Hexetron claims glornox is protected by the '222 patent, which expires about two years from today. Hexetron makes $10B a year in revenues from glornox. The marginal cost is almost zero. Econopharm wants to manufacture glornox and files a paragraph IV certification challenging the '222 patent as invalid for being nonobvious (and there's a 50% chance a court will agree). The court's decision will come down very soon (after a bunch of money is spent on lawyers). Here are two possible settlements:

(A) Econopharm drops the challenge, and Hexetron will allow Econopharm to make glornox one year from today. Until then, Econopharm will refrain. Econopharm figures this path will give it $675M in additional revenue versus having to wait two years.

(B) Hexetron will pay Econopharm $675M for Econopharm to drop the challenge and to wait two years to market glornox. What's the difference between these two settlements? (Use your economics!) Should Hexetron offer and agree to either of these settlements? Should Econopharm? Should one party agree to neither and push forward with the litigation/challenge? Does it make any difference to overall societal welfare?

(X) The challenge never existed:

Econopharm gets $0; Hexetron gets $20B.

(Y) The challenge/litigation plays out:

Compared to (X): Econopharm expects to gain $675M (50% of $1.35B) less some legal fees; Hexetron expects to lose a bit less than $10B. You can call it $10B for simplicity. (Or you could say $9.325B: 50% of $20B is $10B, but it would get back about $675M in authorized-generic revenues, plus some legal fees.)