TOWARDS AN EU DOCTRINE OF ANTICOMPETITIVE PATENT-RELATED LITIGATION

Simonetta Vezzoso, Trento University

4th Annual Conference on Innovation and Communications Law

University of Turku, Faculty of Law 

May 24-25, 2012

Background

• Competition/antitrust law and IP law: an evolving

relationship

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• well known topics: refusal to license, standard setting,

technological transfer agreements, etc.

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• Anticompetitive IP-related litigation doctrine (topic) rather

underdeveloped in the EU

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• Pharma sector inquiry: patent-related litigation part of a

«tool box» hampering entry by generics

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Outline

• Inquiry into the pharmaceutical sector: focus among others on patent-related litigation involving originator companies.
• Litigation as an abusive conduct: the ITT-Promedia Commission's decision
• 2006 AstraZeneca decision: IP-related litigation against generics companies as part of a comprehensive abusive conduct
• Italian 2012 Pfizer decision: vexatious litigation (also) as a stand-alone abuse under EU competition law.
• US/EU comparison

Doctrine of vexatious, IP-related litigation as abusive conduct: likely to acquire increasing importance in the EU, possibly beyond the pharmaceutical sector but it is still necessary to develop the “competition by innovation perspective”

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Notion of anticompetitive litigation

• Adjudicatory proceedings that have a negative impact on the working of competition processes
• Negative effect (1): from the outcome of the litigation before the judicial authority (e.g., a party is misleading the court in an attempt to secure a ruling that impairs competition on the market)
• Negative effect (2): the right of petitioning itself used as an anticompetitive tool (e.g., plaintiff is not motivated by a subjective expectation of success, but seeks to impose a collateral harm on the defendant and, by that, on competition)

Strict competition policy perspective

• Outcome/Tool: possible predatory use of adjudicatory procedures to achieve anticompetitive goals.
• "Abusive litigation represents (…) the most egregious form of non-price predation“, Richard Bork, The Antitrust Paradox: A Policy at War With Itself (1978)
• Non-price strategic tools aimed at foreclosing actual and potential competitors or, at least, at increasing their costs
• More attractive from the dominant firm's perspective than other types of exclusionary practices ("cheap" exclusion: relatively inexpensive to undertake)
• Fully-fledged economic analysis, taking into consideration the specific circumstances of the case

Do we really need such a doctrine?

• If anticompetitive patent-related litigation really exists, a reform of the patent/IP system should be called for

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• Competition policy intervention could be particularly difficult because of the undeniable complexity of most patent litigation cases

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• Protection of the fundamental right to have access to court (Art. 67(4) of the Treaty on the Functioning of the European Union: "the Union shall facilitate access to justice“; Art. 47 of the Charter of Fundamental Rights of the European Union: "right to an effective remedy and to a fair trial“): more caution is required than in other areas at the intersection of intellectual property and competition law

Pharma Sector Inquiry/1

• 2000: the EU Commission acknowledged its lack of decisions on the issue of abuses of dominant position by pharmaceutical companies; reference to the US experience for welcome guidance in this area
• IP MATTERS: New product development is made to rely heavily on the protection afforded by strong IP rights such as patents (profits flowing from the exercise of the exclusive rights granted by the patent regime)
• Still, Art. 102 TFEU issues: Makers of brand-name drugs employ a broad range of tools aimed at influencing market entry of manufacturers of corresponding generic substitutes

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Pharma Sector Inquiry/2

• Array of practices used by branded companies in order to prolong the life cycle of their prescription medicines for human use
• Tool-box: patent settlement agreements, patent related filing and litigation strategies, intervention and litigation by originator companies in administrative proceedings for generic medicines, etc.
• Questionnaires sent to originator and generic companies: patent litigation defined "as covering any type of court proceedings or other formal adversarial proceedings with the exception of patent opposition proceedings", in particular actions for infringement, for declaration of non-infringement, and for annulment

