Competition and Patent Law in thePharmaceutical Sector

An International Perspective

Edited by

Giovanni PitruzzellaGabriella Muscolo

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Editors

Gabriella Muscolo Commissioner at the Italian Competition Authority, former Judge atthe specialized section for IP and Competition Law Litigation of the Court of Rome,former member of the Enlarged Board of Appeal of the European Patent Office, authorof several publication in the field of IP Law, Competition Law and Company Law andusual lecturer in several Universities in Italy and abroad.

Giovanni Pitruzzella Chairman of the Italian Competition Authority – full professor ofConstitutional Law University of Palermo – former lawyer at the bar of Palermo, authorof several publications in the field of European Constitutional Law and CompetitionLaw.

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Contributors

Filippo Arena serves, since November 2013, as Chief of Cabinet at the ItalianCompetition Authority, where he previously was the Legal Advisor. After a graduationin Law at the University of Messina in 1991, he became State Lawyer in 1997,representing Italy before the European Court of Justice and also being in charge oflitigations of the Italian Competition Authority, the Italian Parliament and thosebetween Government and Regions. He is a lecturer and speaker at conferences relatedto competition policy.

Sir Gerald Barling is a Justice of the Chancery Division of the High Court of Englandand Wales and was President of the Competition Appeal Tribunal from 2007–2013. Hehas been an Acting Deemster in the Isle of Man Court of Appeal. Educated at St Mary’sCollege, Blackburn and New College, Oxford (where he was later a lecturer in law forseveral years). He was called to the Bar by the Middle Temple in 1972, where he waselected a Bencher in 2001, and was appointed Queen’s Counsel in 1991. He was aDeputy High Court Judge and also sat as a Recorder on the Midland Circuit. Afterpractising at the Bar in Manchester for several years, from 1981 onwards his practicewas based at Brick Court Chambers in London, where he specialized in public law andEuropean Union law and was frequently instructed by both UK government and privateclients, and appeared both in British and European Courts of Justice. His workencompassed virtually every field of European law.

Ginevra Bruzzone is Deputy Director General of Assonime, in Rome, where she is incharge of EU and Italian competition law, consumer protection, IP law and regulation.She was formerly Senior Economist at the Research Department of the Italian Compe-tition Authority, from 1991 to 2000. She teaches a course on Competition andConsumer Protection in the EU at the Luiss School of European Political Economy(SEP), in Rome. She is a member of the Advisory Board of the Italian TransportRegulation Authority.

Sara Capozzi is a lawyer at Assonime, in the Enterprise, Competition and RegulationUnit. Her research areas include competition law, IP law and regulation. She earned a

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MA in Antitrust and Regulation from the University of Rome ‘Tor Vergata’ and a MA inInternational Business Law from the University of Rome ‘La Sapienza’.

Beniamino Caravita is Full professor of Public Law in La Sapienza Rome University,Chairman of CdTA Lawyer Firm, author of several publications in the fields of PublicLaw, Competition Law, Company Law, Member of several Government Commissionsand Editor of the Review ‘federalismi.it’.

Michael A. Carrier is Distinguished Professor at Rutgers Law School. He is theco-author of the leading IP/antitrust treatise, IP and Antitrust Law: An Analysis ofAntitrust Principles Applied to Intellectual Property Law, the author of Innovation forthe Twenty-First Century: Harnessing the Power of Intellectual Property and AntitrustLaw, and the editor of Critical Concepts in Intellectual Property Law: Competition. Hehas written more than seventy-five book chapters and articles and is regularly quotedin leading media outlets. He has testified before the US Senate and other bodies, is amember of the Board of Advisors of the American Antitrust Institute, and is a past chairof the Antitrust and Economic Regulation section of the AALS.

Giovanni Cavani is a lawyer, born in Modena, 5 December 1950; admitted to the barin 1976, Italy. Education: University of Modena (J.D., magna cum laude, 1973).Professor, Intellectual Property Law, Modena University. Author of several contribu-tions on industrial and antitrust law, Intellectual Property and international contractsof technology transfer.

Roberto Chieppa has been appointed Secretary General of the Autorità Garante dellaConcorrenza e del Mercato since December 2011. Judge at the High AdministrativeCourt (Consiglio di Stato) since February 2000. Previously he has been judge at the FirstInstance Administrative Court (1998–2000), judge at the Court of Auditors(1997–1998) and civil and criminal judge since 1991. Author of more than fiftypublications in administrative law and competition law. Co-editor of specialized legaljournals. Lecturer for university and post-graduate courses on administrative law andantitrust law.

Naval Satarawala Chopra is a Partner in the Competition Law Practice of ShardulAmarchand Mangaldas & Co., recently indicted by Global Competition Review in its listof top ‘Forty under Forty’ competition lawyers worldwide, acknowledged by Chambers& Partners, 2015 as a ‘master strategist’ who is known for his ‘ability to think out of thebox and find solutions’, and by Chambers & Partners 2016 as ‘very knowledgeable,very well read and very smart’, author of several publications in the field of Competi-tion Law. In 2014, Naval instituted a course on competition law at ILS Law College,Pune, where he teaches part time. He is qualified to practice in New York, England &Wales and India.

Avantika Chowdhury is a senior economist at Oxera Consulting LLP specialising inantitrust and intellectual property related issues. She has published extensively onthese issues including co-authoring a book on the interactions of competition law with

Contributors

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other disciplines. She has a Ph.D. in economics and game theory from PennsylvaniaState University, USA and regularly lectures in courses for competition authorities andjudges.

Daryl Dingley is a partner at Webber Wentzel, and a former senior economist at theSouth African Competition Commission, specializes in competition law and hasparticular expertise in economics and international trade. He has authored a number ofarticles and is a co-author of a book on competition law, ‘A Practical Guide to the SouthAfrican Competition Act’.

Sir Christopher Floyd (The Rt Hon Lord Justice Floyd) has been a judge of the Courtof Appeal for England and Wales since April 2013. From 2007 he was a judge of theChancery Division of the High Court, a judge and subsequently judge in charge of thePatents Court, and a Deputy Chairman of the Competition Appeal Tribunal. Beforebecoming a judge, he practised as a barrister in intellectual property law fromchambers at 11 South Square, Gray’s Inn, becoming Queen’s Counsel in 1992. Whilstin practice he was a Deputy Chairman of the Copyright Tribunal, Chairman of theIntellectual Property Bar Association and a Recorder.

Ian S. Forrester holds office of a Judge, General Court of the European Union. RetiredPartner, White & Case; formerly Forrester Norall & Sutton. Hon Professor and HonDoctor of Laws, Glasgow University; admitted to the bar in Scotland, New York,England and Belgium; Queen’s Counsel (1988); Bencher, Middle Temple (2012).Author; advocate in several leading cases in national and European courts: Magill;Bosman; Microsoft; IMS; Pfizer Animal Health; Government of Gibraltar v. Council;Glaxo Spain and Syfait et al. v. GlaxoSmithKline; Servier; Halcor; A v. National BloodAuthority; Bellona Foundation v. EFTA.

Mario Franzosi is a Visiting Professor of Intellectual Property at the University ofWashington, Founding Partner of Avvocati Associati – Franzosi Dal Negro Setti, Chairof the Special Committee Designs AIPPI; Vice-President of the Italian Design Jury at theADI (Italian Association of Designers), former President and founder; Member of theBar of Milan since 1959. Author of key legal texts on Intellectual Property Law.

Alexander Gaigl is an economist at Oxera Consulting LLP. He specializes in competi-tion economics and has worked on a wide range of competition cases in manyindustries across Europe, including in the pharmaceuticals sector. He has extensiveexperience in relation to the economic assessment of the interplay between competi-tion and innovation. He advised clients in the context of several patent settlementinvestigations and has published articles on this topic.

Damien Geradin is the founding partner of EDGE Legal, a competition and IP boutiquelaw firm based in Brussels. He is also a Professor of competition law & economics atTilburg University, a Professor of Law at George Mason University School of Law, anda visiting Professor of Law at University College London. He is the author/co-author/

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editor of 20 books and over 100 scientific papers. He is the co-editor of the Journal ofCompetition Law & Economics.

Gustavo Ghidini is a Professor of IP and Competition Law, University Luiss GuidoCarli, Rome, and University of Milano. Director of the Observatory of IP, Competitionand Communication Law/ DREAM, Luiss Guido Carli University.

Douglas H. Ginsburg is a Senior Judge, United States Court of Appeals, WashingtonDC; Professor of Law at George Mason University; Chairman of the Global AntitrustInstitute International Board of Advisors; and a former Assistant Attorney General incharge of the Antitrust Division of the US Department of Justice.

