THE PROXIMATE CAUSE REQUIREMENT IN PRIVATE REVERSE PAYMENT ANTITRUST LITIGATION

By Sarah H. Trela and Kenneth R. O’Rourke¹

I. INTRODUCTION

An unlitigated patent is a bit like Schrodinger’s cat:² until challenged and adjudicated, the patent arguably appears as though it is both valid and invalid.³ This ambiguity has led certain courts and legal scholars to observe that, at the time a reverse payment settlement is executed, the brand pharmaceutical company really owns a "probabilistic patent" that may or may not give it the right to exclude competition.⁴ In the context of private antitrust litigation involving reverse payment settlements, patent ambiguity has tempted some to substitute proxies or presumptions for actual proof of proximate cause. That will not do. Proximate causation is an element a private plaintiffs must prove in all cases; reverse payment settlements do not create an exception.

Following the Supreme Court’s 2013 opinion in FTC v. Actavis, Inc.,⁵ a government enforcement case, courts have split in how they approach the proximate cause requirement in private reverse payment cases. Several recent appellate and district courts have properly required proof that the patent supposedly blocking a generic’s entry is, in fact, invalid before finding that a reverse payment proximately caused any antitrust injury.⁶ Other courts have relied on a few select phrases in Actavis to eschew the causation element entirely, using the size of the reverse payment as a proxy for patent invalidity.⁷ But, Actavis was a Federal Trade Commission (FTC) enforcement action that did not require proof of actual causation.⁸ Thus, this latter approach is inapplicable in private antitrust cases because it imports the different and lighter standard from government enforcement actions into Clayton Act claims.

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Under the better approach to private reverse payment claims, the parties must open Schrodinger’s box and determine the cat’s welfare, rather than simply presuming the worst.

II. CAUSATION IN PRIVATE ANTITRUST LITIGATION

A. Proximate Causation Is an Essential Element

Private antitrust plaintiffs can maintain their damages claim under the Clayton Act only if they are injured "by reason of anything forbidden in the antitrust laws." 15 U.S.C. § 15(a) (emphasis added). Courts have interpreted this as a "proximate cause" requirement.⁹ In order to establish such a causal link between a reverse payment settlement and antitrust injury, a plaintiff must show that "if not for the challenged settlement agreement, there would have been earlier entry of generics into the market."¹⁰

This "but-for" world is necessary, because if a pharmaceutical manufacturer has a valid patent, it also has a protected legal right to exclude other market entrants throughout the patent term.¹¹ If a party with a valid, enforceable patent makes a reverse payment to a competitor in exchange for delayed entry before patent expiration, the reverse payment merely upholds that right and maintains the existing market conditions; it causes no further delay in generic entry or antitrust harm.¹² Thus, in order for a plaintiff to prove that the settlement caused delay that harmed competition, the plaintiff must establish the generic entrant could have and would have launched a competing product earlier without violating the brand’s patent—in other words, that generic entry in the but-for world would have been early and would not have infringed on a valid patent. "After all, if the launch were stopped because it was illegal, then the [plaintiffs’] injury (if it could still be called that) would be caused not by the settlement but by the patent laws prohibiting the launch."¹³

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B. Proximate Causation Unnecessary in Government Actions

On the other hand, the government has the authority to enforce antitrust laws directly, without the need to "satisfy the additional burdens imposed by" Sections 4 and 16 of the Clayton Act.¹⁴ The FTC must prove an antitrust violation, but does not need to prove actual harm (i.e., proximate causation) or actual damages resulting from the alleged violation.¹⁵ Consequently, the government need only prove that a defendant’s action is "likely to cause injury." 15 U.S.C. § 45(4)(A)(i) (emphasis added).¹⁶ This standard underlies the Supreme Court’s reasoning in Actavis, where Justice Breyer explained that the size of a reverse payment can serve as a proxy for the strength of a patent in assessing whether there is an antitrust violation:

[A]n unexplained large reverse payment itself would normally suggest that the patentee has serious doubts about the patent survival. And that fact, in turn, suggests that the payment’s objective is to maintain supracompetitive prices to be shared among the patentee and the challenger rather than face what might have been a competitive market . . . [so] the size of the unexplained reverse payment can provide a workable surrogate for a patent’s weakness, all without forcing a court to conduct a detailed exploration of the validity of the patent itself.¹⁷

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But even the Court in Actavis was not united: Chief Justice Roberts explained in dissent that, "settling a patent claim cannot possibly impose unlawful anticompetitive harm if the patent holder is acting within the scope of a valid patent and therefore permitted to do precisely what the antitrust suit claims is unlawful."¹⁸

