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Eli Lilly Loses in Chapter 11 NAFTA Arbitration over Drug Patents

By Gabriel M. Lentner

On 16 March 2017, the NAFTA tribunal issued its final award in the case of Eli Lilly v Canada, dismissing the claim.

Two patents of the U.S. pharmaceutical company known as ‘Eli Lilly’ were invalidated by the Canadian federal courts based on judicial interpretations of the utility requirements contained in the Canadian patent statute (referred to as the ‘promise utility doctrine’). Eli Lilly alleged that these interpretations, and in particular the courts’ adoption of the promise utility doctrine, departed dramatically from prior Canadian patent law. On this basis, Eli Lilly initiated proceedings against Canada under Chapter 11 of NAFTA claiming that the invalidation of its patents amounted to unlawful expropriation of its intellectual property (NAFTA Article 1110) and a violation of the Minimum Standard Treatment (NAFTA Article 1105).

The Tribunal dismissed the alleged breaches stating that the Claimant had not met the required burden of proof. However, it noted inter alia that, contrary to what Canada argued, not only may a denial of justice serve as a basis of liability for judicial measures, but also other conduct which ‘may also be sufficiently egregious and shocking, such as manifest arbitrariness or blatant unfairness’. It held that invalidation under naturally evolving patent laws is not a breach of legitimate expectations but also suggested that a violation could take place when ‘a fundamental or dramatic change in Canadian patent law’ occurs.

Finally, the Tribunal noted that the evolution of the Canadian legal framework, in relation to Claimant’s patents, could not sustain a claim of arbitrariness or discrimination amounting to a violation of NAFTA Articles 1105 or 1110.

The award comes at a time of heightened interest (and criticism) surrounding the use of Investor-State Dispute Settlement (ISDS) for the protection of intellectual property rights (see cases of Philip Morris v Australia and Philip Morris v Uruguay).The Tribunal was careful not to dismiss out of hand IP-based ISDS claims, but similarly did not provide any further clarification regarding such cases and the applicable legal standards for IP protection. Thus, this case will not necessarily serve to reduce the uncertainties in this area of law, and as a result, as one commentator put it, it rather further opened the door to such claims.

Happy Ending in Sight? New Impulses for the European Unitary Patent

By Martin Miernicki

On 10 February 2017, Italy ratified the Agreement on a Unified Patent Court. Already, the UK had announced their commitment to continuing the ratification process of the agreement, despite the ongoing “Brexit”-discussion.

The unitary patent – an overview

The legal basis for the unitary patent is the so-called “patent package” adopted between 2012 and 2013. It consists of three main instruments:

The patent package is the result of an enhanced cooperation (art. 326 et seq. TFEU) between, originally, 25 EU member states. Italy joined in 2015, leaving Spain and Croatia as the only member states not participating in the enhanced cooperation.[1] The adoption of the patent package was accompanied by several disputes,[2] especially regarding translation arrangements.

The unitary patent (European patent with unitary effect) supplements the options for the international protection of patents like the protection systems under the Patent Cooperation Treaty (PCT) or the European Patent Convention (EPC). The unitary patent is designed as a European patent issued by the European Patent Office (EPO) under the EPC. A European patent granted with the same set of claims in respect of all the participating member states can, upon request of the patent owner, benefit from the unitary effect under the Unitary Patent Regulation. In this case, the patent provides uniform protection and has equal effect in the participating member states (art. 3 of the Unitary Patent Regulation). Translations – in addition to those required under the EPC procedure – may be necessary if a dispute arises relating to the infringement of a unitary patent and during a transitional period (article 4, 6 of the Unitary Patent Translation Regulation). The Unified Patent Court (UPC) has jurisdiction for the unitary patents according to the UPC Agreement.

Entry into force

The Unitary Patent Regulation’s entry into force is linked to the UPC Agreement (art. 18). The same applies to the Unitary Patent Translation Regulation (art. 7). The UPC Agreement will enter into force upon the ratification of thirteen member states, including France, Germany, and the UK (as the countries with the highest number of European patents). As of March 2017, 12 signatory states, including France, have ratified the agreement.