Heinz Goddar is a European and German Patent and Trademark Attorney. He is apartner of Boehmert&Boehmert and works in its Munich office. He teaches as anHonorary Professor at Bremen University, Germany, and lectures at various otheruniversities and institutions in Germany and abroad. He is a Past President of LESGermany and LES International. Furthermore, he has received a Gold Medal of LESI in2004 and has been inducted into the IAM IP Hall of Fame in 2014.

Alan Gunderson is a Coordinator within the Competition Promotion Branch of theCompetition Bureau Canada. He has led the Competition Bureau’s recent initiative toupdate and expand its Intellectual Property Enforcement Guidelines. He has a Ph.D. ineconomics from Queen’s University in Kingston, Ontario.

Willem A. Hoyng is a Professor of IP Law University Tilburg and managing partner ofHOYNG ROKH MONEGIER.

Anne-Claire Hoyng has worked as a senior case handler for the Netherlands Compe-tition Authority in the past. She obtained her Ph.D. in Economics in 2011. Since 2014she works as Manager Competition Policy at Liberty Global. She also lectures thecourse Economics of Competition Law and Policy at the University of Utrecht.

Alexey Ivanov leads the Skolkovo-HSE Institute for Law and Development (Moscow,Russia), a joint venture of the National Research University – Higher School ofEconomics (HSE) and the Skolkovo Foundation, a Russian development institution.Alexey, since 2008, has taught at HSE a course on antitrust in the new economy as partof the educational program mandated by the Federal Antimonopoly Service of Russiaand published prolifically on this and related topics.

Sir Robin Jacob is Professor of IP Law at University College London. He is a formermember of the Court of Appeal of England and Wales and is currently an arbitrator andmediator as well as President of the Intellectual Property Judges’ Association.

Ioannis Kokkoris holds a Chair in Law and Economics at the Centre for CommercialLaw Studies, Queen Mary University of London, UK. He is also the Executive Director

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of the Institute for Global Law Economics and Finance. He has authored and co-authored more than 15 books, more than 50 articles and 15 chapters in edited volumes.Professor Kokkoris has formerly served as Principal Case Officer/Economic Advisor inthe Mergers branch at the Office of Fair Trading, UK where he dealt with leading casessuch as NASDAQ/LSE, NYSE/Euronext, Global/GCap and was a member of thedrafting team of the UK Merger Guidelines. He has also worked on abuse of dominancecases as well as cartels and other anticompetitive agreements cases.

Bruno Lasserre is the President – Autorité de la concurrence (France), Member of theConseil d’État, the French supreme administrative court, which he joined in 1978 aftergraduating from École Nationale d’Administration (ENA), the French national schoolfor civil service. After serving as Member of the board of the Conseil de la concurrence(1998–2004), he was appointed President in July 2004, and in this capacity pushedthrough a major reform that transformed it into the Autorité de la concurrence,responsible for merger review and competition advocacy in addition to antitrustenforcement. He has chaired the Autorité since then. He is also a Commander of theFrench Légion d’honneur and a Commander of the French Ordre national du Mérite.

Ana Paula Martinez is a partner with Levy & Salomão Advogados (Brazil). From 2007to 2010, she was the head of the Antitrust Division of the Secretariat of EconomicLaw/Ministry of Justice, and co-headed the cartel sub-group of the InternationalCompetition Network. She is licensed to practice in Brazil and NY and served as anantitrust advisor to Unctad, to the World Bank and to the Government of Colombia. Sheholds an LL.M. from the University of São Paulo (USP) and from Harvard and a Ph.D.from USP. She is a Professor of Law at Fundação Getulio Vargas – Rio de Janeiro. Shehas received several prizes and awards for her antitrust work.

Pietro Merlino is a counsel at Cleary Gottlieb Steen & Hamilton LLP, based in Rome.He focuses on EU and Italian competition law. He appears frequently before the EUcourts of law and Italian civil and administrative courts, as well as before theDirectorate General for Competition of the European Commission and the ItalianCompetition Authority. He holds LL.M. degrees from the College of Europe and theUniversity of Michigan Law School (Fulbright scholar) and a Ph.D. in EU competitionlaw from the University of Naples “Federico II”. He regularly lectures at variousacademic institutions and international conferences and is the author of severalpublications on competition law issues.

Jan Bernd Nordemann is a certified German intellectual property, copyright andmedia lawyer. He is a partner of the German intellectual property boutique BOEHMERT& BOEHMERT, Berlin office. In 2007, he was appointed Honorary Professor at theHumboldt University of Berlin. Best Lawyers International 2015 and Legal 500 Ger-many 2015/2016 accords him special recognition for legal advice on copyright issues aswell as in trademark and competition law. Nordemann is a co-author of ‘Fromm/

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Nordemann’, one of the leading German copyright law commentaries, and he co-authored the commentary on European and German anti-trust law, ‘Loewenheim/Meessen/Riesenkampf’.

Cristoforo Osti is a Full Professor of Business Law at the School of Law of theUniversity of Salento, Lecce. He is a partner at Chiomenti Studio Legale since 2012where he leads the Competition Law Department. Before then he held the sameposition at Clifford Chance LLP. He is the author of monographs and articles oncompetition law and contract law and is a regular speaker at national and internationalconferences.

Hermes Pazzaglini has extensive experience on PRC-related commercial law issuesand is an arbitrator of the Shanghai International Arbitration Center and the ShenzhenCourt of International Arbitration. He is fluent in Mandarin, Cantonese, Italian, Frenchand Spanish. He currently heads the Shanghai practice of NCTM Shanghai. He hasauthored numerous articles on Chinese law in English and Italian on legal magazinesand books.

Andrea Pezzoli holds the office of the Director General for Competition of the ItalianCompetition Authority, where he has worked since 1993 as head of the InvestigativeDirectorate ‘Food, Pharmaceutical and Transport’ and as Chief Economist. He teachesCompetition Issues at the University of Tor Vergata and at Luiss University in Rome.Author of several publication in the field of Competition Policy and Industrial Econom-ics.

Piera Francesca Piserà is a Ph.D. Candidate in IP and Competition Law, University ofModena and Reggio Emilia. Since 2013, she has been collaborating with the Observa-tory of IP, Competition and Communication Law (OPICC/DREAM), Luiss Guido CarliUniversity, Rome.

Luigi Prosperetti is a Professor of Economic Policy at the Faculty of Law, Universitàdegli Studi di Milano. He studied economics at Bocconi, Milan (cum laude, 1976) andthe London School of Economics (M.Sc., 1978; Ph.D., 1982). He has written extensivelyon regulatory and antitrust issues, and in 2009, he published Il danno antitrust: unaprospettiva economica.

Enrico Adriano Raffaelli is a Lawyer specialized in national and European competitionlaw, intellectual property law, commercial law, commercial litigation and national andinternational commercial arbitration; founding partner of the Rucellai & Raffaelli lawfirm; frequent lecturer on intellectual and industrial property rights, EU law and EU andnational competition law at conferences and seminars; member of various antitrustassociations.

Renella Reumerman (BA (Hons), BCL, LL.M.) is qualified as a solicitor in England andWales in 2003. Following six years at law firm Freshfields Bruckhaus Deringer, sheworked as a senior legal advisor and assistant director at the UK’s Office of Fair Trading

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and the Competition Commission (as well as their successor, the Competition andMarkets Authority). Currently she is a référendaire at the Competition Appeal Tribunal.

Graham Safty is a litigation associate at Williams and Connolly in Washington, DC,and a former law clerk to Judge Douglas H. Ginsburg. He graduated from TheUniversity of Chicago Law School, with Highest Honors, in 2013.

Alexandra Sidossis holds an LL.B. in European Legal Studies from the University ofKent at Canterbury, UK, and an LL.M. in Commercial Corporate Law from the QueenMary University of London, UK.

Mario Siragusa is a partner at Cleary Gottlieb Steen & Hamilton LLP, based in theRome and Brussels offices. He focuses on corporate and commercial matters andspecializes in EU and Italian competition law as well as complex commercial litigation.He appears frequently before the European Court of Justice, the General Court of theEuropean Union, the Directorate General for Competition of the European Commis-sion, as well as the Italian Antitrust Authority and Italian civil and administrativecourts. He lectures regularly at conferences throughout the United States and Europeand has published numerous articles in US and European legal journals. He is aprofessor at the College of Europe in Bruges and lectures at the Catholic University inMilan.

