Lyrica or generic pregabalin? An innovative court order

Warner-Lambert Company, LLC v Actavis Group PTC EHF and others [2015] EWHC 485 (Pat) is a Patents Court, England and Wales ruling of Mr Justice Arnold on 2 March which has already received substantial attention on the IPKat blog, thanks to Darren Smyth, here. 02 March 2015

In short, in January 2015, in an action for patent infringement the Patents Court dismissed Warner-Lambert's application for an interim injunction. The problem before the court was that doctors, when prescribing pregabalin as a painkiller for neuropathic pain (the sole use that remained within the scope of patent protection), weren't prescribing it by reference to its brand name LYRICA but rather by reference to its generic name, i.e. pregabalin. Said Arnold J, it did not lie within the power of Warner-Lambert, or indeed of Actavis (which was poised to launch its own generic version of pregabalin) to ensure that doctors prescribed the drug only as LYRICA when treating neuropathic pain, since this was an outcome that depended entirely on the behaviour of the doctors as prescribers.

Subsequently both Warner-Lambert and Actavis sought orders that prescribers be given clear guidance by the National Health Service (NHS England), to the effect that the brand name should be used for the patented indication while the generic name should be used for non-patented indications. The parties also wanted prescription software suppliers to alter their software in order to make it easier for doctors to prescribe pregabalin by brand name. Meanwhile. the parties agreed that Warner-Lambert should give a cross-undertaking in damages, but they could not agree as to its ambit: should it only be given to Actavis or should it also cover other generic manufacturers, in this case Teva and Dr Reddy.

Arnold J's conclusions, in brief, were as follows:

On the evidence, the issuing of guidance by NHS England was the most efficacious, dissuasive and cheapest solution to the problem, especially since the alternative from Warner-Lambert's point of view would be to pursue its applications for interim relief against all the generic suppliers.

The benefit of the cross-undertaking should be extended to the other generic companies for two reasons: (i) if Warner-Lambert's patent later turned out to be invalid, the companies ought not to be prevented from making sales of generic pregabalin, and (ii) even if the patent was valid, the effect of LYRICA being prescribed and dispensed at the expense of generic pregabalin in circumstances that did not amount to an infringement of the patent could not be discounted.

Dealing with mumbo-jumbo

"Inventor says HDB infringed patent for clothes-drying rack" is the title of an article in Singapore's Today Online, here, which tells the story so far with regard to a patent infringement action brought by Mr Yiap Hang Boon, a 54-year-old inventor, against the Housing and Development Board (HDB) for infringing his patent for a clothes-drying rack. The HDB denies infringement and is seeking to revoke the patent, which was granted ten years ago.

This extract from the Today Online feature caught this blogger's eye:

Mr Yiap, who is not represented by a lawyer, appeared to have difficulty conveying his points yesterday.

Justice Chan Seng Onn interjected during his opening statement, saying he could not understand the latter’s “mumbo jumbo”. The judge also sought visuals for a clearer idea of the alleged infringements.

The invention itself, illustrated above, is of quite a low-tech nature. It is regrettable that the patentee should find it difficult to convey his points, and that the judge should have difficulties understanding it. With a specialist intellectual property court and firm pre-trial case management, these difficulties can be reduced, if not actually eliminated. As it is, the judge -- with degrees in Engineering and Industrial Engineering -- is at least in theory better equipped to hear low-tech infringement cases of this nature than are many others.

Patent infringement as anticompetitive conduct? Why not, says the Eastern District of Texas

Conventional wisdom, and copious case law, suggest that there may be situations in which patent holders use their patent rights to impair competition or foreclose competitors. Examples of such anticompetitive conducts include enforcement actions filed in bad faith with knowledge of invalidity of the asserted patents (see Walker Process Equipment Inc. v Food Machinery & Chemical Co., and Nobelpharma v Implant Innovations Inc.), reverse payment settlements, examined by the US Supreme Court in the recent case of FTC v Actavis Inc., and the refusal to license standard essential patents, currently at the core of an international debate. Patent infringement, instead, does not normally raise anticompetitive concerns as, from the point of view of consumers, it results in an increased availability of substitute goods. In Retractable Technologies Inc. v Becton, Dickinson and Co., the Eastern District of Texas, dealing with a monopolization claim under Section 2 of the Sherman Act, challenged this conclusion, suggesting that there may indeed be cases, albeit exceptional, where patent infringement negatively affects the outcome of competition on the merits.

