Category: patents

FRANDly negotiations: national Courts apply the Huawei v. ZTE framework

IPlensLeave a comment

The Bucharest Court of Appeal and the Regional Court of Düsseldorf have recently issued two decisions concerning the enforcement of standard essential patents (SEPs) in the telecommunication industry. The decisions (which have been made available by Comparative Patent Remedies: see here and here, also for their English translation) are particularly interesting in that they apply the framework depicted by the CJEU in the Huawei v. ZTE case (C-170/13, full text here) with regard to the availability of injunctive relief for SEPs encumbered by FRAND (Fair, Reasonable and Non-Discriminatory) commitments. As is well known, according to the Huawei v. ZTE decision, a SEP holder, before asking an injunction against an alleged infringer, must present him a specific and detailed FRAND license offer (Huawei v. ZTE, par. 63). In the absence of such a FRAND license offer, seeking an injunction may amount to an abuse of dominant position under Art 102 TFEU (Huawei v. ZTE, par. 77). But what if the infringer does not respond to the SEP holder’s offer? Is the FRAND-compliance of the SEP holder’s offer still to be verified, in order for the injunction to be granted?

***.***.***

The Romanian case

In 2014, Vringo, Inc., an Israeli non-practicing entity (NPE), obtained from the Tribunal of Bucharest a preliminary injunction against ZTE Romania on the basis of a patent essential to the 4G/LTE standard. The decision was upheld by the Bucharest Court of Appeal. In particular, in the case at stake, Vringo had offered a license to ZTE Romania and ZTE Romania did not respond to the offer.

Later on, ZTE Romania filed a motion to have the above preliminary injunction lifted on the grounds of its alleged inconsistency with the Huawei v. ZTE framework. However, both the Tribunal and the Court of Appeal of Bucharest dismissed the petition. In particular, by decision of 28 October 2015, the Court of Appeal stated that, precisely in the light of Huawei v. ZTE, when the alleged infringer does not respond to the SEP holder’s offer (but the same applies to the case of a non-FRAND counter-offer), the SEP holder cannot be deemed to be abusing its dominant position. It seems from the line of reasoning of the decision that the Bucharest Court did not verify the FRAND-compliance of Vringo’s offer, and deemed it sufficient that ZTE Romania failed to present a FRAND counter-offer for an injunction to be granted.

The German case

The approach of German Courts is different. In an order of 13 January 2016, the Higher Regional Court of Düsseldorf held that the alleged infringer is not required to propose a FRAND counter-offer if the one it received is not FRAND-compliant. In other words, the Court has, first of all, to verify whether the patent owner’s offer is FRAND. Only if this condition is met, it will check if the counter-offer is FRAND-compliant too. Therefore, the alleged infringer who receives a non-FRAND offer and does not respond cannot be subject to an injunction under the Huawei framework and, if sued before a Court, he can simply object that its counterparty did not respect the FRAND “etiquette” provided by the CJEU. Obviously, the patent holder would still have the chance to prove before the Court that its offer was actually compliant to FRAND terms and conditions, and to obtain an injunction.

The same approach was recently adopted by the Regional Court of Düsseldorf too, in its decision of 31 March 2016 (English  translation  of  the  relevant  excerpts made available by Comparative Patent Remedies blog here). In this case, concerning a patent essential to the AMR-WB standard for 3G communications, the Court specifically assessed the FRAND nature of the patent holder’s offer, although it was undisputed that the alleged infringer had not proposed a counter-offer.

***.***.***

The German approach seems to be preferable. Since, under the Huawei v. ZTE framework, a FRAND-compliant offer by the patent holder is mandatory, Court should not issue injunctions without a prior assessment of the FRAND nature of the patent holders’ offers. Should this assessment be omitted, the burden of estimating a fair offer would shift from the patent holder – the only one who has the very instruments to calculate a fair royalty rate according to “comparable licensing agreements” – to the alleged infringer. So that, in order to avoid an injunction, the alleged infringer will most likely present a very high counter-offer. This seems to stifle the pro-competitive effects of the Huawei v. ZTE framework.

