Alimta: no such thing as a contingent abuse of process

This is a shorter version of an IPKat post, here.

It's worth taking a look at Actavis UK Ltd v Eli Lilly & Company [2013] EWHC 3749 (Pat), a decision of Mr Justice Arnold in the Patents Court, England and Wales, on 27 November 2013.

Eli Lilly held a patent for a cancer-treating drug, Alimta. Actavis wanted to market its own cancer-treating drug on the expiry of Eli Lilly's Alimta SPC and sought declarations of non-infringement in advance of that date. Actavis also wished this issue to be determined with respect to French, German, Italian and Spanish designations of the same patent in a single trial, and commenced two actions which the court said it had jurisdiction to deal with, ordering them to be tried together.

Eli Lilly served a defence, maintaining that Actavis had no locus standi to bring the proceedings because it had failed to comply with French and Spanish procedural requirements to give three months and one month's notice respectively before commencing proceedings. Actavis disputed that French and Spanish law applied, but in any event began two further actions to assist in addressing Eli Lilly's procedural arguments. Eli Lilly then applied to stay the later actions pending the trial in the earlier actions on the basis that they were an abuse of process because Actavis only commenced them in order to circumvent the French and Spanish procedural requirements. Eli Lilly's position was that a stay would be appropriate because (i) if the earlier actions were held to be ill-founded, the later actions would be an abuse of process, and (ii) if the earlier actions were held to be well-founded the later actions would be unnecessary.

Arnold J refused the application for a stay. In his view:

* Eli Lilly had not sought to strike out the earlier actions as a abuse of process, but argued that there would be an abuse of process in respect of the later actions if the earlier actions were held to be ill-founded. However, it was not proper for a court to stigmatise a claim as an abuse of process on a contingent basis. The problem arose by virtue of the earlier actions and the consequences in terms of lis pendens that those actions had.

* If Eli Lilly was right to say that the consequences of those actions being pending was to prevent it from raising the procedural objections that it wished to raise in the later actions, that was a natural consequence of the existence of the earlier actions -- not the consequence of bringing the later actions.

* Despite its apparent logic, Eli Lilly's application was logically incoherent. Even if the later actions were stayed, the court would not have deseized itself of those actions. Accordingly they would have lis pendens priority and would prevent actions being taken in France and Spain. If Eli Lilly was right that the earlier actions were ill-founded, and if it was right as to the consequences, it could raise its abuse of process objections to the later actions at that time.

FTC publishes comments on proposed information requests to patent assertion entities, just in time for Christmas!

In early October, the US Federal Trade Commission solicited public comments on proposed information requests to patent assertion entities engaged in licensing and asserting patents in the wireless communications sector. The broad study envisioned by the FTC would explore the following issues:

• How do PAEs organize their corporate legal structure, including parent and subsidiary entities?
• What types of patents do PAEs hold, and how do they organize their holdings?
• How do PAEs acquire patents, and how do they compensate prior patent owners?
• How do PAEs engage in assertion activity (i.e. demand, litigation, and licensing behavior)?
• What does assertion activity cost PAEs?
• What do PAEs earn through assertion activity?

Companies and individuals were given 60 days to provide their comments on the proposed collection of information. The FTC has now made these comments available, as a Christmas present for anyone interested in the matter. You can browse through the comments here - or you can just sit back, relax, and wait for PatLit to report on anything interesting hidden among the 68 submissions.

In the meanwhile, my colleagues and I would like to wish Merry Christmas to the readers that celebrate it, and a happy New Year to everyone. May 2014 be a year of peace, happiness, and exciting IP news for all of us!

Barcelona court allows filing of "protective letter" by alleged patent infringer

The following information comes via this blogger's friend and former Class 46 trade mark blogging colleague Ignacio Marqués Jarque (Abogado, IP/IT Baker & McKenzie Barcelona, S.L.P.). Ignacio writes:

The Commercial Court no. 4 of Barcelona has allowed the filing of the so-called “protective letters” issued by a potential defendant in a threatened patent litigation. The threatened company requested the Court not to grant ex parte interim relief (provided by Article 733.2 of the Spanish Code of Civil Procedure) in case the patentee so sought.

The case can be summarized as follows:

A pharmaceutical generics company received a warning letter from the patent holder alleging infringement of two of its European patents. In response, the generics company submitted a protective letter outlining to the Commercial Court of Barcelona the reasons why, in its opinion, the potential interim injunction request should be granted only after an oral hearing takes place (which is the usual procedure, as ex parte relief is clearly an exception).

The Court allowed the threatened company’s motion, stating that the submission of such protection could be "convenient and useful". On one hand, the protective letters would limit ex parte preliminary injunctions only in cases when this was truly justified. On the other hand, by means of this letter, the Court would be able to know the defendant's arguments in advance, which would enable speeding up the future decision on the preliminary injunction. The case would proceed much faster as the potential defendant would have had already appeared before the Court even before the infringement case had actually started (there would be no need to summon the potential defendant in its domicile).

As far as the proper legal nature of the motion at issue (protective letters as such are not foreseen in Spanish law), the Court underlined that it could be considered as an “act of voluntary jurisdiction” since the person requests the Court to intervene but such intervention is not related to any existing judicial proceeding. An imaginative solution!

Since protective letters are not expressly provided by Spanish law, the Commercial Court pointed out the following (limited) effects and requirements:

• The protective letter will only have effect if the application of ex parte interim relief is filed before the Barcelona Commercial Courts, and only for a period of six months;

• All future proceedings related to the matter will have to be assigned to the same Court before which the protective letter was filed;

• The protective letter has always to be notified to the patent holder or licensee having sent the warning letter, so that they can be aware of the competent Court once they decide to apply for a preliminary injunction;

• Finally, the Court highlighted the fact that, even if the protective letter is admitted, this does not exclude a future grant of provisional measures ex parte against the alleged infringer if all procedural requirements are met.

This ruling of the Commercial Court of Barcelona is significant since it is the first time a Spanish Court has dealt with protective letters. It sets out the conditions for a party to (try to) exclude an ex parte interim injunction against it. It is still to be seen if other Courts in Spain (outside Barcelona) take the same approach.

Ignacio thanks Revital Cohen for her assistance in preparing this piece.

