Under the antitrust spotlight: patent litigation

Switzerland

On 13 September 2022 the Swiss Competition Commission ("COMCO") opened an investigation into Novartis' possible unlawful use of certain patents and conducted a dawn raid¹ at the offices of the company. Novartis emphasised that the opening of an investigation did not imply any finding of wrongdoing².

According to Novartis' interim financial report³, the investigation is centred on the company's acquisition of certain patents that were allegedly used to tactfully initiate litigation proceedings in order to protect its blockbuster drug⁴ for the treatment of psoriasis from competing products, including a drug produced by Eli Lilly for the treatment of multiple psoriasis diseases⁵ (Taltz). The scope of the initiated litigation proceedings extends beyond Switzerland, with the claims having been made in Germany, Ireland, Italy and Austria. In response to this, Eli Lilly has raised claims "…under both European patent law, seeking revocation of the patents in suit, and unfair competition law"⁶.

In Switzerland, the COMCO has indicated that it aims to determine whether the alleged behaviour constitutes the use of a "blocking patent", which could amount to an abuse of an allegedly dominant position held by Novartis. In parallel to this, it has been reported that the European Commission ("Commission") has issued a formal request for information and documents from Novartis in the context of its "preliminary investigation".

The two authorities are collaborating on the investigation pursuant to a bilateral agreement between Switzerland and the European Union signed in 2014. This permits (inter alia) the exchange of certain confidential information obtained in the course of an antitrust investigation where the Commission and COMCO are investigating the same conduct, without having to obtain the prior written consent of the party (or parties) under investigation.

The European Union

On 10 October 2022, the Commission issued a statement of objections ("SO") to Teva Pharmaceuticals ("Teva")⁷, alleging that Teva abused its dominant position by engaging in unwarranted patent litigation⁸ regarding its patent for glatiramer acetate, an active ingredient in Teva's multiple sclerosis drug (Copaxone). This is the first time the Commission has sent an SO in relation to alleged abusive drug patent filings. Prior to the issue of the SO, the Commission carried out dawn raids at the premises of Teva's subsidiaries in October 2019 and formally opened its investigation against the company on 4 March 2021⁹.

The Commission's SO alleges that since the expiration of Teva's patent in 2015, Teva was playing a 'divisionals game' by artificially extending its patent protection of glatiramer acetate by strategically filing and withdrawing divisional patents, which "forc[ed] its competitors to file new lengthy legal challenges each time"¹⁰, in turn diminishing the uptake of medicines that compete with Copaxone. The alleged abuse of Teva's dominant position spans Belgium, Czechia, Germany, Italy, the Netherlands, Poland, and Spain.

Divisional patents stem from an earlier 'parent' patent, and are most commonly filed to overcome an objection of plurality of inventions in the parent patent. The filing of multiple divisional patents could result in a large family of patents, multiplying the barriers that a generic or generic-like competitor would need to challenge to enter the market.

Spain

On 25 October 2022, the Spanish competition authority, the National Commission of Markets and Competition ("CNMC"), fined Merck Sharp & Dohme ("Merck") €38.9 million for abusing its dominant position by engaging in patent litigation¹¹. Merck's parent company, MSD Human Health Holding, was held jointly and severally liable for the fine.

From 2002 – 2018, Merck exercised monopoly power over its patented contraceptive vaginal ring (NuvaRing) in Spain¹². In June 2017, a competing contraceptive vaginal ring (Ornibel) was launched by Insud Pharma.

In September 2017, the Commercial Court of No.5 Barcelona granted Merck an ex parte interim injunction which prevented the manufacture and sale of Ornibel in Spain, preceded by an urgent filing with the court based on Insud Pharma allegedly infringing Merck's patent rights. The injunction had significant global implications as the factory manufacturing Ornibel was only situated in Spain, in turn preventing the international production and supply of Ornibel.