Stefano Vignati

(IPlens’ guest)

Competition law’s application to patent settlement agreements: the first UK decision

IPlensLeave a comment

When a pharmaceutical patent expires, the patent owner will normally face the competition of ‘generic‘ versions of the patented drug, which often means a dramatic fall in the originator product’s prices as well as an impending revenue cliff.

GlaxoSmithKline (hereinafter “GSK”) faced such a situation with regard to its patented anti-depressant product, Seroxat®, one of its best selling medications during the 2001-2004 time period. In 2001, a number of generics producers were taking steps to enter the market with their own versions of the product. GSK responded to the threat by commencing proceedings against two generics producers, Alpharma Limited (Alpharma) and Generics (UK) Limited (GUK), for breaching its patents.

Rather than taking the matter to trial, the parties proceeded to settle the case. The settlement terms included GSK paying certain sums to the generics producers and appointing them as its distributors of Seroxat®. In return, the generics producers agreed not to launch their own products into the UK market.

On the 12th of February 2016, the Competition and Markets Authority (former Office of Fair Trading) ran out an investigation against GSK and the generic companies finding that they had entered into anti-competitive reverse-payment settlements agreements for breaches of Chapter I of the Competition Act 1998 and Article 101 of the Treaty on the Functioning of the European Union (TFEU) (ex-Article 81 of the Treaty Establishing the European Community, TEC) (see the CMA press release at https://www.gov.uk/government/news/cma-fines-pharma-companies-45-millionfull, text of the decision yet to be published). The CMA found that the agreements effectively prevented the generic competitors from entering the paroxetine market and deprived the National Health Service of price falls averaging 70 per cent. Therefore it characterised the arrangements as a cartel and as an abuse of dominance by GSK.

The decision culminates in total fines of just under £50 million including a fine of £37.6 million against GSK. The size of the fine is itself significant: it is the second largest to have been imposed on an individual company by the UK competition authorities.

This is the first UK decision to consider the application of competition law to patent settlement agreements. However, the pharmaceuticals sector is not new to the attention of the competition authorities.

In the U.S., the FTC’s efforts to combat harmful reverse-payment settlement agreements resulted in the Supreme Court’s landmark decision in FTC v. Actavis, Inc., 133 S. Ct. 2223 (June 17, 2013), which held that these settlements are subject to antitrust scrutiny.

At the EU level, patent settlement were thoroughly reviewed in the Pharmaceutical Sector Inquiry, a report of the European Commission published on 8 July 2009 and followed by yearly Monitoring Reports (full texts here http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/).

In 2013, the EU Commission fined Danish pharmaceutical company Lundbeck €93.8 million and its generic competitors €52.2 million following an investigation which found that Lundbeck had concluded deals with them to unlawfully prevent the market entry of competing generic versions of its branded citalopram, a blockbuster antidepressant, following the expiry of its patents (full text here http://ec.europa.eu/competition/antitrust/cases/dec_docs/39226/39226_8310_11.pdf).

Essentially, the Commission considered that Lundbeck had paid substantial sums to the generic competitors in return for a delay in launching generic products onto the market. Now Lundbeck is appealing against the Commission decision and a judgment is expected later this year.

In 2014, the European Commission fined the French pharmaceutical company Servier and five generics companies a total of 427.7 million (EUR). In that case, Servier implemented a strategy to exclude competitors and delay the entry of cheaper generic versions of its bestselling blood pressure medicine, perindopril. Since its patent protection came to an end generics companies started developing their own products, Servier challenged them and subsequently settled the cases, paying the generics companies to stay out of the market. Also Servier’s appeal against the Commission’s findings is currently before the European General Court.

