The Charlie Series: Reverse Payment Settlements in Patent Litigation, Competition law and Consumers (Part I)

What about Charlie?

Part I

(Basic concepts)

  5306-vintage-wall-pattern-1366x768-abstract-wallpaper There are few who haven’t heard of Roald Dahl’s characters Willy Wonka and Charlie Bucket. Charlie Bucket is the young boy born to a penniless family while Willy Wonka is a famous chocolatier known for his unique chocolate inventions. People in Charlie’s town are fascinated by Wonka’s creations and would prefer his chocolates if they could afford to purchase them. Let us say, Wonka invents a type of dark chocolate gold bar unlike any other found in the market and obtains a patent for it. Soon, his dark chocolate bar is the most sought after bar among the other dark chocolate options available in the market. One year down the line, Wonka realises that Wilbur Chocolates the second greatest chocolate confectionery in town is about to release a similar product at a much cheaper rate making such chocolates more easily available to kids like Charlie. He files a suit for patent infringement. Wilbur Co. in turn decides to file a counterclaim challenging the validity of the patent. The mounting litigation costs force both Wonka and Wilbur to enter into a settlement wherein (1) Wilbur agrees to not enter the market till the patent term expires and (2) Wonka agrees to pay Wilbur millions of dollars. The two competitors may be happy, but the true question is: what about Charlie?

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