When the taste of salts is bitter - AstraZeneca loses appeal in Nexium case

Yesterday, the US Court of Appeals for the Federal Circuit published its decision in the case of AstraZeneca v Hanmi, affirming the judgment rendered at first instance by the District Court for the District of New Jersey.

AstraZeneca holds the US Patents No. 5,714,504 and 5,877,192, which cover pharmaceutical compositions containing alkaline salts of esomeprazole, the S-enantiomer of omeprazole. In particular, AstraZeneca developed and marketed the brand drug Nexium, which contains the magnesium salt of esomeprazole as its active ingredient, for the treatment of gastroesophageal reflux disease and gastric acid related diseases. In 2010, Hanmi filed a New Drug Application with the US Food and Drug Administration for a product containing the strontium salt of esomeprazole, certifying, under 21 USC § 355(b)(2)(A)(4), that AstraZeneca's patents were invalid or would not have been infringed by Hanmi's product. The patent holder thus filed the present lawsuit, alleging patent infringement.

The Federal Circuit examined only one issue, namely whether the written description of the '504 patent limited the claim term 'alkaline salt' to a subset of specifically named salts, defined by six identified cations (Na⁺, Mg²⁺, Li⁺, K⁺, Ca²⁺, and N⁺(R)₄). After reviewing the history of AstraZeneca's patents, the court focused on Independent claim 1, which reads as follows:

A pharmaceutical formulation for oral administration comprising a pure solid state alkaline salt of the (-)-enantiomer of [omeprazole] and a pharmaceutically acceptable carrier.

The judges observed that, 'on its face and outside the context of the '504 patent', the term 'alkaline salt' used in Independent claim 1 would not be limited to the cations named above. However, they found that the written description of the patent limited the claim scope to those cations, introducing a clear disclaimer of any other acceptable salt, as held in the appealed decision. The written description and the abstract respectively indicate that:

[Description] The present invention refers to the new Na⁺, Mg²⁺, Li⁺, K⁺, Ca²⁺, or N⁺(R)₄ salts of the single enantiomers of omeprazole, where R is an alkyl with 1-4 carbon atoms, i.e. Na⁺, Mg²⁺, Li⁺, K⁺, Ca²⁺, or N⁺(R)₄ salts of (+)-[omeprazole] and (-)-[omeprazole], where R is an alkyl with 1-4 carbon atoms.

[Abstract] The novel optically pure compounds Na⁺, Mg²⁺, Li⁺, K⁺, Ca²⁺, or N⁺(R)₄ salts of (+)-[omeprazole] or (-)-[omeprazole], in particular sodium and magnesium salt form thereof, [...]

Reciting previous case law, the court noted that both the description and the abstract of the '504 patent 'clearly confine the invention to the six identified cations, disclaiming anything else' (see Honeywell v ITT and TG; see also Verizon Services v Vonage Holdings, for a case in which the court looked at the specification to find an implicit distinction between the invention and the prior art, and SciMed Life Systems v Advanced Cardiovascular Systems, where the specification limited the invention to a subset of the matter described by the plain language of the claim - both cases are reminiscent of Watts v XL Systems: '[o]ne purpose for examining the specification is to determine if the patentee has limited the scope of the claim'). This conclusion, according to the decision, is reinforced by the fact that the patent applicant conspicuously and consistently referred to only certain members of the class of substances which were potentially suitable for forming a salt with esomeprazole, and specifically to the six cations named above. The reiterated use of this subset of cations, coupled with the language of the description and abstract, 'conveyed a clear and definitive meaning that [AstraZeneca] was disclaiming other members of the class - like Hanmi's chosen strontium'.

The court dismissed three additional arguments raised by the patent holder. The first concerned the 'exemplified' language used in one sentence of the written description ('Alkaline salts of the single enantiomers of the invention are, as mentioned above, beside the sodium salts [...] and the magnesium salts [...], exemplified by their salts with Li⁺, K⁺, Ca²⁺, or N⁺(R)₄ [...]'): the court found that the passage does not clearly affirm the intent to treat all the six cations as mere examples, and cannot be read as a denial of the clear disclaimer language mentioned above. The second argument focused on the prosecution history, but the judges could not identify any statement or data pointing to other salts beyond those identified in the written description. Finally, AstraZeneca sought to rely on claim differentiation, alleging that each independent claim reciting an alkaline salt has a dependent claim that differs only by the addition of 'wherein the alkaline salt is a Na⁺, Mg²⁺, Li⁺, K⁺, Ca²⁺, or N⁺(R)₄ salt'. The court swiftly dismissed this final argument, noting that 'the doctrine of claim differentiation does not [...] override clear statements of scope in the specification' (reciting The Toro v White Consolidated Industries - see also Retractable Technologies v. Becton, Dickinson & Co.).

Confirming the district court's construction of the term 'alkaline salt' in the '504 patent, the Federal Circuit affirmed the judgment of non-infringement rendered at first instance. In spite of the outcome of the case, AstraZeneca acknowledged that the launch of Hanmi's esomeprazole strontium product is unlikely to significantly affect sales of Nexium, as the former 'is not AB-rated [a designation which certifies that a generic drug meets the necessary bioequivalence requirements and is considered to be therapeutically equivalent] and is not automatically substitutable for Nexium'.

Fighting patent trolls by targeting their lawyers? Nebraska's homemade solution backfires!

On 5 December, the United States House of Representatives passed the Innovation Act, a piece of legislation meant to deal with patent trolling phenomena. The Act contains a number of measures ranging from disclosure obligations to fee shifting provisions, rules on discovery, customer-suit exception, etc - a nice recap of the Act is available here. In the past few months, however, there have been some 'homemade' attempts to limit the proliferation of patent trolling. For example, earlier this year, the Vermont Attorney General brought suit against the patent assertion entity MPHJ Technology Investments LLC under the Vermont Consumer Protection Act, § 2451 et seq., alleging that the company had engaged in unfair and deceptive acts. According to the complaint filed by the Attorney General, the demand letters sent by MPHJ to many small businesses and non-profit organizations in Vermont, in which the company had alleged infringement of its patents and threatened to sue the recipients, contained false, misleading and deceptive statements.

