CJEU rules that providing free samples of non-prescription drugs to pharmacists is permitted

CJEU rules that providing free samples of non-prescription drugs to pharmacists is permitted

On 11 June, the Court of Justice of the European Union (“CJEU“) ruled on the question of whether free samples to pharmacists of medicines may be supplied by pharmaceutical companies to pharmacists. The German Federal Supreme Court (Bundesgerichtshof) had referred questions regarding the German provisions which do not provide for supply to pharmacists. According to the judgement, free samples of non-prescription drugs may be supplied to pharmacists whereas prescription drugs may only be supplied to persons entitled to prescribe them.

Background

The legal dispute which led to the decision of the CJEU was an unfair competition lawsuit between two pharmaceutical companies selling non-prescription pain gel. One of the companies had supplied free samples to pharmacists “for demonstration purposes”. The other company considered this to be in violation of the German Medicines Act (“AMG“), resulting in a breach of competition law (“unfair advantage via legal violation”, “Vorsprung durch Rechtsbruch”). The action was successful in first instance and appeal. The courts concluded that Section 47 Para 3 of the AMG exhaustively listed the persons to whom free drug samples could be provided, namely specific groups, all of whom were entitled to prescribe prescription drugs. Pharmacists were not included in the list, so the courts considered the supply to them to be illegal.

Referral to the CJEU by the German Federal Supreme Court

The Federal Supreme Court had doubts whether the German provision was in line with the Community code relating to medicinal products for human use (Directive 2001/83/EC, in the following “Community Code”). The respective provision regarding the supply of free samples is Article 96 Para 1 which addresses solely the supply to prescribing persons and provides for certain conditions for such supply. However, recital 46 of the Community Code excludes the provision of free samples only to the general public and recital 51 states that “It should be possible within certain restrictive conditions to provide samples of medicinal products free of charge to persons qualified to prescribe or supply them so that they can familiarize themselves with new products and acquire experience in dealing with them.”

Based on this the Federal Supreme Court referred to the CJEU firstly the question whether Article 96 para 1 of the Community Code really exhaustively limited the provision of free samples to persons entitled to prescribe, so that any provision of free drug samples to pharmacists was illegal or whether the provision of samples labelled “for demonstration purposes” to pharmacists so that they can familiarize themselves with the product was permitted. Further, and (only) in case the CJEU found the latter to be true, the Federal Supreme Court referred a second question, namely whether a reading of the German provision which excluded the giving of samples to pharmacists was still in line with the Community Code based Article 96 para 2 which gives member states the possibility to provide for further restrictions over para 1.

Ruling of the CJEU

The CJEU concluded based on the interplay of the provisions of the Community Code that the rules of Article 96 of the Community Code related only to prescription drugs, and were exhaustive, so that the supply of prescription drugs to pharmacists is not allowed in any case. In this regard the CJEU argued that the Community Code differentiates throughout between prescription and non-prescription drugs with prescription drugs being those which due to the dangers associated with their use need to be under the control of physicians whereas this is not the case for non-prescription drugs (Articles 71 and 72 of the Community Code). Having that differentiation in mind the CJEU sees Article 96 as tailored towards the dangers of prescription drugs which requires the supply to be limited to persons entitled to prescribe.

The CJEU on the other hand reasoned that it does not follow from Article 96 of the Community Code that the provision of samples of non-prescription drugs to pharmacists is excluded. In this regard the CJEU referred specifically to the above-mentioned recitals 46 and 51. The CJEU stated that the Community Code allows the supply of free samples to pharmacists within the framework of national law under limited conditions and under safeguarding of the goals pursued by the Community Code.

The CJEU, therefore, rules (note the official English translation of the judgment is not yet available):

“Art. 96 of the Directive 2001/83/EC (…) is to be interpreted in such a way that it does not allow pharmaceutical companies to supply free samples of prescription drugs to pharmacists. On the other hand, the provision does not hinder the supply of free samples of non-prescription drugs to pharmacists.”

It should be noted that the Attorney General’s opinion did not make this differentiation between prescription and non-prescription drugs and considered that pharmacists were completely excluded from receiving free samples. It follows from the CJEU decision that the previous interpretation of Section 47 AMG by the German courts as limiting also the supply of non-prescription drugs to persons entitled to prescribe prescription drugs was not in line with the EU Community Code. The question remains what the conditions shall be for the supply of non-prescription drugs to pharmacists, e.g. whether (with the exception of the limitation to prescribing persons) the conditions as set out in Article 96 of the Community Code shall apply mutatis mutandis, e.g. including a requirement of a prior written request from the pharmacist.

Authors

Ina vom Feld
Ina vom Feld
Parner, Disputes, Dusseldorf
+49 211 975 59091

Behyad Hozuri
Behyad Hozuri
Junior Associate (Germany), Disputes, Dusseldorf
49 211 975 59097

UK Supreme Court in Regeneron v Kymab: technical contribution critical to determining sufficiency

The Supreme Court has handed down today its judgment in Regeneron Pharmaceuticals Inc v Kymab Ltd [2020] UKSC 27, allowing Kymab’s appeal and holding Regeneron’s patents invalid for insufficiency by a majority of 4:1.

The judgment emphasises the fundamental principle of the patent bargain, which envisages that the patentee makes full disclosure of the invention in return for a time-limited monopoly. Sufficiency is, amongst other tools like novelty, inventive step and industrial application, one of the ways to ensure such patent bargain is struck in the right place, such that the protection afforded by the claim is commensurate with the technical contribution to the art made by the disclosure of the invention in the patent. Whilst the Lords and Lady of the Supreme Court were of the view that their judgment does not change the existing, fundamental legal principles of sufficiency contained in the well-established authorities in the UK and of the Technical Board of Appeal of the European Patent Office, this case illustrates the importance of, and difficulty in, identifying a patent’s technical contribution and the significant consequences which follow. Continue reading

Unsuccessful strike out of a quia timet infringement counterclaim

Teva UK Ltd v Chiesi Farmaceutici SpA [2020] EWHC 1311 (Pat), 2 June 2020

Summary

After having been pressed by the defendant pharmaceutical company, Chiesi Farmaceutici SpA (“Chiesi”), to disclose a product description in a patent revocation action brought by Teva UK Ltd (“Teva”), Teva applied to strike out Chiesi’s counterclaim for quia timet infringement. Teva argued that the legal test for such a claim had not been met and, in the alternative, that the disclosure of the product description required for the infringement claim would violate competition law. Mr Justice Birss refused to strike out the counterclaim for infringement on the basis that it has a real prospect of success at trial and that the disclosure sought by Chiesi does not amount to collusion contrary to Art 101 TFEU.

Background

In October 2019, Teva brought an action to revoke three of Chiesi’s patents which, along with others, cover one of Chiesi’s products known as FOSTAIR in the UK, used in inhalers to treat asthmatics. The patents are due to expire in 2027/28, but the data exclusivity for FOSTAIR expired in 2012 such that generic companies were free to apply for marketing authorisations for that product. In response to Teva’s revocation action, Chiesi filed a defence and counterclaimed for infringement on a quia timet basis, seeking disclosure of a product description in the usual way. The trial for both the validity and infringement claims is currently listed for October 2020.