The case concerned antitrust and false advertising claims brought by Retractable Technologies (RT) against Becton Dickinson (BD), the latest of a series of lawsuits in which the parties discussed the infringement of RT's patents disclosing retractable syringes. Inter alia, Retractable argued that, by manufacturing and commercializing syringes of inferior quality which infringed the plaintiff's patents, Becton Dickinson resorted to an anticompetitive conduct in an attempt to monopolize the relevant market, violating Section 2 of the Sherman Act. The defendants filed a Motion for Partial Summary Judgment on Patent Infringement as an Antitrust Violation, asking the court to rule that, as a matter of law, patent infringement is not anticompetitive conduct and, thus, cannot be the basis for a monopolization claim. Becton Dickinson essentially maintained that case law supported a similar conclusion, adding that a finding of patent infringement as anticompetitive conduct would make 'no economic sense'.

Judge Payne, acting as Magistrate Judge, examined the motion for summary judgment in his Report and Recommendation. He firstly looked at Section 2 of the Sherman Act, which reads as follows:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Interpreting the provision, Judge Payne relied on the teachings of the Supreme Court in United States v American Tobacco Co. and Aspen Skiing Co. v Aspen Highlands Skiing Co.. The first case clarified that the Sherman Act covers 'every conceivable act which could possibly come within the spirit or purpose of the prohibitions of the law, without regard to the garb in which such acts were clothed'. The second provided a definition of the exclusionary conducts that may result in unlawful monopolization, ruling that the term 'exclusionary' 'comprehends at the most behavior that not only (1) tends to impair the opportunities of rivals, but also (2) either does not further competition on the merits or does so in an unnecessarily restrictive way'.

The court observed that, even assuming that no other court ever found patent infringement to be an anticompetitive act under Section 2 of the Sherman Act, as asserted by the defendants, 'the lack of such a conclusive holding is far from [...] "precedent" that patent infringement can never, as a matter of law, be anticompetitive conduct'. Reviewing previous case law cited by BD, Judge Payne could not identify any judgment that ruled out the possibility of configuring patent infringement as an anticompetitive act (noting that Northwest Power Products Inc. v Omark Industries Inc. merely found patent infringement not to be an anticompetitive injury cognizable under the Sherman Act - see Kinnear-Weed Co. v Humble Oil & Refining Co.).

Assessing the defendant's claim that no anticompetitive effects can arise from patent infringement, as it 'actually increases competition by making more products available to consumers', the court took the view that this argument effectively explains why most of the antitrust lawsuits pointing to patent infringement as the conduct leading to unlawful monopolization are likely to fail. However, Judge Payne highlighted that the facts of the case unfolding before the court were quite unique. The plaintiff alleged that the patent infringement, in this case, resulted in decreased competition, as the commercialization of infringing products of inferior quality impaired the adoption of retractable syringes in the relevant markets. 'Thus', explained the court, 'BD’s allegation that "the corresponding increase in competition forecloses any antitrust injury" ignores RT’s actual allegations – that the infringement has, in this case, caused a decrease in competition rather than an increase'.

In light of these findings, Judge Payne recommended that the motion for summary judgment be denied, observing that:

BD has asked this Court for an incredibly broad holding: that patent infringement can never, as a matter of law, serve as anticompetitive conduct under Section 2 of the Sherman Act. Such a sweeping holding would be inappropriate in light of the fact-sensitive nature of the determination of whether a given act qualifies as anticompetitive conduct. [United States v American Tobacco Co., and Eastman Kodak Co. v Image Technical Services]. Similarly, the record as a whole does not support a summary judgment finding as to the conduct in question here, as genuine issues of material fact exist as to all the grounds raised by BD.

