Patents / Unfair Competition

The intersection between competition law and patent law: the fingolimod case

Sonia Sarroca Suñer

On 20 January 2023, the 15th Section of the Barcelona Provincial Court overturned interim injunctions imposed by Barcelona Commercial Court No. 10 against three pharmaceutical companies seeking to market generic medicines based on the active ingredient fingolimod in Spain. The plaintiff, in this case, had invoked Law 3/1991 of 10 January 1991 on Unfair Competition (“LUC“) because it did not (yet) have a granted patent and, therefore, could not apply for injunctive relief based on patent law.

Background

In 2015, the applicant (Novartis) filed a divisional patent application with the European Patent Office (“EPO“) to protect a 0.5 mg dosage regimen for fingolimod (an active ingredient known in the prior art), claiming a priority from 2006. In December 2020, the EPO Examination Division rejected this application. However, following an appeal of the decision by the applicant, the EPO Board of Appeal ordered to refer the case back to the Examination Division to grant the patent in a limited form at the beginning of February 2022. The written grounds for the decision were published in June 2022 and the patent was finally published in the EPO Official Gazette on 12 October 2022.

In the meantime, at the end of February 2022, the period of data and market exclusivity of the plaintiff’s medicine expired in accordance with Royal Legislative Decree 1/2015, of 24 July, approving the Consolidated Text of the Law on Guarantees and Rational Use of Medicines and Health Products. Therefore, taking into account that the plaintiff’s patent had not yet been granted by the EPO (let alone validated in Spain), several generic drug companies considered that they were entitled to launch their fingolimod medicines on the market.

It was then that the plaintiff, unable to invoke a patent right, built a case based on unfair competition. Specifically, it invoked Article 4 LUC (general clause), which prohibits any conduct objectively contrary to the rules of good faith, one of its manifestations being acts of obstruction of competition. Thus, in the applicant’s opinion, the defendants intended to take unfair advantage of the time that the EPO would take to grant the patent in the knowledge that, once granted, they would have to exit the market.

 

The first instance decision

The Commercial Court no. 10 of Barcelona, considering that there was a possible infringement of art. 4 LUC, imposed the interim measures on the defendants without hearing the parties and subsequently confirmed them after the opposition hearing (Orders of 7 and 22 March 2022, respectively). Their validity was extended until 12 October 2022, i.e. until the date of grant of the patent. For this Novartis had to request up to two extensions of the interim measures, as it had initially envisaged that the patent would be granted earlier.

In the court’s opinion, the requirement of the plaintiff’s prima facie case (fumus boni iuris) was met, mainly because once the patent was granted, the plaintiffs would have to exit the market. Thus, it was affirmed that the defendants intended to take undue advantage of the interim period between the expiry of the period of data and market exclusivity and the grant of the patent in order to empty of content the exclusive right conferred by the future patent. It was therefore considered justified to resort to unfair competition law to prevent such undesired effects from being consolidated.

The second instance decision

The 15th Section of the Barcelona Provincial Court upheld the appeal of the defendants and revoked the interim measures previously imposed by the Commercial Court no. 10 of Barcelona, ordering the plaintiff to pay the legal costs of the proceedings and to compensate the defendants for the damages they suffered due to the imposition of the aforementioned interim measures.

In its decision, it emphasised that the principle of relative complementarity does not allow a conviction for unfair competition to be based on the same facts that would justify a conviction for patent infringement. In other words, the prosecution cannot be based on the fact that, when the patent is granted, the defendants’ medicines will invade their scope of protection, but something else must be present in order to consider that there is an act of unfair competition.

In the present case, the appeal court considered that the marketing of generics in the period between the end of data and market exclusivity and the publication of the patent grant would harm the competitive position of the plaintiff, who would have to reduce the price of its drug and share the market which it had hitherto enjoyed as a monopoly. It also stressed that it was equally clear that the marketing of generic medicines would bring an economic advantage for the defendants. However, these two assumptions were the consequence of effective competition on the market. Therefore, the decisive factor in considering whether or not there was an act of obstruction contrary to Art. 4 LUC was whether or not such conduct was objectively justified.

In the present case, the Court found that the defendants’ behaviour was fully justified. Thus, applying the standard of the diligent businessperson and taking into account that the defendants stated that they had strong arguments to challenge the validity of the patent, which they would assert once granted, the Court stated that they had two options:

  • The first, which it described as less risky, was to bring a nullity action in court and await the outcome.
  • The second, which it considered more risky, was to start marketing the generic medicinal product and wait for the plaintiff to bring an action for infringement of its patent in order to seek, by way of an action or counterclaim, its invalidity. In this case, the defendants would run the risk of having the invalidity action dismissed and being ordered to pay damages to the plaintiff.

However, according to the Court, this second case, although more risky, cannot be said to be contrary to good faith, since patents are granted without prejudice to the rights of third parties.

Therefore, all that is required is proof of objective justification of the defendant competitor’s conduct, i.e., having a real intention to market the generic medicine (unlike other case law precedents where the defendants did not, and were therefore considered to have committed acts of unfair competition) and the will to challenge the validity of the patent. In this case, the defendants did so and therefore the prima facie case (fumus boni iuris) of the plaintiff’s claim was rejected.

Without doubt, the defendants’ position would have been equally justified had they claimed that they had arguments of non-infringement of the patent.

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