C. Patent Validity Plays a Role in Analyzing Antitrust Causation

As Actavis indicates, the Court struggled with the fact that a patent’s validity is not known until it is litigated.¹⁹ While a patent application goes through an examination process, an issued patent is not unassailable. The California Supreme Court has stressed that a patent is not "ironclad," but simply gives "holders a potential but not certain right to exclude. . . . A patent is, in effect, a right to ask the government to exercise its power to keep others from using an invention without consent."²⁰

Courts confront a similar issue in deciding the threshold question of whether there is an antitrust violation at all, let alone whether the added causation element is present. As the Supreme Court explained in Actavis, even a reverse payment settlement regarding a valid patent can potentially violate the antitrust laws.²¹ Thus, to determine whether a particular reverse payment settlement violates the antitrust laws,²² courts apply the "rule of reason," requiring that courts balance a reverse payment’s anticompetitive effects against procompetitive benefits.²³ This includes, but is not limited to, an assessment of the patent. Notably, in Actavis the Court rejected the FTC’s suggestion that "reverse payment settlement agreements are presumptively unlawful." ²⁴ By contrast, the Court held that such "presumptive rules" were not appropriate because reverse payment settlements are not the type of activity where a "rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets."²⁵

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Courts have struggled to decide whether, under the rule of reason, it is appropriate to look beyond the day of the transaction in assessing these potential effects. As the court explained in Nexium, "[r]egardless of the absolute validity or invalidity of patents, business players make reverse payment decisions in an environment in which that validity has not yet been adjudicated. They take into account the risk of litigation and the possibility that patents may be adjudicated invalid or uninfringed."²⁶ Some find that the rule of reason analysis is restricted to the time of the settlement, and others assess the actual effect of the settlement as it played out in the market.²⁷

That debate relates to a separate issue that this article does not address: under what circumstances is a reverse payment settlement an antitrust violation at all (i.e., liability). Whether there is an antitrust violation does not speak to whether there is proximate causation—private antitrust plaintiffs must prove both.²⁸ Even courts that do not undertake an assessment of patent validity as part of the rule of reason to determine whether there has been an antitrust violation might take a different approach in assessing causation, applying a stricter standard that considers patent’s validity.²⁹ For this reason, it is important to isolate the causation analysis from the antitrust violation analysis. This article addresses only the causation issue.

III. MOST COURTS ASSESS THE UNDERLYING PATENT’S VALIDITY

In applying proximate causation, a building majority of courts—including both the First and Third Circuits, along with district courts in the Second Circuit—closely examine the validity of the underlying patent in assessing proximate cause. These courts have held that for there to be a finding of causation, the court must first find that the brand manufacturer’s "patent claims were invalid and the infringement actions against the Defendants would have failed."³⁰ These opinions properly distinguish between the private causation standard and the lower standard applicable in government enforcement actions.

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For instance, the Eastern District of Pennsylvania has stressed this point in both Wellbutrin and Apotex, stating that "although the Actavis Court stated that ‘it is normally not necessary to litigate patent validity to answer the antitrust question,’ that statement does not address a private plaintiff’s causation requirement nor does it preclude examination of the validity of the patent where necessary."³¹ Comparing government and private actions, the court further emphasized that while "it is understandable that an analysis of patent validity may normally be unnecessary in actions brought under the FTC Act," "the Clayton Act does demand such an analysis, and nothing in Actavis altered the Clayton Act’s causation requirement."³²

In Wellbutrin, the courts confronted claims by consumers who alleged that they paid inflated prices for Wellbutrin, an antidepressant, because the manufacturer, GlaxoSmithKline, entered into reverse payment settlements with generic pharmaceutical companies that allegedly prevented competing generic versions of the medication from entering the market.³³ The district court granted the defendants’ motion for summary judgment because a patent arguably prevented the launch of the generic’s product, so there was no proof that the settlement—"as opposed to an independent patent, prevented market entry."³⁴ The Third Circuit recently affirmed the district court’s holding, observing that the generic’s entry into the market was "effectively blocked by federal patent law."³⁵ It stated that Actavis was inapplicable to the private litigation, and noted that it cannot determine whether patent law would have allowed the generic to enter "without considering the merits of the underlying patent dispute."³⁶

