ECJ rejects appeal relating to abuse of the patent system and the procedures for marketing of drugs

On 6 December 2012, the European Court of Justice (“ECJ”) handed down its ruling rejecting AstraZeneca’s (“AZ”) appeal in relation to the Losec case. In the first instance, the General Court largely upheld the Commission decision which found that AZ abused the patents system and the procedures for marketing pharmaceutical products in order to prevent or delay the arrival of competing generic medicinal products on the market for proton pump inhibitors, such as AZ’s product Losec (See Newsletter 4/2010, p. 6, Newsletter 5/2010, p. 7 and Newsletter 3/2012 p. 9 for additional background information).

In its appeal, AZ claimed that lack of transparency was insufficient for a finding of regulatory abuse, notably to obtain supplementary protection certificates (“SPCs”), but there should be a requirement for deliberate fraud or deceit. AZ further claimed that the withdrawal of marketing authorizations constituted the exercise of an unfettered right under EU law. It should not be regarded as failure to compete on the merits and therefore did not constitute conduct that tended to restrict competition.

With regards to the first abuse of a dominant position concerning SPCs, the ECJ recalled that EU law prohibits a dominant undertaking from eliminating a competitor and thereby strengthening its position by using methods other than those which come within the scope of competition on the merits. In this respect, the ECJ recalled that pursuant to settled case-law the concept of “abuse” is an objective concept referring to the conduct of a dominant undertaking which is such as to influence the structure of a market where the degree of competition is already weakened precisely because of the presence of the undertaking concerned, and which, through recourse to methods different from those governing normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.

Accordingly, the ECJ held that the General Court was fully entitled to hold that AZ’s “consistent and linear conduct”, characterized by (a) the misleading representations it made to the patent offices to obtain the issue of SPCs which it was either not entitled to or for which it was entitled for a shorter period, and (b) its manifest lack of transparency (e.g. as regards the existence of the French technical authorization) by which AZ deliberately lead the patent offices and judicial authorities into error to preserve its monopoly on the medicinal products market, was a breach of competition on the merits and therefore an abuse of a dominant position. In fact, as regards AZ’s misleading representations (made in relation to the aforesaid French technical authorization) to secure the grant of SPCs, AZ knowingly accepted that the granted SPCs were unlawful in the event that the alternative interpretation proposed by AZ was not followed by the national courts or the Court of Justice.

However, the ECJ held that it cannot be inferred from the General Court’s judgment that any patent application made by a dominant undertaking which is rejected on the ground that it does not satisfy the patentability criteria automatically gives rise to liability under Article 102 of the Treaty on the Functioning of the European Union. In fact, the General Court did not hold that undertakings in a dominant position had to be infallible in their dealings with regulatory authorities and that each objectively wrong representation made by such an undertaking constituted an abuse of that position, even where the error was made unintentionally and immediately rectified. And the assessment of whether representations made to public authorities for the purposes of improperly obtaining exclusive rights are misleading must be made in concreto and may vary according to the specific circumstances of each case.

As regards the issue of whether an abuse of dominance can only be found if the conduct also has anticompetitive effects, the ECJ held that under the established case law there is no requirement that current and certain anticompetitive effects be shown. In any event, AZ’s misleading representations to patent offices were not only liable to lead the public authorities to grant it a right to which it was not entitled, but they also actually had such result in several Member States.

With regards to the second abuse of a dominant position, the ECJ held that the deregistration of the marketing authorizations, without objective justification and after the expiry of the exclusive right granted by EU law, with the aim of hindering the introduction of generic products and parallel imports, also does not come within the scope of competition on the merits.

Yet, the ECJ confirmed that the preparation by an undertaking, even in a dominant position, of a strategy whose object is to minimize the erosion of its sales and to enable it to deal with competition from generic products is legitimate and is part of the normal competitive process, provided that the conduct envisaged does not depart from practices coming within the scope of competition on the merits, which is such as to benefit consumers. In fact, an undertaking which holds a dominant position has a special responsibility to ensure that competition in the common market is effective and undistorted, and therefore it cannot therefore 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 defense of the legitimate interests of an undertaking engaged in competition on the merits or in the absence of objective justification, like the onerous pharmaco-vigilance obligations.

The ECJ further confirmed that the fact that, in the light of its special responsibility, an undertaking in a dominant position cannot deregister a market authorization in such a way as to prevent or render more difficult the entry of competitors on the market, unless, as an undertaking engaged in competition on the merits, it can rely on grounds relating to the defense of its legitimate interests or on objective justifications. Where the latter grounds do not exist, the fact that the undertaking in question is prevented from deregistering a market authorization does not constitute either an “effective expropriation” of such a right or an obligation to grant a license, but a straightforward restriction of the options available under European Union law.

Therefore the fact that the regulatory framework offers alternative means, which are longer and more costly, to obtain a market authorization does not prevent the conduct of an undertaking in a dominant position from being abusive where that conduct, considered objectively, has the sole purpose of rendering the abridged procedure provided for by the EU legislator unavailable, thus excluding the producers of generic products from the market for as long as possible, by increasing the costs incurred by them in overcoming barriers to entry to the market, and ultimately delaying the significant competitive pressure exerted by those products. [Gabriele Accardo]