Waiting for the outcomes of these rulings, the case at stake seems to fall squarely within the territory that the EU consistently considers as giving rise to an “object” or automatic infringement of EU and EU national competition law (cf. Guidelines on the application of article 101 TFEU (ex Article 81 TEC) to technology transfer agreements, 2014/C 89/03 of 28.3.2014). Indeed, the misuse of the patent settlements to restrict competition emerges clearly looking at the direction of the transfer of value. In genuine patent litigation settlement, any payment will tipically flow from the alleged infringer to the patentee. Here, on the contrary, it is the patentee which provides compensation to the infringer. This deal is a straight horizontal agreement in restraint of competition, which would be equally unlawful if it had been stipulated by two producers of generics. As Prof. Ghidini outlines in Profili evolutivi del diritto industriale, 2015, 426, the deal is unlawful not because it concerns a patent, but due to the payment for delaying the product’s entry in the market (cfr. Abbott A.F., Michel S.T., The right balance of competition policy and intellectual property: A perspective on settlement of pharmaceutical patent litigation, IDEA, 2006, 46).

It remains to be seen what further repercussions GSK may face from this case. It is possible that the Department of Health and any other customers of the product could consider to launch a claim for recovering loss they may have suffered because of the amount Seroxat® was overpriced as a result of GSK’s conduct.

Jacopo Ciani

 

UK Competition and Market Authority, 12 February 2016, CMA v. GlaxoSmithKline plc  and others, CE/9531-11

Max Mara gets patent protection for jeans’ pockets which fit better to wearers’ body shapes.

IPlensLeave a comment

By judgment no. 472 of 14 January 2016, the IP Court of Milan (Judges Mr Marangoni, Mrs Dal Moro and Mrs Giani) ruled that jeans produced by Germani Group and distributed by Il Passatempo infringed Max Mara’s italian patent on “a pocket for clothing” that can “enhance and shape the forms of the wearers, with particular reference to the gluteus area”.

The Court dismissed the defendants’ exception of patent invalidity, based on the alleged lack of inventive step. A three-dimensional pocket that well adapts to the body constitutes an appropriate technical solution for a very clear technical problem: the reduction of the jeans unpleasant aesthetic effect of flattening and the increase in comfort. “This technical solution involves an inventive step, since for a person in the art it was not evident from the state of the art.”

The Court recognized that the patent infringement amounted also to unfair competition for contrast with professional ethics principles under art. 2598 no. 3) Italian Civil Code.

With reference to the distributor, the Court excluded its exemption from liability because unaware of the infringing nature of the saled product. Since intellectual property rights are subject to a system of publicity, the Court argued that market operators are presumed to be aware of their existence. As a consequence, the sale of i
nfringing goods amounts to infringement unless the distributor gives evidence that he was unaware, without his fault, of the infringement. That was not the case, since the distributor continued in marketing the infringing product even after the date of notification of the summons.

As regards the assessment of damages, the Court ordered the defendants to return the profits derived from the sale of the infringing products pursuant to art. 125 Italian Code of Industrial Property. This remedy was granted notwithstanding that Max Mara had not provided any evidence of the alleged damages and loss of profits. Even if the infringement does not give rise to damages, in any case it cannot enrich its authors, which will have to return their profits.

The decision seems to set the inventive step’s threshold required to get patent protection at a particularly low level. The related risk is that the same owner could claim different protections in relation to the same products. Indeed, in connection with the same jeans, design or even trademark protection could be successfully invoked as well.

Court of Milan, 14 January 2016, n. 472, Max Mara v. Germani Group et al. 

 

Jacopo Ciani

The CJEU sheds light on the way to calculate the term of SPCs

IPlens1 Comment

Article 13 (1) of Regulation EC No. 469/2009 (concerning the supplementary protection certificate for medicinal products, “SPC”) provides that SPCs are calculated on the basis of “the date of first authorisation to place the product one the market in the Community”. Existing SPC regulation is however ambiguous on this point and EU member states have adopted divergent practices.

By decision of 2 October 2014 the Oberlandesgericht Wien has referred questions to CJEU on a preliminary ruling regarding the calculation of SPCs term under Article 13 (1) of Regulation EC No. 469/2009.

The referral concerned two queries: a) whether the date of an MA (Market Authorization) has to be determined according to Community law or that of the member state where the SPC application is filed; b) whether (under Community law) “the date of the first authorisation” – as per Article 13(1) of the Regulation – is the date the MA actually issued or the date the applicant is notified.

The CJEU issued its Decision on 6 October 2015 in the case C-471/14, Seattle Genetics Inc. v Österreichisches Patentamt (full text here).