Legal test for a strike out claim and quia timet injunction

Birss J reiterated that the legal test for infringement on a quia timet basis is whether “viewed in all the relevant circumstances, there was a sufficiently strong probability that an injunction would be required to prevent the harm to the claimant to justify bringing the proceedings” (MSD v Teva [2013] EWHC 1958 (Pat)). He rejected Teva’s submissions that sought to qualify this test and also the submission that, as a matter of legal principle, it was a prerequisite for quia timet claims in pharmaceutical patent case for there to be a pleaded, relevant marketing authorisation. In rejecting the latter submission, he considered and distinguished his earlier decision in Actavis v ICOS [2016] EWHC 1955 (Pat) on which Teva relied. In Actavis v ICOS, Birss J held when granting a final injunction at trial that the inference supporting quia timet infringement does not derive solely or even predominantly from the fact they have sought to clear the way by applying to revoke patents, but that it derived from the relevant marketing authorisation. Addressing Teva’s submission, Birss J cautioned that this decision and his reliance on the existence of a relevant marketing authorisation must not be taken out of context. In Actavis v ICOS, he was considering the grant of a final injunction at trial whereas in this case he was being asked to strike out a claim for infringement on a quia timet basis at an interim stage.

In considering the correct approach, Birss J held that a lack of evidence at the start of the action to justify a final injunction is not determinative of the relevant question at a strike out hearing, where the relevant legal question is whether there is a real prospect of success of establishing a threat or intention to infringe at trial, i.e. whether such evidence may exist by then. In the absence of other regulatory hurdles that would preclude a marketing authorisation during the remaining life of the patent, it is not a complete answer at an interim stage that the alleged infringer has not obtained a marketing authorisation, although the weight given to this fact will change if the question is assessed again at trial. Birss J took further support for his conclusion from Arnold J (as he then was) allowing a quia timet infringement claim by amendment in Generics v Sandoz [2017] EWHC 2276 (Pat).

Birss J also held that the approach of the English Courts to patent litigation was a relevant consideration. Here, he highlighted the well established principle that an alleged infringer ought to “clear the way” by revoking the relevant patent and/or seeking a declaration of non-infringement (“DNI”). Actions to clear the way usually result in the alleged infringer seeking to both revoke the patent and obtain a DNI, such that issues of both infringement and validity are determined together. In such actions, the fundamental question can be answered: are the alleged infringer’s proposed acts lawful or not in view of the patentee’s rights. If the alleged infringer chooses not to seek a DNI, then the patentee may wish to counterclaim for infringement so that this fundamental question can be answered.

In light of these considerations, a simple, rebuttable inference can be drawn from the fact that the party seeking the revocation of the patent intends to infringe by launching a product before expiry of the patent.  As Teva had commenced revocation proceedings, Birss J drew this inference, which, as set out above, is not displaced simply by the absence of a pleaded, relevant marketing authorisation. Birss J drew further support for this inference from the fact that, as pleaded by Chiesi, Teva had failed in correspondence to state that it did not have an intention to launch, despite having been given an opportunity to do so. Teva’s offer of two weeks’ notice of launch was also insufficient to rebut this inference, as it would not allow infringement to be decided in advance of such a launch. In light of this, Birss J was satisfied that Chiesi’s pleaded claim for quia timet infringement had a real prospect at trial and therefore refused to strike out this claim.

Abuse of process

Teva pleaded an alternative free standing “abuse of process” argument to strike out the claim, contending that the Chiesi’s true motive in pleading the infringement counterclaim was a collateral one, namely to obtain Teva’s launch plans through disclosure. Having summarised the earlier law, Birss J relied on JSC BTA Bank v Ablyazov (No. 6) [2011] 1 W.L.R. 2996 as establishing that even if a claimant has two purposes for commencing proceedings, one legitimate and the other sufficiently collateral as to be illegitimate, the commencement of proceedings will not be an abuse. Birss J starkly noted that even assuming disclosure was one of Chiesi’s motives, it is obvious that there is another purpose in bringing the infringement claim, namely to sue Teva for infringement and obtain appropriate remedies such as an injunction if the claim is made out. Furthermore, he noted the claim was being brought by Teva in the first place, and thus held that the infringement claim is not an abuse of process.

Competition law

Teva put forward another alternative argument, submitting that the parties are “competitors” and that there is a very real risk that the provision of the information requested by Chiesi mentioned above would be found to infringe Art 101(1) TFEU. Birss J agreed that the parties were competitors and summarised infringement of Art. 101(1) as requiring a collusion between undertakings.

Birss J highlighted that the point of the patent system is to stimulate innovation, which itself is pro-competitive. Resolving disputes between rivals about patent validity and infringement are part of that system and therefore this sort of litigation, conducted properly and not as part of a sham, is inherently pro-competitive, irrespective of the result. A court determination that a patent is valid and infringed should not be seen as a “negative” result even if it means that consumers will pay higher prices for the patented goods, because such determinations are a necessary means of ensuring that patent-holders receive the proper rewards for their innovations.

Although Birss J agreed that the provision of information between undertakings can itself amount to the requisite form of collusion required, Art. 101 will only be engaged if this provision amounts to practical cooperation between the parties being substituted for the risks of competition. Balancing the factors above, the judge concluded that exchange pursuant to disclosure obligations and case management orders which are made in properly constituted patent litigation does not meet the minimum threshold to amount to a form of collusion prohibited by Art. 101 TFEU, and, accordingly, he dismissed the competition law argument.

Stay of proceedings

Finally, Teva argued that, if the claim was not struck out, it should be stayed because it was prepared to offer 14 days’ notice of launch. Birss J was not convinced by the argument and stated that it offered no substitute for resolving issues of infringement on their merits at trial, remarking that Chiesi asking Teva for two months’ notice seemed to have been a fair attempt at a compromise.

Jonathan Turnbull
Jonathan Turnbull
Partner
+44 20 7466 2174
Monika Klajn
Monika Klajn
Associate, London
+44 20 7466 7604
Charlie Madill
Charlie Madill
Trainee, London
+44 20 7466 3585

 

 

The rock misses its target in this story of “David and Goliath” – the UK High Court’s consideration of interim injunctions in Neurim Pharmaceuticals v Mylan

Neurim Pharmaceuticals (1991) Limited (Neurim) and Flynn Pharma Limited (Flynn) sought interim injunctive relief against Generics UK Ltd (t/a Mylan) and Mylan UK Healthcare Limited (Mylan), concerning their prolonged release melatonin pharmaceutical formulation sold under the brand names Circadin® and Slenyto®. The global market for melatonin is estimated to be around US$700 million in 2019 and is expected to reach more than US$2 billion in the next five years. Despite this case being portrayed as a David and Goliath battle, with Mylan far eclipsing the size of the claimants, the UK High Court ultimately refused to grant an interim injunction in favour of the claimants, Neurim and Flynn, to stop Mylan from entering the market pending trial.