Toshiko Takenaka holds office of Washington Research Foundation/W Hunter Sim-pson Professor of Technology at University of Washington School of Law (Seattle,USA), and teaches US and comparative patent law and other technology related aspectsof IP laws at universities in Asia and Japan. She will be a joint appointment betweenUW Law and Keio University School of Law (Tokyo, Japan) starting 2017 April.

Elisa Teti is a partner of the Rucellai & Raffaelli law firm; she focuses in EU and Italiancompetition law, intellectual property law and consumer protection law; she is authorof several publications in the field of competition law.

Yaman Verma is a Senior Associate in the Competition Law Practice at ShardulAmarchand Mangaldas & Co, formerly an intern with the Competition Commission ofIndia, author of several publications in the field of Competition Law. Yaman workswith a wide range of international and domestic clients, most recently advisingMicrosoft (information technology); Vodafone (telecommunications); Apollo Tyres(automotives); and Coal India (natural resources).

Julian Waiblinger is a German attorney-at-law, and a partner of the German intellec-tual property boutique BOEHMERT & BOEHMERT, Berlin office. Besides counselling incopyright, trademark and competition law, IT licensing and contract law is a key areaof his work. Another focus of his activity is antitrust law. He wrote his Ph.D. thesisabout plagiarism in research and science. Besides his legal work his passion lies inmusic. He studied music at the Hanns Eisler Academy of Music Berlin and is an activepercussionist; he has published several albums under a US records label.

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Summary of Contents

Editors v

Contributors vii

Foreword xxxiii

Preface xxxv

PART IPharmaceutical Patents and Competition Issues 1

CHAPTER 1The Perspective of Economics 3

The Economics of Competition Law and of Pharmaceutical PatentsAvantika Chowdhury & Alexander Gaigl 5

The Procompetitive and Anticompetitive Impact of Patent SettlementsGinevra Bruzzone & Sara Capozzi 15

Originators versus Originators: Competition before the Market and MarketPower beyond DominanceAndrea Pezzoli 31

Damages for Patent Infringements: The Interplay of Legal and EconomicPerspectives in the Main European JurisdictionsLuigi Prosperetti 43

CHAPTER 2The Perspective of Law 51

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Balancing the Human Right to Health with the Competition Law and theIntellectual Property RegimeBeniamino Caravita di Toritto 53

The Dangers of Settling Patent LitigationIan S. Forrester 67

Life-Cycle Management Strategies in the Pharmaceutical Patent SectorGiovanni Pitruzzella 77

Pharmaceutical Patents: Competition Law Goes Too FarRobin Jacob 85

What’s in a Name: The Concept of Abuse in Sui Generis AbusesCristoforo Osti 93

Abuse of Litigation, Abuse of Patent and Abuse of Dominance: Where DoWe Stand?Gabriella Muscolo 107

Reverse Settlements in the European Union and the United StatesDamien Geradin, Douglas H. Ginsburg & Graham Safty 125

Co-marketing and Co-promotion AgreementsEnrico Adriano Raffaelli & Elisa Teti 147

The New Unified European Patent Court and a New Patent Law: When aKU is Not a KUMario Franzosi 167

PART IIWhat Is Going on in National Systems? 183

CHAPTER 3The Perspective from Europe 185

FRANCE

Raising Artificial Barriers against Generic Entry: The French ExperienceBruno Lasserre 187

GERMANY

Patent Settlements and Drug Discount Agreements in Light of European andGerman Antitrust LawHeinz Goddar, Jan Bernd Nordemann & Julian Waiblinger 205

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GREECE

The Status Quo and the Future of the Balance between Patent Law andCompetition Law in the Pharmaceutical Sector in GreeceIoannis Kokkoris & Alexandra Sidossis 219

ITALY

The Intersection between Competition Law and Intellectual Property Law:The Public Enforcement Approach Followed by The ICAFilippo Arena & Roberto Chieppa 239

ITALY

Abuse of Patent Rights and Abuse of Dominant Position: The Pfizer CaseGustavo Ghidini, Giovanni Cavani & Piera Francesca Piserà 253

ITALY

Antitrust Assessment of Co-marketing Agreements: A Diverging Approachbetween EU and Italy?Mario Siragusa & Pietro Merlino 273

NETHERLANDS

Follow the Dutch?Willem Hoyng & Anne-Claire Hoyng 299

UNITED KINGDOM

The Pharmaceutical Sector between Patent Law and Competition Law inthe UKIoannis Kokkoris 307

UNITED KINGDOM

IP in the Pharmaceutical Sector in the UK: Some Recent CasesChristopher Floyd 345

UNITED KINGDOM

Gaviscon: The Diagnosis and Treatment of Abuse of Dominance: VeryRecent Changes in the Private Enforcement of Competition Rules in the UKGerald Barling & Renella Reumerman 355

CHAPTER 4The International Approach 369

BRAZIL

Competition Policy and Life Cycle Management: The Brazilian ExperienceAna Paula Martinez 371

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CANADA

The Intersection of Canadian Competition and Intellectual Property Law:Developments in the Pharmaceutical SectorAlan Gunderson 381

CHINA

The Development of China Antitrust Law and a Review of the Main Decisionon the Pharmaceutical IndustryHermes Pazzaglini 395

INDIA

The Interplay between Competition Law and Intellectual Property in theIndian Pharmaceutical Sector: Deference Is Better than CureNaval Satarawala Chopra & Yaman Verma 419

JAPAN

Japan’s Pharmaceutical Industry and the Patent and Non-patent Incentivesfor Pharmaceutical R&DToshiko Takenaka 431

RUSSIA

The Interplay of Patents and Competition Law in the Russian PharmaceuticalSector: An Everlasting State of TransitionAlexey Ivanov 449

SOUTH AFRICA

The Intersection between Patent Law and Competition law as It Relates tothe Pharmaceutical Sector in South AfricaDaryl Dingley 459

UNITED STATES

Pharmaceutical Antitrust Law in the United StatesMichael A. Carrier 477

Index 489

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Table of Contents

Editors v

Contributors vii

Foreword xxxiii

Preface xxxv

PART IPharmaceutical Patents and Competition Issues 1

CHAPTER 1The Perspective of Economics 3The Economics of Competition Law and of Pharmaceutical PatentsAvantika Chowdhury & Alexander Gaigl 5

1 A Brief Introduction 51.1 Impact of Patents and Competition on Innovation: The Theory 71.2 Impact of Patents and Competition on Innovation: The Evidence 91.3 Patent Law and Competition Law: Is There a Conflict? 12

The Procompetitive and Anticompetitive Impact of Patent SettlementsGinevra Bruzzone & Sara Capozzi 15

1 Introduction 152 An Economic View of Reverse Payment Settlements 18

2.1 Interaction between Originator and Generic Companies withinthe Competitive Process 18

2.2 Restrictions of Entry and Value Transfer 202.3 Beyond Simple Stories: Adding Uncertainty to the Picture 202.4 Reverse Payment Settlements: The Full Story 22

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2.4.1 Reduction in the Branded Company Profits as aConsequence of Entry 23

2.4.2 Estimated Probability of Losing the Trial and RiskAversion 23

2.4.3 Legal Expenses and Negative Hold-Up for the PatentHolder 24

2.4.4 Additional Features: Product Differentiation andRelaxing the Duopoly Assumption 24

2.4.5 Summing Up 253 The Application of Competition Rules to Reverse Payment Settlements 25

3.1 Relevance of the Institutional Setting 253.2 The Scenario Justifying a Negative Presumption against Reverse

Payment Settlements 263.3 Outside the Hypothetical World 26

3.3.1 Non-interference with IP Matters as a Possible Approach 263.3.2 Case-by-Case Approaches 273.3.3 Inadequacy of a Restriction by Object Approach 283.3.4 Which Role for Competition Policy? 29

Originators versus Originators: Competition before the Market and MarketPower beyond DominanceAndrea Pezzoli 31

1 Preliminary Remarks 312 Originators versus Originators: Competition beyond the Market 333 The Box of Tools and Competition for Future Markets 354 A Complementary Tool: Competition as a Process 395 Concluding Remarks 40

Damages for Patent Infringements: The Interplay of Legal and EconomicPerspectives in the Main European JurisdictionsLuigi Prosperetti 43

1 Introduction 432 Lost Sales and Price Erosion 453 Irrecoverable Costs 464 Disruption of End-of-Patent-Life Care 465 Damage Recovery in Court: Unreasonable Royalties 476 Conclusions 49

