German Federal Court of Justice upholds provisional compulsory license for HIV drugs

The Bundesgerichtshof (German Federal Court of Justice - FCJ), Germany’s highest civil court, has decided on 11 July 2017 that  the decision of the Bundespatentgericht (Federal Patent Court) granting for the first time in the history of the Federal Republic of Germany a provisional compulsory patent license by way of interim measures is upheld. At least until the case has been decided on the merits, the respective HIV drugs can be further distributed in Germany.

Already the Federal Patent Court in the first instance came to a landmark decision by granting a compulsory patent license by way of an interim order according to Sections 24 (1), 85 German Patent Act. The FCJ now has upheld that decision. Three companies of the MSD group of companies as applicant are therefore entitled to further distribute the HIV drug “Isentress” on the German market until the case has been decided on the merits. Until then, cease and desist claims by the Japanese patent owner Shionogi are suspended. The decision on the merits also will have to deal with the question of reasonable license fees for the compulsory license.   

The Federal Patent Court’s decision

By judgement dated 31 August 2016 the Federal Patent Court has decided on a pioneer case in German patent law. By application of three companies of the MSD group of companies the court granted a compulsory patent license on the basis of an interim order for the use of the HIV drug ingredient Raltegravir in the four doses used in the “Isentress” drug for the German market. The MSD group of companies has distributed its HIV drug “Isentress” already for some years throughout Europe but faced legal challenges from Shionogi when Shionogi's European patent covering also Raltegravir was granted in 2012. The European patent was upheld with amended claims during the opposition proceedings at the EPO which still cover Raltegravir. The final decision by the European Patent Office’s board of appeal though has yet to be passed.

The grant of a compulsory patent license according to Section 24 (1) German Patent Act is subject to two conditions:

  1. a license seeker has, within a reasonable period of time, unsuccessfully attempted to obtain permission from the owner of the patent to use the invention on reasonable commercial terms and conditions, and
  2. the public interest calls for the grant of a compulsory license.

The Federal Patent Court has decided that the attempt to obtain permission to use the patent in question has to be made in form of genuine negotiations. This condition though should not be interpreted too narrowly since the second condition regarding the public interest is of higher importance. In the case at hand offer of a onetime lumps sum of 10 Million USD by the MSD group of companies was regarded by the Federal Patent Court as sufficient attempt. Further, the MSD group of companies could take into account that the validity of the European patent was still in question until the decision of the European Patent Office’s board of appeal resulting in a deduction from the amount of reasonable license fees.  

Public health care has always been in the focus of the debate among patent experts as important public interest. The case at hand though has shown that even for drugs against severe illnesses a compulsory patent license cannot easily be obtained. Against the background of the severe encroachment of the patent owner’s fundamental right to property this is well justified. The Federal Patent Court’s decisive criterion for granting a compulsory license was the need of certain HIV patient groups for a treatment with “Isentress”. A change of medication would according to the court’s findings be accompanied by the potentially severe risk of adverse effects or unwanted interdependencies with other drugs and a loss of therapy quality. In particular for infants, children under 12, pregnant women, people who need prophylactic treatment because of the risk of infection and patients who are already treated with “Isentress” and a substitution with alternative drugs was regarded as not possible by the court. This was not to be accepted, also with regards to the potential infection risk for the rest of the population.

FCJ upholds decision   

In its decision on Shionogi’s appeal the FCJ upholds the provisional compulsory patent license. The FCJ thereby approves the two main reasons given in the Federal Patent Court’s decision: Because the European patent’s validity is still subject to opposition proceeding, a onetime payment is a sufficient offer for obtaining permission to use the patented invention. Further, a public interest has to be seen with regards to special patient groups for which no equivalent substitute drug is on the market. Thus, according to the FCJ, a compulsory license is in the interest of public health care.  

Special relevance for pharmaceutical patents

Compulsory patent licenses are not by coincidence predominantly discussed for the field of pharmaceutical patents. The protection of public health care is rightfully regarded as important reason constituting an important public interest. It has played in important role justifying compulsory patent licenses throughout various jurisdictions all over the world. Both decisions however emphasize that for the concrete case such severe public interest has to be demonstrated and proven by the applicant in order to obtain a compulsory license. Granting a compulsory license for other (phony) reasons such as the protection of domestic economic like decisions e.g. from India and legislation in other emerging countries suggest has therefore not been accepted by German courts. Their strict test for what constitutes a public interest effectively bars such attempts.

The FCJ’s recent decision will nonetheless have impact for future license negotiations in the pharmaceutical sector. Well advised patent owners will take into account the risk of a compulsory patent licenses where imminent in licensing negotiations. For license seekers the recent decisions have shown that the option of obtaining a compulsory license is not merely an empty threat. Under special circumstances it can be an efficient instrument to receive licenses for crucial patents.