Another interesting homemade solution, and the subject of this post, consists in the use of cease and desist orders against the law firms that sent patent license solicitation letters on behalf of patent assertion entities. This strategy was employed, among others, by the Nebraska Attorney General, Mr. Jon Bruning, who had already voiced his deep concern over patent trolling:

Businesses that have used, developed, or sold established technologies are often caught off-guard by such threats. [...] Patent trolls make egregious threats with little or no valid legal purpose to gain fast money. It is a top priority of our office to protect Nebraska consumers and businesses from this sort of baseless harassment.

Nebraska AG, Jon Bruning

On 18 July, the Office of the Nebraska Attorney General filed a cease and desist order against the Farney Daniels law firm, which had sent demand letters to companies in Nebraska, on behalf of MPHJ. The order enjoined the law firm from initiating new patent infringement enforcement efforts within Nebraska, pending an investigation on the alleged violation of the Nebraska Consumer Protection Act, § 59-1601 et seq., and the Uniform Deceptive Trade Practices Act, § 87-301 et seq. A Civil Investigative Demand, submitted with the order, required the law firm to submit information about the infringement allegations made against any individual or entity within the State of Nebraska.

In August, Activision TV Inc., a client of Farney Daniels, filed an Amended Complaint in the on-going patent infringement action against Pinnacle Bancorp Inc., pending before the United States District Court for the District of Nebraska. The plaintiff added Jon Bruning (and two of his employees) to the list of defendants, seeking declaratory judgment that neither Activision, nor its representatives and counsels, violated any Nebraska state laws related to unfair competition and deceptive trade practices. Activision strenuously argued (i) that the company was not a patent assertion entity, (ii) that the letters sent by Farney Daniels to potential infringers, on its behalf, did not contain any false, misleading or deceptive statements, and (iii) that the cease and desist order had been issued before conducting a thorough investigation. It also maintained that the order violated Activision's First Amendment rights, preventing it from hiring the counsel of its choice (other arguments concerned the violation of the Fifth and Fourteenth Amendment rights to due process, the preemption of state law by federal law, and the applicability of the Noerr-Pennington doctrine). Soon after filing the amended complaint, Activision submitted a motion for a preliminary injunction, asking the court to permanently enjoin the Nebraska Attorney General from enforcing the cease and desist order.

Ruling on the motion, the court held that Activision had standing to raise constitutional issues, finding that the plaintiff suffered an injury directly related to the order issued by Jon Bruning. Judge Bataillon observed that the order prevented Farney Daniels from (i) representing Activision in the pending lawsuit, (ii) pursuing further investigations on behalf of the plaintiff in Nebraska, (iii) negotiating settlements with alleged infringers and actual defendants.

The court examined in detail the argument concerning the compatibility of the cease and desist order with Activision's rights protected under the First Amendment ('Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances'). Reciting Weaver v Bonner, and other case law on prior restraints of speech, it noted that a cease and desist order does not meet the threshold of constitutionality when it 'prohibits future statements which, although possibly similar to prior statements, have not yet [been] found to be false, misleading, and deceptive'. In this perspective, the judge severely criticized the steps taken by the Office of the Nebraska Attorney General, observing that the cease and desist order issued against Farney Daniels was akin to a forbidden prior restraint of speech and association:

The court is deeply concerned about the ability of the Attorney General to issue cease and desist orders, prior to the conclusion of the investigation, prior to any negative findings, prior to any hearings, and prior to permitting submission of documents and evidence by the Farney Daniels law firm. On the contrary, the Attorney General sent a request for information to Farney Daniels the same day it sent the cease and desist order, and gave Farney Daniels until August 18, 2013, to respond. Farney Daniels responded, and no further actions have been taken. The inability of Farney Daniels to submit such letters to businesses in Nebraska clearly infringes on the First Amendment rights of Activision to be represented by the counsel of their choice.

This conclusion followed the teaching of Globetrotter Software Inc. v Elan Computer Group Inc., where the Federal Circuit clarified that the First Amendment, as well as federal preemption and the Noerr-Pennington doctrine, prevent the imposition of state-law tort liability for allegations of patent infringement made by the patent holder in good faith. In particular, the Federal Circuit held that 'to avoid preemption [by federal patent laws], bad faith must be alleged and ultimately proven, even if bad faith is not otherwise an element of the tort claim', as a patent holder 'that has a good faith belief that its patents are being infringed violates no protected right when it so notifies infringers'. The court mentioned several cases which applied Globetrotter in the context of actions brought against patent holders under state laws.

In light of these findings, Judge Bataillon concluded that Activision, in the absence of claims or evidence of bad faith, was likely to win on the merits, sustaining the plaintiff's arguments concerning federal preemption and violation of First Amendment rights. The court, evaluating the other Dataphase factors governing preliminary relief, found that (i) Activision had shown a sufficient threat of irreparable harm, (ii) the balance of harm tilted in favor of the plaintiff, and (iii) the public interest 'is served by enforcing the Constitution'. Therefore, the District Court for the District of Nebraska granted the motion for a preliminary injunction, enjoining the Nebraska Attorney General from enforcing the cease and desist order 'in any manner that would prevent or impede the Farney Daniels firm from representing Activision in connection with licensing and litigation of U.S. patents owned by Activision with respect to companies based in, or having operations in, Nebraska'. The judge added, however, that if 'at some point during the investigation evidence supports a claim of bad faith, the Attorney General is free to revisit this preliminary injunction with the court'.

On 8 November, MPHJ filed a Complaint in Intervention in the same lawsuit, essentially seeking to obtain an analogous preliminary injunction. Just a couple of weeks later, Jon Bruning announced his intention to withdraw the cease and desist order issued against Farney Daniels. Although Nebraska's homemade remedy did not reach its goal, it appears that concern over misleading and deceptive demand letters is at the core of the Innovation Act, which introduced specific provisions aimed at increasing the transparency of such letters (e.g. inserting a new subsection (c) in 35 USC § 284, which prevents a claimant seeking to establish willful infringement from relying on evidence of pre-suit notification of infringement, unless that notification precisely identified the asserted patent, the product or process accused, and the ultimate parent entity of the claimant, explaining how the product or process infringed the asserted patent). According to the Act,

It is the sense of Congress that it is an abuse of the patent system and against public policy for a party to send out purposely evasive demand letters to end users alleging patent infringement. Demand letters sent should, at the least, include basic information about the patent in question, what is being infringed, and how it is being infringed. Any actions or litigation that stem from these types of purposely evasive demand letters to end users should be considered a fraudulent or deceptive practice and an exceptional circumstance when considering whether the litigation is abusive.