The district court’s opinion in Wellbutrin was cited with approval by the First Circuit in Nexium, which similarly affirmed the requirement that there be "some evidence of the patents’ invalidity or non-infringement before allowing the plaintiffs to pursue an at-risk launch theory."³⁷ That case involved a settlement agreement between AstraZeneca, a brand manufacturer, and a generic manufacturer who agreed to delay launch of a generic acid reflux medication until a certain date in exchange for a license after that date.³⁸ But in Nexium, the plaintiffs did not present any evidence about the patent’s validity or strength, leading the district court to grant a judgment as a matter of law on any theory related to the patent invalidity.³⁹ When the plaintiffs subsequently attempted to argue causation, the court rejected their argument and affirmed summary judgment for AstraZeneca.⁴⁰ The First Circuit explained that because the plaintiffs did not present evidence that AstraZeneca’s patents were invalid, there was nothing "that would allow the plaintiffs to overcome the likelihood that AstraZeneca’s patents, not its reverse payment to [the generic], were the bar to a generic launch."⁴¹

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Under a somewhat different procedural posture, Apotex dealt with settlements from brand manufacturer Cephalon to several generic manufacturers related to a narcolepsy medication. The plaintiffs both brought antitrust claims and sought a declaratory judgment invalidating the relevant patent.⁴² The court separated the claims, beginning a patent trial on a separate track from the antitrust claims and ultimately finding the patent was invalid.⁴³ As the antitrust claims approached trial, Cephalon attempted to argue that the finding of invalidity was irrelevant to plaintiffs’ antitrust claims.⁴⁴ The court disagreed, concluding that "the prior patent ruling is highly probative in the context of Plaintiffs’ at-risk launch theory of causation" and admitting the evidence for that purpose.⁴⁵

This reasoning highlights why it is usually essential to determine a patent’s validity. Because "a valid and uninfringed patent would interfere with the plaintiffs’ chain of causation: a valid patent independently ‘preclude[s] competition’ apart from any agreement and an ‘at risk’ launch is unlawful absent a later finding of patent invalidity or non-infringement,"⁴⁶ it is inappropriate to use proxies or presumptions in place of an actual evaluation of patent validity. As the district court concluded in Wellbutrin, noting that "the Clayton Act’s ‘by reason of’ causation requirement cannot be satisfied by using the size of the payment as a proxy for patent strength and the success of the underlying patent litigation."⁴⁷

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The use of proxies as a substitute for proximate causation is inappropriate because "[w]hile the size of a reverse payment may have some relevance in determining how confident a litigant is in the strength of its case . . . it is far from dispositive."⁴⁸ The Third Circuit has affirmed this perspective, noting that "risk aversion makes it difficult to use the size of a settlement as a proxy for the brand-name’s likelihood of success in [patent] litigation."⁴⁹A successful private antitrust claim requires more than that anticompetitive conduct creates an increased risk of injury—it requires actual causation of injury.

It is not unusual for courts to need to determine a subsidiary legal issue before proceeding on to the main claim. For example, courts must "litigate patent validity in antitrust cases . . . when plaintiffs allege Walker Process fraud."⁵⁰ There is no more reason to short circuit the necessary additional analysis in the reverse payment context than there is in the Walker Process context. Even if litigating patent validity may make the antitrust claim more complex and consume additional judicial resources, that is an unavoidable consequence of the standard of proof for private litigants seeking treble damages.

IV. FEWER COURTS IMPROPERLY USE PROXIES FOR CAUSATION

Some courts—notably the Supreme Court of California and the District of Connecticut—have shied away from looking into questions about patent validity on top of already complex antitrust actions. These courts rely on select phrases in Actavis to skirt the requisite causation analysis and hold that, even in private plaintiff reverse payment cases, the parties need not litigate the validity of the patent. Some of these courts even expressly acknowledged that they were importing the standard from FTC enforcement cases to private actions. As the Aggrenox court explained in its clarifying order:

If private antitrust plaintiffs must fully litigate the validity of the patent anyway in order to show but-for causation, then Actavis‘s insistence that litigating the patent is not normally necessary to show that a large and unjustified reverse-payment settlement violated antitrust law would have no practical effect in private suits, and Actavis itself therefore would have no practical application except in suits by the government. That is not an impossible interpretation of the case—and it would act as a powerful brake to Actavis’s potentially disruptive impact in the world of pharmaceutical patent litigation—but I consider it dissonant with the decision’s reasoning and on the whole a very unlikely interpretation.⁵¹