Confirming both the conclusions and the arguments submitted by the Advocate General Niilo Jääskinen in his Opinion as of September 10, 2015, the Court clarified: a) that, since Article 13(1) of aforesaid Regulation contains no express reference to the laws of the member states, it is necessary to adopt an independent and uniform interpretation that will be valid throughout the EU; b) that the date of the first authorisation is a matter of Community law, not of the legislation of the member state where the marketing authorisation has effect. The Court declared that the EU legislator chose to use the Regulation as the legal instrument to create a standard SPCs system.

In evaluating the second question, the CJEU further pointed out that SPCs were created to ensure sufficient protection to encourage pharmaceutical research, in light of the fact the period of exclusivity granted by patents concerning pharmaceutical products is insufficient to cover the R&D investment necessary.

In this context, the right to market a new drug arises on the date the patent holder becomes aware that the MA has been issued.

The Court therefore answered the second question by confirming that it is the date of notification of the MA that is to be considered the “date of the first authorisation”, this is the date to be taken into account in calculating the term of SPC.

As a result of this ruling, SPCs holders will benefit from a longer term of protection – by up to some weeks. Furthermore, a number of SPCs will likely need to have their duration recalculated.

 Matteo Aiosa

Court of Justice, Eighth Chamber, 6 October 2015, C-471/14, Seattle Genetics Inc. v Österreichisches Patentamt.

Huawei v. ZTE: Enforcing standard-essential patents as abuse of dominance

IPlens1 Comment

Following the request for a preliminary ruling issued by the Landgericht of Düsseldorf (Germany), on July 16th 2015, the European Court of Justice addressed the question whether or not, and at what conditions, the firm holding a standard-essential patent (SEP: namely, a patent essential to produce manufactures in compliance with a particular standard), which has committed to grant a license to third parties on FRAND terms, abuses its dominant position by seeking injunctions against alleged infringers (decision available here).

The long-awaited judgment of the Court confirms the general approach adopted by the Commission in both Motorola and Samsung cases (available here and here). However, while the Commission had merely stated that enforcing a SEP in court can constitute an abuse of dominance under certain circumstances, the ECJ decision goes further, clarifying what those circumstances are. In particular, the Court held that seeking an injunction against an alleged infringer does not violate competition law when the following conditions are met:

  1. prior to bringing the action, the SEP holder has informed the alleged infringer of the violation of its intellectual property right, specifying the mode of infringement;
  2. the SEP holder has presented a written offer for a license on FRAND terms to the “infringer” (which has previously expressed its intention to conclude a license agreement). The offer must include all the relevant conditions of the agreement, in particular the royalty rate applied and the way it is calculated;
  3. the potential licensee has not “diligently responded to [patent owner’s] offer in accordance with recognized commercial practices in the field and in good faith”, and has continued to use the protected technology.

The decision of the Court of Justice seems to subordinate the finding of abuse to the “bad faith” of both SEP owners and producers of standard-based products. On the one hand, the formers have to concretely fulfill the obligation to the standardization bodies consisting in giving a license on FRAND conditions to third parties. Indeed, a patent cannot obtain the SEP status unless the legitimate holder undertakes to grant a FRAND license to anyone who may require it, in order to prevent the SEP holder from “reserv[ing] to itself the manufacture of the products in question”. Thus, it is not surprising that, according to the ECJ, the patent owner may incur in an abuse of dominance if it seeks an infringement injunction without even submitting a licensing agreement to the alleged infringer.

On the other hand, the ECJ imposes the obligation of good faith also to the potential licensee, which – having decided not to accept the offer submitted by the patent owner – “may rely on the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms”.

The ECJ judgment has definitely the merit of striking a reasonable balance between the interests at stake: those of the potential (and willing) licensees, which supposedly made specific investments relying on the FRAND license promised by the SEP holder; and those of the SEP holder itself, which should be granted the right to effectively protect its intellectual property rights from free-riders.

