it please the court appreciate the privilege of being able to argue this morning this case involved a unique settlement where the reversed payment actually made consumers better off because that was the only way to insure a competitive market for opon it yar from night two thousand and thirteen all the way until two thousand and twenty three because of this settlement impact is the only generic on that market today settlement without payment they proposed settlement with earlier date and rejected they were rejected by endo because endo think higher strategy with to remove it and any generic competitor from the market before there could be competition that's why it's not unusual case under ashes to its have a question about that a footnote forty three of the commission decision there is tension in the testimonium it sounds like you are negotiator testified and at least in the commission's view differently a trial then it is pretrial testimony and why isn't that just then a credibility determination especially on this issue of whether insisted on only a two thousand and thirteen entry date why isn't that a sort of credibility finding that we have on substantial evidence review we have to defer to your honor i think if the f t three were applying the proper test here and made a determination that there would have been an earlier entry we would be in a different situation all they say here is that theoretically there could have been an earlier entry and the record does not reflect that certainly and i'm not suggesting that you are and so and the l j findings they don't ask the right legal question well on that that's there is another something else i want to ask about and i agree with you that there's sort of seems to be a difference in what the legal question is on what's was necessary or on the final inquiry what's the least worst it was or a less restrictive alternative you seem to view it as would the parties have actually wanted to do a deal that had an earlier entry date could they it would they have agreed to that was a desirable of the parties the f t c seat more as was that a viable potential existing alternative the gist was out there what's your best authority for your view that it has to be you know would the parties have actually agreed to or desired to enter into this less restrictive alternative well  the to carry their burden on the left mr of alternative they have to show this is under the brown case and under city of to well me they have to show by a preponderance of the evidence that the alternative is liable for what they say and this is i think perhaps the most critical error in the case they say at the rd step of rule of reason they say well even if all of these competitors benefits were there even if we have say well we know that companies can always said no without reverse payments and therefore in this situation since endo with willing to settle without making a payment surely impact would have taken a settlement without a payment they don't actually show by a preponderance of the evidence that they alternative is viable because they don't even apply the right they flipped the bird and they burden to us show that in earlier settlement with impossible early and a little late depending on whose perspective you're looking at but as part of that negotiation part of the consideration was eight why since all of the other patents that endo had already started applying for which it then successfully kept everybody else out of the market so if you look at the but for world if impacts that continued litigating who won the patent case the a l j thing unlikely to have gotten in before two thousand and thirteen anyway because of the time it would have taken for the appeal to run but even if you say theoretically they could have gotten in a little earlier a couple of months earlier they would have then been kicked off the market after only to allow entry before two thousand and thirteen and why was that well because they were trying to do this product top where people would no longer want their product into the the product they were the reformulated drug that they were trying to and then they have another monopoly on that and some courts the nd circuit has said that product topping can be anti competitive and it's a little troubling to say well this is justified because because they want to make a better deal so that they can engage in priority to shift the market boat or allowing entry so this is a very different situation from a typical repayment case where a branding uplift says i plan to stay in this market for another ten years  what critical here i also just want to make a couple points about step one because i think the f t c also made a mistake when it said at step one the agreement actually have competitive that there a large payment that's not justified by goods and services or defrayed legal fees and if there is such payment then you have to go to rule of reason but that doesn't necessarily obviate the requirement to avoid having to do the balance thing i also think that there was a fundamental legal error at step one that conflicts with the activist determination and essentially try thursday once you have a large payment that's not justified by the two dollars factors that are in the opinion want to magically be competitive for purpose of the rule of reason if that were the case the supreme court would not have said we're there should have been an analysis of real anticompetitive effect that what what am ex tells you to do here you could have shown that in the real world the generic would in fact have the judgment about what was your read of all here that you also could have shown obviously that the payment for example with who are juror in a case then the generic could possibly have  cases have viewed be earlier entry date as a pro competitive benefit i think there's the eastern district of pennsylvania that district court is are there any others that if that is allowed that is a pr entry in an overt shelf is a pro competitive benefit it's not that they say that you can necessarily decide that that only pro competitive benefit but that it's certainly a pro competitive benefit and we had anticompetitive harm here the pro comparable arms are so overwhelming and again your honor the real issue here is and i think there's enough not evidence in this record for this court to make a judgement on its o settlements that include reversed payments the relevant antitrust question is what are those reasons if the basic reason is a desire to maintain and to share patent generated monopoly profits that in the absence of some other justification the antitrust laws are likely to forbid that arrangement your honor since there is nothing in this record suggesting that impacts had any rationale for this transaction for the acceptance of a reverse payment beyond a desire to share patent paper in this case is just off the table will ever be permitted i would say that your honour's i would say that activists plainly says that the rule of reason question is whether settling with the reverse payment leads to more other