Following an oral hearing held on 30 and 31 August 2016 the German Federal Patent Court (‘Bundespatentgericht’) has decided in preliminary injunction proceedings to grant Merck a compulsory licence for the distribution of its HIV medicament, “Isentress”.
This was the first time in the 55-year history of the Federal Patent Court that a compulsory licence has been granted in PI proceedings. The only other example of a compulsory licence being granted was during the course of main proceedings and the decision was later overturned on appeal by the Federal Supreme Court (‘Bundesgerichtshof’) (cf. BGH GRUR 1996, 190 – Polyferon).
Shionogi, patentee of the European Patent EP 1 422 218 which covers the antiviral compound Raltegravir (RAL), had brought a patent infringement lawsuit before the Regional Court of Düsseldorf (docket no.: 4c O 48/15) against Merck. It its defence against the allegation of patent infringement, Merck initiated compulsory licence proceedings before the Federal Patent Court requesting a licence in main (docket no.: 3 Li 1/16) and preliminary proceedings (docket no: 3 LiQ 1/16).
Legal standards applied by the Federal Patent Court
The German Patent Act (‘Patentgesetz’) stipulates in Section 24 para. 1 that the Federal Patent Court shall grant a compulsory licence in cases where (i) a licence seeker has, within a reasonable period of time, unsuccessfully attempted to obtain permission from the proprietor of the patent to use the invention on reasonable commercial terms and conditions; and (ii) the public interest calls for the grant of a compulsory licence. Additionally, since such licence was requested by way of preliminary proceedings, according to Section 85 of the Patent Act the applicant has to show and substantiate that there is an urgent need, in the public interest, for the immediate grant of a compulsory licence.
Unsuccessful attempt to obtain a licence on reasonable terms
The licence seeker must earnestly declare its general willingness to obtain a licence on reasonable commercial terms. In this context the Court emphasised that the principles which have been established for granting a compulsory licence under anti-trust laws, in particular regarding fair, reasonable and non-discriminatory (FRAND) licences, were not applicable with regard to the compulsory licences between Merck and Shionogi under Section 24 of the German Patent Act.
During the oral hearing at the Federal Patent Court it was revealed that the parties had been negotiating a licence for about 2 years but were not able to find common ground. Apparently Merck’s offer to pay 10 million USD for a global licence was considered entirely unacceptable by Shionogi who had requested a much higher payment. Yet, the court found Merck’s offer to be (just) sufficient as it also reasonably reflected uncertainties as to the validity of the patent against which appeal proceedings before the Board of Appeals of the European Patent Office are pending. Although Merck’s offer was considered low, according to the opinion of the Court, a further improved offer could not be expected given the enormous difference between the parties’ expectations.
Detrimental effect on patients’ health if the drug was removed from the market
More importantly, the granting of a compulsory licence must lie in the public interest, which is a rather high threshold and must be proven by the licence seeker. In practice, this criterion translates to a weighing of interests. In the Polyferon decision the Federal Supreme Court had established the test to determine the importance of a drug to the public health: the medicament must treat a serious disease which cannot be treated by a comparable product or only so with considerable side effects. The Supreme Court had confirmed that Polyferon was a drug to treat a serious condition: rheumatoid arthritis. However, its removal from the market would still leave the patients with Imukin, another IFN-gamma drug which was considered a valid alternative even though it had not been approved for the treatment of rheumatoid arthritis.
In the present case Merck, carrying the burden of proving that a compulsory licence was in the public interest, argued that due to the fact that HIV infection is still considered to be both infectious and lethal, it is in the interest of public health to treat HIV infections as effectively as possible. Having argued this, Merck emphasized that patient compliance is an important aspect in treating HIV infections successfully and forcing patients who are being treated with Isentress to replace it with another drug could not been achieved without subjecting the patient to potentially life-long side-effects.
While Shionogi had argued that there were comparable alternatives to the Merck product, in particular the active compound Dolutegravir (DTG), the court appointed expert stated that, at least for some patients, there was no comparable alternative treatment since greater side-effects and disadvantageous drug interactions were suffered with DTG than with RAL. Moreover, as was confirmed by the expert, Isentress was particularly important in post-exposition prophylaxis and in the treatment of certain patient groups, such as babies and infants, pregnant women and long-term patients.
Thus, the Court found that the weighing of interests must (preliminarily) be decided in favour of Merck.
The judgment has the effect of granting the licence seeker a preliminary right to use the patented invention for its previously approved product. However, it does not create a contractual licence agreement between the parties. Thus it follows that the licensee (in contrast to the contractual licensee) is not prevented from bringing a nullity action against the patent.
Prospects in the main proceedings
The decision made in the preliminary proceedings has indicative effect on the decision in the main proceedings. Moreover, a compulsory licence is generally a severe encroachment on the patentee’s rights. Therefore, in the main proceedings the Court will carefully (re)evaluate whether the arguments brought in favour of a compulsory licence can support such a licence permanently. Should the preliminary decision be confirmed in the main proceedings the Court may stipulate the further conditions of the licence, such as duration and reasonable royalties.