Nonetheless, the intervention of European judges leaves some issues unsolved. Firstly, the decision does not explain when a license can be considered FRAND. Secondly, it does not answer the question whether holding a SEP implies, per se, a dominant position on the market (actually, the referring court had not asked about the finding of dominance). At first glance, there seems to be the glimmer of an opening for such a conclusion. A passage of the sentence, in fact, reads as follows: “[…] the patent at issue is essential to a standard established by a standardization body, rendering its use indispensable to all competitors which envisage manufacturing products that comply with the standard to which it is linked. That features distinguishes SEPs from patents that are non essential to a standard and which normally allow third parties to manufacture competing products without recourse to the patent concerned and without compromising the essential functions of the product in question” (emphasis added). This appears quite close to an irrebuttable presumption of dominance. A debatable position: in my view, the presumption should be rebuttable (as suggested by the Advocate General Whatalet in his opinion, available here), hence the judges should continue assessing, case-by-case, a situation of actual, effective dominance.

Piera Francesca Piserà

CJEU, 16 July 2015, case C-170/2013, Huawei Technologies Co. Ltd. v. ZTE Deutschland GmbH.

Product-by-process patent = product patent??

IPlens1 Comment

Worthy of comment is a recent decision of EPO’s Enlarged Board of Appeal (March 25, 2015) in the cases Tomato II and Broccoli II (respectively, Case Number G2/12 here and Case Number G2/13 here). Both cases relate to the patentability of plants and plant matter under Article 53(b) EPC. The Tomato II case concerns a “method for breeding tomatoes having reduced water content and product of the method”, while the Broccoli II case concerns a “method for selective increase of the anticarcinogenic glucosinolates in brassica species”.

The EPO’s Enlarged Board of Appeal stated that even a product-by-process patent is a “product patent” autonomously protected from the process that describes the former and from which the implementation as product depends.

The EPO’s approach (see, in each decision: Reasons, Legal erosion of the exceptions to patentability,§ 6.(b), p.61) is open to criticism. On the one side it risks paralyzing the competitive dynamics of process innovation, in contrast an interpretation of articles 64(2) EPC and 34 TRIPs whereby third parties are allowed to make the same product with a totally different process—hence,   without any absolute block imposed by pre-existing product patents that are the fruit of a totally different intellectual process. On the other side, EPO’s opinion ‘forgets’ that in absence of that process, the product wouldn’t even exist, as the facts of the cases highlighted that no other processes were available to achieve the same result. The final outcome of said decisions is even more debatable as the process through which the product was described and claimed was essentially biological , thus as such non patentable: with the paradoxical ultimate result of allowing the patenting of a product that could be realized only through a process not patentable by definition!

Gustavo Ghidini

Gianluca De Cristofaro

EPO, Enlarged Board of Appeal, 25 March 2015, Case Number G2/12 and Case Number G 2/13, Tomato II and Broccoli II

updated on 12 November 2015

The ECJ delimit the scope of the human embryos’ uses unpatentability

IPlensLeave a comment

Corte-di-Giustizia-Unione-Europea-CGUE-2In International Stem Cell Corp., 18 December 2014, C-364/13 (full text here), the ECJ returns on the meaning of “human embryo” for the purpose of their uses’ unpatentability laid down in art. 6(2)(c) of Dir. 98/44/EC on the legal protection of biotechnological inventions. The Court was asked to clarify the scope of its previous ruling in Brüstle, 18 October 2011, C-34/10, where that concept was interpreted in a wide sense as including not only embryos created by ovum’s fertilization, but also non-fertilized one, if such ova are capable of commencing the process of a human being’s development.

The Court established that it is correct to infer from the absence of such a capacity that human cells generated through parthenogenesis (a form of asexual reproduction in which growth of embryos  occurs without fertilization) do not constitute ‘human embryo’. Organisms which are not capable of developing into a human being can not be considered “human embryos” and therefore are not eligible for patent protection. It is for the referring Court to determine whether or not. The decision apparently centers two objectives: to be coherent with the Directive’s aim to exclude patentability where respect for human dignity could be affected and to delimit this exclusion, allowing the Member States no discretionality.

