Intellectual Property Rights (“IPRs”) and Antitrust have always had a difficult relationship. IPRs may confer legal monopolies, antitrust "ghts them. DG COMP has acknowledged that in technology markets, it protects not only competition but also innovation. But does it respect IPRs? The question is whether the balance is always right.
On 19 June 2013 the European Commission was the "rst agency in the European hemisphere to rule on the assessment of so-called “reverse payment patent settlements”.1 The outcome is striking. The Commission’s 460+ page decision concluded that reverse settlements constitute a restriction by object. Restrictions by object are those that are obviously and by their very nature most harmful to competition. The Commission has taken the view that a payment from the originator to the generic company in a patent settlement necessarily reduces the latter’s efforts to enter the market independently with its generic product. For the Commission, such payment is literally “pay for delay”, with a big emphasis on the “for” so as to underline the intention of the payment and its "nality. Defendants – originators and generics alike – argued in vain that this view is overly limited. They took the view that the settlement was the only viable way out of a blocking situation and that for this reason the payment did not induce the decision not to launch. The key fact for all defendants: the existence of a granted and presumptively valid new patent.
The scenario at the basis of such cases can be easily described. A patented blockbuster drug comes close to the expiry of the original patent. Generics makers gear up for launch. Shortly before the patent expiry, the innovator obtains new or secondary patents and threatens the generics with lengthy and costly infringement litigation. There is a genuine dispute about the validity of the new patent and whether or not the generic product infringes it. There is uncertainty in relation to the infringement. Each of the parties prefers to avoid litigation with uncertain outcome. The originator, while having scienti"c evidence of an infringement, fears the uncertainty of patent litigation, with its risk of diverging outcomes in different Member States. A single adverse judgement could destroy much of the commercial value of the patented drug. The generic company is concerned about delayed entry and litigation cost. The generic business model implies that each generic company aims at being “first to market”. An injunction would frustrate this aim. It is also concerned about lengthy and costly litigation, as its pockets are less deep than those of originators. A launch at risk brings about two main risks. Firstly, an injunction may blow the freshly launched product off the pharmacy shelves. In the buyers’ minds, this raises doubts as to the safety of the product, and it will be dif"cult to win the buyers’ trust back after re-launch later on. Secondly, if no injunction is granted, the generic sells its product until the day the patent court may find an infringement. The generic undertaking then compensates high originator losses with modest generic revenues. It is therefore not surprising that both the originator and the generic company have an interest in settling their dispute out of court or before a final ruling. In such a settlement, the generic typically undertakes not to launch before a certain date. The originator in turn agrees to make a payment to the generic or to otherwise transfer value. The European Commission has now created a rule of presumptive invalidity of reverse payment patent settlements. Other agencies in Europe are expected to follow this approach.
1 Commission Decision of 19 June 2013, AT.39226 – Lundbeck (not yet published).