CHAPTER 2The Perspective of Law 51Balancing the Human Right to Health with the Competition Law and theIntellectual Property RegimeBeniamino Caravita di Toritto 53

1 Intellectual Property and the Right to Health: An International View 53

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2 Patents for Pharmaceutical Products: A Conflict between the Right toHealth and the Intellectual Property Right 56

3 Rules and Flexibilities: An International Impact 584 A Comparative Analysis between the Human Right to Health, the

Intellectual Property Right and the Protection of Competition 635 Conclusions 65

The Dangers of Settling Patent LitigationIan S. Forrester 67

1 Introduction 672 Some Economic and Regulatory Context 683 Value Transfers 704 Anti-competitive Settlements 705 Pre-trial Nervousness and Uncertainty 716 The Public Interest? 727 The Overuse of the Notion of Restriction ‘By Object’ 728 Where are the Limiting Principles? 739 What Precisely Is the Illegal Conduct? 7410 A Patent Judge Comments 7411 Conclusion 75

Life-Cycle Management Strategies in the Pharmaceutical Patent SectorGiovanni Pitruzzella 77

1 Introduction: Life-Cycle Management in IP-Intensive Industries 772 A Very Essential Case-Law Survey 80

2.1 The AstraZeneca-Losec Case 812.2 The Pfizer-Xalatan Case 82

3 Concluding Remarks 84

Pharmaceutical Patents: Competition Law Goes Too FarRobin Jacob 85

1 The Pharma Industry 852 Patents and Divisional Patents 873 Why the Decision in Ratiofarm v. Pfizer is Wrong, Antipatent and Unfair

on Pfizer and Other European Countries 90

What’s in a Name: The Concept of Abuse in Sui Generis AbusesCristoforo Osti 93

1 Introduction 932 The AstraZeneca Case 943 A Deluge of Cases 974 Sui Generis Abuse as Abuse of Rights 98

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5 Sui Generis Abuse as an Act of Unfair Competition 1026 Conclusion: What the Overlap with Abuse of Rights and Unfair

Competition Tells Us about Sui Generis Abuses 104

Abuse of Litigation, Abuse of Patent and Abuse of Dominance: Where DoWe Stand?Gabriella Muscolo 107

1 Introduction: Focus on Sham Litigation 1072 The Right of Access to Courts and Its Abuse 1083 The Abusive Litigation Doctrine and Tests 1114 Focus on the Abuse of Injunction 1125 Vexatious Litigation in the Pharmaceutical Sector between Patent

Protection and Competition Issues 1186 Conclusions: Some Critical Remarks 123

Reverse Settlements in the European Union and the United StatesDamien Geradin, Douglas H. Ginsburg & Graham Safty 125

1 Introduction 1252 United States 125

2.1 Statutory Framework 1262.2 The Actavis Decision 1282.3 Important Questions after Actavis 128

2.3.1 What Is a Reverse-Payment? 1292.3.2 When Is a Reverse-Payment ‘Large and Unjustified?’ 1322.3.3 How Will Courts Evaluate the Procompetitive Effects

of a Reverse-Payment Settlement Agreement? 1342.3.4 What Is the Role of the FTC in Regulating

Reverse-Payment Settlement Agreements? 1363 European Union 137

3.1 Regulatory Context 1373.2 Evolution of the Assessment of Patent Settlements in the EU 1373.3 The Decisions from the Commission 1403.4 Ongoing Investigations 143

4 Conclusion 144US Materials 144EU Materials 145References 146

Co-marketing and Co-promotion AgreementsEnrico Adriano Raffaelli & Elisa Teti 147

1 Introduction 1472 Co-promotion and Co-marketing Agreements 153

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3 Co-promotion and Co-marketing Agreements Examined by AntitrustAuthorities 156

4 Co-promotion Agreements Used to Delay Market Entry of GenericManufacturers: The Johnson & Johnson / Novartis case 161

5 Conclusions 164

The New Unified European Patent Court and a New Patent Law: When aKU is Not a KUMario Franzosi 167

1 The New UPC: Applicable Rules of Law 1671.1 The New UPC 1671.2 The Substantive Rules of Law 168

2 The Old Rules of Law 1702.1 The Traditional Patent System 1702.2 Exclusivity as Specific Object of the Patent Right 1712.3 Exclusivity versus License 1722.4 Technologies Where Exclusivity Is the Rule (with Exceptions):

Pharmaceuticals 1742.5 Technologies Where License Is the Rule (with Exceptions):

Electronics 1762.5.1 Thickets 1762.5.2 SEP 1772.5.3 NPE 180

3 Conclusion 1813.1 The New Rule of Law 181

PART IIWhat Is Going on in National Systems? 183

CHAPTER 3The Perspective from Europe 185

FRANCE

Raising Artificial Barriers against Generic Entry: The French ExperienceBruno Lasserre 187

1 Introduction 1872 Background Elements on the Distribution of Generic Medicines in France 188

2.1 Main Market Entry Requirements 1882.2 The Pivotal Role of Pharmacists in the Distribution of Generics 188

3 Identifying Market Distortions Which Impede Generic Entry 1913.1 Prices of Generic Medicines and Their Reimbursement 1913.2 Repertoire of Generic Drugs: A Limited Listing 1923.3 The Denigration of Generics: A French Feature? 193

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4 Barring Market Entry to Generic Medicines: The Case of Denigration 1954.1 The Plavix Case 195

4.1.1 The Generification of Plavix: A Major Challengefor the Pharmaceutical Sector in France 196

4.1.2 A Strategy of Structured Denigration 1964.1.3 The Very Atypical Evolution of the Clopidogrel Market 1974.1.4 Denigration as an Abuse of Dominance 198

4.2 The Subutex Case 1994.2.1 Proceedings Originated from a Complaint 1994.2.2 A Comprehensive Plan Conceived to Counter the

Arrival of the Subutex Generics 2004.2.3 The Implementation of the Plan by Schering-Plough 2014.2.4 A Conduct That Qualifies as an Abuse of Dominance 2014.2.5 A Fine in Proportion to the Seriousness of the Conduct

and Magnitude of the Harm to the Economy 2024.2.6 A Settlement Accompanied by Commitments 203

5 Conclusions 203

GERMANY

Patent Settlements and Drug Discount Agreements in Light of Europeanand German Antitrust LawHeinz Goddar, Jan Bernd Nordemann & Julian Waiblinger 205

1 Introduction 2052 Patent Settlements in Light of Article 101 (1) TFEU/Section 1 German

Act against Restraints of Competition 2062.1 Settlement Agreements as a Legitimate Means of Resolving

Disputes 2062.2 General Applicability of Antitrust Law to Patent Settlements 2072.3 Patent Settlements in the Case Law of the German Federal Court

of Justice (BGH) 2072.4 Patent Settlements in the Decision Practice of the European

Commission 2082.4.1 Categories of Patent Settlements 2082.4.2 Assessment of Individual Clauses in Patent Settlements

from an Antitrust Law Perspective 2092.4.2.1 Agreements Involving Value Transfers to

Generic Companies (‘Pay-for-Delay’/‘Reverse Payment’ Settlements) 209

2.5 Non-challenge Arrangements in Settlement Agreements 2143 Antitrust Law Risks of ‘Patent Extending’ Drug Discount Agreements 215

3.1 Incentive to Conclude Drug Discount Agreements 2153.2 Violation of National Prohibition of Restrictive Practices

(Section 1 German Act against Restraints of Competition) 215

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3.3 Abuse of a Dominant or Powerful Market Position (Article 102TFEU, Section 19, Section 20 German Act against Restraints ofCompetition) 217

3.4 Conclusion 218

GREECE

The Status Quo and the Future of the Balance between Patent Law andCompetition Law in the Pharmaceutical Sector in GreeceIoannis Kokkoris & Alexandra Sidossis 219

1 Introduction 2192 An Overview of the Greek Legal System 2193 An Overview of the Greek Patent System 2204 Seminal Case Law Related to Patents 2235 An Overview of Greek Competition Laws 2246 The Generics Market in Greece 2317 Thoughts on the Status Quo and the Future 2358 Conclusion 236Annex: GSK AEVE Case Timeline 237

ITALY

The Intersection between Competition Law and Intellectual Property Law:The Public Enforcement Approach Followed by the ICAFilippo Arena & Roberto Chieppa 239

1 Preliminary Remarks on Public Enforcement: When IP Are Involved 2392 The Analysis of Effects in Assessing Abusive Practices: The Pfizer Case 2423 The Analysis By-Object and the Assessment of Effects in Restrictive

