Reverse payment, also called pay-for-delay, is not an uncommon strategy in a settlement between a pharmaceutical brand-name patent holder and a generic patent challenger.
A reverse payment can be a cash payment from the patent holder to the challenger or a discounted compensation from the challenger to the patent holder. Other forms of reverse payment include noncash incentives, such as exclusive licensing or early entry to the market prior to the expiration of the patent at dispute. Regardless of the form of a reverse payment, proponents defend it for allowing both parties to avoid lengthy and costly litigation and remove uncertainties related to the dispute. Opponents, however, attack reverse payment as an illegal instrument to protect weak patents from invalidation and thus eliminate the risk of competition.
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