The injunction was lifted three months after its grant as Merck was unable to prove that Insud Pharma had abused Merck's patent rights. Following a full investigation into an abuse of dominance claim raised by Insud Pharma¹³, the CNMC found that Merck had withheld "relevant factual and technical information from the court"¹⁴ in order to illegally obtain the injunction and subsequently delay the generic entry of Ornibel onto the Spanish pharmaceuticals market.

The concealment of factual and technical information contravened Merck's "special responsibility [as a dominant undertaking] not to impede, through its conduct, the development of effective and undistorted competition"¹⁵.

Merck has the opportunity to directly appeal the CNMC's decision to the National High Court up until 26 December 2022.

A transatlantic view of patent litigation and antitrust

Of particular relevance to the Commission's SO issued to Teva is the judgment of the ECJ in AstraZeneca's appeal against the Commission's 2005 finding that AstraZeneca abused its dominant position by taking various actions to block or delay generic competitors from entering the market. These included making misleading representations to patent offices in various Member States - resulting in AstraZeneca's product obtaining supplementary protection certificates - and requesting the deregistration of marketing authorisations in other Member States, to block the entry of generic competitors and prevent parallel trading. When considering the deregistration of marketing authorisations in its judgment, the ECJ stated that the General Court was correct to hold that the fact that AstraZeneca was entitled to request the withdrawal of its marketing authorisations "in no way causes that conduct to escape the prohibition laid down in Article 82 EC [now Article 102 TFEU] … the illegality of abusive conduct under Article 82 EC is unrelated to its compliance or non-compliance with other legal rules and, in the majority of cases, abuses of dominant positions consist of behaviour which is otherwise lawful under branches of law other than competition law."

Indeed, the ECJ went on to note that AstraZeneca had a special responsibility as an undertaking holding a dominant position, and that it could not "…use regulatory procedures in such a way as to prevent or make more difficult the entry of competitors on the market, in the absence of grounds relating to the defence of the legitimate interests of an undertaking engaged in competition on the merits or in the absence of objective justification."¹⁶   

Against this background, whilst it is technically possible for Teva to file and withdraw divisional patents, it appears that this conduct could (as also indicated by the Commission's preliminary findings in its SO) nevertheless potentially amount to an abuse of a dominant position if it has an exclusionary impact on generic competitors, absent an objective justification.

Similar questions were recently considered by a Seventh Circuit Court in the US, in a challenge mounted against a "thicket" of patents held by AbbVie on the world's best-selling arthritis drug.¹⁷ Although the original patent expired in 2016, AbbVie held 132 other patents related to the drug, the last of which expires in 2034. However, the Court did not agree with the Plaintiffs that merely holding a large volume of patents could in itself constitute an antitrust infringement, with Judge Easterbrook querying in the Panel's opinion “What’s wrong with having lots of patents? If AbbVie made 132 inventions, why can’t it hold 132 patents?”. The Plaintiffs' arguments that the patents were too weak to monopolise such an important drug - were similarly rejected. Judge Easterbrook commented that "[w]eak patents are valid; to say that they are weak is to say that their scope is limited, not that they are illegitimate". Competitors might argue to the Patent Office that they did not justify legal protection, but in the context of the antitrust proceedings - given that the Plaintiffs were not arguing that the patents were obtained fraudulently - the Court found it hard to see how AbbVie could be penalised for its successful applications. A source of liability may have arisen if AbbVie had filed frivolous suits against its rivals, solely to increase their costs (e.g. by asserting irrelevant patents against them). However, this was not suggested in the patent litigation. Finally, the Court also concluded that AbbVie's patent settlements in the US and Europe did not amount to payments to delay entry, instead noting that both settlements concluded were traditional resolutions of patent litigation.   

Final thoughts…

There is an inherent tension between IP law (which creates and protects monopoly rights) and the competition rules, which can make their concurrent application extremely complex. This is brought into particular focus in situations where undertakings are acting in compliance with the IP laws, but alleged to be taking advantage of the permitted procedures to enhance their own position and stifle competition. 

