European Commission Issues First Fine for Abusive Patent Game-Playing and Disparagement

Summary

On 31 October 2024, the European Commission (the Commission) fined pharmaceutical company Teva €462.6 million for certain allegedly abusive practices relating to its multiple sclerosis medicine Copaxone. The decision marks the culmination of five years of Commission investigation, which launched formally in March 2021 following unannounced inspections of Teva’s premises in 2019.  The decision covers two strands of conduct, which the Commission found to be complementary and to amount to a single and continuous infringement:

1. Misusing patent procedures: the artificial extension of the length of Teva’s patents relating to Copaxone in an effort to delay competitor entry; and
2. Disparagement campaign: the systematic disparagement of the safety and efficacy of rival drugs.

Teva has already indicated its intention to appeal the fine, but the decision (one in a number of disparagement cases currently being pursued) underlines the Commission’s desire to take on novel abuses of dominance.

The Case against Teva

Teva owns the basic patent over the active pharmaceutical ingredient in Copaxone – glatiramer acetate.  The Commission found that Teva abused its dominant position in the market for medicines based on that active ingredient to hinder or delay competition from rival drugs in two ways.

  1.  Abusing European divisional patent procedures

Teva had a patent for the product Copaxone for almost 20 years (used to treat multiple sclerosis). The Commission found that, as the expiration of the patent in 2015 approached, Teva applied a tactic called the “divisionals game” with a view to artificially extending the Copaxone patent. In brief, Teva used two remaining secondary patents to obtain multiple “divisional patents” from the European Patent Office (EPO) with a very similar content to the original Copaxone patent.  Teva filed these divisional patents in a staggered manner over the course of several years, creating a series of over-lapping patents around the product. It then proceeded to enforce those patents (pending approval from the EPO) against competitors.

To gain market access, competitors would have to file patent litigation against each of these divisionals, at which point the second leg of Teva’s strategy came into play. The Commission found that Teva abused the divisional patent process by revoking the divisional patent applications when it appeared likely the patent was about to be rejected by the EPO to avoid the knock-on consequence that the rejection would otherwise have on the validity of the other divisional patent applications, which it continued to enforce against competitors.  This approach subjected competitors to almost identical lengthy litigation on the validity of the patents, hindering rival efforts to enter with competing products. It took altogether nine years for competitors to work through these issues (2015–2024).

  2.  Disparaging rivals

The Commission also found that Teva had implemented a “systematic disparagement campaign” against competitors.  It did so by systematically targeting doctors, health insurance companies and national health administration officials with misinformation on the safety and efficacy of rival drugs to Copaxone, despite findings of relevant health authorities that the rival products were both safe and effective. This effectively slowed down and blocked entry by rivals and covered seven Member States for a period of four to nine years.

The emerging law on abusive disparagement

While it appears that the Commission’s focus in the Teva case was primarily on the patent abuse conduct, the case is noteworthy as the Commission’s first decision on disparagement as an abuse of dominance.  The Commission settled a second disparagement investigation into Vifor Pharma in July of this year, with commitments addressing the disparagement concern.  There is as yet little insight into the Commission’s analytical approach for such cases, but the two cases point to an emerging trend – at EU level – of these cases, at least in the pharmaceutical space.

While Commission enforcement here is still nascent, some insight is available from a number of cases at the national level.  In 2019, the Danish competition authority fined a dominant company for putting in place a disparagement campaign against a winning bidder in a tender for the provision of ambulance services.[1]  And the French Competition Authority has brought several disparagement cases across the pharmaceutical, electricity,[2] telecommunication,[3]  and phone services sectors.[4]  In those cases, the FCA considered whether statements constituting the alleged disparagement:

• relied on unverified assertions;
• were likely to develop an impact on the market (for example by influencing customer behaviour); and
• appeared credible because of the dominant companies’ reputation and market presence.[5]

In the pharmaceutical sector, the FCA fined Novartis, Roche and its subsidiary Genentech €444 million in September 2020 for disparaging the off-label use of Roche’s Avastin drug – finding that the statements fulfilled these cumulative criteria.

Takeaways

There are a number of takeaways from the Commission’s Teva decision:

1. A novel area to keep watch on. This area of law is still developing.  However, Teva’s expected appeal will provide an important opportunity for the European Courts to provide clarity on the legal principles and analysis applicable to these practices.  It also remains to be seen whether either practice (misusing patent procedures or the disparagement) would have attracted Commission enforcement had they been implemented independently of the other – particularly given the settlement of the Commission’s only other disparagement case to date.

2. High fines. While the Commission is yet to release the non-confidential version of the decision (and so the allocation of the fine across the different practices is unclear), the magnitude of the fine indicates that the Commission is willing to take a heavy-handed approach to enforcement even in novel areas.

3. Translation to non-pharma sectors. There are certain specifics of the pharma industry – such as the heavy impact on prescribing practices that misinformation can have – that raise the priority of enforcing in these types of cases.  Nevertheless, the establishment of clear principles by the courts will provide greater legal certainty for businesses in all industries on where to draw the line between (i) promoting the benefits of your products as against denigrating the qualities of those of competitors; and (ii) pursuing the legitimate protection of IP rights as against abusive game-playing.

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[1]        Falck - Press statement of the Danish Competition authority of 30 January 2019.

[2]        FCA Decision No. 09-D-14 of 25 March 2009.

[3]        FCA Decision No. 10-D-32 of 16 November 2010.

[4]        FCA Decision No. 07-D-33 of 15 October 2007.

[5]        FCA Decision n°13-D-11 of May 14^th, 2013, paras- 366-369.