On January 19, 2015, the European Commission (Commission) published its decision of June 19, 2013 imposing a fine of nearly €93.8 million against Lundbeck, and a fine totalling €52.2 million against the generic companies for the conclusion of so-called pay-for-delay agreements in breach of Article 101 of the Treaty (TFEU).
In 2002 and 2003, Lundbeck, a Danish originator company, concluded six agreements with four generic companies (respectively Merck, Arrow, Alpharma and Ranbaxy), in the context of a patent dispute with each of these companies over the marketing of Lundbeck’s branded-drug Citalopram.
In each settlement agreement, the generic companies committed not to enter the market for a determined period of time in consideration for a value transfer (i.e. the settlement amount). The geographic scope of these agreements either concerned one European member state (i.e. the UK or Denmark) or was as wide as the European Economic Area (EEA).
On the basis of Article 101 TFEU, the Commission first considers that the originator and the generic companies were ‘potential competitors’ on the market for Citalopram, under the assumption that generic companies had concrete possibilities of entering markets in one or more EEA member states, despite Lundbeck’s concerns over the infringement of its process patents.
More importantly, the Commission makes a strict application of Article 101 TFEU and concludes that the agreement between the originator and the generic company concerned constitutes a restriction by object in light of the very nature of the agreement. For doing so, the Commission applies, for each of the six agreements, the same following criteria:
- the originator and the generic companies were potential competitors in the geographic area concerned when concluding their agreement
- there was evidence in the agreement of the existence of a significant value transfer from the originator to the generic company
- there was a direct link between that value transfer and the acceptance by the generic company not to enter the market temporarily
- the transferred value approximately corresponded to the profits that the generic company expected to make, had it successfully entered the market
- the originator could not have obtained those limitations on entry through enforcement of its process patents
- the agreement contained no commitment from the originator to refrain from infringement proceedings had the generic company entered the market after expiry of the agreement.
Whilst the principles underlying the Commission’s decision are clear, anticipating how they would be applied in other cases with a different set of facts is much less so. In particular, considering whether the Commission will conclude in a few years’ time that the payment adequately reflects the settling parties’ individual assessment of the scope and objective strength of the patent may prove to be difficult. Consequently, the legal challenge brought by the parties before the General Court against the decision is welcome insofar as further clarification from the General Court on the appropriate legal standards applicable to patent settlements is necessary.