At present, it is becoming evident that national competition authorities, like the CNMC, and the Commission are adopting an increasingly serious stance¹⁸ towards pursuing pharmaceutical companies whose alleged abusive conduct impacts access to "…innovative medicines [that] can make a major difference to a patients' quality of life"¹⁹. With specific regard to divisional patents, it will be interesting to see if the preliminary views contained in the Commission's SO relating to Teva's conduct will be confirmed in an infringement decision (subject to any potential appeal made by Teva to the General Court). This will assist in confirming whether there will be a limited extent to which the holding of numerous (validly obtained) patents could itself be sufficient to amount to an abuse of a dominant position in Europe and, the circumstances in which such a finding may be made.

As further details of the Commission and COMCOs' investigations into Novartis become public, it will be interesting to understand more about the nature of the conduct that is being investigated as potentially anticompetitive – and whether this aligns with the nature of the alleged conduct carried out by Teva. This will include which 'litigation proceedings' were referred to by COMCO (e.g. whether they could be regarded as vexatious), and whether the alleged actions may be technically permissible under IP law, but are being investigated as a potential abuse of a dominant position in view of their actual (and intended) impact on generic competitors. 

Pending such further information on the Commission's and COMCO's current investigation into Novartis, and the outcome of the Commission's SO in relation to Teva's conduct, it is not entirely clear to what extent the position in Europe will ultimately align with that taken in the US, and where the boundary between a dominant company's legitimate protection of its IP rights and its responsibilities under competition law will be drawn. In the meantime, pharmaceutical companies holding dominant positions by virtue of their IP rights will be on notice to err on the side of caution in ensuring that their patent litigation strategies – and indeed, their commercial strategies in protecting their IP more generally - are competition compliant.

¹ COMCO: Investigation on use of patents (admin.ch)

² Novartis statement regarding competition authority investigation into assertion of a patent

³ Novartis' condensed interim financial report – supplementary data

⁴ A blockbuster drug is a drug that generates annual sales of at least $1 billion for the company that sells it.

⁵ The diseases include plaque psoriasis, psoriatic arthritis, and paediatric plaque psoriasis.

⁶ Eli Lilly and Company et al v Novartis Pharma AG, Application for extension of time to file a petition for writ of certiorari, 27 September 2022, paragraph 2

⁷ Commission press release dated 10 October 2022: "Commission sends Statement of Objections to Teva over misuse of the patent system and disparagement of rival multiple sclerosis medicine"

⁸ The Commission also alleged that Teva engaged in a misleading information campaign about a competing drug for the treatment of multiple sclerosis.

⁹ Commission press release dated 4 March 2021:"Commission opens formal investigation into possible anticompetitive conduct of Teva in relation to a blockbuster multiple sclerosis medicine"

¹⁰ Commission press release dated 10 October 2022 (n 7).

¹¹ CNMC press release published 26 October 2022: "The CNMC fines pharmaceutical company Merck 39 million euros for abuse of a dominant position in the market for vaginal contraceptive rings"

¹² NuvaRing was the first contraceptive vaginal ring introduced on the Spanish pharmaceuticals market.

¹³ The abuse of dominance claim was raised in November 2019.

¹⁴ CNMC press release published 26 October 2022 (n 11).

¹⁵ CNMC press release published 26 October 2022 (n 11).

¹⁶ Judgment of the Court in Case C‑457/10 P, AstraZeneca AB and AstraZeneca plc v European Commission,6 December 2012, paragraph 134

¹⁷ Mayor and City Council of Baltimore v. AbbVie Inc, 7th U.S. Circuit Court of Appeals, No. 20-2402, 1 August 2022

¹⁸ In addition to the Commission's focus on patent litigation, the Commission also opened an investigation into another pharmaceutical company (Vifor) in June 2022 for the alleged spread of misinformation about a close competitor. See Commission's press release dated 20 June 2022.

¹⁹ Commission press release dated 10 October 2022 (n 7).