WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW VOLUME 15 NUMBER 3 SPRING 2015 ANTITRUST ANALYSIS AFTER ACTAVIS: APPLYING THE RULE OF REASON TO REVERSE PAYMENTS Benjamin M. Miller 382 ENFORCEABILITY OF EMPLOYMENT CONTRACT COVENANTS NOT TO COMPETE IN NORTH CAROLINA'S CHANGING BUSINESS ENVIRONMENT H. William Constangy 424 A BLUEPRINT TO MODERNIZE MAJOR LEAGUE BASEBALL'S ANTITRUST EXEMPTION IN LIGHT OF CITY OF SAN JOSÉ Eli Marger 475 HARRIS V. QUINN'S PARADOXICAL RELATIONSHIP WITH PAST UNION JURISPRUDENCE AND THE PATH TO THE FUTURE Ashley Brompton 513 OPRAH, BEYONCÉ, AND THE GIRLS WHO "RUN THE WORLD" - ARE BLACK FEMALE CULTURAL PRODUCERS GAINING GROUN D IN INTELLECTUAL PROPERTY LAW? Toni Lester 537 ABOUT THE JOURNAL The WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW is a student organization sponsored by Wake Forest University School of Law dedicated to the examination of intellectual property in the legal context. Originally established as the Wake Forest Intellectual Property Law Journal in 2001, the new focus and form of the Journal, adopted in 2010, provides a forum for the exploration of business law and intellectual property issues generally, as well as the points of intersection between the two, primarily through the publication of legal scholarship. The Journal publishes four print issues annually. Additionally, the Journal sponsors an annual symposium dedicated to the implications of intellectual property law in a specific context. In 2009, the Journal launched an academic blog for the advancement of professional discourse on relevant issues, with content generated by both staff members and practitioners, which is open to comment from the legal community. The Journal’s student staff members are selected for membership based upon academic achievement, performance in an annual writing competition, or extensive experience in the field of intellectual property or business. The Journal invites the submission of legal scholarship in the form of articles, notes, comments, and empirical studies for publication in the Journal’s published print issues. Submissions are reviewed by the Manuscripts Editor, and decisions to extend offers of publication are made by the Board of Editors in conjunction with the Board of Advisors and the Faculty Advisors. The Board of Editors works closely and collaboratively with authors to prepare pieces for publication. Manuscript submissions should be accompanied by a cover letter and curriculum vitae, and may be sent electronically to [email protected] or by mail to: Manuscripts Editor Wake Forest Journal of Business and Intellectual Property Law Wake Forest University School of Law P.O. Box 7206 Reynolda Station Winston-Salem, North Carolina 27109 COPYRIGHT © 2015 WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW ISSN 2164-6937 (Print) ISSN 2164-6945 (Online) BOARD OF ADVISORS DANNY M. AWDEH BARBARA LENTZ Finnegan Henderson Farabow Professor, Wake Forest Garrett & Dunner LLP University School of Law Washington, DC Winston-Salem, North Carolina CHARLES W. CALKINS JAMES L. LESTER Kilpatrick Townsend & Stockton MacCord Mason PLLC LLP Greensboro, North Carolina Winston-Salem, North Carolina JUSTIN R. NIFONG KENNETH P. CARLSON Olive Law Group Constangy, Brooks & Smith, LLP Cary, North Carolina Winston-Salem, North Carolina MICHAEL S. MIRELES TRIP COYNE Professor, University of the Williams Mullen Pacific, McGeorge School of Law Wilmington, North Carolina Sacramento, California RODRICK J. ENNS ALAN PALMITER Enns & Archer LLP Professor, Wake Forest Winston-Salem, North Carolina University School of Law Winston-Salem, North Carolina EDWARD R. ERGENZINGER, JR., PH.D. ABBY PERDUE Ward & Smith, P.A. Associate Professor, Wake Forest University School of Law Raleigh, North Carolina Winston-Salem, North Carolina JASON D. GARDNER Kilpatrick Townsend & Stockton COE W. RAMSEY LLP Brooks Pierce Atlanta, Georgia Raleigh, North Carolina STEVEN GARDNER T. ROBERT REHM, JR. Kilpatrick Townsend & Stockton, Smith, Anderson, Blount, LLP Dorsett, Mitchell, & Jernigan, Winston-Salem, North Carolina LLP ROB HUNTER Raleigh, North Carolina The Clearing House Payments SIMONE ROSE Company, LLC Professor, Wake Forest Winston-Salem, North Carolina University School of Law Winston-Salem, North Carolina Editor-in-Chief ANDREW W. POWELL Managing Editor REBECCA S. WINDER Manuscripts Editor Notes and Comments HANNAH NICHOLES Editors JOSHUA R. ADAMS Symposium Editor JEB S. VAUGHN BRINSON TAYLOR Executive Articles Development Editor Editors CAITLIN S. HALE JAMES P. MILLER Marketing Editor ASHLEY N. QUARANTA CHRISTINE CARR YORK BRAY TAYLOR Articles Editors Senior Notes and Comments Editor JINGBANG (REX) LI ERICA L. NAVALANCE SCOTT L. MCEVOY ALEXANDER R. TELARIK Editorial Staff DEREK M. BAST