties to settle on an earlier entry date relative to the entry date negotiated in the absence of follow-on products, and litigation may arise in equilibrium.

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Delayed entry settlements at the patent office

Cited by 8 publications

References 8 publications

Antitrust Limits on Patent Settlements: A New Approach*

Antitrust Limits on Patent Settlements: A New Approach*

Reverse payments, patent strength, and asymmetric information

Pay-for-delay with Follow-on Products

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