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Courts that apply such a weak proximate cause requirement to analyze reverse payment claims typically highlight the "expected life" of the patent, maintaining focus on what the parties knew at the time of the reverse payment before the validity of the patent could be adjudicated.⁵² As such, they emphasize that consideration of reverse payment settlements "will not turn on whether the patent would ultimately have proved valid or invalid," but that "what matters is whether a settlement postpones market entry beyond the average point that would have been expected at the time in the absence of agreement."⁵³

The California Supreme Court offers a key example of this reasoning in Cipro. There, the plaintiffs brought claims related to brand manufacturer Bayer’s settlement payments to a generic manufacturer over rights to sell an antibiotic.⁵⁴ After (pre-Actavis) federal courts granted summary judgment for the defendants, Bayer sought summary judgment in state court as well.⁵⁵ While the trial and appellate courts affirmed summary judgment, the California Supreme Court applied Actavis and disagreed. It concluded that a plaintiff has established causation where the court applies the rule of reason and determines there is an antitrust violation because the settlement excludes competition beyond the "expected life" of the patent.⁵⁶ The "expected life" is the term of the patent discounted by the risk the patent will be found invalid.⁵⁷

The District of Connecticut followed Cipro in Aggrenox, where it dealt with the patent-owning brand manufacturer Boehringer’s settlement with would-be generic manufacturers of Aggrenox, a medicine used to lower the risk of stroke.⁵⁸ The court’s initial opinion declining to dismiss the antitrust claims relied heavily on its interpretation of Actavis‘s language regarding when it is unnecessary to litigate the patent’s merits.⁵⁹ After the defendants argued that the initial order conflated causation and liability, the court issued a clarifying order to reaffirm that while the plaintiffs must prove causation, Actavis limited the need to assess the actual patent in connection with that burden.⁶⁰ The court stated its agreement with the reasoning of Cipro and presented the anticompetitive harm at issue as the diminished "risk of competition."⁶¹ Notably, the clarifying order also granted a motion to certify the ruling on causation for interlocutory review. In so doing, it noted that "Actavis is a new Supreme Court precedent with clear potential for a disruptive effect on very large-scale litigation, and [] it provides limited guidance to the lower courts . . . the question that most clearly warrants review is the substantive standard of Actavis . . . what constitutes proof under Actavis of an antitrust violation and causation of antitrust injury."⁶² However, the Second Circuit declined to hear the interlocutory appeal.⁶³

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Where Aggrenox, Cipro, and other courts err is in treating an antitrust violation— which, as discussed above, is subject to the rule of reason—as synonymous with causation and injury. For example, in Aggrenox, the court stated that if plaintiffs prove that a "large and unjustified reverse payment . . . did effectively extend the life of the patent beyond its expected life in the absence of settlement; and [] a generic could have entered the market at that earlier time. . . . then the plaintiffs will have proved an antitrust violation and causation of antitrust injury."⁶⁴ But these are not the same inquiry; collapsing them buries the assumption that a generic could have entered the market only if the patent were invalid at that time. In private litigation, a presumption derived from the "expected life" of the patent cannot substitute for that proof about causation. Courts that maintain the strong proximate causation requirement for private reverse payment claims reach the correct conclusion that decisions like Cipro and Aggrenox incorrectly "relax Section 4’s causation requirement for the specific circumstance of challenges to reverse payment settlements."⁶⁵

V. ROLE OF REGULATION IN PATENT VALIDITY

Requiring courts to determine patent invalidity in order to find proximate causation is consistent with a robust line of case law holding that independent regulatory activity can be an intervening factor that cuts the chain of causation.⁶⁶ In the context of pharmaceuticals, this is commonly FDA regulatory activity, though it can also include patent law and other regulatory actions.⁶⁷ On reconsideration of the Nexium district court case, the District of Massachusetts, framed its task as assessing "whether a reasonable jury could find that [a generic defendant] would have overcome regulatory and other hurdles to enter the market before [the agreed date in the reverse payment settlement], if it had not entered its settlement with [a brand manufacture]. If [it] would not have overcome such hurdles, then these obstacles were independent causes of [the] delayed launch and thus break the causal chain between the [] Settlement and the Plaintiffs’ injuries."⁶⁸ The court found that, with respect to one generic, there was no evidence that the FDA would approve the generic’s product before the reverse payment period expired, and, even if it would have been approved, there was no evidence suggesting the generic would have risked the patent litigation that inevitably would have followed.⁶⁹

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Of course, not all regulatory action is "independent," and courts have found that the misuse of the patent process in order to prompt certain FDA action makes that action an insufficient barrier to causation.⁷⁰ This argument is not confined to the pharmaceutical antitrust arena; cases spanning many industries and areas of law have held that, if injury arises due to the independent actions of government regulators, there is no causation.⁷¹

VI. CONCLUSION

As recent appellate decisions have confirmed, private antitrust litigants must prove that a reverse payment settlement proximately caused their antitrust injury without resort to proxies or presumptions. This means that courts will need to assess whether a patent potentially preventing the generic from entering the market was or was not invalid. On the other hand, courts that extend the reach of Actavis ignore that Actavis considered claims by the FTC, which do not involve the same causation burden as private plaintiffs’ claims.