JORDAN R. DONGELL JOHN HODNETTE SAMANTHA B. BERNER ZACHARY K. DUNN DAVID C. HOPPER ASHLEY R. BROMPTON AUSTIN J. GRIFFIN M. RILEY PHILLIPS MELISSA C. BRYSON NATHANIEL C. HARRIS STEPHEN J. WHITE Staff Members ANDREW MCCLAIN ADAMS SARAH A. GALLAS EMILY G. MORRIS ISSAC B. ALLMAN DANIEL P. GALYON KATHERINE S. OTT MITCH BLANKENSHIP JAIME C. GARCIA TIMOTHY J. READLING ALEXANDRA C. BRAVERMAN JANE C. GARRITY JEANNA S. REVELL CAMERON J. BROWN DAVID GIFFIN ALEC C. ROBERSON KEES C. BURNS JOSEPH GREENER ELIZABETH RUOCCO BRITTANY P. COLTON CALEB J. HOLLOWAY JOHN I. SANDERS BRANDY L. DAVIS TYLER S. HOOD RACHEL M. SHIELDS MAGGIE H. DICKENS AFZAL KARIM JONATHAN D. SILVER CHRISTIAN C. DORISMOND COLIN T. KENNEDY EMILY A. SINGER ANASTASIA E. FANNING ELI M. MARGER TALIS TREVINO KAYLA M. FREDERICKSON TIMOTHY M. MCLISTER JAMES C. WYATT S. BLAYDES MOORE Faculty Advisors BARBARA R. LENTZ ALAN R. PALMITER ABBY PERDUE SIMONE A. ROSE WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW VOLUME 15 SPRING 2015 NUMBER 3 ANTITRUST ANALYSIS AFTER ACTAVIS: APPLYING THE RULE OF REASON TO REVERSE PAYMENTS Benjamin M. Miller† I. INTRODUCTION ............................................................. 384 II. BACKGROUND .............................................................. 388 A. THE HATCH-WAXMAN ACT AND REVERSE PAYMENT SETTLEMENTS ............................................ 388 B. ANTITRUST BACKGROUND—THE EVOLUTION OF THE RULE OF REASON ................................................ 390 C. BASIC ANTITRUST PRINCIPLES AS APPLIED TO REVERSE PAYMENT LEGALITY ................................... 393 III. ANALYSIS—WHAT FACTORS SHOULD THE COURTS CONSIDER? ...................................................... 395 A. MARKET POWER IS AN INDICATOR OF ANTICOMPETITIVE EFFECT ......................................... 396 B. THE AVAILABILITY OF LESS RESTRICTIVE ALTERNATIVES ........................................................... 398 C. PATENT VALIDITY IS A FUNDAMENTAL CONSIDERATION ......................................................... 401 1. The Reason Patent Validity Should Be A Factor .... 401 2. The Form of a Patent Validity Analysis .................. 404 3. Arguments Against Assessing Patent Validity Do Not Withstand Analysis ............................................. 406 4. How Patent Validity Affects the Rule of Reason Balancing .................................................................. 410 D. SIZE OF THE PAYMENT—A NOVEL TEST FOR REVERSE PAYMENTS .................................................. 411 † Benjamin M. Miller is a J.D. Candidate, May 2015, at The George Washington University Law School; he received a B.A. in Economics and a B.A. in History from the University of Virginia in 2011. He would like to thank the faculty of The George Washington University Law School, and in particular Professor William Kovacic for providing inspiration for the topic and Margaret Barone for her guidance through the writing process. 2015] ANTITRUST ANALYSIS AFTER ACTAVIS 383 1. What the Test Cannot Be ......................................... 412 2. What the Test Should Be ......................................... 414 E. PRO-COMPETITIVE JUSTIFICATIONS ......................... 420 IV. CONCLUSION .............................................................. 422 ABSTRACT In F.T.C. v. Actavis, Inc., the Supreme Court resolved a circuit split regarding the proper evaluation of reverse payment settlements under federal antitrust law, holding that they must be evaluated under a rule of reason analysis. However, the Court simultaneously created significant uncertainty by declaring that the lower courts were responsible for structuring the analysis. While a few cases are currently in the pre-trial phase, the only decisions relating to reverse payments since Actavis have been rulings on pre-trial motions—there have been no decisions on the merits. Given the intricate intersection between antitrust and intellectual property principles in these cases, the issue of how courts will structure the analysis is an area of substantial interest and uncertainty. This Article examines the minimal guidance provided by the Supreme Court in Actavis and traditional factors considered in other rule of reason cases to identify what elements courts should consider. Lower courts should analyze certain traditional factors, such as the market power of the settling parties, whether there are less restrictive alternatives, and any proffered pro-competitive justifications. After analyzing the relevance of each of these factors, this Article discusses how that factor weighs for or against the permissibility of a reverse payment. This Article further finds that courts must also analyze two additional factors that are closely related to reverse payments: (1)