IP and competition law - 'We have been up to the challenge so far', says the EU Commission

It has been a busy week for Joaquin Almunia, Vice President of the EU Commission, and the DG Competition. At the IP Summit 2013, held in Paris from 9 to 11 December, Almunia (speech available here) examined the crossroads between IP and competition law and the Commission's policy on the matter, both from a general perspective and in light of some recent cases. The Commissioner highlighted the growing importance of IP for the economies of the EU member states, noting that it plays a fundamental role in ensuring that companies compete on the merits and invest in research and innovation. In this perspective, he concluded that the EU Commission has been up to the task of preventing abuses of the IP system, in the exceptional cases in which it conflicts with competition law:

[C]ases involving IP are also likely to remain on our radar. Although the intersection of competition and IP can be a very challenging spot, I believe that we have been up to the challenge so far. Our laws have proved to be sufficiently flexible to take into account a range of different market characteristics. Overall, our enforcement record shows that IP cases are rare and that we tread very carefully. However, our record also shows that IP is not immune from competition law scrutiny and that we will continue to intervene if necessary.

In his speech, Commissioner Almunia made it clear that antitrust authorities should normally refrain from interfering with IP rights, intervening 'only when the IP rights are abused or used as a cover-up for anti-competitive practices - which is clearly the exception, not the rule'. Among the cases warranting this exceptional intervention, Almunia first mentioned the refusal of a dominant undertaking to license its intellectual property rights, which constitutes an anti-competitive behavior when it prevents a third party from entering the relevant market and eliminates effective competition in the market, as taught in Magill, IMS Health and Microsoft. Similar anti-competitive effects may derive, according to the Commissioner, from patent ambushes in the standard-setting context (Rambus), as well as from the use of injunctions during the negotiations leading to the licensing of standard essential patents on F/RAND terms (Samsung, see PatLit post here). Examining the latter issue, he stated that injunctions should not be awarded against a willing licensee, adding that standard-setting organizations are expected to implement appropriate rules to this aim. If this is not going to happen, however, Almunia clarified that the Commission is 'willing to provide clarity to the market through competition enforcement'.

Assessing competition law issues arising in mergers, the speech briefly mentioned the cases of Google's acquisition of Motorola (here) and Microsoft's acquisition of the mobile-phone division of Nokia (here). Both cases, however, did not give rise to significant anti-competitive concerns, as Motorola's essential patents remained subject to their original F/RAND commitments, while Nokia retained its patent portfolio and the licensing commitments already made to the standard-setting bodies (although he was quick to add that '[i]f Nokia were to take illegal advantage of its patents in the future, we will open an antitrust case - but I sincerely hope we will not have to').

Almunia also referred to the new draft Technology Transfer Block Exemption Regulation, which contains rules aimed at encouraging the creation of patent pools, seen as a viable antidote to patent thickets and as a pro-competitive mechanism for the licensing of SEPs. The Commissioner promised to keep an eye on the rise of patent assertion entities, although 'they have been less active in Europe than in the US'. Mentioning the competition law issues encountered in the investigation on Google's scrapping practices, he noted generally that 'it is important to realise that competition-law tools have their limits [as they] cannot be a panacea for issues that relate solely to the nature of IP protection'.

Surveying the potential anti-competitive effects of patent settlements in the pharmaceutical sector, Almunia recalled the recent case of Lundbeck and the on-going investigations against Servier, Cephalon and Teva. Further, he observed that unlawful pay-for-delay agreements may also be concluded through commercial agreements, rather than through patent settlements, as shown by the very recent case of Johnson & Johnson and Novartis, commented yesterday on PatLit. The Commissioner concluded, however, that the number of potentially problematic settlements has been on a downward trend since 2008-2009:

These cases follow an inquiry in the pharmaceutical sector the Commission conducted in 2008-2009. The study found that over 20% of all patent settlements concluded between 2000 and 2008 were potentially problematic. We have since monitored the industry every year and the potentially problematic settlements have stabilised to around 10% of the total. The latest monitoring report, covering the settlements concluded in 2012, is published today. Its findings confirm the trend. Although the total number of settlements has increased, around 7% of these are potentially problematic. These results show that our scrutiny is not forcing companies to "litigate each patent dispute to death" –as is sometimes suggested by the industry. On the contrary, companies can often solve their disputes in a manner that stays on the right side of EU competition law.

Finally, Almunia favorably commented the UPC Agreement, clarifying that, from the perspective of competition law, 'there is no doubt that the introduction of a unitary patent and the creation of a Unified Patent Court will cut costs for innovative firms and reinforce the internal market'. He reassured, or threatened, that the paths of the new Court and EU competition authorities will frequently meet.

EU Commission fines Johnson & Johnson and Novartis for concluding a pay-for-delay agreement

Joaquin Almunia

On Tuesday, the EU Commission announced that it imposed fines of € 10,798,000 on Johnson & Johnson and € 5,493,000 on Novartis, finding that two subsidiaries of the pharmaceutical companies had concluded an unlawful pay-for-delay agreement in 2005, delaying the market entry of a generic version of the pain-killer fentanyl in the Netherlands. Commission Vice-President Joaquin Almunia issued a severe statement, noting that:

Johnson & Johnson paid Novartis to delay the entry of a generic pain killer. The two companies shockingly deprived patients in the Netherlands, including people suffering from cancer, from access to a cheaper version of this medicine. Today's decision should make pharmaceutical companies think twice before engaging into such anticompetitive practices, which harm both patients and taxpayers.

Johnson & Johnson, which originally developed and commercialized fentanyl-based drugs in the 1960s, held a patent on a fentanyl depot patch (a device which administers a predefined dose of fentanyl through the skin). In the Netherlands, the patent was due to expire in July 2005. At the time, Sandoz, a subsidiary of Novartis, was preparing to enter the market with a generic fentanyl depot patch and it had already produced the necessary packaging material. Instead of launching its generic version of the brand drug, however, Sandoz concluded a 'co-promotion agreement' with Janssen-Cilag, a Dutch subsidiary of the patent holder, by which the latter agreed to make monthly payments exceeding the profits that Sandoz expected to obtain from selling its generic product. The agreement remained in force until December 2006, when a third company commercialized a generic fentanyl patch.