The UK High Court adopted a structured approach in the exercise of its discretion on whether or not to grant interim injunctive relief, and made it clear that there was no norm in pharmaceutical cases in favour of an injunction – each case must be assessed on its particular facts. Here, the Court found that damages would be an adequate remedy to the claimants, even if the changes to the market for its product were irrecoverable. This decision stresses the importance of being able to articulate why the losses to the patentee would be unquantifiable if the interim relief was not awarded.

The Patent

Neurim is the registered proprietor of EP 1 441 702 (the Patent), which covers a prolonged release formulation comprising melatonin for improving the restorative quality of sleep in a patient suffering from primary insomnia characterised by non-restorative sleep. Flynn was purported to be the exclusive licensee of the Patent (but more on this later). The Patent expires on 12 August 2022.

In November 2019, the Opposition Division (OD) of the European Patent Office (EPO) revoked the Patent. However, a revocation decision by the EPO does not become effective until any appeal to the Technical Boards of Appeal (TBA) is decided and, accordingly, the Patent remains in force in the UK. Although the decision of the OD to revoke the Patent was appealed by Neurim, it is unlikely that a final decision would be issued by the TBA before 2022.

Neurim’s product

Neurim markets a melatonin product called Circadin®, which is indicated for the treatment of primary insomnia characterised by poor quality of sleep in patients who are aged 55 or over. Neurim has another melatonin product, called Slenyto®, which received regulatory approval in October 2018 and is indicated for use in children and adolescents.

During the proceedings, three medical uses were identified for Circadin®:

  1. Medical Use 1: Use within the label and within the Patent, that is treatment of patients aged 55 or over for primary insomnia;
  2. Medical Use 2: Use outside the label but within the Patent, that is treatment of patients aged under 55 for primary insomnia; and
  3. Medical Use 3: Use outside the label and outside the Patent, which would include, for example, prescriptions for childhood autism.

Mylan asserted that Medical Uses 1 and 2 constitute only 2% of all prescriptions for Circadin®.

Mylan’s product

Mylan proposes to launch a generic version of Circadin®, with the release being described as “fairly imminent”. The marketing authorisation for Mylan’s product is identical to Circadin®. Neurim and Flynn commenced proceedings in the UK against Mylan for infringement of the Patent, seeking a declaration of infringement and injunctive and other relief, and Mylan counterclaimed for revocation of the Patent.

Mylan provided an undertaking to the claimants that it would stay off the market until 20 May 2020, the date of the hearing before the UK High Court on interim injunctive relief, although this was extended to 3 June 2020 when judgment was to be formally handed down. An expedited trial has been ordered for 26 October 2020.

In this decision, the question before the Honourable Mr Justice Marcus Smith of the UK High Court was whether interim injunctive relief should be ordered to restrain Mylan from entering the market from 3 June 2020 until final judgment in the proceedings or further order.

Interim injunctions

In this decision, the Honourable Justice Smith comprehensively outlined the principles that the UK Courts will apply when determining an application for interim injunctive relief. These are derived from the speech of Lord Diplock in American Cyanamid Co v. Ethicon Ltd [1975] AC 396. Smith J stressed that his discretion is structured and it is not a fact-finding exercise.

Essentially, four steps are involved in the assessment, which are, in order:

  1. The claimant must show that there is a “serious issue to be tried”. This is no more than a roughly-meshed filter, intended to remove from the Court’s consideration the obviously unsustainable claims. It is important, when considering this step, not to conduct a trial within a trial.
  2. Damages must not be an adequate remedy to the claimant, even if their claim is very strong. This considers not only the theoretical adequacy of damages, but the practical aspects as well.
  3. Even if damages are not an adequate remedy to the claimant, the Court must consider whether the undertaking in damages to the defendant (that is, the undertaking provided by the claimant to compensate the defendant for any loss sustained by reason of the injunction) will adequately protect the defendant.
  4. Where damages will not be an adequate remedy to either party, other factors might be taken into consideration including:
    1. The status quo;
    2. The merits of the claim, but only if this assessment reveals that there is no credible dispute; and
    3. Whether the generic had sought to ‘clear the way’ before entry onto the market, for example by seeking revocation of any patent rights or a declaration of non‑infringement.

Relevant facts in the present case

The Honourable Justice Smith identified the following facts as relevant to his decision:

  1. Is there a serious issue to be tried?
  • This was effectively accepted by Mylan.
  • Smith J considered that the decision of the OD of the EPO to revoke the Patent was irrelevant, as decisions of the EPO are not binding on English courts.
  1. Are damages an adequate remedy to the claimant?
  • Smith J accepted that Mylan’s entry into the market would result in loss to Neurim and Flynn, owing to a combination of loss of sales and lower sales prices for Circadin® and Slenyto®. It was also accepted that the sales prices for these products may never recover, even if Mylan was subsequently ordered off the market.
  • Smith J was also prepared to consider that the losses flowing from Mylan’s infringements in the cases of the patented uses (Medical Uses 1 and 2 above) could arguably include lost sales for the non-patented Medical Use 3. While refusing to reach a conclusion on this issue, Smith J accepted this point as arguable, given that Mylan has chosen to copy the label for Circadin® as a means of avoiding the cost of obtaining its own label.
  • Consequential effects of Mylan’s entry into the market were also considered, such as the entry of other competitors, the impact on the claimant’s research and development, and the prospect of redundancies. However, Smith J considered that these were not relevant to his assessment, given that Neurim was said to “[sit] on cash of a significant amount”.
  • Smith J concluded that damages would be an adequate remedy to Neurim and Flynn. He could not see any reason why these losses could not be calculated by reference to their existing sales and Mylan’s new sales. Even if their position in the market is irretrievable, that is not to say that it cannot be compensated for in damages.
  • On a related point, Mylan questioned Flynn’s standing in the proceedings as an exclusive licensee because only an “aggressively redacted licence agreement” was provided to the Court. Smith J agreed, observing that the whole of the agreement must be disclosed in order to establish standing, and measures can be put in place to ensure the confidentiality of the document. However, Smith J felt that to go further and make findings about the standing of Flynn would be to conduct a trial within a trial. It was sufficient that any damage to Flynn, whether an exclusive licensee or not, would cause Neurim to suffer as a result of reduced royalties.
  • On the question of evidence, Smith J observed that the evidence adduced by each side was from experts associated with the parties and hence was not independent, and accordingly he considered it “substantially valueless”.
  1. Are damages an adequate remedy to the defendant?
  • Although Smith J found that the claimants were unsuccessful at step two of the assessment, he continued to consider whether damages would be an adequate remedy for Mylan if an interim injunction was granted and then overturned.
  • Smith J considered that such an assessment in relation to the defendant would be more difficult than the assessment required by step two above. For example, Smith J had “some sympathy” with the submission that the loss to Mylan of its ‘first mover advantage’ (that is, the advantage gained by Mylan in being the first generic entrant onto the market) would be difficult to quantify in damages.
  1. Are there other factors to take into consideration?
  • Smith J addressed three other considerations that were raised as relevant by the parties.
  • First, relating to the title of this article, he considered the ‘David and Goliath’ submission that Mylan is larger and more powerful than Neurim and Flynn, who are smaller players in the pharmaceutical market. Smith J, however, considered that such a difference in size was irrelevant per se, unless it affected some other factor that the Court should take into consideration.
  • Second, although Mylan was an opponent in the successful EPO opposition to the Patent, it did not commence revocation proceedings in the UK. Smith J considered that this would have been a relevant factor when considering the extent to which damages would have been an inadequate remedy to Mylan, had the claimants not failed at the second stage of the inquiry.
  • Third, it was observed that the Court received a communication from solicitors for the Secretary of State for Health, writing on behalf of the National Health Service (NHS) in England. The communication noted the potential loss to the NHS should an interim injunction be granted and subsequently overturned. Smith J agreed that the interests of participants in the market, such as the NHS, should be considered when assessing whether an injunction ought to be granted at all. Had he been minded to order the interim injunction, Smith J would have wanted further submissions on whether the granting of an injunction would be appropriate.