Horizontal Agreements: The Roche/Novartis Decision 246

ITALY

Abuse of Patent Rights and Abuse of Dominant Position: The Pfizer CaseGustavo Ghidini, Giovanni Cavani & Piera Francesca Piserà 253

1 Introduction 2532 The Ratiopharm/Pfizer Case 2563 The Decision of the Italian State Council 257

3.1 Abuse of Right(s) 2593.2 Abuse of Patent Rights 260

3.2.1 Some Criticisms of the Decision… 2623.2.2 …And Their Rebuttal 263

4 Beyond Abuse of Dominant Position? 268Bibliography 269

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ITALY

Antitrust Assessment of Co-marketing Agreements: A Diverging Approachbetween EU and Italy?Mario Siragusa & Pietro Merlino 273

1 Introduction 2732 The Assessment of Co-marketing Agreements under EU Competition

Law 2752.1 Co-marketing Agreements between Non-competitors 2752.2 Co-marketing Agreements between Actual Competitors 2772.3 Co-marketing Agreements Entered into with a Potential

Competitor 2782.4 Implications of the Proper Qualification of Typical Co-marketing

Agreements (i.e., those between non-competitors) as VerticalAgreements 280

3 Co-marketing Agreements in Italy 2843.1 The Italian Competition Authority’s Approach: The Parties to a

Co-marketing Agreement are Invariably Horizontal Competitors 2853.2 The Far-Reaching Consequences of the ICA’s Diverging Approach

to Co-marketing: The Italfarmaco Case 2884 Conclusions 297

NETHERLANDS

Follow the Dutch?Willem Hoyng & Anne-Claire Hoyng 299

1 Introduction 2992 The Case Law of the District Court of The Hague 3003 The ACM 3034 The Role of the EPO 3045 Conclusion 305

UNITED KINGDOM

The Pharmaceutical Sector between Patent Law and Competition Law inthe UKIoannis Kokkoris 307

1 Introduction 3072 The Legal Framework for IP and Competition in the UK and the EU 311

2.1 Patents and Patent Law 3122.2 Supplementary Protection Certificates 3132.3 Other Forms of Regulation and Protection 3132.4 Infringement Procedures and the Challenge of Patents 314

3 Between Tension, ‘Disconnect’ and Common Objectives 3153.1 Common Objectives 315

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3.2 ‘The Disconnect’ 3163.3 Tensions 317

4 The Theoretical Background of the IP/Competition Tension 3194.1 The Theoretical Background in the Doctrine 3194.2 A Theory of Practical Concordance between IP and Competition

Law 3215 The Internalization of Competition Law Considerations into Patent Law

and Its Role in Competition Decisions 3235.1 The Process of Internalizing Competition Considerations into IP

Law 3235.2 The Pro-competitive Doctrines of IP Law 3265.3 UK Patent Case Law Internalizes Competition Considerations 3305.4 Conclusion 332

6 The Process of Internalizing Patent Law into Competition Policy 3336.1 The Competition Cases at the Frontier of IP and Competition in

the Pharmaceutical Sector 3346.2 Reckitt Benckiser and Certain Features of the Introduction of Its

Next-Generation Gaviscon Product 3346.3 GlaxoSmithKline (GSK) and Supply of Paroxetine/Seroxat

(‘Pay-for-Delay’) 3376.4 The Servier Proceedings in the UK 3386.5 Parallel Import and Chemistree Homeacre Limited v. Abbvie 339

7 Striking the Balance between IP and Competition Law in thePharmaceutical Sector: Hierarchy or Equal Partners? 3397.1 The Difficult Task of Striking the Right Balance 3407.2 IP or Competition: UK’s Approach of Taking into Account the

Other Discipline 3437.3 Conclusion and Outlook 344

UNITED KINGDOM

IP in the Pharmaceutical Sector in the UK: Some Recent CasesChristopher Floyd 345

1 Trademarks and Free Movement 3452 Construction of Second Medical Use Claims 351

UNITED KINGDOM

Gaviscon: The Diagnosis and Treatment of Abuse of Dominance: VeryRecent Changes in the Private Enforcement of Competition Rules in the UKGerald Barling & Renella Reumerman 355

1 Introduction 3552 The OFT’s Gaviscon Decision 356

2.1 Market Definition and Establishing Dominance 3602.1.1 Abuse 362

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2.2 Some Comments 3633 Changes to Private Enforcement of Competition Law in the UK 365

CHAPTER 4The International Approach 369

BRAZIL

Competition Policy and Life Cycle Management: The Brazilian ExperienceAna Paula Martinez 371

1 Overview of Competition Law and Practice in Brazil 3712 Alleged Anticompetitive Practices in the Pharmaceutical Industry

Reviewed by CADE: Drawing the Line for Life Cycle ManagementStrategies 3732.1 Boycott against Generic Drugs 3742.2 Extension of Pipeline Patent Protection 3752.3 Refusal to Deal 3752.4 Extension of EMR Due to New Use 3762.5 Abuse of Data Protection Rights 3772.6 Ring-Fencing Practices 3772.7 Launch of Second Generation Drugs 378

3 Expected Future Developments 378

CANADA

The Intersection of Canadian Competition and Intellectual Property Law:Developments in the Pharmaceutical SectorAlan Gunderson 381

1 Introduction 3812 Overview of the Competition Act 3823 Overview of IPEG 3844 Overview of Canada’s Pharmaceutical Regulatory Regime 3855 Bureau’s Intervention in Apotex/Eli Lilly 3866 Brand Pharmaceutical Product-Switching Conduct 3897 Patent Settlements 3908 Conclusion 393

CHINA

The Development of China Antitrust Law and a Review of the MainDecision on the Pharmaceutical IndustryHermes Pazzaglini 395

1 Competition Law in China before the Antimonopoly Law 3952 Overview of the History of Promulgation of the Antimonopoly Law of

the PRC 397

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2.1 The Drafting Stage 3972.2 The State Council Review 3982.3 The National People’s Congress’s Approval 398

3 The Antimonopoly Law of the PRC 3983.1 Contents 3983.2 Comments on the Antimonopoly Law 402

4 The Enforcement of the Antimonopoly Law in the PharmaceuticalIndustry 4044.1 Roles of Enforcement Agencies 4044.2 Implementation by the Courts: The Ruibang v. J&J case 4054.3 Implementation by MOFCOM 407

4.3.1 In General 4074.3.2 Specific Decisions 408

4.3.2.1 Pfizer Wyeth, Announced with NoticeNo. 77, (2009) 408

4.3.2.2 Novartis Alcon, Announced with NoticeNo. 53, (2010) 410

4.4 SAIC 4114.5 NDRC and the Pharmaceutical Pricing System 411

4.5.1 An Overview of the Pharmaceutical Market in thePRC 412

4.5.2 NDRC: An Overview of the Pharmaceutical PricingRegulatory System in Force Until 2015 4124.5.2.1 Notice No. 2142, (2000) 4124.5.2.2 The Pharma Law 413

4.5.3 NDRC: The 2015 Pharmaceutical Pricing Reform 4144.5.3.1 The SCNPC Decision 4144.5.3.2 The NDRC & Others’ Notice No. 904,

(2015) 4144.5.3.3 The NDRC Notice No. 918, (2015) 4164.5.3.4 The NDRC Notice No. 930, (2015) 416

5 Conclusions 417

INDIA

The Interplay between Competition Law and Intellectual Property in theIndian Pharmaceutical Sector: Deference Is Better than CureNaval Satarawala Chopra & Yaman Verma 419

1 Introduction 4192 IP and Competition Law: The Road Thus Far 4203 Overview of CCI Decisions in the Pharmaceutical Sector in India 4224 Potential Competition Law Concerns in the Indian Pharmaceutical

Sector: Patent Pools 4255 Competition Law: An Alternative to Compulsory Licensing? 4276 Conclusion 429

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JAPAN

Japan’s Pharmaceutical Industry and the Patent and Non-patent Incentivesfor Pharmaceutical R&DToshiko Takenaka 431

1 Introduction 4312 The Pharmaceutical Industry in Japan 4333 Regulatory Approval Process and Data Exclusivity 4354 Patent Protection 438

4.1 Pre-patent Expiration Clinical Trial Safe Harbour 4384.2 Patent Term Extension 440

5 Competition Law: Legality of Reverse Payment Settlement 4446 Conclusion 447

RUSSIA

The Interplay of Patents and Competition Law in the Russian PharmaceuticalSector: An Everlasting State of TransitionAlexey Ivanov 449

