What is a reverse-payment?

California antitrust attorney Joseph Saveri defines reverse-payment.

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The terminology reverse-payment really comes from an intellectual property or patent dispute. In the ordinary situation, a company with a patent or an intellectual property right sues another company for violating that right, copying the product or taking the intellectual property. Usually in that situation, the company that violates the intellectual property right has to pay the company that owns the intellectual property right. That’s the payment. In these drug cases, the payment goes the other way and what ordinarily happens or what can happen is that in a – there is a dispute between a generic company and a branded company and instead of the generic company paying the branded company for taking or violating its intellectual property rights, the branded company pays the generic. The payment goes the other way. And so we call that a reverse-payment.

And one of the things we say in the context of these cases is that’s an indication that there is something anti-competitive and illegal going on that in contrast to ordinary intellectual property disputes, there’s money being changed hands for anti-competitive reasons. And that indicates that there is something going on that’s illegal, hence reverse-payment.