than a division of monopoly profits for example if the brand name if the generic company was providing a legitimate service for that money the money would be explained as something other than a monopolist exploiting its monopoly power to to extend its monopoly beyond what the merits of the patent would warrant in our brief we also mention another example which which is the instance which is a generic could argue in one of these cases that the money was actually vital to bringing the product to the market it's the example of a cast are generic so it generic might be able to claim that without the money it wouldn't have been able to develop the product to bring it to market and the commission if such an argument was made would have to consider those facts and determine whether or not that sort of explanation passes muster but mr lefkowitz at the beginning of his presentation here your honor conceded that in order to justify the reversed payment he would have to show reasonable necessity under this court's controlling reasoned decision in united states versus real realty multipass and what that what that decision said is whether where there is no argument that a restraint of trade is pro competitive on its own the defendants has the burden at the nd stage of the rule of reason to to demonstrate that the payment is both reasonably necessary and narrowly tailored to obtain the objectives here your hon the only objective that activist cites for this payment impacts sites for this payment is the desire to obtain a license to after acquire patents that as of the time of this transaction it was entirely speculative would have any benefit so so no the answer to the question is no it was not reasonably necessary to obtain the payment the only reason why it impacts preferred settling with the payment is that it was more profitable and your honor is that the efficiencies of this transaction have to be assessed at the time it was at and impacts the only pro competitive rationale as of the time it was entered is a license to hypothetical future patents and consider your honour's the other side of this transaction impacts was well aware at the time of this deal at the time of this transaction the license that they cake that they claim is pro competitive was unacceptable to them that means that for whatever the benefits that impacts claims flowed from this license they were outweighed by the benefits of continuing to litigate impacts his own expert at page eighty nine of the appendix makes quite clear what the framework is here if if a if a generic is going to be rejecting a settlement and litigate is because it believes it's going to receive earlier competition through that litigation and so here are the undisputed evidence if you're judging this transaction at the time of the agreement the only rationale for this agreement was anti competitive the citation of this license to after acquired patents was nothing but a pretext impacts could have obtained the very same patent license either way so if it so that the sixty four thousand dollars question is your honour's if this license was pro competitive why did impacts need to be paid off to take it all of the benefits it cites are based on post  analysis that the antitrust laws do not credit at the time of this agreement impacts had no idea st of all whether the patents would even issue impacts had no idea that federal courts would subsequently uphold those pat unsafe that's the only reason why impacts on the market it's an effect that impacts didn't foresee and let's not forget the elephant in the room here your honour's which is the following impacts is presently paying endo to stay off the market so so they cite the benefits of a the two thousand and ten settlement agreement your honour's but the two thousand and ten settlement agreement didn't even resolve the parties dispute in this case impacts and endos seven years after the settlement is now h settlement in which impacts is now the monopolist and is paying and doe not to compete if impacts wasn't paying off endo there'd be a competitive market so it's your honour's i submit beyond perverse earlier and she would undermine the product top why isn't that evidence that would give compelled looking clues in it would not have agreed to an earlier and treated well the the question under less restrictive alternatives could not possibly be is there an alternative that a monopolist would have been willing to accept the question under less restrictive alternative is if the parties are acting for a legitimate purpose rather than a monopolistic one could they have reached a viable settlement agreement and it goes back to the passage i lead with on page one hundred and fifty eight of activists that the parties to this agreement have to explain why they preferred settling with the payment than without one impacts proffers no justification here your honour's and if you can get to the parties can still settle these transactions without the use of the reverse payment and the dispositive question of their activists is what were the parties reasons for preferring to settle without the payment the all the x s only reason on this record for prefer to settle with the reverse payment is that it preferred to be paid off receive a cut of monopoly profits and contemporaneously the business evidence shows impacts with had its eyes wide open it knew if it accepted this deal the generic market entirely could be wiped out that's not a pro competitive rationale your honour's that's an anti competitive rationale so so it's that at stage three of the real reason what the commission did is it looked at and professor hovan can't by the way who who activists relied on in its in its opinion said that he what he said was to show a less restrictive alternative it has to be based either on relevant industry experience or fairly obvious and here the answer is  expert testimony shows that after activists the rate of reverse paid settlements is actually increasing not decreasing add in the vast majority settlements the parties are able to come to the table and said oh without a reverse payment to eliminate the risk of even earlier competition so so we know that and we also know from the admissions and impacts his birth ok impact has that impacts his brief admits that they could have gotten this license without the payment they just prefer to be paid off 's less restrictive you know whether it's feasible or not the parties are maybe actually disputing but i think that to me is clearly would be less restrictive than a new entry date but the f c c also says well impacts could have agreed the same agreement sa percent certainty led to a later entry date it's that a monopolist is using money to buy off the prospect of an earlier entry date so even without definitive proof that that the alternative settlement would have led to an earlier today it's by definition less anti competitive because it doesn't contain that payoff to prevent an earlier date but there's also the point that your honor mentioned which is that there is no no evidence in this record of of and as you put it