Jacopo Ciani

ECJ (Grand Chamber), 18 December 2014, C-364/13, International Stem Cell Corporation v. Comptroller General of Patents, Designs and Trade Marks

ECJ: the “supplementary protection certificate” for protein D in Synflorix. A tough interpretation of Regulation (EC) No.469/2009

IPlensLeave a comment

On January 15, 2015, the Court of Justice of the European Union (ECJ), in Arne Forsgren v. Österreichisches Patentamt C-631/13, issued a decision regarding the granting of a Supplementary Protection Certificate (SPC), requested by Arne Forsgren, for Protein D used in Synflorix, a vaccine authorized in European Union to protect from diseases caused by the bacterium S.Pneumoniae (full text here). As per the Regulation (EC) No.469/2009, the SPC covers the cost of research leading to the discovery of new “products” in order to ensure sufficient protection to encourage pharmaceutical research, which plays a decisive role in the continuing improvement in public health. In the present case, the Protein D contained in Synflorix is bond to some polysaccharides as a “carrier” and not associated to any pharmacological effect on its own. Based on the concepts provided in Regulation (EC) No.469/2009, can a SPC be attributed to the Protein D, even if this substance is not considered an active ingredient? The commission rejected the request, based on the interpretation of Regulation (EC) No.469/2009 article 1, lett.b and article 3, lett.a and b. according to which the “carrier” protein could be protected by a SPC. Otherwise, in respect of the article 3, lett.b the SPC protection is granted only if Protein D may be categorised as an “active ingredient” and if this action is covered by the therapeutic indications of the marketing authorization. The decision to provide the SPC protection should be carefully taken: potential misapplications may result in risk to monopolize the market, viceversa the refusal to grant supplementary protection might take the interested company in a disadvantageous position in relation to market competitors.

Grazia Maria Gaspari

Court of Justice, 15 January 2015, C-631/13,  Arne Forsgren v. Österreichisches Patentamt

Evergreening allegations and the orphan medicinal products Regulation: fresh guidance from the GC. A victory for originators in the war against generic manufacturers?

IPlensLeave a comment

An interesting decision from the General Court (full text here) on the exclusivity regime of orphan medicinal products authorised for marketing under Article 8/3 of EC Regulation 141/2000. As is well known, regardless of their patentability/patent protection, Art. 8/1 provides for 10-year market exclusivity for orphan medicinal products complying with the Regulation requirements. This exclusivity prevents the EU and Member States from granting authorisations “for the same therapeutic indication, in respect of a similar product”. By way of derogation from the said provision, Art. 8/3 permits authorisation for a similar medicinal product with the same therapeutic indication to be granted even during the market exclusivity period, provided that certain conditions (inter alia, the consent of the holder of the marketing authorisation for the original orphan medicinal product: Art. 8/3/a) are met. But does an authorisation granted under Art. 8/3, where the similar medicinal product is also orphan, give rise to market exclusivity? And, if so, is such exclusivity independent of the one already granted to the original orphan medicinal product, even though they concern similar products with the same therapeutic indication?

According to the applicant (giant generic manufacturer Teva), both answers should be negative. Granting market exclusivity to similar medicinal products authorised under Art. 8/3 could lead to evergreening the 10-year market exclusivity of the first orphan medicinal product. All the more so where, as in the case at hand, the holder of the original marketing authorisation is the same company as the one which obtained the “second” marketing authorisation under Art. 8/3/a. The GC did not share the applicant’s view. It stated, on the one hand, that market exclusivity “must be granted in all cases in which an orphan product has been given marketing authorisation”, Art. 8/3 cases included (p. 80); and, on the other, that “the fact that the therapeutic indications for which both orphan medicinal products received marketing authorisation are similar cannot undermine the market exclusivity enjoyed by each of those medicinal products” (p. 79). As a result, the GC dismissed Teva’s action, stressing that the interpretation maintained by the applicant “would jeopardise the objective of the regulation … and run counter to its spirit” (p. 80). Whether this is a real victory for the “spirit” of EC Regulation 141/2000 evoked by the GC, rather than a victory for originators in their war against generic manufacturers, is at least debatable.

Riccardo Perotti

General Court (Sixth Chamber), 22 January 2015, T‑140/12, Teva Pharma BV, Teva Pharmaceutical Europe BV v. European Medicines Agency (EMA), supported by European Commission