Unlike the indeterminate cat in Schrodinger’s hypothetical, courts are quite capable of resolving the parties’ differing perspectives about a particular patent’s validity, thereby avoiding the need to resort to probabilistic or paradoxical assumptions about the state of the patent. This approach is not only feasible; it is obligatory under the causation requirement of the Clayton Act.

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Notes:

^1. Kenneth R. O’Rourke is a partner in O’Melveny & Myers LLP’s Antitrust & Competition Practice Group. Sarah H. Trela is an associate in O’Melveny & Myers LLP’s White Collar Defense & Corporate Investigations Practice Group. This article reflects the views of the authors and not necessarily those of O’Melveny & Myers LLP, its attorneys, or its clients.

^2. Schrodinger’s cat refers to a hypothetical experiment by particle physicist Erwin Schrodinger. To paraphrase: a cat is sealed inside a closed box with a poison that will be randomly released. An observer can open the box and determine if the cat is alive or dead, but until this observation is made, the cat is in a state of "quantum superposition" and must be treated as simultaneously both alive and dead. See John D. Trimmer, The Present Situation in Quantum Mechanics: A Translation of Schrodinger’s ‘Cat Paradox’ Paper, Proceedings of the American Philosophical Society 124:5 at 323 (Oct. 10, 1980).

^3. Other patent observers have referenced the paradox of Schrodinger’s cat in discussing patent ambiguity prior to adjudication. See, e.g., Richard H. Stern, FTC v Actavis: Patent Validity, Schrodinger’s Cat and Reverse Payments, 35 Eur. Intellectual Prop. R. 743 (2013), Pablo Ibanez Colomo, GC Judgment in Case T-427/13, Lundbeck v. Commission: on Patents and Schrodinger’s Cat, ChillingCompetition.com, Sept. 13, 2016, https://chillingcompetition.com/2016/09/13/gc-judgment-in-case-t-47213-lundbeck-v-commission-on-patents-and-schrodingers-cat (discussing patent validity presumptions underlying a European Commission General Court judgment); Robert Plotkin, Software Patents Are Only As Dead as Schrodinger’s Cat, IPWatchdog.com, Oct. 6, 2014, http://www.ipwatchdog.com/2014/10/06/ software-patents-are-only-as-dead-as-schrodingers-cat/id=51549/ (analyzing uncertainty around software patents).

^4. See In re Cipro Cases I & II, 61 Cal. 4th 116, 143 (2015) (citing Mark A. Lemley & Carl Shapiro, Probabilistic Patents, 19 J. Econ. Perspectives 75, 88 (2005)). A reverse payment patent settlement, generally speaking, refers to the settlement of patent litigation in which a patent-holding brand pharmaceutical company pays the allegedly infringing generic manufacturer for a promise by the generic not to enter the market before a future date prior to patent expiration. There are variations, and this article does not focus on a specific definition or differing circumstances.

^5. FTC v. Actavis, Inc., 133 S. Ct. 2223, 2236—37 (2013).

^6. See, e.g., In re Wellbutrin XL Antitrust Litig., 868 F.3d 132, 169-70 (3d Cir. 2017); In re Nexium (Esomeprazole) Antitrust Litig., 842 F.3d 34, 64 (1st Cir. 2016); Apotex, Inc. v. Cephalon, Inc., 2017 U.S. Dist. LEXIS 87936, at *20-26 (E.D. Pa. June 8, 2017); In re Wellbutrin XL Antitrust Litig., 133 F. Supp. 3d 734, 764 (E.D. Pa. 2015); In re Actos End Payor Antitrust Litig., 2015 U.S. Dist. LEXIS 127748, at *84-85 (S.D.N.Y. 2015); In re Nexium Esomeprazole Antitrust Litig., 42 F. Supp. 3d 231, 265 (D. Mass. 2014).

