Does an agreement to settle a dispute between a patentee and a generic drug maker breach competition law? AG's opinion

An agreement settling a patent dispute may constitute a restriction of competition by object or by effect and that entering into such an agreement may be an abuse of a dominant position, according to Advocate General Kokott's 276-paragraph, 223-footnote opinion of 22 January in Generics (UK) Ltd e.a. v Competition and Markets Authority (Case C-307/18) ECLI:EU:C:2020:28.

The reference to the Court of Justice came from the Competition Appeal Tribunal, which was hearing an appeal against the Competition and Markets Authority's finding that GlaxoSmithKline, Alpharma Limited and Generics (UK) Limited had breached EU and UK competition law by entering into a series of agreements that had the effect of delaying generic entry of the drug paroxetine. The generic manufacturers concerned undertook, inter alia, not to enter the market with their products for an agreed period: the CMA found the agreements to be akin to market exclusion agreements, prohibited under Chapter 1 of the Competition Act 1998 and by Article 101 TFEU, and an abuse of GSK's dominant position prohibited by Chapter 2. The CAT referred ten questions for a preliminary ruling.


The fact that the validity of the patents, and whether the generic products infringe them, remained uncertain did not mean that the patent holder and generic manufacturers were not potential competitors, according to the Advocate General. The correct question to ask is whether there are real, concrete possibilities to enter the market despite the patents, and this (the Advocate General went on) is a matter for the competition authority to decide taking into account all the relevant factors. She also considered that conduct that can constitute an abuse of a dominant position can only be justified by consumer benefits when it can be shown that those benefits offset an agreement's adverse effects on competition on the relevant market. Where the agreements provide limited benefits, while eliminating competition by removing all sources of potential competition, this condition is unlikely to be satisfied.

Intellectual property and competition law

Always an interesting topic ...

Hemphill, C. Scott, Intellectual Property and Competition Law (May 9, 2017). Forthcoming, Oxford Handbook of Intellectual Property Law (Rochelle C. Dreyfuss & Justine Pila eds. 2017). Available at SSRN: https://ssrn.com/abstract=2965617 or http://dx.doi.org/10.2139/ssrn.2965617

And another article of interest:

Lim, Daryl, Retooling the Patent-Antitrust Intersection: Insights from Behavioral Economics (April 14, 2017). 69 Baylor Law Review 124 (2017). Available at SSRN: https://ssrn.com/abstract=2953031

The ineffectiveness of competition law

One theme which can be observed running through intellectual property law over the past two or three  decades is the cutting back of protection to deal with problems that might otherwise - might better - be dealt with by competition laws. So, when the Competition Act 1980 (of blessed memory) failed to remedy the harm caused by the Ford Motor Company's policy of not granting licences to use its registered designs for body panels, design protection for body panels was effectively abolished in the 1988 Act. And although IBM was found (by a Commission decision in 1984) to have abused a dominant position by keeping information about interfaces offered by its computer systems from its competitors, rather than rely on that finding to deal with competition problems in the emerging computer sector, in the software directive the EC excluded interfaces from copyright protection altogether.

Competition law is is a set of rules that seeks to give legal expression to economic concepts. It therefore takes a huge amount of time to weigh the evidence necessary to decide whether an economic wrong is being committed - or, indeed, whether one has been committed. Because the time it takes to deploy the heavy artillery of competition law is the main justification, it seems, for cutting back intellectual property protection to ensure that the competition problems don't arise in the first place. Today we have a classic example reported in European Voice here: a record financial penalty imposed on a cartel that fixed the price (and other matters too) of cathode ray tubes for televisions and computer monitors. Great news for consumers of those goods - were it not for the fact that cathode ray tubes have not been used in those devices for some years.

Limits claims for competition infringements

The Competition Appeal Tribunal has restricted the scope of "follow on" claims, on a narrow (but perfectly proper) interpretation of Section 47A of the Competition Act 1998, which was added by the Enterprise Act 2002.

This provides a mechanism for “follow-on” claims for damages – following on, that is, from a finding by the authorities that the competition rules had been breached. But in Emerson Electric v Le Carbone (Great Britain) Limited the Competition Appeal Tribunal held that the claim was ill-founded because Carbone had not been an addressee of the European Commission's decision. It did not follow on: it was a new matter, and Emerson would have to go to all the trouble of proving a breach, which is what section 47A tries to short-circuit.

The decision was that there had been an illegal carbon and graphite products cartel which included Le Carbone-Lorraine SA, the GB company's parent. Emerson were not simply naïve in getting the wrong company, though: they based their case on the argument that the two Carbone companies formed a single undertaking and the parent had been named in the decision in a representative capacity.

The British Carbone company applied to strike out the claim, on the grounds that it was not an addressee of the decision. The CAT rejected Emerson's argument about representative capacity, partly because there was nothing in the decision to suggest that the British company had been involved in the infringement. The decision did, it was true, refer to a British subsidiary, but the defendant was not the only one at the time of the infringement. There was nothing to suggest that the Commission meant the defendant, nor was there anything to suggest that the two companies formed a single undertaking. Even if the company was indeed the UK subsidiary referred to, that would not mean that the Commission had found it to be infringing the rules. There might be evidence to support a decision that it too had infringed the competition rules, but that was a completely different matter.

Although the decision to strike out the claim is hardly surprising in the circumstances, it does show us that section 47A has very limited scope. The option of bringing a follow-on claim before the CAT will be available to a very small class of claimants, very different from the High Court's approach (as shown in Cooper Tire and National Grid) which tends to make it the forum of choice for cartel claims.

Evidence in claims for breach of competition rules

It's long been open to anyone damaged by someone's breach of competition rules to claim damages, but there have been few cases of it happening. You'd think that if the competition authorities had found there was an illegal cartel, and had fined participants, it would be dead easy to get damages, but National Grid are currently demonstrating just how tricky it can be to adduce the necessary evidence. It's applied to the High Court to be given access to documents used in support of leniency applications. And the leniency deal (without which the authorities would have no chance of finding out about the existence of cartels) is a first past the post one: in contract terms, the second whistleblower is unable to give valuable consideration in return for immunity - the authorities already have the information. The result could be an unseemly rush to the Office of Fair Trading as soon as the cartel meeting is over ...

So, although it's not an IP case, this one will be worth watching. This report in The Guardian also makes the important point that prospective claimants are also likely to be concerned about the damage that pursuing a claim would do to commercial relationships. How much simpler life was when if someone ripped you off you didn't still need to be nice to them in future.

Postscript: Pfleiderer AG v Bundeskartellamt (Case C-360/09); [2011] WLR (D) 196 - ICLR summary says “A person adversely affected by an infringement of European Union competition law was not precluded by the provisions of that law from being granted access to documents relating to the leniency procedure for the purposes of bringing a civil action for damages.”

Abuse of dominant position: AstraZeneca

In Case T-321/05 AstraZeneca v Commission the General Court upheld the Commission's finding that the drug company had abused its dominant position (contrary to Article 82 as it was, Article 86 as I remember it, now Article 102 TFEU - and also Article 54 of the EEA Agreement), but reduced from 60 million to 52.5 million Euros the penalty imposed for it. The Commission found that it had done so to keep a generic competitor for Omeprazole, which it  sold under the names  Prilosec and Losec heartburn medicine, off the market.

AstraZeneca challenged the European Commission's decision to fine it for abuse of its dominant position including misleading patent offices in several countries (including the UK) and a number of courts.This finding stands, but the Court reversed the Commission's finding that AstraZeneca breached competition rules by withdrawing market approvals for older versions of the medicine in Denmark and Norway, preventing generic producers and parallel importers entering the market.