Antitrust and Unfair Competition Law

Competition: Fall 2015, Vol 24, No. 2


By Jordan Elias1

Justice Cardozo summed up the essential challenge of deciding cases with a single sentence: "There are gaps to be filled."2 Gap-filling best describes the judicial function that a unanimous California Supreme Court performed this year in its major antitrust decision in the Cipro reverse payment litigation.3 Confronting spaces in the law left by the U.S. Supreme Court in its own recent reverse payment decision—FTC v. Actavis, Inc.4—the California court elaborated at length on why reverse payment agreements must be treated as suspect under the rule of reason and how a reverse payment trial under the Cartwright Act5 must be structured.

The California Supreme Court’s Cipro decision is binding authority as to Cartwright Act claims in state and federal courts and, in my view, should also be persuasive authority for courts interpreting and applying Actavis. As one federal judge remarked, Cipro contains "one of the most thorough and thoughtful discussions of Actavis yet"; it explains "that ‘the period of exclusion attributable to a patent is not its full life, but its expected life had enforcement been sought,’ and that ‘[t]his expected life represents the baseline against which the competitive effects of any agreement must be measured.’"6

The authoritative guidance and reasoning in the Cipro decision should inform the prosecution, management and resolution of reverse payment claims, under California law and otherwise, for years to come.7 Where Actavis left questions, Cipro supplied answers grounded in existing antitrust principles and economic analysis, from the high court of the most populous state. And to the extent Cipro has a lasting effect on the contours of future reverse payment cases, and on antitrust law in general, it will be because the California Justices refused to dodge the issues that have made reverse payments such a conundrum.

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