1 Relevance of the Russian Experience 4492 The Russian Pharmaceutical Market and Regulatory Regime 4523 Conclusion 456

SOUTH AFRICA

The Intersection between Patent Law and Competition Law as It Relates tothe Pharmaceutical Sector in South AfricaDaryl Dingley 459

1 Introduction 4592 Competition Law Exemptions for the Exercise of Patent Rights 4613 Competition Challenges and Remedies in Relation to the Exercise of

Pharmaceutical Patent Rights 4634 Compulsory Licensing of Pharmaceutical Patents in South Africa for

Abusing a Patent Right 4695 Competition Issues Arising from the South African Patent System 4726 Conclusion 475

UNITED STATES

Pharmaceutical Antitrust Law in the United StatesMichael A. Carrier 477

1 Markets 4772 Regulatory Regime 4783 Generic Entry 4794 Product Hopping: General 4795 Product Hopping: Case Law 480

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6 Settlements 4836.1 Settlements and Product Hopping 4856.2 Authorized Generics 485

7 Conclusion 487Index 489

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The Dangers of Settling Patent LitigationIan S. Forrester*

1 INTRODUCTION

The intrinsic tension between competition law and IP law has nourished manyacademic dissertations and has been at the core of several celebrated competitioncases. I have written about this tension in such articles as Magill Revisited1 andCompulsory Licensing in European Competition Law: The Power of the Adjective.2

These cases often involve a conflict between ‘free competition’ on the one hand and onthe other hand the classical exercise of an IP (closing down a copyright infringer,refusing to grant a licence). Sometimes, however, they involve an exercise of the rightwhich is disputed as a matter of IP law (like invoking a trademark against the sale ofnon-spurious goods imported via parallel trade or tying to the licensing of a rightacceptance of an obligation not conferred by that right). In the early cases, which cameto the ECJ under the Treaty’s provisions on free movement, the reason for condemningthe invocation of the IP right was often conflict with the policy of market integration,as in the many Centrafarm cases from the 1970s:3 there the holder of parallel patent ortrademark rights in several Member States tried to block the sale of genuine goods toprevent parallel traders profiting from the differences in price in adjoining Member

* The opinions expressed are wholly personal. The law is stated as of December 2014, and may wellevolve during the next five years.

1. See I. GOVAERE, R. QUICK, M. BRONCKERS, Trade and Competition Law in the EU and Beyond,Festschrift for Jacques Bourgeois (Elgar Publishing, 2011).

2. See I. FORRESTER, K. CZAPRACKA, Compulsory Licensing in European Competition Law: The Power ofthe Adjective, in S. ANDERMAN, A. EZRACHI (eds) Intellectual Property and Competition Law: NewFrontiers (Oxford University Press, 2011).

3. See Case 15/74, Centrafarm, BV v. Sterling Drug, Inc., 1974 E.C.R. 1147, [1974] 2 C.M.L.R. 480(1974); Case 16/74, Centrafarm, BV v. Winthrop, BV, 1974 E.C.R. 1183, [1974] 2 C.M.L.R. 480(1974); Case 107/76 Hoffmann-La Roche AG v. Centrafarm Vertriebsgesellschaft Pharmazeutis-cher Erzeugnisse mbH, [1977] ECR 957; Case C-102/77, Hoffmann-La Roche & Co. v. CentrafarmVertriebsgesellschaft Pharmazeutischer Erzeugnisse, GmbH, 1978 E.C.R. 1139, [1978] 3 C.M.L.R.217 (1978).

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States. In the early cases, the European Court drew a distinction between core rightsand ancillary rights (these are my glosses as existence and exercise were the wordsused), to justify a conclusion that the Treaty of Rome permitted the intervention ofEuropean law principles against obstacles to cross border trade. Those judicial theorieswere subsequently invoked in competition cases to argue that competition law couldnot constrain the assertion of a core or essential IP right, an assumption whichsubsequent cases such as Magill4 and Microsoft5 have shown to be ill-founded.

The topic described in this chapter is much more innovative, going to the core ofthe privileges conferred by IP law: it is a new kind of controversy, relating to thesettlement of patent disputes. The topic originally became hot in the United States overthe past ten years due to the quirks of US legislation about the status of genericcompetitors: they were encouraged by statute to enter the market, towards the end ofthe life of the patent, on favourable terms. As a result, litigation in the US offered aregulatory prize, and settling litigation became correspondingly more significant.

Officials have pursued the idea that there might be a comparable public interestin the EU, despite the different regulatory regime, in attacking agreements which settlelitigation over whether a patent is valid or is infringed. How should competition lawregard the settlement of a dispute over whether a patent on a pharmaceutical inventionwas validly granted and is infringed by a generic version of the original product? Is thesettlement to be welcomed as a desirable resolution of an expensive and uncertaindispute, or should it be regarded as a scheme to perpetuate the existence of a patent ofdubious validity, with the consequence that generic entry is postponed, to thedetriment of tax payers in the sense that public health budgets have to purchasepatented medicines during a longer period? Is there a competition law duty to prefer ajudicial determination of a controversy over a contractual resolution of the controversyin which contract each side gets an outcome which is better than it feared but worsethan it hoped?

2 SOME ECONOMIC AND REGULATORY CONTEXT

It may be helpful to begin by recording some of the context which may reveal arationale for the recently adopted policy. Pharmaceutical medicines in Europeancountries are sold in pharmacies to patients who have received prescriptions fromdoctors. In most EU Member States, the state pays a portion, sometimes a large portion,of the price paid by the patient;, and also the state usually prescribes the price. Themore novel the medicine, the more elevated the price: governments set the price theyare willing to pay in function of the therapeutic value of the medicine, and the price ofother medicines in the same category. The price of patented medicines is usually higherthan medicines no longer covered by patents (so-called generics). The shorter theperiod of patent protection, the sooner the price will fall; thus in Europe it can be

4. C-241/91 P and C-242/91P Judgment of the Court of 6 Apr. 1995, Radio Telefis Eireann (RTE) andIndependent Television Publications Ltd (ITP) v. Commission, ECLI:EU:C:1994:210.

5. T-201/04 Judgment of the Court of First Instance (Grand Chamber) of 17 Sep. 2007, MicrosoftCorp. v. Commission, ECLI:EU:T:2007:289.

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argued that the challenging of the patent by a generic competitor is a merit, a publicadvantage, which may lead (if the court were to find that the patented invention hadnot been infringed or the patent itself had been wrongly granted) to a reduction of thecountry’s health budget. Of course, it can also be noted that pharma companies makeintense research to develop tomorrow’s drugs using the revenues earned by sellingpatented medicines today. So if the patent is upheld the extra expense is not ‘lost’ to thepublic interest in that a percentage of the revenues thus earned will be spent onresearch by the patentee.

There is a related policy concern which has been articulated during the sectorenquiry into the pharmaceutical industry, launched by Commissioner Kroes on 16January 2008: that pharmaceutical inventors, instead of being content with thewell-established years of patent protection deservedly accorded to the basic molecule,may additionally seek to get patent protection for complex steps in the productionprocess which makes that molecule efficiently on an industrial scale. Thus a genericcompetitor would have to develop its own solutions to avoid the techniques covered bythe process patents. As generics like quick low-price industrial operations, they preferto make a product which is easy to copy or replicate. There may be a suspicion thatthese process patents are less worthy of respect than the original patents on themolecule itself. This policy approach (assuming it exists) confronts the problem that allpatents are granted after extensive research by skilled patent examiners who haveaccess to millions of publications about the prior art. They do not grant patents lightly.It is not easy to say that the European Patent Office (EPO) is systematically wrong, andit would be astonishing to argue that the competition law is a good remedy for anysupposed over-generosity of the patent examiners at the EPO.

However, there is unquestionably suspicion about any agreement which appearsto insulate a pharma patent from future challenge, and a readiness to assume that theagreement implementing a settlement of the dispute can be assessed by focusing on itsprohibition of future challenges rather than by the saving of expense and effort whicha settlement delivers.

One way of regarding a settlement is as a device to bring an end to an expensiveand uncertain dispute. Another way of regarding a settlement is as a device to share amarket between two natural competitors. The new, currently fashionable, theory isthat while settlements are in theory desirable, their terms are to be reviewed sosceptically that genuine settlements of genuine disputes risk condemnation on thetheory that they contain contractual restrictions typical of a settlement involvingmutual concessions, by which each side binds itself to accept less than it might havehoped for at the moment the litigation was initiated. The settlement will excludefurther litigious challenges.