So, ultimately, the claimants failed on step two of the inquiry. Proving inadequacy of damages to the patent holder will be crucial in obtaining interim injunctive relief in future cases.

Postscript on costs

Following his refusal to grant an interim injunction, Smith J considered the issue of costs in a subsequent, short judgment of 8 June 2020. Smith J rejected Neurim and Flynn’s submissions that costs should be reserved on the basis that their application failed to establish the inadequacy of damages, which is a point that would not be determined on the merits at trial. This was different to the cases cited by Neurim and Flynn where costs were reserved when interim injunctions were granted, as in those cases the interim injunctions were inevitably granted on the basis that there was a serious issue to be tried (under the first step of American Cyanamid), which would be subsequently determined on the merits at trial.

However, when awarding Mylan its costs on standard basis Smith J held that Mylan should not get all its costs. This was because Mylan had contested that the first step of American Cyanamid had been met and had lost on this and on a number of other points. Whilst the first step of American Cyanamid did not occupy much time at the hearing, substantial costs were incurred in the run-up to it. As a consequence Smith J adopted an issues based approach in which Mylan could not recover more than 65% of its assessed costs. Given that Mylan’s costs were £182,432, Smith J ordered that Neurim and Flynn should make an interim payment of £80,000, with this representing 70% of Mylan’s costs recoverable costs.

George McCubbin
George McCubbin
Associate (Australia) - London
+44 20 7466 2764

COVID-19: Pressure points: UK Government disables domain names and social media accounts involved in selling fake or unauthorised COVID-19 products

On Saturday (4 April 2020) the UK Government issued a press release on how the medicines and medical devices regulator, the Medicines and Healthcare Products Regulatory Agency (MHRA), is investigating the increasing number of bogus medical products being sold through unauthorised websites claiming to treat or prevent COVID-19 cases of fake or unlicensed COVID-19 medical products.

These concerns were reflected in our blog post of 2 April, COVID Counterfeits, which identified many of the problems facing business supply chains caused by the opportunities that unscrupulous parties see arising from the pandemic, and suggested ways to deal with them using intellectual property rights and advertising regulations inter alia.

The Government’s press release refers to “self-testing kits, ‘miracle cures’, ‘antiviral misting sprays’, and unlicensed medicines” as being amongst the products being promoted, and states very clearly:

At this time, there are currently no medicines licensed specifically for the treatment or prevention of COVID-19 and there are no CE marked self-testing kits approved for home use“.

According to the press release, the MHRA has disabled 9 domain names and social media accounts selling fake or unauthorised COVID-19 products.

Lynda Scammell, MHRA Enforcement Official, is quoted as saying: “There is no medicine licensed specifically to treat or prevent COVID-19, therefore any claiming to do so are not authorised and have not undergone regulatory approvals required for sale on the UK market. We cannot guarantee the safety or quality of the product and this poses a risk to your health.”

Key Contacts and Authors

Joel Smith
Joel Smith
Partner, Head of Intellectual Property, London
+20 7466 2331
Jonathan Turnbull
Jonathan Turnbull
Partner, Intellectual Property & Pharma, London
+44 20 7466 2174
Rachel Montagnon
Rachel Montagnon
Professional Support Consultant, IP, London
+44 20 7466 2217

 

COVID-19: Pressure points: COVID Counterfeits – combating counterfeiting, product replacement, misleading advertising and cyber crime in the current crisis

Whilst as a global community we have witnessed extreme acts of kindness, compassion and camaraderie since the start of the COVID-19 crisis, regrettably, some have sought to exploit the crisis. From sales of counterfeits, mis-substitution of products and misleading advertising, to reverse engineering and cyber attacks, intellectual property (IP) rights holders are amongst the many becoming victims of such activities. Here we ask what has been happening and what IP holders can do about it. We provide an overview of the options available for IP rights holders to limit the damage caused by such activities, and, if necessary, enforce their rights.

What has been happening?

A range of counterfeit medicines, vaccines and other devices which claim to prevent, test for or even cure COVID-19 have been introduced into the market in the wake of the global epidemic. In some cases these have been found to be relatively non-harmful substances, such as paracetamol or caffeine tablets, whereas in more extreme cases the ingredients have been far more dangerous, such as thiocyanate and hydrogen peroxide. Similarly, for Personal Protection Equipment (“PPE”), counterfeit face masks have been produced that have not been thoroughly tested and consequently do not bear the required “CE” mark.

Incidences of cybercrime are also on the rise as criminals take advantage of the unique opportunity COVID-19 has provided. Included within the broad range of businesses that have been targeted there have been ransomware attacks on scientific testing centres and laboratories and phishing attacks on members of the public, through emails claiming to contain important information from the government.

Supply chains have also been weakened by the crisis, with suppliers either unable to meet demand or unable to sustain themselves with the reduction in demand. In the former case, the temptation is for purchasers to seek alternative sources for required products or component products, leading to an increase in counterfeit or substitute products being offered on the market, possible reverse engineering attempts or misleading advertising of alternatives as suitable replacements.

Although this note focuses on those seeking to exploit the COVID-19 crisis, many people and companies have rallied together to fight the pandemic, such that there have been significant collaborative efforts aimed at solving the medical issues presented by COVID-19 (see our publication COVID-19 Global: Collaboration is key in the race to develop a vaccine).

What can IP rights owners do about it?

Considerations include infringement of patent and trade mark rights, parallel imports, Customs seizure, issues with threatening the supply chain, misleading advertising and passing off, falsified medicines provisions and cyber threats.

Patent infringement

Where the holder of a patent, or the exclusive licensee of a patent, is aware of an infringement of its rights, patent infringement proceedings can be commenced in the national courts where the patent is in force. Where the invention relates to a product, it will be an infringement of the patent right in the country of export to distribute the product, and also an infringement in the country of importation.

A rights holder can also approach the national courts to obtain additional information on possible infringement: for example, in the UK, a type of order called a Norwich Pharmacal order can be sought for the purpose of identifying the wrongdoer (such as the supplier of the allegedly infringing goods or other distributors).  Applications for disclosure and non-party disclosure are also available, where infringement proceedings have been commenced.

