AstraZeneca v Jiangsu Aosaikang Pharmaceutical
This article is the second in a three-part series on how settlement agreements may constitute monopoly agreements. For parts one and three please see:
- "Why did the Supreme People's Court deem settlement agreements in a patent litigation case to be monopoly agreements?"; and
- "Horizontal monopoly agreements: analysis of key legal issues".
Recently, a power equipment company (PEC) appealed to the Intellectual Property (IP) Court of the Supreme People's Court (SPC) regarding a horizontal monopoly agreement dispute in the transformers market.
The PEC successfully obtained a verdict in the second instance that reversed the first-instance judgment and invalidated the settlement agreement in question, which was considered to be in violation of the Anti-Monopoly Law (AML).
The standard for the review of monopoly agreements in this case was the same as that which was used for the review of reverse payment agreements in another SPC case, as this article explains.
AstraZeneca v Jiangsu Aosaikang Pharmaceutical
On 17 December 2021, the SPC ruled on the application for withdrawal of appeal in the case of AstraZeneca v Jiangsu Aosaikang Pharmaceutical(1) and made the first preliminary anti-monopoly review of reverse payment agreements for pharmaceutical patents.
In the case at hand, the disputed agreement was the settlement reached between the third party, Bristol-Myers Squibb (BMS), and Jiangsu Vcare PharmaTech Co, Ltd to settle the patent dispute over the drug saxagliptin. In accordance with the settlement, Vcare had to withdraw the request for patent invalidation within five days of the settlement's effective date, and BMS and the subsequent patentee (ie, AstraZeneca) undertook not to claim responsibility for any action of Vcare and its affiliates (ie, Aosaikang) that would infringe on the disputed patent after 1 January 2016. The duration of the disputed patent right expired on 5 March 2021.
Vcare withdrew its request for invalidation after the settlement was reached, and its affiliate Aosaikang applied for the registration of saxagliptin tablets and the ownership of such tablets that had been manufactured, used and authorised for sale and sold after the agreed date. AstraZeneca filed a lawsuit with the Intermediate People's Court of Nanjing City in Jiangsu Province and accused Aosaikang of infringing its patent. The Court held that Aosaikang, as an affiliate of Vcare, was entitled to exploit the disputed patent according to the settlement agreement and dismissed all of AstraZeneca's claims. AstraZeneca filed an appeal to the SPC but applied to withdraw the appeal later, on the basis of the settlement with Aosaikang.
In the process of reviewing the withdrawal of the appeal application, the IP Court of the SPC found that the settlement agreement in question had the characteristics of a "drug patent reverse payment agreement" – that is:
- the drug patent right holder promised to compensate the generic applicant for direct or indirect benefits (including disguised compensation such as reducing the generic applicant's non-benefits); and
- the generic applicant promised not to challenge the validity of the drug-related patent rights or delay entering the market of the patented drug.
The IP Court of the SPC pointed out that the arrangement of such agreements was generally specific to each case and was often hidden, which may have the effect of excluding or restricting competition and may constitute a monopoly agreement under the AML. On this basis, the core judgment criterion was whether the agreement in question was suspected of excluding or restricting competition in the relevant market.
In this case, the IP Court of the SPC clarified its method of analysis for its antitrust review of the reverse payment agreement for pharmaceutical patents: by comparing the actual situation where the agreement was signed and fulfilled with the hypothetical situation where the agreement was not signed or fulfilled, the focus was on the possibility of the generic applicant's invalidation request not being withdrawn. The possibility that the patent right related to the drug was invalidated by the invalidation request and then used as a basis to analyse whether and to what extent the agreement in question had caused competitive harm for the relevant market.
In AstraZeneca and the horizontal monopoly agreement dispute case (outlined in the first part in this series), the parties had entered into the disputed agreements for the same reason: to settle patent disputes. The core standard that the IP Court of the SPC adopted in determining whether the concerned agreements constituted a monopoly agreement in both cases was the same – namely, whether the relevant agreement had the effect of eliminating or restricting competition. The analytical approach adopted by the IP Court of the SPC in these cases may also be applied or referred to when determining whether other patent dispute settlements executed under different circumstances constitute monopoly agreements.
For further information on this topic please contact Ying Song or Zhu Libo at AnJie Law Firm by telephone (+86 10 8567 5988) or email ([email protected] or [email protected]). The AnJie Law Firm website can be accessed at www.anjielaw.com.