What can be expected?

The British announcement to continue preparing for ratification was somewhat surprising given the current circumstances involving Brexit. It remains to be seen how the UK government will proceed, especially in light of the upcoming negotiations between the EU and the UK on their future relationship. The announcement alludes to this point, saying, “[t]he decision to proceed with ratification should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU.” Furthermore, British minister Jo Johnson presented a favorable explanatory memorandum on the UPC to the British Parliament earlier this year. In turn, Italy’s ratification highlights that the preparation for the unitary patent is ongoing, and shows that the patent package could indeed enter into force sooner than later. Meanwhile, the UPC Preparatory Committee is working towards the phase of provisional application, which it expects to start in spring 2017.

[1] For the time being, Poland has not signed the UPC Agreement.

[2] Spain unsuccessfully asked the ECJ to annul the Unitary Patent Regulation, see Spain v. European Parliament, C‑146/13 (2015).

Recent developments in the Apple-Samsung dispute over iPhone patents

By Nicole Daniel

On 22 March 2016, it emerged that the final Apple-Samsung trial is likely to be delayed for more than a year as a reaction to the Supreme Court’s decision granting Samsung’s request to review $ 399 million in design patent damages resulting from the 2012 jury verdict in the first Apple-Samsung trial.

Following the trial in August 2012 Apple was awarded damages of $ 1.05 billion as it was held that Samsung’s smartphones infringed three design patents and three software patents belonging to Apple. Due to a damages retrial in 2013 the damages were then pared to approximately $ 930 million, including $ 399 million for infringement of design patents. In May 2015 the US Court of Appeals for the Federal Circuit affirmed the verdict on design patents but tossed out other damages. This decision therefore necessitated a second damages retrial which was originally scheduled to start on 28 March 2016.

In December 2015, Samsung asked the Supreme Court to review the case arguing that it was inappropriate to award to a patent-holder the infringer’s entire profits from the sale of an item that is highly complex. That way design patents are rewarded far beyond the value of the inventive contribution.

The Supreme Court granted Samsung’s request but limited its inquiry to a single issue, namely whether the award of the infringer’s profits should be limited to the infringed components only in a case where the design patent applied only to a component of a product and not to the whole product.

It remains to be seen how the Supreme Court will decide on this important issue.

Microsoft and Google make up

By Nicole Daniel

On 22 April 2016, Microsoft and Google announced that following their patent settlement, they have decided to end their long-running feud.

Microsoft’s spokesperson said that Microsoft will withdraw its regulatory complaints against Google. This step reflects its changing legal priorities. Google’s spokesperson said that the two companies came to an understanding that they wanted to compete on the merits of their products as opposed to legal proceedings.

In fall 2015, the two companies have since entered into a settlement agreement thereby dropping a number of patent lawsuits in the US and Germany.

Complaints to be dropped by Microsoft include a complaint filed in 2011 at the European Commission and complaints filed in Latin America.

This announcement is a further sign that the so-called worldwide smartphone wars are indeed winding down.

U.S. FTC urges the Appeals Court to revive the Loestrin Suit

By Nicole Daniel

On December 7, 2015, during oral argument, the U.S. FTC urged the Court of Appeals for the First Circuit to revive the Loestrin suit.

The case concerns a so-called reverse payment settlement. In 2009 Watson Pharmaceuticals agreed drop a challenge to a patent serving to protect Loestrin, which is a contraceptive pill, as long as it could market its own version six months before expiration of the patent. Warner Chilcott in turn agreed not to market its generic version of the drug for six months. Both companies are now owned by Actavis.

A number of drug buyers sued and argued that these companies essentially had agreed to divide up the market for Loestrin at the expense of the consumer. In September 2014 a district court judge threw out these suits, holding that a reverse payment not made in cash or in a very close analogue is not illegal.