Reverse engineering may be attempted to make up for the lack of supply of patented goods or in an attempt to “design around” a patented part or product that cannot be sourced or for which there is a significant delay. If a patent is in force and the inventive concept of the patent is infringed then so-called “designing around” will not avoid infringement, however if alternative ways to achieve the same effect may do so, depending upon the way the patent’s claims are structured.

Trade mark infringement

The Trade Marks Act 1994 (“TMA”) contains provisions covering UK trade mark infringement, as well as criminal offences relating to anti-counterfeiting. Further, both the EU Trademark Regulation (2017/1001), which governs the unauthorised use of EU trade marks, and the EU Customs Enforcement Regulation (608/2013), which concerns the customs enforcement of IP rights by customs authorities, have effect in the UK. The Customs Regulation makes it possible for Customs authorities to have intercepted goods destroyed, without the need for a Court to determine whether any right has been infringed under national law. See more on this above.

Whether opportunistic trade mark applications for “Covid” or “Coronavirus” may have any value is another question. During March 2020, there were 7 UK trade mark applications and one EU trade mark application designating the UK for “Coronavirus” or variants thereof (including for “KEEP CALM AND CORONAVIRUS ON”!), as well as 12 applications for “Covid” or variations thereof, although the earliest two of these have been withdrawn. The remaining applications are under examination and it remains to be seen whether they may be registered.

Civil actions:  For counterfeit goods, the use of a sign in the course of trade will normally be identical to the registered trade mark and in relation to identical goods. Accordingly, this constitutes a subcategory of infringement under Section 10(1) of the TMA) or Article 9(2)(a) of the Trade Mark Regulation in relation to EU trade marks). In the case of use of an identical mark on identical goods, the trade mark owner is not required to demonstrate a likelihood of confusion.

If urgent action is required, in certain circumstances UK courts can grant interim injunctions and search and seizure orders against the infringer. These orders can be applied for without notice to the infringer and granted within days. Where urgent action is not warranted, then the trade mark owner may initiate proceedings seeking permanent injunctions against future infringement, orders for the infringer to pay damages or an account of profits to the trade mark owner, orders for the infringer to deliver up or destroy the infringing goods and costs.

Criminal Actions: Under section 92 of the TMA, it is a criminal offence to use without the proprietor’s consent a sign identical with a trade mark, or likely to be mistaken for that mark, with a view to make a gain or to cause a loss to another. The Fraud Act 2006 and the Proceeds of Crime Act 2002 may also be relevant to criminal IP cases:

  • Under the Fraud Act, it is a criminal offence to dishonestly make a false representation with an intention to make a gain for oneself or another or an intention to cause loss to another or expose another to a risk of loss, and to make or possess articles for use in or in connection with fraud, and to make or supply articles for use in fraud.
  • The Proceeds of Crime Act provides for the recovery of assets and proceeds obtained through crime, including IP crime, as well as recovery of proceeds of crime through civil proceedings where a criminal conviction has not been possible.

Trade mark owners have the right to bring private prosecutions under the various criminal IP provisions. Alternatively, the Crown Prosecutions Service may bring criminal proceedings against suspected offenders, but has no influence over private prosecutions. National Trading Standards also provides national and local protection and enforcement of IP rights, and is empowered to bring criminal prosecutions themselves, issue statutory notices and cautions, and obtain search and seizure orders from the courts. Further, the Police Intellectual Property Crime Unit (PIPCU) is the specialist unit within the police service tasked with tackling serious and organised IP crime and in particular IP crime committed online.

Parallel Imports

During the current times of high demand for particular products and the potential/actual breakdown of normal supply chains, there may be an increase in supply from jurisdictions where products are available at a lower price or simply are still available. This leads to what is called parallel imports or grey goods markets, where products that were only supposed to be supplied to one country’s market are sold into another. IP rights can be used to prevent this except where they have been “exhausted”. IP rights in goods that have been put on the market in the EU with the consent of the IP right owner and are now circulating in the EU are deemed exhausted, unless there has been repackaging of the product in the case of pharmaceuticals, and then generally only where there is some element of risk to the ultimate consumer. It may be possible to prevent importation from third countries however, depending on whether the courts consider international exhaustion of rights to have occurred. Much will depend on evidence of consent or otherwise of the IP right owner.

Customs seizure

When it is not clear whether an infringement of intellectual property rights is occurring, or by whom, it is important to turn to the national customs authorities, which monitor the goods that are passing through their borders each day.

EU Regulation No 608/2013 gives patentees an avenue to ask border authorities to inspect and seize possibly counterfeit and pirated goods upon importation into the member state.  Under this regulation, an application can be made to each customs authority to request them to seize goods that are suspected of infringing an intellectual property right.  Such application should provide the authority with sufficient information in which to identify possibly infringing goods, including detailed descriptions and photographs of the goods and any likely packaging or labelling. (See above for more on trade mark infringing goods).

If possibly infringing goods are seized by customs, the authority is to provide the applicant with information about the goods, including photographs of goods and the names and addresses of the consignee and the holder of the goods, and their origin, provenance and destination. In some instances, it will be possible to request that a sample of the goods be analysed The applicant can request destruction of the goods if they consider that the goods are indeed infringing their rights, and/or the applicant can commence legal proceedings for infringement.

Threatening an infringer’s supply chain

At first glance, it may appear that a quick way to stop infringements would be to contact those retailing the infringing products or supplying materials to the infringer for their manufacture. However, the national laws on unjustified/groundless threats (such as those in the UK, as updated by the Intellectual Property (Unjustified Threats) Act 2017) could result in liability and proceedings against the rights owner making such a threat. Under UK law threats could be actionable as unjustified threats as a matter of patent, trade mark or design law if threats are made in relation to secondary acts of infringement, such as sale or supply of essential means. As a consequence, great care needs to be taken when sending letters threatening action to anyone other than primary infringers for primary infringing acts.

Misleading advertising and passing off

Misleading advertising and adverts that attempt to pass goods off as those of another, are both actionable and injunctions can be obtained to stop these activities. Misleading advertising can also be a criminal offence (corporate and directorial), in a B2B context, under the Business Protection from Misleading Marketing Regulations 2008 (BPRs), and, in a B2C context, under the Consumer Protection from Unfair Trading Regulations 2008 (as amended by the Consumer Protection (Amendment) Regulations) (CPRs).

The CPRs protect the consumer against unfair commercial practices including misleading actions and omissions, which are prohibited under these regulations. The BPRs prohibit advertising that misleads traders and define advertising as misleading where it: “(a)  in any way, including its presentation, deceives or is likely to deceive the traders to whom it is addressed or whom it reaches; and by reason of its deceptive nature, is likely to affect their economic behaviour; or (b)  for those reasons, injures or is likely to injure a competitor”. Anything that would breach the CPRs is also a breach of the BPRs. This could include false attribution of intellectual property rights.  Enforcement is via enforcement authorities (usually Trading Standards) which can require undertakings and bring injunction proceedings.  The BPRs also regulate comparative advertising which is could also be relevant in COVID-19 situations e.g. where products are being advertised or compared as substitutes for example, although there are no criminal sanctions for comparative advertising, only regulatory ones as described above.