The Commission opened a formal investigation on 18 October 2011, to verify whether the 'co-promotion agreement' concluded between Janssen-Cilag and Sandoz was compatible with Article 101 TFEU. On 31 January 2013, it sent a Statement of Objections to all the companies involved, taking the preliminary view that the agreement had unlawfully delayed the entry of a cheaper generic drug for a period of seventeen months, allowing the patent holder to keep the market prices for fentanyl in the Netherlands artificially high.

In the press release issued on Tuesday, the Commission confirmed its previous findings, noting that internal documents of the two companies suggested that the agreement was concluded to preserve Johnson and Johnson's monopoly in the relevant market, allowing Sandoz to receive its 'part of [the] cake'. According to the same documents, the companies colluded in order 'not to have a depot generic on the market and in that way to keep the high current price'. The investigators also found that Janssen-Cilag did not consider any other potential partners for the 'co-promotion agreement' and that Sandoz did not engage in any meaningful promotion activity.

The actual decision has not been made public yet, but readers should be able to find a redacted version here, in the following weeks. According to the Financial Times, Johnson & Johnson and Novartis reject the Commission's conclusions, although the latter is quoted as saying that it 'look[s] forward to putting this historical matter behind'. Both companies are likely to appeal the decision, in order to prevent it from becoming res iudicata under Art. 16 of Regulation 1/2003, which would turn the decision into binding proof, before any national court, that the behavior took place and was illegal (see Joined Cases C-295/04 to 298/04).

Portugal's ethical code for compulsory arbitration of medicinal IP disputes

This is a corrected version of an earlier post.

From Baptista, Monteverde & Associados (Lisbon, Portugal) comes the following news:

The Law No. 62/2011 of December 12 established that disputes arising from industrial property rights related to reference medicines and generic medicines are subject to necessary arbitration, institutionalized or not.

Most of these ad hoc arbitrations adopted, at least partially, the regulation of the Commercial Arbitration Centre (CAC) of the Portuguese Chamber of Commerce.

The Board of Directors of the CAC of the Portuguese Chamber of Commerce and Industry has just approved a New Arbitration Regulation, a new Schedule of Fees and Administrative Charges and a Code of Ethics for Arbitrators.

Further details are available from the firm's website, here.

Bolar CJEU reference: Poles say no, Germans say yes

Paul England

Via Paul England (Taylor Wessing LLP) comes news that the Düsseldorf Court of Appeal, Germany, has referred some questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling as to whether and, if so, under what conditions, the supply of patent-protected substances by a third party to a generic company, which intends to use the substance for obtaining a marketing authorization, is covered by the Bolar exemption. Paul explains:

While it is undisputed that generics themselves are allowed to manufacture the patent protected substance for marketing authorization purposes under the Bolar exemption, it was unclear whether active pharmaceutical ingredient (API) suppliers may sell a protected substance to generics for Bolar purposes. The question is crucial for the API suppliers and the generic industry in Europe. If a supply in the development phase is not possible under the Bolar exemption, European API suppliers will be forced out of Europe and the supply sources for generic companies and their ability to enter the market immediately after patent expiry will be seriously limited. The objectives of the Bolar exemption to strengthen the generic industry in Europe and allow immediate market entry of generic products after patent expiry would be at risk.

Cases

Decision of the Polish courts

The Polish Supreme Court recently confirmed decisions of its lower instance courts and decided that third party supply is not covered by the Polish implementation of the Bolar exemption. The Court also refused to refer the case to the CJEU.

Decision of the German courts

The district court Düsseldorf decided that such a third party supply is only exempted by the Bolar provision under very restrictive conditions, namely if the supplier is co-organiser of the tests and studies carried out by its customer and allowed under the Bolar exemption. The district court of Düsseldorf refused to refer the question of third party supply to the CJEU.

The Düsseldorf Court of Appeal has now disagreed with the first instance decision and referred the question to the CJEU. According to the Düsseldorf Court of Appeal, third party supply shall be allowed under certain conditions, namely if the supply is aimed at the privileged purposes.

Paul promises that Taylor Wessing will report further details of this reference as they are made public.

Wragge review now online: comments and criticisms welcome!

Gordon looking happy

From Gordon Harris (Wragge & Co.) comes the welcome news that his firm's sixteenth annual review of UK patent cases (69 pages, here, packed with useful references and information) is now available online, along with the accompanying webinar (just over 62 minutes).  Says Gordon:

"This year, under the slightly foreboding title "The Virtue of Justice", the comprehensive review covers all the usual topics, but contains a lengthy analysis of the two Supreme Court cases, Schutz v Werit [on, inter alia, the extent to which repairing or replacing part of a patented product was 'making' it] and Virgin v Zodiac [in which Wragge acted for the successful appellant in a case that people are still arguing over], which have been the centrepiece of the developments in 2013. 

As luck would have it, the Court of Appeal answered the call from the Supreme Court to review "stays" in relation to patent cases just in time to get into this review".

Gordon is more than happy to receive feedback, criticism or comment on the contents of the review. If you'd like to tell him what you think, just email him here.

This blog welcomes information about equivalent annual reviews of patent litigation, whether in the UK, elsewhere in Europe or in other jurisdictions further afield.  If your firm conducts an exercise of this nature, do remember to let us know.

New EU patent court structure may (not) be OK: Ingve reveals all

I recently received the following information from Dr Ingve Björn Stjerna (Rechtsanwalt and Certified Specialist for Intellectual Property Law in Simmons & Simmons' Düsseldorf office) which is well worth noting.  Ingve writes:

"I have news re the "unitary patent“.