The District Court adopted the Report and Recommendation of the Magistrate Judge, denying the motion. The Charge of the Court, containing instructions for the jury on the law to be applied, clarified that a finding of patent infringement does not imply an automatic finding of anticompetitive conduct. 'Any damages awarded relating to the anticompetitive behavior based on patent infringement', added the court, 'should not be for the infringement itself, but only for harm caused by BD’s alleged restriction in competition by allegedly selling retractable syringes with known design flaws, allegedly tainting the market with respect to all retractable syringe products'. 

The jury awarded Reatractable Technologies more than $ 113 million in 'deception damages' related to false advertising, subject to trebling under antitrust law. Although the verdict does not appear to be related to the monopolization claims concerning patent infringement (even if the jury found that Becton Dickinson attempted to acquire monopoly power within the market for safety syringes), the case is certainly a good starting point for a discussion on the crossroads between patent infringement and antitrust law. The two elements, however, appear difficult to reconcile.

As the court noted, patent infringement restrains competition only in exceptional cases: the production of infringing products of inferior quality in order to impair the development of the market, as in the case examined, or the commercialization of infringing products on a vast scale in an attempt to drive the patent holder and its licensees out of the market. But, in order to evaluate patent infringement from the point of view of competition law, it is also necessary to assess whether the anticompetitive effects arise from a willful conduct, e.g. if the inferior quality of the infringing products was the result of a deliberate choice of the infringer, made with the intent of hurting the development of the market, as opposed to simply being the result of poor manufacturing techniques or lack of relevant know-how. At the same time, significant alterations of competition in a market are usually the result of the combined behaviors of a number of companies operating within the market, rather than the outcome of the conduct of a single undertaking. An infringer facing a monopolization claim could, for example, raise issues concerning the behavior of the patent holder once it acquired knowledge of the on-going infringement, arguing that, by failing to react promptly to infringement, it determined or concurred to determine the decrease in competition. In this perspective, the lack of case law on the matter may be explained by the simple fact that linking antitrust liability to patent infringement is likely to raise more issues than courts are willing to face.

Mission impossible? Following EPO infringement rulings

This week's ruling of the UK's Supreme Court in Schütz v Werit [2013] UKSC 16 has already been noted on this weblog, has attracted a good deal attention on account of its potential impact on the spare parts sector. However, it is not just the substantive ruling that has captured attention.  It's worth taking note of paragraph 38 of the decision in which Lord Neuberger, delivering a speech with which the four other judges agreed, said:

"The House of Lords and this court have emphasised on a number of occasions the desirability of national courts following the established approach to infringement of the Technical Board of Appeal of the European Patent Office (“the EPO”), and the German Bundesgerichtshof (“the BGH”) have taken the same view – see, most recently, Human Genome Sciences Inc v Eli Lilly & Co [2011] UKSC 51, [2012] 1 All ER 1154, paras 84-87, and Case Xa ZR 130/07".

Bearing in mind the words in bold red type, if you then click through to the EPO's Board of Appeal FAQs, you will find this:

What do the technical boards of appeal and the Legal Board of Appeal do?

The technical boards of appeal and the Legal Board deal with appeals filed in relation to decisions reached by the first instance in the patent grant procedure, that is the Receiving Section and the Examining, Legal and Opposition Divisions.

They decide on questions relating to the granting of and opposition to European patents under the European Patent Convention, but not on questions of patent infringement.

The Legal Board of Appeal deals mainly with appeals by parties adversely affected by decisions of the Receiving Section and the Legal Division.

The technical boards may order that an opposed patent be maintained in its entirety or in part only, or that it be revoked.

PatLit thanks Gary Moss (EIP) for digging up the EPO link for us.

Replacement of consumable parts need not infringe a patent, rule UK Supremes

The ruling of the UK Supreme Court today in Schütz v Werit, already noted briefly on the IPKat weblog, is subjected to a rather longer and more detailed analysis below, prepared by Hogan Lovells partners Daniel Brook and Stephen Bennett (Hogan Lovells acted for Werit in these proceedings). PatLit thanks the crew at Hogan Lovells for getting this note ready for posting on this weblog so speedily.

When does replacing a consumable part infringe a patent? 

