The relationship between intellectual property (IP) and competition law is complex. IP rights allow the holder a period of exclusive exploitation, with the aim of rewarding the inventor and incentivising future innovation, while competition law seeks to protect the competitive environment and thus to foster efficient and innovative markets. Both IP and competition law ultimately seek to protect the same goals – encouraging innovation, industry and competition. In certain circumstances, however, competition authorities may decide to intervene in the exercise of IP rights where they consider that particular companies are using their IP rights to stifle innovation or charge excessively high prices.

One area received particular attention from competition authorities last year: IP rights in the pharmaceutical context, although some of the issues clearly have application in other industries. Both the US agencies and the European Commission continued to monitor the pharmaceutical industry in 2010, particularly in relation to alleged attempts by pharmaceutical originators to delay the entry of generic drugs on to the market or to extend the life cycles of patented products.

The US Federal Trade Commission (FTC) took action against what it considers to be ‘pay-for-delay’ agreements in a number of patent litigation settlements between pioneer and generic pharmaceutical companies. The FTC may decide to investigate where a patent litigation settlement involves some form of compensation from the pioneer to the generic company combined with a delay in generic entry. The FTC published a study outlining its concerns in January 2010 and has pursued a number of cases in the courts (although with little success in recent years). A number of states are also concerned about the issue and have urged the US Supreme Court to consider it. The FTC is seeking legislation that would allow it to initiate proceedings against any party that enters into a so-called pay-for-delay deal. The legislation would not ban such agreements, but would make them presumptively anti-competitive.

The European Commission has been concerned about the same issue, and has continued to use the knowledge acquired during the sector inquiry to launch investigations into individual companies.

  • In January 2010, the Commission announced the opening of formal proceedings against Lundbeck due to concerns that unilateral behaviour and agreements by Lundbeck may hinder the entry of generic versions of citalopram, an anti-depressant drug.
  • The Commission also has an ongoing investigation into Les Laboratoires Servier and a number of generic drugs companies in relation to similar concerns about delaying the entry on to the market of generic perindopril, a cardio-vascular medicine.
  • On 30 November 2010, the Commission dawn raided pharmaceutical companies in a number of countries over possible individual or joint action to delay the entry of generic drugs such as generic versions of esomeprazole, used for the control of stomach acid.

In 2010 the European Commission carried out a monitoring exercise of patent settlements in the European Economic Area over an 18-month period. It found that the proportion of patent settlements that it considers potentially problematic had decreased to 10 per cent, compared with 22 per cent in the period covered by the pharmaceutical sector inquiry. The Commission has indicated that it may investigate cases that fall into the potentially problematic category, or pass information to national competition authorities where there is a purely national issue. It has just initiated its second monitoring exercise, which requires a selected number of originator and generic companies to submit a copy of all patent settlement agreements concluded during 2010 that concern the EU or EEA.

The European Commission also had a victory in the European General Court, which largely upheld the Commission’s decision that AstraZeneca had abused its dominant position by blocking or delaying market access for generic versions of an anti-ulcer medicine, Losec, in Europe. The General Court confirmed the Commission’s findings that AstraZeneca abused its dominant position by (i) making misrepresentations to national patent offices to obtain and defend extended patent protection and (ii) replacing Losec capsules with tablets and then withdrawing the marketing authorisation for the capsules to restrict competition from generic suppliers. In relation to the first finding, the General Court found that a ‘lack of transparency’ was sufficient – a lower bar than in the US, where, to prove that fraud on the patent office contravenes monopolisation law, the misrepresentation must be intentional.

The AstraZeneca judgment is significant for the European Commission’s ongoing investigations in the pharmaceutical sector, but it also has implications for dominant companies in other industries. It confirms that dominant companies need to exercise great care in using regulatory procedures related to IP and similar rights, and that their conduct may be considered abusive even if they are exercising a legal right.

Other authorities are also looking into the pharmaceutical sector – for example, Brazil’s Secretariat of Economic Law has announced that it is considering how the European Commission’s pharmaceutical inquiry can be applied to Brazil.

Read our briefing AstraZeneca – the EU General Court extends categories of abuse.