^7. See, e.g., Cipro, 61 Cal. 4th 116; In re Aggrenox Antitrust Litig., 2015 U.S. Dist. LEXIS 94516, at *32 (D. Conn. 2015). But see Wellbutrin, 868 F.3d at 168 (summarizing amicus brief filed by a group of antitrust economists to explain why the size of a settlement is not a good proxy for a brand’s success in patent litigation).

^8. Actavis, 133 S. Ct. at 2236-37.

^9. Associated General Contractors v. Cal. State Council of Carpenters, 459 U.S. 519, 533—37 (1983); 2660 Woodley Rd. Joint Venture v. ITT Sheraton Corp., 369 F.3d 732, 740 (3d Cir. 2004); Sullivan v. NFL, 34 F.3d 1091, 1103 (1st Cir. 1994). See also Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 269 (1992) (antitrust injury must be proximately caused "by reason of" the antitrust violation); Ian Simmons, Kenneth R. O’Rourke, & Scott Schaeffer, Viewing FTC v. Actavis Through the Lens of Clayton Act Section 4, Antitrust 28:1 at 24 (Dec. 2013) (discussing the "by reason of" causation requirement in private antitrust actions for damages).

^10. Aggrenox, 2015 U.S. Dist. LEXIS 94516, at *32; Nexium, 42 F. Supp. 3d at 265, Wellbutrin, 868 F.3d at 164—65 (plaintiffs "must show that the harm they say they experienced—increased drug prices for [the brand drug] (and its generic equivalents)—was caused by the settlement they are complaining about.").

^11. See Actavis, 133 S. Ct. at 2231.

^12. See, e.g., Cipro, 61 Cal. 4th at 138 ("[I]f a patent were known to be valid, an agreement foreclosing competition no more than the statutory monopoly would not restrain trade beyond what federal law permitted."); see also Simmons, O’Rourke, & Schaeffer, supra at 9 (stating that "some form of patent analysis and litigation is necessary in private actions post-Actavis if the defense asserts that it was the branded company’s patents that foreclosed the generic company’s market entry."); Phillip E. Areeda & Herbert Hovenkamp, Fundamentals of Antitrust Law § 3.04[B] (rev. 4th ed. Supp. 2015) ("[A] plaintiff cannot be injured in fact by private conduct excluding it from the market when a statute prevents the plaintiff from entering that market in any event.").

^13. Wellbutrin, 868 F.3d at 165.

^14. See Brief of Federal Trade Commission as Amicus Curiae Supporting No Party, In re Nexium (Esomeprazole) Antitrust Litig., No. 12-md-02409-WGY, Doc. 00116958619 at 21 (1st Cir. Feb. 12, 2016).

^15. See Cal. v. Am. Stores Co, 495 U.S. 271, 295—96 (1990) (contrasting the government and private plaintiffs’ burdens); Nexium, 842 F.3d at 60 (explaining that "Private plaintiffs and the FTC as government enforcer stand in different shoes" and private plaintiffs "must therefore satisfy the additional evidentiary burdens"); Apotex, 2017 U.S. Dist. LEXIS 87936, at *26 n. 3 (noting that "[i]n antitrust cases, the FTC is held to a less stringent causation standard than private plaintiffs. As such, although the Actavis Court stated that ‘it is normally not necessary to litigate patent validity to answer the antitrust question.’ that statement does not address a private plaintiffs’ causation requirement nor does it preclude examination of the validity of the patent where necessary.") (citation omitted).

^16. See also Wellbutrin, 133 F. Supp. 3d at 764.

^17. Actavis, 133 S. Ct. at 2236—37.

^18. Id. at 2244 (Roberts, C.J., dissenting) (emphasis added).

^19. Id. at 2230—31.

^20. Cipro, 61 Cal. 4th at 143.

^21. Actavis, 133 S. Ct. at 2234—36.

^22. Courts have held that "[c]ertain agreements, such as horizontal price fixing and market allocation, are thought so inherently anticompetitive that each is illegal per se without inquiry into the harm it has actually caused." Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984) (emphasis added); see also Mark A. Lemley & Christopher R. Leslie, Categorical Analysis in Antitrust Jurisprudence, 93 Iowa L. Rev. 1207, 1213—15 (2008). This article does not address those cases, but focuses on the causation requirement for alleged reverse payment antitrust violations that are subject to the rule of reason analysis.

^23. Actavis, 133 S. Ct. at 2237—38; Wellbutrin, 868 F.3d at 160—61; In re Loestrin 24 Fe Antitrust Litig., 814 F.3d 538, 551 n.12 (1st Cir. 2016) (stating that Actavis did not "overhaul the rule of reason" in reverse payment cases); King Drug Co. of Florence, Inc. v. SmithKline Beecham Corp., 791 F.3d 388, 398 n.15 (3d Cir. 2015) (reverse-payment claims are subject to the "traditional, full-fledged rule of reason standard").