it's a classic credibility assessment negotiator was not credible because he testified in his deposition he had no recollection whatsoever of whether he saw an entry date before two thousand and thirteen and he had no recollection of what endos reaction would have been so so they claim that this pa nt was necessary to to fill the gap again that appears to be pretax their impact has not cited any documentary evidence in this record of impacts ever seeking a settlement with it with an entry date and twelve but either way that's only an alternative argument because either way it simply does not matter because impacts it all goes back to what i started with they cite no reason why they prefer to settle with the reversed payment rather than settling without one other than a division of monopoly profits and that's what activists said the antitrust laws condemn i don't like to like to move on now and focus on this question of pro competitive the facts because it packs claims throughout their briefing such as professor holden camp and professor lemley and they said that the concessions that impacts has made in this litigation are unprecedented in the post activists case law because these cases your honor usually center on the question of what was the explanation for the payment could the payment be explained by something other than a division division of monopoly profits impacts vigorously can tested the purpose of the payment at trial they argued that these payments were not a payment for deferred competition had other they had other explanations well they conceded on their end of history to appeal to the commission they dropped that point they conceded it was a it was an anti competitive payment without without an explanation but the division of monopoly profits and on their appeal they concede the issue of market power so so so the perverse thing in taxes argument is they claim that the f t c somehow presume this transaction anti competitive right but they concede all of the fact that make the transaction anti competitive under activists mr lefkowitz his argument is that the f t c somehow needed to determine whether or not there would be entry on an earlier date and he lives principally on two cases he relies on the rd circuit's decision and smith kline the beecham versus king drug and he relies on the california's supreme court's decision inseparable both of those cases your honour's in fact hope the exact opposite of the proposition for which mr left huzzah cited them as we explained in our brief both of those cases explain that when when a monopolist is making a transfer of monopoly profits to induce a later entry date that on its own is enough to show that the transaction is anti competitive both of those cases your orders held that the plaintiff meets its prima fascia burden to show anti competitive effects by demonstrating that the payment cannot be explain anything other than a division of litigation costs as anything other than a transfer of monopoly profits that alone needs a prima fascia burden and we cite those cases quite clearly in our brief i'd like to entire settlement rather than the restraint of trade two of the cases the solid in case and the in the western case don't stand for that proposition they were merely those were merely evidentiary rulings a law allowing allowing expert case that i'd like to explain you know i'd like to explain why that decision was was incorrect st of all it's a decision in the eastern district of pennsylvania that's contrary to the governing circuit precedent in that used it i district because the rd circuit in in re lipitor or which is cited in our brief held that the defendants have the burden to justify at the nd stage of the rule the reason the rather large reversed payment and what the court held in  texas specialty physicians because it wants texas specialty physicians what the court held was the defendant needs to proffer a justification for the specific activities that are anti competitive cannot  simply proffer a justification for the agreement as a whole it has to explain why the specific activities identified by the court as being it's a competitive are in fact pro competitive  and the decision an in well putrid simply relies on a truism that well the contract was was negotiated as a whole therefore it has to be justified as a whole your honour's that simply can't be again it's  contracts as a whole if the defendant is trying to justify a restraint based on a separate provision in the contract and there's no argument that the restrain itself meaning the payment to prevent competition is justified the defendant has to explain again and mr leftwards can see that this is the beginning the defendant has to concede that the that the restraint is reasonably necessary and narrowly tailored to achieve the pro competitive balance and again there is no argument here that the restraint was in any respect the payment to stay off the market was in any respects reasonably necessary or narrowly tailored to do impacts his objective for competing that impacts accepted has led to more competition ben ben ben ben ben settling without the reverse payment it cites the benefits of this of this license all of the benefits of the license are based in hindsight including impacts paying its rival to stay off the market and based on everything that impacts knew at the time this transaction was unambiguous lianne take competitive it entered the deal and took cash for a transaction that it foresaw would decimate generic competition entirely and it citing a license that base the what it knew at the time would have been totally worthless if events had tried had played out as the parties had predicted they would so unless the court has any further questions i activists page one hundred and fifty eight it says look the parties may have reasons prefer verse well what are the reasons it seems to me that what the f c c is saying is that impact says essentially conceded that the only reason two thousand and twelve the exist it with request it and it was rejected in this case the payment with actually contingent here is what makes this case so shockingly different ultimately have to pay a lot of money to impact but it with totally contingent on them killing the market by more than fifty percent where elf you have a party to a monopoly rant sharers letting agreement agreed to an agreement kind of thing that the courts have now said does not allow you to be in that world of the munity you have to get into the rule of reason but in this situation the no way ga with net v a g with never even going to happen because the last thing endo would have ever done gotten the broad licenses it got if it had continued to litigate so this settlement if clearly better than any alternative settlement that could have happened in the real world they flipped the bird to say well it's our bird just show that denied an opportunity to show the real pro competitive benefits outweighed the yaquis competitive effect such that they might have been and that's where they made a mistake they short circuited the entire rule of reason