I recently managed to (finally) get access to large parts of document 15856/11 from the Council, an opinion of its Legal Service on the compatibility of the revised court structure with European law after the Opinion of the Full Court in Case C-1/09 (cf. attachment, for your comparison I attach the previously redacted version as well). As you may remember, it is one of the heavily redacted documents (discussed on the IPKat, eg here); it became famous since access to it was repeatedly refused with the incredible reasoning that, otherwise, it might “affect the ratification process in the Member States willing to participate in the envisaged agreement” and “ultimately delay or put into question the entry into force of the envisaged international agreement” [reasons for withholding information in the EU IP context can be bizarre, such as disturbing the judicial serenity of the CJEU, here]. After my first access request and the related confirmatory application were refused in early 2012, upon my renewed access request, the document has now been released to me (with the exception of one large footnote).

The opinion concludes (cf. para. 44) that the new structure should be compatible with EU law – but that it could also well be that it is not. Now we know why the document was locked away so strictly. Whether this will increase the user’s trust in the system remains to be seen [it seems to this blogger that it can't reduce the level of trust in the system, since there's no trust left to reduce ...].

I have published on my website (http://www.stjerna.de/unitary_patent.htm) an article titled “Law-making in camera” on the history of the various attempts to get hold of document 15856/11, in case you should find this topic and the background interesting".

Well done, Ingve, we are all in your debt.  It is sad that we appear to have entered an era of secret law-making, amid spurious reasons for resisting access to documents that affect not merely the operational utility but the very legality of a patent system and court structure that will affect us all.

News from recent US pharmaceutical patent cases - damages for infringement and reverse payment settlement

For readers interested in pharmaceutical patent litigation, here's a summary of two recent decisions from the United States. The first concerns the award of damages for the infringement of AstraZeneca's patents for Prilosec. The second deals with the final approval of a settlement between Bayer AG and California consumers, in an antitrust lawsuit targeting a reverse payment settlement concluded in 1997 between Bayer and Barr Laboratories. 

Damages awarded in AstraZeneca v Apotex - The Globe and Mail reports that the District Court for the Southern District of New York awarded $ 76 million in damages to AstraZeneca, in light of patent infringement committed by the generic manufacturer Apotex (AstraZeneca AB et al. v Apotex Corp. et al. - Docket No. 01-9351). In previous decisions, the same court and the Court of Appeals for the Federal Circuit (here) had already established that Apotex, in the period 2003-2007, infringed AstraZeneca's patents for Prilosec (omeprazole), a drug used for the treatment of gastroesophageal reflux and heartburn.

The judge, after a damage trial lasted two weeks, assessed the outcome of a hypothetical negotiation between AstraZeneca and Apotex, held on the date of the first act of infringement (November 2003), as taught by Georgia Pacific. According to the judgment, dated 26 November but kept sealed until yesterday, AstraZeneca ' was in the driver’s seat in the negotiations and would have required Apotex to pay a hefty portion of its profits for a license'. On one side, the generic manufacturer, which had failed to produce a non-infringing generic version of Prilosec, would have been willing to invest a significant amount of its profits to enter into a licensing agreement, since it 'expected to (and did) make substantial profits from its sales of omeprazole'. On the other, AstraZeneca would have demanded a high price, due to the risk of cannibalization arising from the commercialization of a generic version. The court also found that, although three generic manufacturers had already brought generic versions of Prilosec to the market by November 2003, two of them were under the threat of patent litigation, while the third was unable to meet the market's full demand. In light of these findings, the judge ruled that the generic manufacturer would have agreed to a license in exchange for a sum of about half of its yearly profits.

Bayer's Cipro settlement approved - On 18 November, the Superior Court of the State of California (San Diego) granted its final approval of a class action settlement between Bayer AG and the California consumers that bought Bayer's drug Cipro between 1997 and 2004. The court found the $ 74 million in cash consideration to be fair, reasonable and adequate, in light of the claims and defenses, the substantial litigation risks and the history of the class action. Notably, all the class members had strongly supported approval of the settlement.

The approval of the class action settlement is the final stage of a saga which entertained patent and antitrust lawyers for almost two decades. In 1984, Bayer filed a patent application for ciprofloxacin hydrochloride, which was granted as US Patent No. 4,670,444; Bayer commercialized its drug under the brand name 'Cipro'. Seven years later, in 1991, Barr Laboratories (BL) filed an Abbreviated New Drug Application, declaring that Bayer's patent was invalid and thus unenforceable (so called Paragraph IV certification). When Bayer sued BL for infringement, the generic manufacturer filed a counterclaim, alleging invalidity of the asserted patent. In 1996, the parties settled the lawsuit: BL accepted (i) to convert the Paragraph IV certification into a Paragraph III declaration (asking the FDA to approve its generic version of Cipro only after the expiry of the patent term), (ii) not to challenge the validity or enforceability of the patent, and (iii) not to sell its generic version until at least six months before the expiry of the patent term. In return, Bayer agreed (i) to pay BL $ 49.1 million, (ii) to provide BL with supplies of Cipro for resale or to make quarterly payments till 31 December 2003, and (iii) to allow BL to resell Cipro beginning six months before expiration of the patent. In total, Bayer payed BL almost $ 400 million between 1997 and 2003.

BL declared that its 'decision to settle the patent challenge assures that consumers have access to a more affordable generic ciprofloxacin at least six months ahead of the patent expiry', noting that there was no assurance that the court would have found the patent to be invalid. The generic manufacturer said that the 'settlement represents a substantial savings on a product with current annual brand sales in excess of $900 million' and added that other companies remained free to challenge the validity or enforceability of the patent. Several purchasers of Cipro, however, did not agree with BL's assessment. They filed numerous antitrust lawsuits, later consolidated in the Eastern District of New York, alleging a violation of Sections 1 and 2 of the Sherman Act and bringing a Walker Process claim. Both the district court and the Federal Circuit sided with Bayer and BL, ruling that the agreement was not unlawful under the rule of reason. Petitions for certiorari before the US Supreme Court were denied twice. 

In California, the Superior Court upheld the lawfulness of the settlement in 2009; on appeal, notwithstanding a brief amici curiae of 78 scholars in support of the appellants, the Court of Appeal of the State of California affirmed the judgment rendered at first instance. In 2012, the Supreme Court of California granted the petition for review, agreeing to hear the case on the merits (more information here).