The UK Supreme Court ruled today on the tricky question of when replacing a consumable part of a larger device is an act of patent infringement.  The unanimous decision of five justices of the Supreme Court makes it clear that the test is not a simple mechanical test of whether the replaced part is a feature of the patent's claims. Rather, the issue is more nuanced, taking into account a range of factors including: whether the replaced part in any way embodies the invention; and whether that part is expected to be replaced in the normal working life of the larger device.  Significantly, the case brings English law more closely in-line with equivalent German Supreme Court case law. 

Background 

Schütz and Werit, the parties to the case, are both manufacturers of containers called Intermediate Bulk Containers (IBCs).  These are containers designed to carry liquids and powders in approximately 1,000 litre volumes.  As shown below, an IBC is made up of an outer metal part (the cage), an inner plastic container (referred to as a bottle), a pallet base, tap and lid. 

 

IBCs are used to transport chemicals.  It is common that the bottle will be contaminated after one journey carrying chemicals so that it cannot be re-used.  The cage, however is more durable with a life of up to five years.  As a result, there is a practice of replacing the inner bottles of the IBC so the IBC can be re-used.    The standardized outer dimensions of IBCs mean that the inner dimensions of the cages are largely the same between manufacturers.  The result is that the bottle for a Schütz cage will fit into a Werit cage and a Werit bottle in a Schütz cage.  The practice of putting one manufacturer's replacement bottle in the cage of another is known in the industry as "cross-bottling".  Schütz objected to the cross bottling of Schütz cages, suing Werit for infringement of Schütz' patents by supplying Werit bottles to companies that replace the bottles in used IBC cages, including  Schütz' cages. 

Schütz' objections were originally based on three patents.  Schütz dropped its case on one patent EP 673,846 before trial and lost on infringement of a second EP 370,967 at trial (its own cage did not meet the claim requirements).  At first instance, Floyd J held that replacing the bottle in a used Schütz IBC with a Werit bottle did not infringe the remaining patent EP 734, 967 ("EP 967").  He reasoned that the bottle was not part of Schütz' invention and that replacing it was not an act of making the claimed IBC.  In the Court of Appeal the decision went the other way with Sir Robin Jacob holding that replacing the bottle must be making because, in essence, the bottle is a claim feature.  The Supreme Court reversed the Court of Appeal and held that there was no making by replacing the bottle and accordingly, Werit (represented by Hogan Lovells), had not infringed by supplying replacement bottles.  

It was established by the time the case arrived at the Supreme Court that Schütz' invention in EP 967 was in the way that the metal tubes forming the cage of its IBCs were welded together.  The claim of EP 967 in dispute is as follows (using the break-down adopted by the Supreme Court): 

“[A] Pallet container for the transporting and storing of liquids, having a flat pallet, an exchangeable inner container made of plastic material with an upper, closable filler opening and a lower emptying device and also, surrounding the inner container, one outer sleeve which consists of vertical and horizontal lattice bars made of metal which support the plastic inner container filled with liquid, 

[B] the lattice bars which are configured as tubes being indented at the intersection points to form trough-like, double-walled recesses extending in the longitudinal direction of the lattice bars 

[C] in such a manner that at each intersection point between the longitudinal edges of the recesses of two lattice bars lying perpendicularly one above the other there arise four contact points with a material accumulation respectively corresponding to the quadruple lattice bar wall thickness, and the four contact points of the two lattice bars being welded together at the intersection points, 

[D] characterised in that the trough-like recesses of the vertical and horizontal lattice bars have a central raised part extending across the cross-section of the recesses, 

[E] two lattice bars respectively lying one above the other at the intersection points are welded together at the four contact points of these raised parts and the incisions of the recesses of the lattice bars adjacent on both sides to the raised part 

[F] with the contact and weld points form restrictedly elastic bending points with a reduced bending resistance moment relative to the raised part for relieving the weld joints at the intersection points upon application of static and/or dynamic pressure on the lattice sleeve.” 

Although Schütz' invention lay only in the weld joints, it had chosen to claim a complete IBC including the bottle, lid and tap (see feature [A]).  Schütz' case was that anyone who inserted a non-Schütz bottle in a used Schütz cage thereby made an IBC falling within the claim and so infringed.  

