In January 2018, Hogan Lovells’ intellectual property, media and telecommunications team published its second annual Global IP Outlook highlighting some key developments from 2017, and anticipated hot topics for 2018. In this article, we consider in more detail some key recent and pending judgments from the highest courts that are relevant to the pharmaceutical and biotechnology industries
May 2017 – US Supreme Court decision in Impression v Lexmark
Last May, the US Supreme Court issued a highly anticipated decision holding that, when a patent holder sells a product, it exhausts all of its patent rights in the product, regardless of certain restrictions that the patent holder sought to impose on further resale. The Court held that exhaustion applies whether the product was sold internationally or within the United States, such that the patent holder may not bring an infringement claim for otherwise-infringing activities once the product has already been sold by the patent holder or its licencee authorised to do so.
The decision presents a number of potential challenges for drug companies, who frequently commercialise their products through complex networks with multiple tiers of licencees and distributors, while seeking to impose limitations on the jurisdictions and fields in which their licencees and distributors may sell their products. A few key points to note are:
The Supreme Court’s decision takes from patent holders the right to bring certain patent infringement lawsuits against a purchaser outside the US that carries out post-sale infringing activities inside the US. In light of Lexmark, the patent holder might have a breach of contract claim against certain purchasers, but not an infringement claim.
Lexmark goes to some lengths to clarify that a licencee (who is not itself a purchaser) may still be subject to restrictions on the scope of that licence (such as a specific territory or a particular field), and that only an authorised sale by the licencee (or patent holder) exhausts the patent holder’s IP rights.
Where the patent holder sells product to a distributor who sells to customers, the patent holder is viewed as fully compensated under the first sale, such that certain further restrictions may be imposed through contract, but not under patent. In contrast to a pure licence, under a typical distribution agreement any activities that the patent holder wants to prohibit must be expressly prohibited in the contract.
July 2017 – UK Supreme Court Judgment in Eli Lilly v Actavis
The UK Supreme Court’s decision of 12 July 2017 was significant, because it nuanced the UK test for infringement by formally adopting a separate test for equivalence for the first time. While Lilly’s invention was administering pemetrexed with vitamin B12 to avoid certain fatal side effects when treating lung cancer, Lilly’s patent claims referred only to a combination of pemetrexed disodium with B12. Actavis sought approval for generic products, each using a different pemetrexed salt (namely the diacid, diromethamine and dipotassium salts).
The Supreme Court held that, when considering whether a variant falls within a patent claim, the correct approach to infringement involved two distinct steps. Firstly, work out what the patent claim means and whether the variant falls within any of the claims as a matter of normal interpretation. If not, then separately consider whether the variant nonetheless infringes because it varies from the invention in a way which is immaterial. Assistance in answering the second question is provided by three revised guideline questions: Does the variant achieve substantially the same result in substantially the same way as the invention, i.e. the inventive concept revealed by the patent? Would it be obvious to an informed reader, knowing that the variant achieves substantially the same result as the invention, that it does so in substantially the same way as the invention? Would the skilled reader have concluded the patentee nonetheless intended strict compliance with the literal meaning of the relevant claim(s) was an essential requirement of the invention?
A key change in this approach is that the skilled person is taken to know that the variant achieves substantially the same effect – this was not the case previously. This mattered for Lilly because, while only routine testing was needed to prove the other salts had substantially the same effect as the disodium salt, the skilled person wouldn’t have known this without performing these tests.
This recognition of a separate test for equivalence is likely to result in broader protection for patentees in cases where infringements fall outside the strict language of the claim in immaterial respects, but implement the invention therein. It also brings the UK approach more closely into line with that of other key European jurisdictions.
November 2017 – Dutch Supreme Court decision in MSD v Teva
On 3 November 2017, the Dutch Supreme Court (Hoge Raad) handed down a landmark decision on the infringement of second medical use patents relating to MSD’s Swiss type second medical use patent protecting a combination therapy of ribavirin and interferon alpha for a specific group of hepatitis c patients. Teva had introduced a generic ribavirin product on the Dutch market, which was accompanied with a skinny label in which the patented indication had been carved out.
The Supreme Court held that a manufacturer or seller of a generic product directly and indirectly infringes a Swiss type second medical use claim if it is reasonably foreseeable that the generic product will be used intentionally for the patented use. If this is the case, the manufacturer or seller will have to take all effective measures that can reasonably be requested to prevent the product bei provided for the patented second medical use. The Supreme Court further held that second medical use claims relating to a ‘new’ patient subgroup convey the same protection as second medical use claims relating to a ‘new’ indication. The Supreme Court also held that a reasonable protection for the patentee justifies that indirect infringement of Swiss type claims is possible in the same way as an EPC 2000 claim, as there is no real difference between the two.
This is an important decision for the life sciences industry, as for a long time it was unclear how effectively second medical use patents could be enforced. The decision makes clear that such patents can be both directly and indirectly infringed, even if the generic company carves out the patented indication from the packaging.
July 2017 – German Federal Court of Justice decision in MSD v Shindig
In only the second compulsory licence case in the history of the Federal Republic of Germany, Merck Sharp & Dohme received the first ever preliminary compulsory licence granted in Germany. Shinogi sued MSD for patent infringement in Germany, after the parties failed to agree licence terms for MSD to use a Shionogi patent claiming the drug Isentress, which is used in the treatment of HIV/AIDS.
The infringement decision, which could potentially have resulted in an injunction, was due to be considered before the main proceedings on the compulsory licence. Therefore, MSD asked the Federal Patent Court to grant a preliminary compulsory licence in the meantime. The Court granted that licence having assessed that the two main requirements were fulfilled, namely that MSD had made reasonable attempts to obtain a contractual licence, and that there was a public interest in the drug remaining available.
Importantly, the Court decided that the drug did not have to be generally superior over other drugs – at least in this specific case – but that in this case there were some patients who could not be treated with other drugs, or where such treatment would be inferior, Isentress had to be used to treat those patients. This preliminary decision was upheld by the Federal Court of Justice and subsequently confirmed by the Federal Patent Court in the main compulsory licence proceedings.
The high burden an applicant for a compulsory licence must meet makes it unlikely that this decision will open the floodgates to the grant of such licences. A key requirement is that such a licence can only be issued for drugs that differ from other drugs on the market, which rules out generics. Relevant cases would only arise relating to innovator drugs emerging from parallel developments or patents with a wide scope of protection.
Katie McConnell is a counsel, London; Cullen Taylor is a partner, Northern Virginia; Hank Watsky is an associate, Northern Virginia; Ruud van der Velden is a partner, Amsterdam; Miriam Gundt is a partner, Dusseldorf and Martin Koch is an associate, Dusseldorf, all at Hogan Lovells