For passing off to be made out there has to be an act of misrepresentation that goods/businesses are those of another, that other must have demonstrable goodwill in those goods/business and there must be actual or likely damage.  Passing off actions can be difficult to bring without significant evidence and individual instances of confusion as to the origins of the goods or services being offered. However, the goodwill-owner can bring the action themselves such that it has more control over enforcement and is not reliant on the relevant enforcement authorities to bring actions under the BPRs or CPRs.

Online sales

Online distribution of counterfeit goods is becoming ever more prevalent. Use of social media platforms, including the use hidden closed group on platforms such as Facebook, is now considered to have overtaken the more traditional auction sites and online marketplaces. This can, unfortunately, make such sales harder to detect. Online platforms also have procedures to take down infringing content and listings of counterfeit goods, but the efficiency of these procedures, and scope of what content can be removed, vary between sites.

In addition, the following steps can be considered:

  • An action before Nominet, which is the the ‘.uk’, ‘.cymru’ and ‘.wales’ domain registry,. It offers a domain name dispute resolution service (DRS) that rights holders can use to take down domain names used in relation to online IP infringement. Nominet will also suspend domain names involved in online IP infringement in response to requests from PIPCU, who are focussed on stopping online counterfeit trading and can bring prosecutions and have assets seized under the Proceeds of Crime Act.
  • Seeking an order from the courts against the internet service providers (ISPs) to block websites known to host infringing content under Section 97 of the Copyright, Designs and Patents Act 1988.
  • Involving the National Trading Standards’ e-Crime Team, which is focused on investigating online crime, including counterfeiting and IP crime, and has the power to seize counterfeit goods and takedown of infringing website listings.

Falsified Medicines

In relation to medicines, the Falsified Medicine Directive (the “FMD”)) may be of assistance (Directive 2011/62/EU which amended Directive 2001/83/EC on the Community code relating to medicinal products for human use in order to prevent the entry of falsified medicinal products into the legal supply chain). A falsified medicine is defined by the European Medicines Agency (“EMA”) as a “fake medicine that passes itself off as a real, authorised medicine”.  The FMD contains provisions requiring Member States to impose penalties for acts involving falsified medicinal products however sold.

The UK implemented the FMD via the Human Medicines Regulations 2012, as amended by two further statutory instruments the following year (the “Regulations”). The Regulations make it a criminal offence to import, manufacture or distribute active substances unless they are registered with the relevant licensing authority and meet stringent regulations elsewhere in the legislation.

Therefore, although not a direct remedy for a rights holder, these provisions offer reassurance to pharmaceutical manufacturers as the Regulations provide barriers to, and sanctions against, those involved in activities relating to falsified medicines if they attempt to introduce falsified medicines into the pharmacy supply chain.

 

Key contacts and Authors 

Joel Smith
Joel Smith
Partner, Head of Intellectual Property, London
+20 7466 2331
Jonathan Turnbull
Jonathan Turnbull
Partner, Intellectual Property & Pharma, London
+44 20 7466 2174
Rachel Montagnon
Rachel Montagnon
Professional Support Consultant, IP, London
+44 20 7466 2217
Kate Macmillan
Kate Macmillan
Consultant, London
+44 20 7466 3737
Joanna Silver
Joanna Silver
Senior Associate, IP, London
+44 20 7466 2315
George McCubbin
George McCubbin
Associate, IP, London
+44 20 7466 2784
Charlie Madill
Charlie Madill
+44 20 7466 3585

The impact of COVID-19 on competition law in the pharmaceutical sector

The global COVID-19 pandemic has, to an extent, re-directed some of the actions and focus of competition authorities, which are placing increasing scrutiny on several strategic industries to ensure they do not profit from the crisis. Some of these developments, as outlined below, are relevant to the pharmaceutical industry (for information on COVID-19’s more general implications on competition law, please see our blog postCOVID-19 and the impact on competition law”).

Key points for pharma companies to note
  • Despite some relaxation in the competition rules to enable companies to cooperate, regulators remain very vigilant and have signalled that they will pursue violations of competition law during the COVID-19 crisis. In this vein, the EU’s Competition Commissioner, Margrethe Vestager, warned at an online event on 27 March that the COVID-19 crisis is “not a shield against competition enforcement” and that the EC will be “even more vigilant than in normal times if there is a risk of virus-profiteering”.
  • Although certain forms of necessary and temporary cooperation between businesses aimed at ensuring the supply and fair distribution of essential products might be acceptable during the crisis, cooperation between pharma companies to develop or market new products should nonetheless be done in a compliant manner, as such activities are likely to be closely scrutinised by the authorities.
  • Regulators will not hesitate to intervene in cases of excessive pricing and indeed enforcement action is currently being taken against such practices. Pharma and medical device companies should be particularly cautious given the sensitivities about their pricing practices, especially against a backdrop of various recent findings of excessive pricing of products within the sector. To help combat price gouging, regulators are welcoming the imposition of maximum prices on resellers of products, which is generally permissible under competition rules.
  • As regards M&As in the pharma sector, companies should be aware that in response to the COVID-19 outbreak, the European Commission (“EC”) has adopted guidelines on foreign direct investment (“FDI”) screening in order to protect critical European assets in areas such as health, medical research and biotechnology.
Competition authorities are hot to respond to price gouging and exploitation allegations

Numerous competition authorities across the world have given robust responses to seemingly rocketing prices of products experiencing high demand due to the COVID-19 crisis.

  • Opening of investigations

The Italian authority announced on 12 March that it was investigating Amazon and eBay for the excessive price rises of hand sanitizer and face masks. Similarly, the French authority has launched an investigation into price surges and also announced price regulation for antibacterial hand gels, whilst the Greek authority has also launched an investigation into price increases and output restrictions in healthcare materials (including antiseptic wipes/solutions and surgical masks).

  • Warning letter to pharma and food/drink companies

On 20 March, the UK’s Competition and Market’s Authority (“CMA”) issued an open letter to companies in the pharmaceutical and food/drinks sectors. The CMA has received reports that a minority of companies in these sectors are charging unjustifiably high prices for in demand goods, or making misleading claims about their efficacy, and warns companies against exploiting the COVID-19 pandemic for their benefit. The CMA emphasises that it will use all the powers available to it to ensure that these critical sectors continue to work properly in the months ahead and asks companies to provide it with any information relating to price increases.  Similar warnings have been issued by the competition authorities in Spain and in the USA amongst others.

  • Companies should be mindful of the “abuse of economic dependence” provisions in various national jurisdictions

Several countries have pre-existing measures that prevent the abuse of relationships of economic dependence, including Austria, Belgium, Germany, France and Japan. The scope for such abuse could, in theory, be heightened in a more uncertain and difficult economic environment. Thus companies with others dependent on them must not exploit this advantage, e.g. by raising their prices or reducing their supply. The Polish competition authority earlier this month launched an investigation into two wholesalers’ termination of contracts to supply medical equipment to doctors, which they did with the intention of re-signing the agreements at significantly higher prices. Whilst the authority is investigating an abuse of dominance, rather than economic dependence, it acts as a warning that the dominant parties in a commercial relationship must act fairly and not exploit the current situation.