Reverse payment settlements in the pharmaceutical sector have long been targeted by the FTC and others involved, e.g. drug buyers. In 2013 the Supreme Court made an important decision in the FTC v. Actavis case in this regard, holding that reverse payment deals can be challenged under antitrust laws. However, there is still debate on how to interpret “pay”. Accordingly, an ultimate decision in the Loestrin suit could help determine what counts as “pay” and set limits on what pharmaceutical companies can do to settle with their rivals that challenge their patents.

At the oral arguments a lawyer for the FTC said that the district court in this case elevated form over economic substance, and argued that a reverse payment need not be in cash.

The three judges on the panel seemed to be critical of the district court’s decision. Judge Juan R. Torruella said that in the dictionary the word payment is defined as the delivery of money or something equivalent. He also questioned the difference between a settlement including cash and a settlement including something other than cash.

Judge O. Rogeriee Thompson said that payment is “nothing but consideration“. Judge Sandra Lynch noted that the amount of profit for the generic company seemed “awfully large“.

A lawyer for Actavis argued that the court should not adopt a broad definition of payment, since payments should be quantifiable.

A decision from the Court of Appeals is expected next year.

Samsung/Apple update: Samsung will pay $548 million in patent damages to Apple

By Nicole Daniel

On December 3, 2015 Samsung and Apple submitted a joint filing in which Samsung agreed to pay $548 million in patent damages to Apple to satisfy a partial judgment.

In August 2012, a jury had awarded $ 1.05 billion in damages to Apple; however this amount changed a number of times during the appeals process over the last three years.

In September 2015 District Judge Lucy Koh entered a partial final judgment of $548 million for Apple after Samsung’s appeal of the damages award was denied by the Court of Appeals for the Federal Circuit. In that ruling the Federal Circuit vacated the trade dress damages.

The final amount of damages to be paid to Apple is not yet known as a second damages retrial is scheduled to start on March 28, 2016 before District Judge Lucy Koh in San Jose, California. In this retrial a jury will set the patent infringement damages for five smartphone models by Samsung which were found to infringe Apple’s patents and trade dress.

The joint filing acknowledges that Samsung is now at a point where it has to pay as there is no other legal avenue left to go. This brings a close to over three years of appeals in the patent and antitrust proceedings between Samsung and Apple.

In their joint filing Samsung informed Apple that they are ready to make the payment 10 days after the receipt of Apple’s original invoice.

European Court clarifies duration of effective patent protection for medicinal products

By Gabriel M. Lentner

In Seattle Genetics Inc. v Österreichisches Patentamt (Case C-471/14), the Court of Justice of the European Union (CJEU) clarified that the relevant date to be used by national patent offices when calculating the duration of a supplementary protection certificate (SPC) is the date when an applicant is notified of the decision granting a marketing authorization (MA).

 

Background

 

Under EU law, no medicinal product may be commercially exploited before the relevant authority has issued a marketing authorization (MA). In order to compensate for the period that elapses between the filing of a patent application and obtaining an MA, a supplementary protection certificate (SPC) extends the period of effective patent protection. An SPC thus aims to offset the loss of patent protection for medicinal products that occurs due to the compulsory testing and clinical trials required for obtaining an MA.

These issues are governed by Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products. Article 13(1) of the Regulation provides that “[t]he certificate shall take effect at the end of the lawful term of the basic patent for a period equal to the period which elapsed between the date on which the application for a basic patent was lodged and the date of the first authorization to place the product on the market in the Community reduced by a period of five years.”

Accordingly, the Regulation provides for an overall maximum of 15 years of protection from the moment the MA is first granted to the medicinal product in question.

The clarification of the Court was necessary since the Regulation does not further specify the relevant date for the protection to be calculated.

 

Results

 

Aside from legal certainty, the ruling can be seen as a victory for the pharmaceutical industry in Europe. The few additional days of protection (the duration between the grant of an MA and notification of approval to the applicant) are of significant commercial value. Furthermore, the Court set an important precedent for similar issues regarding the calculation of the period of regulatory data protection for medicinal products and the period of orphan market exclusivity for orphan medicinal products.