^24. Actavis, 133 S. Ct. at 2237. Such a presumption would shift the burden of proof to defendants to show that a reverse payment settlement had pro-competitive effects. Id.

^25. Id. at 2237.

^26. Nexium, 842 F.3d at 64.

^27. Compare, e.g., Apotex, 2017 U.S. Dist. LEXIS 87936 at *17 (holding that "the relevant rule of reason analysis is conducted on an ex ante basis, that is, as of the time the settlements were executed.") and Cipro, 61 Cal. 4th at 158—59 ("Agreements must be assessed as of the time they are made, at which point the patent’s validity is unknown and unknowable."), with Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 29 (1984) (requiring that plaintiffs prove under the rule of reason that an anticompetitive act "as it actually operates in the market, has unreasonably restrained competition.") (emphasis added) and United States v. Microsoft Corp., 253 F.3d 34, 95 (D.C. Cir. 2001) ("[P]laintiffs must show that [defendant’s] conduct unreasonably restrained competition. Meeting that burden ‘involves an inquiry into the actual effect’ of [defendant’s] conduct on competition.") (citation omitted).

^28. Nexium, 842 F.3d at 60; Atl. Richfield Co. v. USA Petroleum Co, 495 U.S. 328, 344 (1990).

^29. See Wellbutrin, 868 F.3d at 164—69, Apotex 2017 U.S. Dist. LEXIS 87936 at *26 ("[N]othing in the albeit limited case law suggests that the strict ex ante lens that applies to the rule of reason under Actavis must also apply to the question of causation.").

^30. Actos, 2015 U.S. Dist. LEXIS 127748, at *84-85, rev’d on other grounds, 848 F.3d 89, 98 (2d Cir. 2017). See also Wellbutrin, 868 F.3d at 169; Nexium, 842 F.3d at 64; In re Namenda Direct Purchaser Antitrust Litig., 2017 U.S. Dist. LEXIS 83446, at *61 (S.D.N.Y. 2017) (noting in dicta that while reverse payments may violate the Sherman Act, proving it will require, among other things, "the presence of ‘evidence suggesting that the settlement agreements did, in fact, delay generic entry,’ which will presumably require proof that the [] Patent would likely have been found invalid or not infringed by the Generic Competitors."); Valley Drug Co. v. Geneva Pharms., 344 F.3d 1294, 1310—11 (11th Cir. 2003) (rejecting a rule that reverse payments are per se anticompetitive because "[w]hen the exclusionary power of a patent is implicated, however, the antitrust analysis cannot ignore the scope of the patent exclusion").

^31. Apotex, 2017 U.S. Dist. LEXIS 87936, at *26 n. 3; see also Wellbutrin, 133 F. Supp. 3d at 764 ("[T]he FTC Act’s causation requirement is broader and more relaxed than the Clayton Act’s, no showing of proximate cause is required. Compare 15 U.S.C. 45(n) with 15 U.S.C. § 15(a). The hurdle, therefore, that independent regulation poses for causation under the Clayton Act is not necessarily present in FTC Actions.").

^32. 133 F. Supp. 3d at 764.

^33. Id. at 142.

^34. Wellbutrin, 133 F. Supp. 3d at 762—63.

^35. Wellbutrin, 868 F.3d at 165.

^36. Id. at 166 n. 58.

^37. 842 F.3d at 63. The relevant portion of the opinion focuses on plaintiffs’ post-trial appeal of a grant of summary judgment on causation issues. When the case went to trial, the jury found that although there was an antitrust violation, the violation did not cause any injury. Id. at 39.

^38. Id. at 42.

^39. Id. at 62-63.

^40. Id. at 63-64.

^41. Id. at 63 (citing In re Wellbutrin, 133 F. Supp. 3d at 767 ("the ‘patent served as an independent regulatory bar to [the generic’s] launch.")).

^42. 2017 U.S. Dist. LEXIS 87936 at *11-12.

^43. Id.

^44. Id. at *15-16.

^45. Id. at *26.

^46. Id.

^47. Id. See also Simmons, O’Rourke, & Schaeffer, supra at 9 ("But whatever the merits of using settlement amounts as surrogates for patent validity and scope, that shortcut should not apply in private actions.").

^48. Id.

^49. Wellbutrin, 868 F.3d at 168.

