In a decision rendered on July 12, 2021, the Israeli Supreme Court upheld an important decision that was rendered by the Central District Court (Honourable Judge, Prof. Ofer Grosskopf) on October 8, 2015. The Supreme Court affirmed the lower court’s ruling that Sanofi had misled the Commissioner of Patents by providing misleading information while also concealing other essential information during the prosecution of a patent application relating to its drug Plavix® (Clopidogrel Bisulfate). By doing so, Sanofi was able to delay the launch of generic competition. Based on the Unjust Enrichment Law, the Supreme Court remanded the case to the District Court to evaluate Sanofi's profits for the period of delay, and determine the amount of redress to be awarded to Unipharm, Ltd. ("Unipharm"), the generic competitor who filed the suit, based on Sanofi's said profits.
Sanofi was the owner of an Israeli patent which claimed Clopidogrel in all its salt forms and all possible polymorphs. The patent expired on February 3, 2008 ("the Basic Patent"). At that time, only one polymorph of Clopidogrel Bisulfate was known ("Form 1").
In the second half of 1997, and close to completion of the procedures for obtaining marketing approval for Sanofi's drug, a new crystalline polymorph of Clopidogrel Solfate, with improved qualities – Form 2 – was accidentally discovered by Sanofi ("Form 2"). On October 11, 2000, Sanofi filed another patent application in Israel, IL 139790, claiming Form 2 ("the Patent Application"), thus deterring potential competitors from using the more advantageous polymorph.
The Patent Application was subject to two opposition proceedings filed by Unipharm and Teva Pharmaceutical Industries Ltd. On June 6, 2010, in the midst of the opposition proceedings, Sanofi announced its abandonment of the Patent Application due to commercial reasons.
Unipharm asserted that it delayed the launch of its generic drug due to the risk of being liable for retroactive compensation had the Patent Application been accepted. Unipharm further asserted that Sanofi was liable for the delay that arose in the marketing of Unipharm’s generic drug, thus entitling it to Sanofi's profits spanning the period commencing from the date of expiry of the Basic Patent until abandonment of the Patent Application ("the Period of Delay").
The District Court Decision
In the decision under appeal, the District Court accepted Unipharm's suit. The District Court ruled that Sanofi had knowingly misled the Commissioner of Patents, and concluded that the very existence of the misleading Patent Application was the main reason for Unipharm having to delay the launch of its generic product into the market and for its increased costs of development.
The District Court then turned to examine Unipharm's entitlement to compensation and the scope thereof. After examining several possible legal grounds for establishing Unipharm's entitlement to compensation, including, the Patents Law and the Competition Law, the District Court ultimately held that the basis for Unipharm's legal standing in this regard was found to exist in the Unjust Enrichment Law.
The District Court accordingly ruled in favour of Unipharm, stating that it is entitled to the profits reaped by Sanofi during the Period of Delay. By so holding, the District Court demonstrated that awarding compensation to generic companies in the form of the brand manufacturer’s profits could incentivize them to somehow combat the phenomenon known as "Evergreening".
The Supreme Court Decision
The Supreme Court accepted the factual findings of the District Court. It held that Sanofi consciously decided to include a misleading example in the patent specification, in order to avoid divulging the circumstances involving the discovery of Form 2 (in particular, the fact that Form 2 could have been obtained through a spontaneous conversion of Form 1) and to rely on a priority document that Sanofi had known at the time of filing the Patent Application was incorrect. This information was held to be crucial, in the sense that, had it been disclosed to the Commissioner of Patents, it could have had an adverse effect on the chances of the Patent Application being accepted, as well as the period of opposition. Thus, the Supreme Court affirmed that Sanofi had knowingly and intently misled the Commissioner of Patents, and so breached the disclosure obligations as set out in section 18 of the Patents Law.
The Supreme Court clarified in this context that an analysis of the question of materiality (namely, whether the misleading/withheld information was material) does not focus on whether the misleading of the Commissioner of Patents caused the grant of the patent, but rather, whether it led to Sanofi being enriched. In the case at hand, it was held that the misleading of the Commissioner of Patents resulted in the extension of the proceedings relating to acceptance of the Patent Application (the prosecution and opposition proceedings) and Sanofi's enrichment at the expense of its competitors, including Unipharm. In this context, and while accepting the proposition that there was no certainty as to what would have happened had Sanofi not misled the Commissioner of Patents, both the District Court and the Supreme Court nonetheless held that the vagueness in this regard should be held against Sanofi (similarly to the Evidential Damage Doctrine).
Just like the District Court, the Supreme Court affirmed that the basis for Unipharm's legal standing could be found in the Unjust Enrichment Law. The Supreme Court also implemented rules of competition. In so doing, it held that section 18 of the Patents Law constituted a rule of competition and that its breach can, in the appropriate circumstances, give rise to a suit being brought in reliance on the Unjust Enrichment Law. In addition, it held that the Patents Law does not negate the application of the Unjust Enrichment Law in cases where the patent applicant knowingly and intently misled the Commissioner of Patents. It also held that, while section 18 of the Patents Law does provides some form of sanction for its breach (e.g., revocation of a patent or rejection of a patent application), reliance on the Unjust Enrichment Law as a means for enabling generic companies to seek redress in the form of profits reaped by the innovator essentially deters innovators from both acting in bad faith during the course of the prosecution of their patent applications and misleading the Commissioner of Patents in cases where the misleading act is intended to unnecessarily prolong the prosecution and opposition proceedings (and, consequently, deter competitors from entering the market).
The Supreme Court further held that, generally, a patent applicant may be found liable under the Unjust Enrichment Law only where the misleading act was performed knowingly and intently. However, it also held, based on the presumption that a man intends the natural consequences of his acts, that, since the natural consequences of including misleading information in the specification of the Patent Application, and withholding relevant information from the Commissioner of the Patents, both amounted to the Commissioner of Patents being misled, Sanofi bears the burden of proving that it did so inadvertently.
A motion for an additional hearing will likely be filed in the next few weeks.
This decision affirms that, applying for a patent, while misleading and withholding information from the Commissioner of Patents, in the patent application and thereafter, may result in significant liability being attributed to the innovative manufacturer for the unjustified deterrence of potential competitors and could lead to a need to compensate potential competitors for the full amount of the innovative manufacturer's profits during the deterrence period. . In general, the burden is on the plaintiff to prove that the defended knowingly and intently misled the Commissioner of Patents.
Some questions that remain open after the decision concern the division of profits in cases where there is more than one competitor, and the effects of the decision on the standing of other parties that were harmed by Sanofi's actions, in particular, the sick funds and Sanofi's customers. In this regard it is important to note that, following the District Court's decision, an additional suit was filed against Sanofi by one of Israel's sick funds, as well as two class actions. These suits were stayed pending the Supreme Court’s decision and it is now expected that their adjudication will be renewed.