Pharma Sector Inquiry/3

• 698 separate litigation cases reported
• Number of patent litigations increased nearly fourfold between 2000 and 2007
• The most disputed pharmaceutical substance was the object of more than 100 patent litigations in several EU countries
• Analysis of the mechanisms by which the use of patent-related litigation can delay legitimate earlier generic entry, i.e. entry that is not in breach of the originator's patent rights

Pharma Sector Inquiry/3

• Two possible causes of delay: (1) the generic entrant's decision not to enter the market after the originator initiated infringement actions; (2) the sale ban on generic products pursuant to an interim injunction, thus hampering generic entry or causing a temporary exit

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• Consequences of a delay in generic entry: (1) the originator can continue charging the original price without losing market share, (2) the generic company suffers economic harm because it cannot enter the market for the prescription medicine in which the originator has enforced the patent through litigation (3) the delay harms the consumers who are being deprived of the choice of cheaper, off-brand medicine

Pharma Sector Inquiry/4

• Commission's Final Report: patent-related litigation is seen as one of the life cycle tools the originator company could resort to in order to delay legitimate market entry, either used on a stand alone basis, or in combination with other tools

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• No specific guidance as regards the competitive assessment of patent litigation under Article 102 TFEU

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FTC (US):

patent-related litigation in the pharmaceutical sector,

under certain circumstances, can have

serious anticompetitive effects

Vexatious Litigation under the ITT Promedia test

Two-part test employed by the Commission in assessing the claim of vexatious litigation under Article 102 TFEU:

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An undertaking in a dominant position brings an action

1. which cannot reasonably be considered as an attempt to establish the rights of the undertaking concerned and can therefore only serve to harass the opposite party and;
2. which is conceived in the framework of a plan whose goal is to eliminate competition

ITT Promedia/2

General Court: access to justice is a "fundamental right and a general principle ensuring the rule of law, it is only in wholly exceptional circumstances that the fact that legal proceedings are brought is capable of constituting an abuse of an dominant position within the meaning of Article 86 of the Treaty [Article 102 TFEU]“

Therefore, the two cumulative criteria employed by the Commission "must be construed and applied strictly, in a manner which does not defeat the application of the general rule."

AstraZeneca/1

• 2005- Commission’s Decision

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• 2010 - General Court upheld the Commission’s decision that AstraZeneca had abused its dominant position in violation of Article 102 TFEU by blocking or delaying market access for  generic versions of Losec, the commercial name of omeprazole

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• May 2012 - Advocate General Mazàk’s Opinion to the ECJ: GC’s ruling should be upheld

AstraZeneca/2

2005 Commission's decision

€ 60m fine on AstraZeneca for abuse of its dominant position in the market for proton pump inhibitors (PPIs)

1. a pattern of misleading representation before national patent offices and courts with regard to authorisation applications for the granting of Supplementary Protection Certificates (SPCs) under the EU SPC Regulation, which resulted in the delayed introduction into the generics market of AstraZeneca's successful drug Losec;
2. submission of requests for deregistration of the marketing authorisation for Losec capsules in Denmark, Norway and Sweden combined with the withdrawal from the market of Losec capsules and the launch of Losec MUPS tablets in those three countries.

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AstraZeneca/3

• Pattern of SPC-related litigations: Generic firms brought legal proceedings before the competent national courts in different member States with a view to invalidating the SPCs that AstraZeneca has previously obtained in those countries. In the context of these court proceedings AstraZeneca continued to make misleading representations in order to preserve its SPC protection.

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• However, first the Commission and then the General Court, declined to apply the ITT Promedia test to characterize AstraZeneca's litigation conduct.

AstraZeneca/4

• Court proceedings concerned "only incidentally", as the logical continuation of the exclusionary strategy based on misleading representations to patent agents and patent offices. Delays and costs suffered by competitors were a consequence of "the SPCs granted as a result of AZ’s misleading representations.“
• The costs and delays that AstraZeneca had inflicted on the opposing party, were "not the result of AZ's defence, but of AZ's initial misleading representations leading to the granting of SPCs.", as "AZ's conduct of its defence ( ….) was simply the continuation of the pattern of misleading representation initiated by AZ well before the competitors instituted proceedings."