Restrictions on horizontal collaboration likely to be relaxed

In times of external events impacting particular sectors of the economy, we could see the formation of “crisis cartels”, wherein governments or authorities permit suppliers (e.g. of pharmaceutical products or key food), to co-ordinate and level out their stock levels. Such coordinating behaviour, which could in principle raise anticompetitive concerns in normal times, could be captured by exceptions (e.g. Article 101(3) TFEU) or, if mandated by law/governmental decrees, be exempt under the state compulsion doctrine (this is to be interpreted strictly and in principle only action that is truly determined by the government without any freedom on the part of the participating undertakings would be captured). Alternatively, there could be a more general relaxation on rules forbidding horizontal co-operation within sectors more acutely affected by the outbreak.

  • Joint statement by EU competition regulators on cooperation between competitors

On 23 March, the European Competition Network (“ECN”), which comprises the EC and the competition authorities of all EU Member States, issued a joint statement on the application of competition law rules during the COVID-19 crisis. The statement indicates that the ECN will not intervene in necessary and temporary cooperation between businesses aimed at ensuring the supply and fair distribution of essential products and services. However, the ECN emphasises the importance of ensuring that products considered essential to protect consumers’ health in the current situation (e.g. face masks and sanitising gels) remain available at competitive prices and notes that it will take robust action against attempts by companies to capitalise on the crisis by cartelising or abusing their dominance (in this regard, the ECN notes that the existing rules allow manufacturers to set maximum prices for their products). In case of doubt, businesses can apply to the EC or the national authority for informal guidance.

  • UK regulator’s approach to business cooperation in response to COVID-19

On 25 March, the CMA published guidance on how it will prioritise its cases during the COVID-19 crisis and how it will apply the legal criteria for exemption from the prohibition on agreements that are restrictive of competition. In light of the current crisis, the CMA does not intend to take enforcement action where businesses adopt temporary measures to coordinate conduct as long as these measures: (i) are appropriate and necessary to avoid shortages or to ensure security of supply; (ii) are clearly in the public interest; (iii) contribute to the benefit or wellbeing of consumers; (iv) deal with critical issues arising as a result of the COVID-19 pandemic; and (v) do not last longer than is necessary to deal with these critical issues. However, the CMA notes that it will ensure that this approach is not used as a cover for non-essential coordination that may cause harm to consumers or the wider economy. For further information on the CMA’s guidance, please see our blog post on this topic.

  • Joint R&D activities

Pharma companies might seek to engage in R&D collaborations with a view to developing a vaccine or appropriate treatments for COVID-19. R&D agreements are not immune from antitrust scrutiny and can be problematic in certain circumstances (e.g. if the joint research replaces the R&D efforts of companies that would have otherwise been competing to develop more innovative products). Therefore, companies need to structure their joint R&D agreements in a way that is compliant with competition law rules and include appropriate information barriers to limit the exchange of competitively sensitive information to what is strictly necessary.

M&A and new EC Guidelines on FDI screening in response to COVID-19 crisis

On 25 March, the EC adopted new guidelines ahead of the application of the FDI Screening Regulation to ensure a strong EU-wide approach to foreign investment screening in response to the COVID-19 crisis.  The EC’s aim is to preserve EU companies and critical assets, notably in areas such as health, medical research, biotechnology and infrastructures that are essential for security and public order in the EU.

According to the EC, in the context of the current crisis, there could be an increased risk of attempts to acquire healthcare capacities (e.g. production of medical or protective equipment) or related industries such as research establishments (e.g. developing vaccines) via FDI. Thus, vigilance is required to ensure that any such FDI does not have a harmful impact on the EU’s capacity to cover the health needs of its citizens and the EC calls on Member States to: (i) make full use already now of its FDI screening mechanisms to take fully into account the risks to critical health infrastructures, supply of critical inputs etc.; and (ii) for those Member States that currently do not have a screening mechanism, to set up a fully-fledged screening mechanism and in the meantime to use all other available options to address cases where the acquisition or control of a particular business, infrastructure or technology would create a risk to security or public order in the EU, including a risk to critical health infrastructures and supply of critical inputs. For further information on the EC’s FDI guidelines, please see our blog post on this topic.

Another development to note in the M&A field is that EC officials are teleworking at the moment thus likely slowing down the review of the merger control notifications. The EC has urged companies to delay filings to the extent possible.

Contacts
Kyriakos Fountoukakos
Kyriakos Fountoukakos
Managing Partner, Brussels
+32 2 518 1840
Peter Rowland
Peter Rowland
Of Counsel, Brussels
+32 2 518 1847
Dafni Katrana
Dafni Katrana
Senior Associate, Brussels
+32 2 518 1846
Verity Musselwhite Steel
Verity Musselwhite Steel
Trainee Solicitor, Brussels
+32 2518 1828

COVID-19: People: Collaboration is key in the race to develop a vaccine (Global)

The race is well underway to develop a vaccine for the coronavirus, now known as COVID-19.

New pharmaceutical products are time consuming and expensive to develop, and the pharmaceutical companies who dominate the global vaccine industry, Pfizer, MSD, GSK, Sanofi and Johnson & Johnson, typically rely on intellectual property rights, exercised over the long term, to recover the significant investment of often billions of dollars associated with new product development. But things look very different in the middle of a global and immediate health crisis, such as that presented by COVID-19.

Developing new vaccines is particularly challenging. In the case of a vaccine for COVID‑19, both traditional vaccines, where part of the virus is used to mimic an infection and trigger the body’s immune response, and novel vaccine mechanisms, employing messenger RNA to trigger an immune response, are being explored. For either type of vaccine, extensive testing will be required both in animal and then human models to ensure both efficacy and safety, with many vaccines having been associated with unacceptable side effects. For example, the vaccine developed by GSK to respond to the 2009-10 swine flu pandemic was withdrawn from sale after it was discovered to cause narcolepsy in some people.

All of that needs to be done within a timeframe that means the vaccine is still needed. With the typical time-line for developing a new vaccine being two to five years, it is not surprising that in 2002-2003, the SARS outbreak came and went before a vaccine could be produced. This work is, however, now proving useful in developing the COVID-19 vaccine given both SARS and COVID-19 are coronaviruses. Coupled with the RNA sequence of COVID-19 having been sequenced by Chinese scientists shortly after the epidemic began and shared with researchers worldwide, the timeframes for development of a COVID-19 vaccine are seemingly being accelerated beyond what has been achieved previously. This week, for example, the first human clinical trials of a mRNA vaccine developed by the National Institutes of Health and Moderna Inc, commenced in the US. This is record speed for a phase I vaccine trial. Johnson & Johnson is also making fast progress on a vaccine, announcing this week that after starting work on a vaccine in January, it hopes to begin human trials in early November (an extremely short time line, although to many that will seem far too far away).