As often happens when a major competition case is unfolding, the opposingtheories are sharply opposed. The defending pharma companies say that a settlementmakes commercial sense for both sides; every litigation presents a risk, the Courts areincapable of deciding all initiated litigations, and ending a dispute must be a publicgood. The competition enforcer says that of course settlements are to be welcomed, but

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that there can be no immunity for anti-competitive agreements by labelling themsettlements. Thus, when the settlement does no more than agree that a patent litigationhas ended, it is acceptable. However, say the prosecutors, bad settlements whichinvolve additional unacceptable features are to be condemned.

3 VALUE TRANSFERS

A ‘value transfer’ is the term attributed to a commercial advantage delivered by theinventor/patentee to the generic alleged infringer: this may be a new businessopportunity or a payment or some other concession which is granted in order to makea conclusion of the litigation acceptable. Surely, says the critic, if the wrongdoer reallywas the wrongdoer and really was infringing the patent, the patentee would relish thechance of a crushing victory in court? Why should the confident patentee give a pieceof business or a lump of money to the dishonourable generic who is violating a vitalpatent? Therefore, on this theory, any restrictive terms in the settlement agreement,even if they are typical of a settlement agreement, are manifestations of anti-competitive intent. Thus acknowledging that the patent is valid and promising not toinfringe it are restrictions on the generic’s freedom of action. This is true even if thegeneric had lost at first instance (since it could have appealed). This is true even if thegeneric had chosen to abandon the litigation, because it had no product to launch if thepatent were annulled (since it might have been able to solve the biochemical purityproblems which had thus far denied it a license to sell its products). This is true evenif the generic producer would stand to lose millions if it lost the appeal or if it wouldhave needed two years to develop a non-infringing technique to avoid the patent. Eachof these commercial or regulatory difficulties might have been solved so the genericremained a potential competitor. And, last but not least, it is true even if the patenteesettles a few parallel litigations and pursues the others to the bitter end. Genericlitigants A through E fight; generic litigants F and G settle. The judicial examination isnot thereby avoided. Yet, there is a gross infringement.

These elements, which do indeed seem surprising, confirm the extremely severeview taken of settlements as soon as they involve the conferring of anything that lookslike a benefit to the generic company.

4 ANTI-COMPETITIVE SETTLEMENTS

Can there be settlements which are truly anti-competitive? Yes, assuredly. Where the‘settlement’ is not a settlement of a genuine dispute about validity or infringement butin truth involves nothing more than a bribe to induce one party to stop competing, orwhere the ‘settlement’ imposes restrictions going beyond the scope of the patent (thepatent covers the production of green tooth brushes and the ‘settlement’ coversthe marketing of all hygienic products), or if the original patent was obtained by fraud(the laboratory reports were faked), the public prejudice and anti-competitive effect is

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evident. The Süllhofer6 case reminds us that there is no immunity for the terms ofsettlement agreements just because they are settlements. But that case does not createa duty to litigate!

Litigators are professional combatants. They gather the facts, they test thewitnesses, they master the key three or four points on which victory or defeat willhinge, and they anticipate the weaknesses of the opposition and of the client. In avigorously contested case, only a fool would promise victory. Any prudent lawyerwould say something like ‘good chances’, ‘65/35’, or ‘It all depends on ProfessorSmith’. Any prudent lawyer will initiate with his client discussion of a possiblesettlement, and in most cases settlement talks will be broached. And it is in the caseswhere the outcome is most unsure that the pursuit of a settlement makes most sense.It seems troubling to imagine that Commission policy favours litigation to the bitterend, even after defeat at first instance. The policy seems not to distinguish between thesituations that are very different. One situation is where for example four weeks beforethe trial of a litigation which will be vital to the commercial future of the key productof the patentee the trial lawyers feel unsure about the outcome because for example thewitnesses are less convincing than when they first gave their story to the lawyers, or theexpert has published an article which seems to contradict his technical report. s a resultof these fresh uncertainties there is a genuine doubt about the wisdom of going on withlitigating an expensive and important case. The second situation is where the patenthas been obtained by fraud and the company is keen to avoid scrutiny, and is willingto pay a lot to be left in peace to exploit it. Yet those situations are hugely different anda policy that treats them as equally objectionable seems puzzling indeed.

5 PRE-TRIAL NERVOUSNESS AND UNCERTAINTY

Any practitioner who has conducted litigation will know that the possibility of asettlement is almost always discussed, and often several times, as the case movesforward. It is in finely balanced litigation where the outcome is the most uncertain andwhere the result may mean life or death for one side or the other that it makes sense toconsider the risks and to consider mutual concessions. Roman law7 and the Bible8 eachfavour settlements. In some countries, such as England, an attempt to settle is a legalrequirement for initiating litigation. Judges will often agree to delay a hearing to permitthe parties to reach a deal. But, if a settlement is reached, it must contractuallyeliminate the possibility of future disputes on the same topic. All the terms must beborne in mind, not only the ones which prevent a rerun of the dispute.

It is easy to grant competition law blessing where one side is in an overwhelm-ingly strong position to reach a deal whereby one side wins and the other surrenders,

6. C-65/86 Judgment of the Court of 27 Sep. 1988, Bayer v. Su″ llho″fer, ECLI:EU:C:1988:448, para.121.

7. Interest rei publicae ut sit finis litis.8. ‘As you are going with your adversary to the magistrate, try hard to be reconciled on the way, (or

your adversary may drag you off to the judge, and the judge turn you over to the officer, and theofficer throw you into prison).’ Gospel of St Luke, Ch. 12, v. 58, NIV.

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with perhaps some concessions about legal fees. But it is difficult where, for example,the expert who will testify is at risk of not being understood, and the laboratory reportsare equivocal, or where there are several cases running in different courts, so thatpossible victory in France may be too late to prevent generic entry and exports fromFrance to other countries are likely. Yet these are the very situations where concessionsare necessary to make the gap bridgeable.

6 THE PUBLIC INTEREST?

There is a potential public interest in the outcome of many disputes – patents overnon-pharmaceutical matters, professional negligence, discrimination or harassment inemployment, to name but a few. There is equally a strong interest for the parties (eitherside or both sides) in avoiding public disclosure of their dispute. An arbitration aboutwhether unlawful state aid was granted, or a dispute about the pay of one part-timeworker may have huge implications for one of the parties, much wider than the singledispute. So it is not the case that disputes about pharma patents are uniquely unfittedto resolution by settlements.

If there is a public interest in seeing litigation about pharmaceutical patentscarried forward to a judicial conclusion, why not apply the same rule to engineering orelectronic patents? Indeed by the same logic, there is a public interest in seeing ajudicial determination of controversies about harassment in the workplace, dangerousfood additives, unhealthy or unsafe premises or negligent lawyers or doctors. It wouldbe surprising to imagine that a settlement of a litigation about any such matter wouldbe anti-competitive if it involved mutual concessions, whereby each party got someadvantage.

I suggest that there is a manifest difference between the settlement of a litigationon the one hand, and an agreement to remove a competitor from the market on theother. The first has overwhelming social, legal and economic benefits, at the price ofcompelling the parties to eschew future combat on the same topic. The second haspro-competitively nothing to commend it. Millions of Euros a year is a lot of money, yetsuch is the price of a hotly contested patent litigation which is fought out in severalcountries since patents are enforced nationally in the courts of twenty-eight MemberStates and imposes ancillary restrictions. We ought not to assume that a deal whichends expensive litigation is no more than a market sharing plot.

7 THE OVERUSE OF THE NOTION OF RESTRICTION ‘BY OBJECT’

It is perplexing to see that current policy is moving towards condemning settlementswhich involve mutual concessions or ‘value transfers’, without proper enquiry intowhether on balance the deal was desirable in competitive terms. Did the litigationabout validity continue as between the patentee and other generics, despite thesettlement with one generic? Had the generic company valid reason to wish to stopthe fight, either because victory would bring it little benefit or would cost too much? Dothe risks at stake make any difference? Suppose that the generic did not hope to make

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a lot of money even if it won the patent case: Does that excuse its trying to bluff and doan advantageous settlement? Was the threat to the prosperity of the patentee huge, sothat it had a high incentive to explore a settlement involving significant concessions? Isthe asymmetry of risk (it means a lot to the patentee who hopes to enjoy a full patentterm of twenty years in seventeen Member States and fifty in the wider world, but notmuch to the generic, who will make little or no money unless it can launch its newproduct legally and quickly) relevant?