United Wire explained 

The leading case before Schütz v Werit was United Wire v Screen Repair Services [2001] RPC 24.  In that House of Lords case, the two patents in issue related to vibrating sifting screen assemblies for use in machines that cleaned up drilling fluid (known as "mud") in large machines known as vibratory sifting machines.  The vibrating screen assemblies were themselves consumables – they had a life measured in days and needed to be replaced regularly.  The patents' claims were to the vibrating screen assemblies which comprised at least two frames with a mesh stretched across each frame.  The defendants in that case took used screen assemblies, took them to pieces, cleaned the frames, glued on new meshes and sold the resulting items.   In that case, the House of Lords key point was that asking whether the defendants' acts were "repair" or were allowed by an implied licence was not necessarily a useful approach.  The question to be asked was simply whether the acts in question amounted to making.  In United Wire, the acts in question did amount to making.  The decision in United Wire is brief and gave little guidance on how to assess what constitutes an act of making. 

Both sides in Schütz v Werit relied on United Wire, each saying that the question of "making" should be answered in its favour.  Schütz case was that replacing any claim feature was making.  Werit argued that there must be more involved and that, in particular, it was important to ask whether the part replaced was any part of the invention of the patent and whether it was a part that was expected to be replaced (in other words, a consumable).  The national law provisions relating to infringement in the UK and Germany are based on the provisions of the Community Patent Convention (CPC).   Werit therefore felt able to cite a trilogy of German Supreme Court cases that had developed the law in Germany for assessing infringement when parts are replaced (Impeller Flow Meter Case X 2R 48/03, Wheel Tread Case X ZR 45/05 and Pipette System Case X ZR 38/06 ).  The UK Supreme Court emphasised the importance of giving considerable respect to decisions of  the courts of CPC signatories although it made it clear that there was no obligation to follow such national court decisions (in contrast to the stronger requirement to follow certain EPO decisions in HGS v Eli Lilly [2011] UKSC51).  The German trilogy proposed a test that involved looking at whether the invention of the patent lay in the replaced part and whether the part replaced was a consumable (expected to wear out in the normal life of the larger device).   

The Supreme Court ruled that the test for "making" is a question of "fact and degree" and the factors considered in the German trilogy could be factors in that assessment.  The Supreme Court's opinion was that all of the following may form part of that assessment:

With respect to the part in issue, whether the part: 

(i)            is a freestanding replaceable component of the patented article;
(ii)           has any connection with the claimed inventive concept;
(iii)          has a much shorter life expectancy than the other, inventive concept; and
(iv)          cannot be described as the main component of the patented article.

Not necessarily infringement ...

The decision sheds considerable light on the pithy United Wire v Screen Repair Services [2001] RPC 24 decision.  Most significantly, it makes it clear that replacing a part which is a claim feature is not necessarily an act of making.  Parties will have to look at further factors and key considerations will include whether the part is expected to be replaced in the normal life of the larger item and whether it forms part of the invention.

FRAND - Commission opens proceedings against Samsung

The European Commussion has announced to have opened a formal investigation against Samsung in the question whether Samsung's strategy seeking injunctive relief based on standard-relevant patents amounts to an abuse of a dominant position which may affect trade and prevent or restrict competition given that Samsung had given its irrevocable commitment  to license any standard essential patents relating to European mobile telephony standards on fair, reasonable and non-discriminatory (FRAND) terms.

PatLit had reported on a selection of the litigations in question e.g. here and here.

Meanwhile, Florian Müller reports on FOSS that Judge VOSS at the Mannheim District court has announced his decision reject Samsung's requests for injunctive relief in both pending cases despite of the suspicious attitude towards the FRAND defence used by Apple discussed in a previous post. However, the reasons for the decision are not yet available.

FRAND Defense Requires Accepting Damages for the Past

The Mannheim District Court had to decide on an infringement action brought against Apple by Motorola Mobility. Apple had raised an "Orange Book" defense, which is the german version a FRAND defense by unconditionally offering a license agreement under FRAND terms for the future but without accepting damages beyond the FRAND license fees for the past.

