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The pharmaceutical market is closely related to public health. The risk of patent invalidation and monopoly of this market may be serious. In this sense, the Drug Price Competition and Patent Term Restoration Act, informally known as the Hutch Waxman Act, seeks to solve this problem, by encouraging generic drug manufacturers to challenge weak or invalid patent of brand named drugs so that consumers can enjoy the benefits of lower drug prices. In particular, filing paragraph IV patent certifications is a way to challenge a patent in court that deals with all IV certifications as an infringement litigation. As a result, the patentee has a strong motivation to settle with the challenger in the form of reverse payment patent settlements, also known as “pay-for-delay” agreements.

Anticompetitive damages due to such payment shall not be limited to the fact that the patentee has obtained unjustly competitive exclusive benefits from a patent that has not been definitely invalidated or infringed. The payment is expected to prevent the risk of competition. Other payment terms allow the general challenger to enter the market before the patent expires and allow competition in the interest of the consumer, but only reverse payment, including delay, keeps the prices at an excessive competitive level while dividing the rewards between the challenger and the patentee. In the situation of reverse payment, the owner of the patent is considered to have the authority to cause this anti-competitive damage. According to the explanation, a large amount of reverse payment itself usually suggests that the owner of the patent has serious doubts about the patent’s survival.

The reverse payment patent settlement is exempt from antitrust attacks so long as its anti-competitive effect is within the scope of patent exclusivity. In FTC v. Actavis, 570 U.S. 136 (2013), the U.S. Supreme Court held that the FTC could make an antitrust challenge under the rule of reason against the reverse payment patent settlements. The Court rejected almost irrefutable presumption known as the scope of patent examination. On the other hand, the court abandoned the “rule of reason” and refused to seek presumptive rule or a quick-look approach. Furthermore, exclusive licenses cannot be exempted from legal scrutiny under the antitrust law. In addition, the Court ruled that that no-AG agreement with unexplainable large transfer of value from the patent holder to the alleged infringer may be subject to antitrust scrutiny under the rule of reason. In the case of South Korea, the ruling could be referred to as the decision on the reverse payment patent settlement case, since it has an impact on the welfare of consumers, not on cash transfer or reverse payment.