I suggest that it ought to be relevant that the parties were confronting genuinebusiness problems that complicated the analysis of whether to continue litigating sincethere was a fair chance that judicial victory would not confer commercial advantage.Yet it seems the duty to litigate overrides such common sense considerations.

I regret the recently fashionable practice of describing complex contractualrelationships as restrictions ‘by object’. Such textual condemnations cannot be usedcasually as a supplementary ground of objection to a controversial practice. I suggestthat it is wise to limit the use of the term ‘by object’ to easy cases where the harm tocompetition fait crever les yeux. Where the merits and demerits of the contract arefinely balanced, where it conferred advantages and burdens on each side, wherechemical, medical or economic opinion is divided, then slogans are not helpful to theanalysis. It is by looking calmly at the effects that one can reach a reliable conclusion.The term ‘by object’ should not be used as an excuse to avoid precise analysis of whatharms and benefits the agreement may confer.

8 WHERE ARE THE LIMITING PRINCIPLES?

It is routine in competition cases about the use and abuse of IP rights for the issue to bepresented as a clash between absolutes. The right holder says that it has ‘merely’invoked a privilege granted by statute and that to deny it this right takes away theessence of the property right. The complainant points to wholesome competition,the end of abuses, freedom of choice, lower prices and all sorts of other benefits. Theseslogans are easy to utter. It is indispensable to have clear limiting principles. Theseminal cases of Volvo/Veng9 and Magill10 provided such clarifications. But it is quiteunclear in the area we are discussing what are the crucial elements whose presence orabsence will reveal that the settlement is anti-competitive or not.

‘Uncertainty about the outcome’ of the litigation is deemed important, but that isa meaningless test since uncertainty is universal on the eve of trial. It is equally riskyto settle by mutual concession with a ‘value transfer’ where the patent is crucial to thecompany’s business even where multiple litigations involving other parties about thesame patent continue. The current approach seems to make no distinction betweenhow confident the patentee feels of victory or how objectively strong the patent isthought to be. Of course it is not the job of the competition authority to decide whether

9. C-238/87 Judgment of the Court of 5 Oct. 1988, AB Volvo v. Erik Veng (UK) Ltd., ECLI:EU:C:1988:477.

10. See supra n. 4, Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP)v. Commission.

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a patent is ‘weak’ or ‘strong’, but it is strange that the words of the settlement are moreimportant than the reasons to settle. Putting it differently, the merits of the underlyingpatent dispute seem to make no difference to the analysis of the legality of the terms ofthe settlement. The fact that it made commercial sense to settle seems likewiseirrelevant. Settling after a defeat in court seems no better, since a settlement promisesthere will be no appeal.

Until clarification has been obtained, it seems to be risky to conclude patentlitigation as to pharmaceuticals other than by a total victory or total defeat before ajudge.

9 WHAT PRECISELY IS THE ILLEGAL CONDUCT?

If we are going to review the context let us consider all pertinent issues. Does the policyaffect litigation only as to pharmaceutical patents, on the rationale that governmentspay for drugs? If so, what about patents relevant to the road-building industry ormilitary equipment which would affect the state’s budget? If not, is the pharmaindustry morally inferior or more prone to abuses than other industries? Does thecampaign threaten other settlements of other cases where there is a public interest inthe clarification of the legal issue in dispute? If the pharmaceutical industry is uniquelyin need of the policy, let this be stated and explained.

A related manifestation of the current muddle is prolixity. The decisions in whichthe European Commission implements its policy are far too wordy. It is impossible toknow at the end of 500 pages exactly what conduct was deemed reprehensible. The filemay well contain inflammatory emails with military metaphors (‘crush them’, ‘nukethem’, ‘no mercy’, or the like), but they do not define what is unlawful. Emailcommunications which threaten destruction to the competitive enemy may be fun toquote from and colourful to invoke as showing hardness of heart and a harsh approachto competitors. But it is not unlawful to voice competitively hostile thoughts. What isneeded is not chapters of ‘context’ but two pages of carefully articulated explanation ofwhat the offence against competition law consists of, placed fairly alongside allrelevant considerations.

If the supposed breach of the law is so clear that it deserves to be damned as a ‘byobject’ infringement, so plain that there is no need to enquire into its effects, then thelegal community, the technology community and the world’s patentees are entitled todemand intelligible and rational articulation of the core of illegality. Yet the decisionswhich have so far appeared are hundreds and hundreds of pages too long. Thiswordiness sows confusion and uncertainty and makes daunting the tasks of judicialreview. The Volvo/Veng judgment set forth the key findings in two celebratedparagraphs, and the Magill decision from the Commission was only nine pages long.

10 A PATENT JUDGE COMMENTS

One of the other contributors to this volume is a distinguished and experienced patentjudge, Sir Robin Jacob. I recollect that he was invited to address a large gathering to

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mark the Commission’s pursuit of its vast enquiry into the pharmaceutical industry. Heastonished the listeners by excoriating the assumptions, techniques and conclusions ofthe sector enquiry. He said it was ‘a disgraceful use of the Commission’s powers’, andof a key theory ‘that was entirely nonsense’. Sir Robin said that the preliminary reportwas ‘appalling’.11 It revealed ‘a vast ignorance on the Commission’s part as to how thepatent system actually works’. He noted that since there is a lot of money involved,generic companies naturally challenge big pharma patents if there is a realisticpossibility of winning. And patentees invoke their patents if there is a realisticpossibility that they may be held valid. Indeed, I would suggest that there is a structuralneed for litigation: it is the mechanism whereby the validity of a valuable grant istested. But there is no merit in compelling those who start a litigation to carry it forwardto the bitter end. Sir Robin noted that ‘The normal case is where there is a realuncertainty about validity. Neither sides know who would win. The prospective legalbattle, if it takes place, will be expensive and time consuming.’ However, at the time ofthe agreement, no one knows whether it is valid or not. That could only be determinedby the end of the final appeals in the very battle the agreement is designed to avoid. Ifthese agreements are treated ipso facto as anti-competitive, there is only one alterna-tive: litigation to the death. I presume that the Commission would deny any such bleakintention, but it is striking that a very experienced national patent judge asks such basicquestions years after the new policy has been adopted, which brings me to aconclusion.

11 CONCLUSION

When I was a young lawyer in Brussels last century, the competition law world wasdominated by the parsing of the implications of Article 85 (1) of the EEC Treaty. As theninterpreted by the European Commission, its reach was very broad. It caught not justagreements which were intrinsically bad (like a market sharing agreement) but thosewhich had some pro-competitive and some anti-competitive features. This reflected theCommission’s understandable nervousness about trusting business people, officialsand even judges to apply sound doctrine when applying the unfamiliar concepts ofArticle 85. The official line was clear: if in doubt, come to the public authority, notifythe agreement and request administrative blessing. In reality, the system functionedvery differently as practitioners tried to game the system to win procedural advantage,while the Commission found restrictions of competition in almost anything while beingreluctant to grant individual exemptions. The system was a procedural curiosityperhaps appropriate to an infant system. Its intellectual flaw was looking at words ona page rather than reality and effects.

I suggest that an excessive reliance on the ‘by object’ damnation echoes the errorof the 1970s and 1980s. Competition takes many forms. It is the consequence of manyactions and many phenomena. The reality of how the competitive process works is not

11. R. JACOB, Competition Authorities Support Grasshoppers: Competition Law as a Treat to Innova-tion, available at http://fordhamipconference.com/wp-content/uploads/2014/10/6A-2-Jacob-Robin-paper.pdf.

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easy to grasp or to measure. Many actions and many agreements have positive andnegative effects. I sell my business and promise not to enter the same line of commercefor five years: that stops my competing with the buyer, earns me a higher price andreassures the buyer that he will be able to approach my customers confident that I havewithdrawn. Is that a bad clause or a good clause? It likely has both features: maybe fiveyears is too long, but maybe it is acceptable. A bald promise not to compete for fiveyears is a clear infringement, but such promise as part of a pro-competitive acquisitionof my business may be acceptable.

We ought not to revert to the easy days of condemning by reference to words andlittle else. There can be settlements of sham litigation which are clearly infringements.Those should be challenged robustly. But it is deeply unconvincing to approach thecarefully negotiated conclusion of a bitter, costly and uncertain litigation as beinginexcusably bad because it involves a ‘value transfer’ and ended a litigation as to theoutcome of which there was ‘doubt’. The topic requires much more careful analysisand better examination of all relevant factors. Discouraging the settlement of truedisputes by prohibiting the parties from bridging the gap between them is bad policyand ought I suggest not to be good law.

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