^50. Ian Simmons, Kenneth O’Rourke, & Stephen Mclntyre, The Continuing Relevance of Patent Validity in Reverse-Payment Litigation, Concurrences 2014:2 at 25, 27—28 (observing that "litigating patent validity in antitrust cases is old hat for U.S. courts" and that courts frequently determine supplementary legal issues in professional malpractice and sham litigation cases).

^51. Aggrenox, 2015 U.S. Dist. LEXIS 94516, at *33—34.

^52. See Cipro, 61 Cal. 4th at 159; In re Aggrenox Antitrust Litig., 94 F. Supp. 3d 224, 241 (D. Conn. 2015) ("The salient question is not whether the fully-litigated patent would ultimately be found valid or invalid—that may never be known—but whether the settlement included a large and unjustified reverse payment leading to the inference of profit-sharing to avoid the risk of competition."); In re Opana Er Antitrust Litig., 162 F. Supp. 3d 704, 720 (N.D. Ill. 2016) (denying a motion to dismiss and noting that "Defendants favor a rule that requires litigating the patents’ merits — at least in some abbreviated fashion — in order to determine whether the settlement violates antitrust law. But the Supreme Court in Actavis expressly disclaimed this line of analysis.").

^53. Cipro, 61 Cal. 4th at 159; see also Aggrenox, 2015 U.S. Dist. LEXIS 94516, at *37-38.

^54. Id. at 130-33.

^55. Id. at 133, 142 (observing that while interpretation of the federal Sherman Act is not dispositive of claims under California’s Cartwright Act, federal law is dispositive to the extent "its analysis establ ishes the metes a nd bou nds of patent law a nd pol icy.").

^56. Id. at 149-150, 158 n.19.

^57. Id. at 150.

^58. Aggrenox, 94 F. Supp. 3d at 236.

^59. Id. at 329-40 (dismissing defendants argument that resolving such a claim "required litigating the patents’ merits, at least in some abbreviated fashion, in order to determine whether a settlement violates antitrust law. That would be a logical (however impractical) way to avoid presuming either the patent’s validity or invalidity, but the Supreme Court expressly disclaimed it.").

^60. Aggrenox, 2015 U.S. Dist. LEXIS 94516 at *33-38.

^61. Aggrenox, 2015 U.S. Dist. LEXIS 94516 at *33-38.

^62. Id.

^63. See ECF No. 362, 3:14-md-2516 (2d Cir. Sept. 16, 2015).

^64. Aggrenox, 2015 U.S. Dist. LEXIS 94516, at *37-38 (emphasis original).

^65. Wellbutrin, 133 F. Supp. 3d at 765 n.45.

^66. Wellbutrin, 868 F.3d at 165 ("That a regulatory or legislative bar can break the chain of causation in an antitrust case is beyond fair dispute."); Wellbutrin, 133 F. Supp. 3d at 765 ("Where a regulation— such as patent law—precludes competition, that regulation cuts off the chain of causation.").

^67. See, e.g., Meijer, Inc. v. Ranbaxy Inc., 2016 U.S. Dist. LEXIS 120780, at *54-55 (D. Mass. June 16, 2016); In re Canadian Import Antitrust Litig., 470 F.3d 785, 791 (10th Cir. 2006) (holding that the lack of Canadian competition in the US prescription market "is caused by the federal statutory scheme adopted by the United States government, not by the conduct of the defendants"); In re Asacol Antitrust Litig., 2016 U.S. Dist. LEXIS 94605, at *24 (D. Mass. July 20, 2016) ("Even if [generic defendant] could have negotiated an earlier entry date, the lack of FDA approval today remains ‘the limiting factor’ in [generic defendant’s] ability to bring its generic drug to market.").

^68. Nexium, 42 F. Supp. 3d at 269-70.

^69. Id. at 272.

^70. In re Actos End-Payor Antitrust Litig., 848 F.3d 89, 98 (2d Cir. 2017).

^71. See RSA Media, Inc. v. AK Media Grp., Inc., 260 F.3d 10, 12-15 (1st Cir. 2001) (holding that there was no antitrust liability because the plaintiff "was not excluded from the market for outdoor billboards because of [defendant’s] threats; it was excluded because of the Massachusetts regulatory scheme that prevents new billboards from being built"); City of Pittsburgh v. W. Penn Power Co., 147 F.3d 256, 265 (3d Cir. 1998) (holding that plaintiffs’ alleged injuries resulted from ‘the realities of the regulated environment’ and not the defendants’ actions).