Patent Litigation as a Type of Abuse – The Spanish Resolution In opposition to MSD


On 21 October 2022 the Spanish CNMC imposed a fantastic of 38.9 million EUR on MERCK SHARP & DOHME DE ESPAÑA, S.A. and its father or mother firm MSD HUMAN HEALTH HOLDING, B.V. (hereafter collectively ‘MSD’) for abusive practices within the Spanish market of contraceptive rings. Their breach consisted in having made baseless court docket claims with the purpose of harassing a competitor (“ejercicio de acciones judiciales infundadas con el propósito de hostigar a un competidor”). A replica of the choice (in Spanish) is out there right here.

 

Vexatious litigation as a type of abuse

The choice is a uncommon instance of a type of vexatious litigation, a kind of competitors legislation infringement that has been lengthy within the books however is seldom utilized. Within the US, “sham litigation” is construed as an exception to the final immunity from antitrust legal guidelines that shields petitions from governmental or judicial authorities below the doctrine established in Noerr and Pennington, permitting findings of antitrust breach by unfounded claims (outlined in Skilled Actual Property Buyers as a scenario the place “no affordable litigant may realistically anticipate success on the deserves”).

On our facet of the Atlantic, vexatious litigation has been thought of by the CJEU in ITT Promedia,  Protégé Worldwide and Agria Polska instances the place the Court docket has imposed two cumulative standards to problem these initiatives below competitors legislation: (i) that the motion couldn’t fairly be thought of as an try to determine the rights of the enterprise involved and might subsequently solely serve to harass the alternative occasion and (ii) that it will be conceived within the framework of a plan whose aim is to get rid of competitors.

Given the potential impression of this doctrine on elementary rights, particularly entry to courts, these findings have required “wholly distinctive circumstances” (ITT Promedia, at 50), a restrictive method that explains that the three above judgments tackle take into account complaints which had been rejected by the Fee, that being later confirmed by the EU courts.

 

The MSD choice of the CNMC

The choice of the Spanish watchdog examines the actions adopted by an affiliate of MSD to invoke its patent rights towards the entry into the Spanish market of a competing product marketed by INSUD PHARMA SL (“INSUD”), an affiliate of the multinational CHEMO/EXELTIS group.

The information of the case could also be summarised as follows: Since 2002, MSD was promoting in Spain the one contraceptive ring offered in Spain (“Nuvaring”), which was protected by a patent relationship again to 1997. In June 2017, INSUD obtained advertising and marketing authorisation for the same product (“Ornibel”). MSD instantly despatched INSUD a warning letter claiming that the latter’s product encroached on its patent (which was as a consequence of expire shortly after, in April 2018). In parallel, it requested the Juzgado de lo Mercantil n 5 of Barcelona the adoption of “diligencias de comprobación de hechos”, an distinctive pretrial discovery mechanism in Spanish patent legislation that’s not even communicated to the potential infringer, with a purpose to entry technical information on the product from the Spanish Medicines Company.

Some weeks later, on 11 September 2017, MSD requested interim measures from the identical court docket consisting in prohibiting the import and sale by INSUD of Ornibel. These measures had been initially granted on 18 September with out having heard INSUD, as Spanish legislation permits. Following the notification of those measures to INSUD, and after its allegations, the court docket lifted the prohibitions on 12 December 2017. MSD’s attraction towards this choice was dismissed one yr later. By that point, MSD’s patent had already expired.

The case was subsequently deserted by MSD, excluding a pending declare by INSUD towards MSD for the damages ensuing from the two-month interval the place INSUD had been prevented from promoting its contraceptive ring.

 

Essential findings

In its choice, the CNMC declares that these court docket actions quantity to an abuse of MSD’s dominant place within the Spanish market of contraceptive rings.

The market definition, on this case, is exceptional and depends on an ATC 4 class, quite than the ATC 3 degree generally utilized in competitors (particularly merger) instances. Apparently sufficient, MSD would doubtless be dominant even below ATC3 (see para 323 of the CNMC choice), however the CNMC has chosen the narrower delimitation, a call that will sign a stricter coverage going ahead.

With respect to the abuse, the choice presents the distinctive instruments on the disposal of patent homeowners to guard their rights below Spanish patent laws (particularly the restrictions of the rights of defence of the potential infringer that permit the courts to make sure pressing findings with out listening to them) as powers that should be used with care by dominant entities given their particular duty below Article 102 TFEU. From that viewpoint it takes concern with MSD not having responded to sure letters from INSUD, having hid data from the court docket and ploughed forward with its court docket case quite than partaking in a great religion dialogue with its rival. One particularly unlucky undeniable fact that seems to have weighed in lots is the absence of direct contact with the defendant by the professional appointed by the court docket within the context of the “diligencias de comprobación de hechos”, one thing the choice seems to attribute to MSD.

On the dearth of benefit of the claims raised by MSD towards INSUD, the Spanish watchdog stresses the variations in design and performance of the contraceptive rings manufactured by each. That dedication seems influenced by the presumed anticompetitive intent of MSD, whose relevance is abundantly mentioned.

On the length of the observe, the CNMC considers that the infringement commenced with the submitting by MSD of the “diligencias de comprobación de hechos” in June 2017, regardless of its absence of direct impression (as above famous, the advertising and marketing prohibition was adopted solely in September), most likely since these measures are understood to lack justification. The conduct would have led to April 2018, when the patents expired, regardless of the raise of the interim measures in December 2017.

 

Closing remarks

The choice within the MSD case strikes as a extreme software of the vexatious litigation doctrine, which as earlier famous, requires “wholly distinctive circumstances”. The actions below scrutiny consisted of a request for entry to paperwork and a request for interim measures which was granted by the Juzgado de lo Mercantil n 5 of Barcelona and later lifted in lower than two months.

Whereas it’s simple to agree that some irregularities tainted these procedures, it might be disputed if they might qualify as a case of vexatious litigation below the standard principle crafted by the EU courts. Somewhat, the choice ought to quite be seen within the context of the elevated consideration given to the pharmaceutical sector because the 2009 Pharmaceutical Sector Enquiry the place, in addition to the “pay for delay” choices in Lundbeck, Servier, Johnson & Johnson or Teva, the authorities have recognized different potential infringements linked to the aggressive use of patent procedures to hinder market entry of generic options, a few of that are mentioned within the 2019 Report on Competitors within the Pharmaceutical Sector, the latest instance being the assertion of objections addressed by the Fee at Teva final 10 October.

From that perspective, the evaluation of the CNMC seems nearer to the logic of the Astra Zeneca abusive patent submitting case (a precedent mentioned in paragraphs 424 ff of the MSD choice), than to a standard vexatious litigation case. True, that precedent mentioned deceptive representations made earlier than an administrative company (a patent workplace) and never a court docket, a distinction that’s related. That stated, the MSD choice examines a case of probably abusive litigation by a patent proprietor aimed toward stopping the entry into the market of generic merchandise, not simply an bizarre (and doubtlessly questionable) vigorous assertion of rights towards market rivals earlier than courts.

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