On 8 September 2016, the European Union's General Court ("GC") handed down judgments dismissing actions brought by Lundbeck and several generic manufacturers and confirmed the fines imposed on them by the European Commission. These companies had challenged a 2013 Commission decision that had found a breach of Article 101 of the Treaty on the Functioning of the European Union ("TFEU") over the conclusion of so-called "pay-for-delay" agreements, which allegedly prevented the market entry of a generic version of an antidepressant medicine (see VBB on Competition Law, Volume 2013, No. 6, available at www.vbb.com).
The agreements at issue involved Lundbeck's antidepressant citalopram. The patent in the active substance citalopram had expired, but Lundbeck still had various process patents for the production of citalopram such as the salt crystallisation patent. According to the Commission's decision, Lundbeck concluded in 2002 six patent settlement agreements with four generic firms (Generics (UK), Alpharma, Arrow and Ranbaxy). Lundbeck agreed to make a lump-sum payment while the generic firms agreed not to enter the market for the duration of the agreement and, in some cases, destroy their stock of generics. The Commission found that Lundbeck and the generic manufacturers were at least potential competitors and that the agreements constituted restrictions "by object" in breach of Article 101 TFEU.
The GC considered first of all, that Lundbeck and the generic manufacturers were potential competitors at the time the agreements were concluded. The GC recalled that, in order to establish that an agreement restricts potential competition, it must be shown that, if the agreement had not been concluded, the competitors would have had real possibilities of entering the market. In this respect, the GC considered that the Commission had relied on objective factors establishing the possibility that each of the generic manufacturers could have entered the market, such as the investments they had already made, the steps they had taken in order to obtain marketing authorisations and the conclusion of contracts with suppliers of active pharmaceutical ingredients.
The GC also held that the Commission was entitled to conclude that the agreements constituted a restriction of competition by object on the basis of a series of factors relating to the content, the context and the purpose of these agreements. The GC reasoned that the conclusion of patent settlement agreements to avoid the cost of potential litigation was not problematic in itself. However, the GC agreed with the Commission's assessment that (i) the existence of reverse payments; (ii) the disproportionate nature of these payments, combined with other factors, including (iii) the amount of the payments calculated by reference to the sales of the generic manufacturers had they entered the market; (iv) the agreements did not provide a clause for the entry of the generic manufacturers on the market after expiry of the agreement without the risk of infringement actions being lodged by Lundbeck; and (v) the presence of restrictions going beyond the scope of Lundbeck's patents, were sufficient factors pointing to the object of restricting competition.
By those payments, the GC found that Lundbeck had provided an incentive to the generic manufacturers not to continue their independent efforts to enter the market – thus replacing the uncertainty as to whether the generic manufacturers would enter the market (without being enjoined or found to infringe the patents, or having to show the invalidity of Lundbeck's patents) with the certainty that they would not enter during the term of the agreements.
The GC also rejected Lundbeck's claim that the reverse-payment patent settlements did not fall within the scope of Article 101(1) TFEU because they were ancillary to the legitimate objective of protecting its IP rights. Under the ancillary restraints doctrine, certain restrictions can fall outside the prohibition of Article 101(1) TFEU if they are directly necessary and related to the implementation of a legitimate purpose. In the present case, the GC considered that the restrictions contained in the agreements were not objectively necessary and proportionate, as there were alternative means available to protect Lundbeck's rights such as infringement proceedings or other settlement terms.
Finally, the GC upheld the Commission's finding that the restrictions included in the reverse-payment patent settlements did not satisfy the conditions for exemption under Article 101(3) TFEU.
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