A generic drug manufacturer has a claim against a patented drug manufacturer who tried to extend its patent monopoly by illegitimate means. This is the bottom line of a decision recently issued by Justice Ofer Grosskopf of the Tel-Aviv District Court. In a precedential and very interesting decision, Justice Grosskopf instructed Sanofi, an ethical drug manufacturer, to render account of profits derived from sales of the drug "Plavix" to one of the local generic competitors – Unipharm.

The decision was rendered in the context of pharmaceuticals, but its rather bluntly-stated rationale may apply to any patent owner trying to extend the patent by using illegitimate means.

This innovative decision has two important aspects:

  • The court states that caution is warranted with regard to any attempt to extend the term of the patent monopoly by registering new patents. Such attempts may, under certain circumstances, be considered abuse of monopoly.
  • An ordinary competitor has standing and a claim for some of the monopoly profits. Such claim is not excluded by patent law.

The decision may be still be appealed to Israel's Supreme Court.

The Unipharm-Sanofi Decision – CC(TA) 33666-07-11 Unipharm v. Sanofi (08.10.2015)

"Awareness is rising, in Israel and in the rest of the world, of the importance to be attributed to imposing effective limitations on illegitimate tactics by patent [drug] companies. It is only a matter of time until courts are required to draw the line between permitted and forbidden, not only on the generic side of the fence, but also on its patent side. The current case is but the first rain. However, winter is coming." (The Unipharm-Sanofi decision, par. 2)

Unipharm, the plaintiff, is an Israeli drug manufacturer and distributor. Sanofi is a patented drug company.

Among other drugs, Sanofi held the patent for Plavix, which the Court describes as a drug to prevent blood clots and heart attacks in high-risk patients. Clopidogrel, the active ingredient of Plavix, was discovered during the 1980s, and was a true medical breakthrough which entitled it to patent protection in multiple countries, including Israel.

Near the middle of the patent term, Sanofi applied to the Israeli Commissioner of Patents for a new patent, for a different polymorphic form of Clopidogrel ("form 2", as opposed to the previous "form 1"), which, according to the Court's findings, was discovered by chance. The patent application encountered many objections, among them Unipharm's opposition, and patent proceedings took a long time.

According to the Court's findings, Sanofi's patent application in Israel, which was filed in the year 2000, contained an error, and only in 2007 did Sanofi request the Patent Registrar's permission to correct this error. The patent procedures dragged on, until, eventually, in 2010, two years after the expiry of its original patent in 2008, Sanofi abandoned the patent application for form 2 in Israel.

Hence – for two years Sanofi had no patent rights, but did the "patent pending" status of its application served as a deterrent against generic manufacturers of Clopidogrel. The Court finds that this delayed the entry of generic competition into the market by at least 15 months.

Unipharm sued Sanofi for abuse of monopoly under the Israeli Restrictive Trade Practices Law, 1988 ("RTPL") as well as unjust enrichment under the Israeli Unjust Enrichment Law, 1979, for filing a nearly baseless patent application and for the error in the patent request.

The Court's Decision

The Court comes to the conclusion that there is not enough evidence that the patent application was baseless or without merit. The Court therefore chooses not to rule on the legal issue of whether filing a patent application without merits or with low chances of success is an abuse of monopoly.

The Court's decision therefore centers on the question whether misleading the Commissioner of Patents constitutes monopoly abuse or unjust enrichment. The Court answers this question in the affirmative.

The Court decides that misleading the Commissioner of Patents, intentionally or as a result of gross negligence, may constitute, and in the case before the Court does constitute, an abuse of dominant position.

On the matter of damages, the Court decides that the plaintiff is entitled to claim all or part of Sanofi's monopoly profits under the Unjust Enrichment Law. The Court reasoned that if the generic manufacturers could only claim their own damages, this would not create a strong enough incentive for them to sue. This would also not diminish the patent owner's incentives to use illegitimate practices to extend its patent.

The Court decides that, contrary to Sanofi's arguments, the plaintiff's claim is not excluded by patent law. Patent law prevents a patent owner from suing a generic manufacturer under any other law except patent law. For example, while the patent is pending, a patent owner may not sue a  generic manufacturer for unjust enrichment. The Court states that there is no mirror-image rule for a generic manufacturer. A generic manufacturer is therefore allowed to sue the patent owner under other laws, such as the Unjust Enrichment Law.

Unipharm explicitly claimed that it wishes to create a new "balance of terror" between patented drug manufacturers and generic drug manufacturers. The Court referred to a generic manufacturer's incentive to perform "at-risk" launches of new products, when there is an honest dispute over the existence of patent rights. The Court explained that from a social point of view such incentives are partial at best. The incentives for an "at-risk" launch are not a sufficient response to the patent manufacturers' incentives to extend their patents by artificial means ("evergreening").

The Court shows, by numerical example, that in such at-risk launch cases, even a small change in the probability of loss is enough to deter a generic manufacturer from making the at-risk launch. According to the Court, this, in turn, makes it all too profitable for ethical manufacturers to file baseless requests for patent extension. It seems that the Court wants to strike a new balance by putting a "price tag" on such behavior.

Future Implications

The Court itself, by stating that "winter is coming", seems to anticipate other claims, based on similar arguments. Monopolies which try to follow an "evergreening" strategy with their patents may find themselves in breach of the RTPL and at risk of sharing their monopoly profits with their competitors. The decision certainly adds an additional factor for generic manufacturers to consider when making an at-risk launch, and for patent owners to consider when filing an application to extend patent protection in scope or term.

The decision is, undoubtedly, interesting and innovative. It is likely to be revisited, by the Supreme Court or otherwise. Only time will tell if the decision is a passing summer shower, or, as the Court suggests, the first rain foretelling the coming of winter.