The hitherto unresolved question whether the FRAND offer has to be made before using the patent has been answered in the negative. However, the court decided that in the case where the patent had been used in the past, the FRAND offer has to include an unconditional acknowledgement of the damages for this past use.

First of all, the patentee behaves contradictory when he admits, in the license agreement, that certain acts in the future use the patent while disputing that the same acts in the past have been infringing the patent. According to the Mannheim Court, antitrust regulations do not require any limitation of damages for the past to amounts corresponding to FRAND-License fees.

Further reasons for the latter decision depend on details of the German jurisdiction and the specific circumstances of the case. It might therefore be difficult to use the arguments in other jurisdictions.


In the case at issue, a nullity suit was co-pending at the Federal German Patent Court and the Mannheim court had decided not to stay the infringement procedure until the decision in the nullity suit was made. In the event that the patent will be revoked, any damages paid would be refunded, whereas this is not the case for license fees. The party raising the FRAND defense would therefore achieve an economical advantage over the diligent licensee asking for a license before using the patent.

Further, the case-law unambiguously accepts the right of the patentee to terminate a license agreement for good cause if the licensee files a nullity action against the patent. In the case of a co-pending nullity suit, the principle of dolo agit, qui petit, quod statim redditurus est therefore forecloses the licensee from forcing the patentee into an agreement which could then be terminated by the patentee immediately.

As a consequence, the unconditional withdrawal of the nullity action as well as the acceptance of damages for the past appear to be mandatory prerequisites for raising a FRAND-defense in Germany.
Further points discussed but not decided include the question whether the unconditional FRAND offer by the licensee has to encompass all of the standard-essential patents of the patentee (or of the patentee’s parent company?) in all countries so as to terminate all the ongoing litigations between the party and the question whether the FRAND defense may not be raised at all in cases of willful infringement.

The full text of the decision has been published under "Justiz in Baden-Württemberg"  here.

Is it worth bothering, if all you get is Hungary?

Football has been much in everyone's mind over the past few weeks, to PatLit makes no apology for alluding to it here. Thank you, Jelena Jankovic (Petosevic), for this link to your news item, "Adidas Loses Against Hungarian Inventor in Patent Infringement Suit", which reads in relevant part as follows:

"On May 12, 2010, the Hungarian Patent Office (HPO) ruled in favor of the Hungarian soccer gear inventor Laszlo Oroszi in his patent infringement suit against the German sports apparel manufacturer Adidas, concerning Oroszi’s patent known as the ball-directing striped-line zone that Adidas allegedly, without Oroszi’s authorization, incorporated into their Predator Precision range of soccer shoes.

Oroszi told the Budapest Report that he registered the patent in Hungary on October 14, 1996, explaining that the striped zone at the tip of the shoe permits football players to shoot more accurately. Oroszi’s representative presented the patent to Adidas in 1998, but Adidas declined the offer claiming that it does not fit into their concept for the then new Predator Precision soccer shoes. However, Oroszi claims that the Predator Precision soccer shoes with his patented concept were launched just before the Euro 2000 soccer Championship.

In 2006 Adidas initiated a nullity proceeding against Oroszi’s patent in Hungary in response to Oroszi’s patent infringement suit. The German company argued that Oroszi obtained an invalid patent and demanded that the HPO annuls it. As a result, the court suspended the patent infringement proceedings until the patent status became resolved.

Last fall, the patent status was resolved in favor of Oroszi. This was the third time that Adidas appealed and that HPO ruled in favor of Oroszi. Adidas was left with no new grounds to object against Oroszi’s concept, resulting in the patent infringement case coming out of suspension.

Oroszi notes that, although Adidas earned millions by using his concept without his consent, he cannot sue the company outside Hungary, as he has no funds to obtain foreign patent protection.

As stated in the Budapest Report (here), although Adidas negated the accusations and maintained that they used their own ideas, they were not able to provide the patent for the concept that was built into their soccer shoes".

Through lack of funds Oroszi was apparently limited to bringing his action in one small jurisdiction which, presumably, does not award damages in respect of infringement of the same patent by the same defendant outside that jurisdiction. If an inventor can afford to protect his patent in Hungary alone, is it worth bothering to get a patent at all?