Given the risks, given the need for speed, and given there is no guarantee that a pharmaceutical company will make much (or any) money from a vaccine, it is perhaps not so surprising and encouraging that we are seeing a number of collaborative efforts emerging, with organisations working together and sharing information freely.

One of the leaders in vaccine development is the Coalition for Epidemic Preparedness Innovations (CEPI), a not-for-profit organisation headquartered in Norway, that brings together public, private, philanthropic and civil organisation to develop new vaccines. Researchers from around the world have now joined CEPI’s effort to develop a Covid-19 vaccine. The first clinical batch of the Moderna vaccine now in human testing was funded by CEPI. Those collaborating with CEPI also include leading researchers from both CSIRO and the University of Queensland in Australia. Researchers at the University of Queensland have already developed a vaccine candidate, which will be tested at CSIRO’s state-of-the-art biologics production facility in Melbourne.

Sanofi Pasteur and Johnson & Johnson have each partnered with the US Biomedical Advanced Research and Development Authority, with BARDA contributing to the costs associated with the research being undertaking by both companies. Pfizer has also this week announced a partnership with BioNTech, a German company, to develop a mRNA-based vaccine and hopes to begin human trials in a few weeks.
Although these collaborations are progressing to human testing at a fast pace, the phase 1 trials involving a limited number of healthy individuals, will take about 3 months to determine if the vaccine is safe enough in those individuals to proceed further. Assuming a successful phase 1 trial, subsequent clinical trial steps would ordinarily mean that a vaccine is still at least some 12 to 18 months away. It is yet to be seen whether regulators can adapt processes, such as running virtual clinical trials, to fast-track promising vaccines.

While the world waits for a vaccine to be developed, a number of companies are also looking to repurpose existing drugs for the treatment of Covid-19. Gilead, for example, is launching two Phase III clinical trials of the antiviral drug, remdesivir, in patients infected with COVID-1 and has been in discussions with Australia’s Therapeutic Goods Administration to allow remdesivir to be used as an emergency treatment. Similarly, AbbVie’s anti-HIV drug, Kaletra, which is already approved for use in Australia, has been used to treat patients in Australia.

All of this underscores the complexities of developing and getting new pharmaceutical products, and particularly vaccines, to market. Pharmaceutical companies will be reluctant to bear the brunt of those complexities and uncertainties on their own, but the adoption of alternative approaches to funding, and collaborative research across the private and public sector, as well as academia, allow the risks associated with those complexities to be shared more effectively. Researchers from around the world are now pulling together, and helping to give hope that an effective vaccine will be developed in time to be of use.

Key Contacts and Authors

Rebekah Gay
Rebekah Gay
Partner, Sydney
+61 2 9225 5242
Emma Iles
Emma Iles
Senior Associate, Melbourne
+61 3 9288 1625

 

Supreme Court hears Kymab’s appeal against the sufficiency findings of the Court of Appeal

On 11 and 12 February the UK Supreme Court heard the appeal brought by Kymab against the judgment of the Court of Appeal which  found Regeneron’s European Patents (UK) No 1 360 287 and its divisional EP (UK) No 2 264 163 valid and infringed, reversing the invalidity finding of the first instance court (see our analysis of the first instance judgment here). The Supreme Court hearing can be viewed here.

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ECJ rules for the first time on “pay-for-delay” agreements

On 30 January 2020 the European Court of Justice (“ECJ”) clarified for the first time the criteria governing whether so-called “pay-for-delay” agreements entered into between originator and generic pharmaceutical companies fall foul of EU competition law rules. Such agreements are a form of patent dispute settlement, whereby in return for a value transfer, a generic manufacturer acknowledges the patent of the originator pharmaceutical company, and agrees to refrain from marketing its generic version of the drug in question for a specified period of time. Pay-for-delay agreements have been in the spotlight of the European Commission (“EC”) and national competition authorities for over a decade.

In line with the non-binding Opinion delivered by Advocate-General Kokott on 22 January 2020, the ECJ held that such agreements may constitute “by object” infringements of the prohibition on anti-competitive agreements (such that a competition regulator is not required to prove effects on the market) or “by effect” infringements, and may also amount to an abuse of a dominant position.

The ECJ had been asked to provide guidance on this issue by the UK Competition Appeal Tribunal (“CAT”), by way of a reference for a preliminary ruling in the UK Paroxetine case. That case involves an appeal by GlaxoSmithKline (“GSK”) and five generics against a 2016 decision of the UK Competition and Markets Authority (“CMA”) imposing fines totalling £45 million on the basis that such pay-for-delay agreements infringed competition law.

Why is the ECJ’s judgment important?

The ECJ’s judgment is expected to have significant implications for both ongoing and future cases in the pharmaceutical sector:

  • The ECJ has sent a clear message to both originator and generic companies that once a generic has demonstrated a clear intention to market a rival version of an originator drug, it is likely to be considered a “potential competitor” of the originator (and thus any patent settlement between the originator and that generic involving a value transfer is likely to attract antitrust scrutiny).
  • The ECJ held that patent settlement agreements can be lawful. In particular, the existence of a value transfer (pecuniary or not) is not, by itself, sufficient to classify the agreement as a restriction of competition by object. This is because such value transfer may be justified taking into account the parties’ legitimate objectives (e.g. if it constitutes compensation for the generic’s litigation costs). However, the ECJ considered that where the value transfer by the originator to the generic cannot have any explanation other than the commercial interest of both parties not to compete on the merits, the agreement at issue will constitute a restriction of competition “by object” (i.e. it will be anticompetitive by its very nature). Therefore, although patent settlement agreements between originators and generics are not automatically anti-competitive, it appears that agreements with large value transfers from the originator to the generic(s) in exchange for a delay in market entry are highly likely to be deemed to be an “object” infringement in most cases. Pharmaceutical companies wishing to argue otherwise are likely to face an uphill struggle (although the ECJ has left the door open in very limited circumstances).
  • Further, the judgment indicates the approach the ECJ is likely to take in pending appeals against EC infringement decisions in two other pay-for-delay cases: Lundbeck (citalopram) and Servier (perindopril).
  • It also seems likely to encourage both the EC and national competition authorities to aggressively pursue more pay-for-delay cases in the future. Indeed, Commissioner Vestager commented to journalists that the judgment “looks very promising on first reading, and in that of course we feel very much encouraged because we find these cases important”. Similarly, the CMA has welcomed the judgment, noting that it “has clarified a number of important questions and will help competition authorities, including the CMA, in their work to tackle this harmful behaviour by pharmaceutical companies”.

Click here to read our full briefing.

This post was first published on our Competition Notes blog.

Contacts

Kyriakos Fountoukakos
Kyriakos Fountoukakos
Partner, Brussels
+32 2 518 1840
Dafni Katrana
Dafni Katrana
Senior Associate, Brussels
+32 2 518 1846
Ruth Allen
Ruth Allen
Professional Support Lawyer, London
+44 20 7466 2556