Probably, the recent judgment of the US Supreme Court in FTC v Actavis, as well as the on-going litigation before the Supreme Court of California, created a pretty significant incentive for Bayer to finally settle the lawsuit. The $ 74 million settlement represents a reasonable compromise between the interests at stake. On one side, in light of the previous judgments on the matter, there was a moderately high likelihood that the lawfulness of the settlement between Bayer and BL would have been upheld once again. On the other, a finding of antitrust liability would have had a much higher cost for Bayer, in light of the payments made to BL under the reverse payment settlement (almost $ 400 million) and of the profits made through the sale of Cipro in 1997-2003 (worldwide, Cipro guaranteed profits of more than $ 1.4 billion in the year 2000 and approximately $ 8 billion in the whole period considered). The lawsuit remains pending against BL.

New study suggests improvements to harmonize the inconsistent IPR policies of standard-setting organizations

I recently came across an interesting study, commissioned by the US Patent and Trademark Office to the Board on Science, Technology and Economic Policy (STEP) of the National Academy of Sciences, entitled 'Patent Challenges for Standard-Setting in the Global Economy: Lessons from Information and Communication Technology'. An expert committee examined the IPR policies of twelve major standard-setting organizations (SSOs), looking for inconsistencies in the way they address the disclosure and licensing of standard-essential patents (SEPs). The study suggests numerous improvements that SSOs and legislators should implement to strengthen F/RAND commitments, prevent abusive behaviors by SEP holders and ensure that standard-setting efforts provide a significant contribution to innovation. If you have time on your hands, the study makes for an interesting and insightful reading.

The researchers noted that, on a general level, the development of standard-setting organizations is influenced by the economic context in which they operate. 'The mature industrialized countries - the United States, members of the European Union, Japan, and to a large extent South Korea -', according to the report, 'generally share a common policy environment that relies on private sector organizations to develop and implement technologies through decentralized market competition'. Emerging economies, instead, either 'view standards setting as a centralized, top-down process that may achieve a variety of objectives, including domestic industrial policy and inbound technology transfer', as in the case of China, or have not yet developed an approach to standards, as in the case of India and Brazil. Even within economies that share the same perspective on the role and function of standards, the approaches of national jurisdictions to the issues surrounding SEPs and F/RAND commitments appear to be inconsistent, if not conflicting.

Standard-setting organizations, besides being exposed to different legal and economic contexts, have a diverse set of stakeholders and constituents. Their IPR policies, however, share a common goal: ensuring that essential patents are timely disclosed and made available under a licensing framework that prevents the exploitation of the increased market power acquired after standardization, through hold-up or royalty stacking. The study found that, despite this coherent aim, there is wide variation and considerable ambiguity in the rules concerning disclosure and licensing. Inter alia, inconsistencies concerned the following issues:

[Disclosure] Whose patents must be disclosed; what qualifies as an "essential" patent or patent claim; when disclosures must be made in the standards development process; whether blanket (non-patent specific) disclosures suffice; to whom the disclosed information is provided; and whether there is a requirement to update disclosures, for example, as a standard evolves and as patents are issued or denied.

[Licensing] What specific terms or limitations are imposed by a commitment to FRAND licensing; what is meant by the individual terms "fair," "reasonable," and "non-discriminatory"; whether a maximum royalty must be posted before the standard is adopted ("ex ante"); how FRAND applies to portfolio licenses and cross-licenses; how non-royalty licensing terms (e.g., grant-backs, geographical or field of use limitations, etc.) are treated; and whether royalty-free licensing is encouraged or required.

According to the report, most of the standard-setting organizations, including all those surveyed, do not implement restrictions on the availability of injunctive relief for SEP holders, while only a few adopt rules that make the F/RAND commitment binding on successors to the original SEP holder. In light of these findings, the committee recommended a number of improvements meant to strengthen the IPR policies of SSOs. The study's suggestions are substantially similar to the recommendations made by three leading economists in a paper published in March 2013 (see IPKat post here).

In relation to F/RAND commitments, the committee suggested that SSOs should be more explicit in their IPR policies regarding their understanding and expectations about licensing obligations, in particular (i) providing guidance on the maximum licensing burden in light of royalty stacking concerns, (ii) clarifying that implementers and consumers of their products and services are the intended beneficiaries of F/RAND commitments, (iii) requiring SEP holders to license their essential patents without obliging the licensee to license back unrelated SEPs or non-SEPs, or to accept a portfolio license that includes non-SEPs or SEPs for unrelated standards, (iv) allowing SEP holders to require the licensee to license back the SEPs it owns or controls covering the same standard or related standards; (v) reaffirming the freedom of the negotiating parties to agree to a portfolio or cross license.

Rules on disclosure, according to the study, should be compulsory. SSOs are expected to clearly state their objectives, the preferred timing and the degree of specificity required, as well as to make the disclosed information available to the public.

SSOs should also develop policies to address patent transfers, binding any successor in interest to the licensing commitment made by the original SEP holder. Legislators should seek to reduce inconsistencies across national legal jurisdictions in patent-transfer issues, tying licensing commitments to F/RAND-encumbered patents and requiring recording of all patent transfers and disclosure of the real party in interest. Similar rules should apply if the patent holder is subject to bankruptcy proceedings.

As for the availability of injunctive relief, SSOs operating in industries where the risk of hold-up is high should adopt rules aimed at allowing the use of injunctions only when (i) a prospective licensee refuses to participate in, or comply with the outcome of, a third party adjudication (by a court or arbitrator) of F/RAND licensing terms, or (ii) the SEP holder has no other recourse to obtain compensation. The majority of the committee also clarified that F/RAND disputes should be adjudged before courts or arbitrators which allow the parties to raise any related claims and defenses (e.g. validity and non-infringement), and which can assess the economic value of the SEPs at issue and award monetary compensation.

The study identified several steps that the USPTO should take to improve the exchange and transparency of information about claims in issued patents, the status of patent applications and finalized standards documents. In particular, the USPTO should (i) comparatively assess the notion of 'prior art' (and, specifically, evaluate when art is 'publicly available' in a standards context), (ii) conclude agreements for the exchange of information with SSOs, similar to those signed by the European Patent Office with ITU, ETSI and IEEE-SA, (iii) establish, in coordination with other patent offices, uniform fields and templates for the submission of standards-based prior art documents, (iv) improve standards technology education for patent examiners.