AstraZeneca/5

• Commission concluded that it was not "necessary to consider whether, by itself, the conduct of a defence based on misleading representations could qualify as abusive on its own."

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• Had the test been applied, AstraZeneca could not have held "to have asserted [at the moment it made the misleading representations before the Courts] rights which it could reasonably have considered to be its own", since AstraZeneca "knew perfectly well" at that time that "Losec could have been launched (and indeed was launched) prior to 21 March 1988."

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AstraZeneca/6

While excluding the application of the ITT-Promedia test because of lack of direct causation between the conduct in court proceedings and the harm suffered by competitors, the General Court clearly confirmed the Commission's assertion that, at any rate, AstraZeneca could not have claimed that before the courts it had asserted rights which it could reasonably have considered to be its own. In fact, AstraZeneca knew of a specific circumstance (i.e. the date on which Losec was launched) invalidating those rights.

ITT Promedia would not have immunized this part of AstraZeneca's overall conduct from the application of EU competition law

Pfizer

Pfizer's overall conduct formed a strategy aimed at obstructing competition by generics.

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Artificial extension of the duration of patent protection beyond the expiring date of the basic patent due in 2009 through the filing of an application for a divisional patent and requesting a SPC in Italy. This created a state of legal uncertainty as to the possibility of legally marketing new generic products that delayed market entry by generics companies in the glaucoma eye treatment market. Pfizer's actions led to uncertainty as to whether the generics companies could legally market their own versions of the drug, as well as rendering commercialisation of the generic versions more expensive.

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Pfizer/2

• ICA’s theory of harm: comprises the allegation that Pfizer

made an instrumental use of judicial litigation aimed at discouraging

or making the sale of generics based on latanoprost more expensive.

• Seven civil proceedings pending before the specialised IP

chambers of the Courts of Milan and Rome against generics

company

Pfizer/3

• ICA: ITT Promedia test could be applied to the facts of the case in order to qualify the vexatious litigation in which Pfizer was involved as an abuse of a dominant position

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• relevant question: Pfizer able to claim that, before Italian courts, it had asserted rights which it could reasonably have considered to be its own.

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• Sufficient evidence to prove that this was not the case:�the filing of the divisional patent was instrumental, and Pfizer was perfectly aware of the fact that Xalatan's patent protection expired in September 2009

ITT Promedia v Noerr-Pennington and Walker Process

• direct influence of US antitrust law on the two-part test developed by the Commission in ITT-Promedia

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• Professional Real Estate Investors, Inc. v. Columbia Picture Industries, Inc. (1993): an "antitrust plaintiff must prove that the suit was both objectively baseless and subjectively motivated by a desire to impose collateral, anti-competitive injury rather than to obtain a justifiable legal remedy“

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• Walker Process Equip. v. Food Mach. & Chem. Corp: the proof that the patent holder "obtained the patent by knowingly and wilfully misrepresenting facts to the Patent Office" would be sufficient to strip it of its exemption from the antitrust laws."

EU v US/2

• No clear-cut competition immunity to petitioning in the EU as in the US

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• Similarities

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• Differences

Conclusion/1

• Doctrine of anticompetitive patent-related litigation in the EU already exists/to be further developed
• EU competition regime has greatly profited from the more than 50-year US experience in dealing with the issue of anticompetitive litigation. The direct and voluntary transplant of the "ready made" US rule has saved the time and costs of independently determining the content of a vexatious litigation doctrine in the framework of EU competition law

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• ITT Promedia possibly superior to the US doctrine?

Conclusion/2

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Moving on, the possible impact of IP-related vexatious litigation on the innovation dimension of competition, and not only on price competition, will need to be more carefully scrutinized

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E.g., AstraZeneca analysed a pattern of patent infringements directed at research based competitors

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