Finally, with regard to the development of standard-setting efforts in emerging economies, such as China, India and Brazil, the committee suggested that the US government should promote awareness 'of the importance of developing IPR policies at an early stage of the development of SSOs', for example by offering appropriate training programs.

The US steers towards a 'differential approach' to pharmaceutical IPR issues in the Trans-Pacific Partnership

The draft IP chapter of the Trans-Pacific Partnership Agreement (TPP) was promptly analyzed in a series of posts published on the IPKat (general provisions, copyright, trademarks, and, of course, patents). Among the provisions dealing with patent rights, the most significant issues concerned the standards of protection for pharmaceutical innovation, including the following points:

• tailoring patent protection to social and economic development
  Articles QQ.A.2 and QQ.A.2 bis, in the formulation proposed by several parties, would recognize that the objectives of the TPP provisions concerning patents include the enhancement of the role of intellectual property in promoting economic and social growth, taking into account the differences between the national legal systems, and preserving the right of each party to adopt measures to promote the public interest in relation to, inter alia, public health and nutrition. The US and Japan oppose both provisions.
• relationship between TPP, TRIPS Agreement and Doha Declaration
  Although Articles QQ.A.4 and 5 reaffirm the commitment of the parties to the Doha Declaration on the TRIPS Agreement and Public Health, the negotiators disagree on the relationship between the TPP and existing international agreements. The US supports a formulation of Article QQ.A.6 that would allow the TPP to derogate to existing agreements, a solution opposed by most of the other parties, which seek to preserve the flexibility afforded by existing agreements with respect to the protection of equal access to knowledge, food and public health. 
• patentability of new uses or methods of using known substances
  The US proposes that the parties confirm the availability of patents for new uses or methods of using a known product and the commitment not to deny a patent solely due to lack of enhanced efficacy over a known product, when the applicant has set forth distinguishing features establishing that the invention satisfies patentability requirements. The other parties, with the exception of Japan, disagree.
• patentability of plants, animals, diagnostic, therapeutic and surgical methods, biological processes for the production of plants and animals
  The US seeks a commitment to the granting of patents for the above mentioned inventions, despite the disagreement of the other parties, which seek to maintain the flexibility guaranteed by Article 27(3) TRIPS. 
• the extension of the patent rights to deal with unreasonable delays or the unreasonable reduction of the effective patent term 
  Articles QQ.E.XX and QQ.E.14, both proposed by the US and opposed by the other parties, would require TPP members to adjust the term of a patent to compensate for unreasonable delays occurred in the granting of the patent, or for the unreasonable curtailment of the effective patent term as a result of the marketing approval process for patents concerning pharmaceutical products or methods of making or using pharmaceutical products.
• the protection of safety and efficacy information whose origination involved a considerable effort, as well as of clinical information needed for regulatory or marketing approval
  Essentially, the US also seeks to protect, for a period of at least five years, the safety and efficacy information submitted by the patent owner in order to obtain marketing or regulatory approval for a new pharmaceutical product, if their origination involved a considerable effort (Article QQ.E.16). At the same condition, a three-year period of exclusivity would protect new clinical information (except those related to bioequivalency) submitted for the approval of a pharmaceutical product containing a chemical entity previously approved for marketing in another pharmaceutical product. Most of the other negotiating parties oppose the provisions concerning data exclusivity.

Michael Froman

 United States Trade Representative

In a statement issued last Friday, the United States Trade Representative clarified its approach towards the protection of pharmaceutical innovation, suggesting that the US may be willing to seek a more balanced compromise on the most controversial issues, taking into account the different social and economic needs of the TPP members. The USTR explained that the US is actively engaged in identifying the right balance 'to make life-saving medicine more widely available while creating incentives for the development of new treatments and cures'. In this perspective, the statement noted that the negotiators are still discussing about the best ways to achieve that balance. However, the latest round of meetings, held in Salt Lake City in mid November, appears to have had a significant impact on the general approach of the US on the matter:

The United States is a leading voice both for strong IPR protections and for access to medicines for the world’s poor, including in developing country TPP partners. We believe the best approach to pharmaceutical IPR issues in the TPP would be one that offers countries flexibility based on their individual circumstances. That’s why we’ve begun to work with TPP partners to gauge their interest in a “differential approach,” and to identify ways to tailor potential flexibilities based on countries’ existing laws and international obligations.

This flexible approach is based on precedent: Previous U.S. trade agreements covered by the May 10, 2007 bipartisan agreement. Under May 10, developing free trade agreement partners (like Peru) were offered greater flexibility relative to more developed trade agreement partners (like Korea). In TPP, we are seeking to pursue a similar idea, using previous agreements – like those with Peru, Australia, Chile, Korea, and Singapore – as benchmarks, but keeping an open mind as to how these standards can be tailored to reflect the situations of individual partners.

The idea of a 'differential approach', tailoring patent protection to the peculiarities of each country, is remarkably similar to the approach endorsed by most of the negotiating parties in the provisions of Articles QQ.A.2, and QQ.A.2 bis and QQ.A.6, previously rejected by the US. The USTR's statement appears to signal a subtle, yet remarkably important, shift in attitude (from an 'aggressive' - as defined by the previous USTR - to a 'differential' approach), which, as I suggested on the IPKat, could be the key to the success of the TPP negotiations on the matter.

On biologic medicines, the statement clarified that they represent a critical area of innovation, whose growth is of great importance for the development of new and more effective drugs. 'Biologic drugs', according to the USTR, 'need data protection because those drugs require enormous amounts of time and money to develop'. Although the statement reaffirmed the US proposal of a 12 year period of data exclusivity, it hinted at the possibility of negotiating a shorter term of protection.

The USTR also caught the occasion to acknowledge a shift in its attitude towards pre-grant opposition procedures, which had attracted significant debate during TPP negotiations:

Reflecting input from stakeholders, the U.S. now supports a more flexible approach under which partners could retain reasonable patent pre-grant opposition procedures. These procedures, available in some countries, allow third parties to formally object to a patent at the initial application phase. Based on stakeholder input and ongoing discussions with TPP countries, we believe that other elements in TPP will meet the larger goals of ensuring that patents are of high quality and provide appropriate incentives for innovation, while ensuring access to medicines.