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11 December 2019
According to Section 24(1) of the German Patent Act, a compulsory licence can be granted to a patent infringer. Recent case law suggests that this possibility is becoming increasingly relevant. Further, in a recent originator-originator pharma case, the enforcement of a recall obligation was suspended for the first time for a certain period for public health reasons.
The grant of a compulsory licence requires that "1. the 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 that "2. the public interest calls for the grant of a compulsory licence".
A grant application can be made in a preliminary proceeding if the matter is urgent (Section 85 of the Patent Act). Until 2016, a compulsory licence had been granted only once (in Polyferon (1994)) by the competent Federal Patent Court (FPC); however, the Federal Supreme Court of Justice (FSC) reversed the decision on appeal.
The first case in which the FPC upheld a compulsory licence was related to Merck's anti-HIV drug Isentress (FPC, judgment of 31 August 2016 – 3 LiQ 1/16; FSC, judgment of 11 July 2017 – X ZB 2/17). However, in a subsequent case relating to Sanofi/Regeneron's cholesterol-lowering drug Praluent, the compulsory licence application was rejected again (FPC, judgment of 6 September 2018 – 3 LiQ/18; FSC, judgment of 4 June 2019 – X ZB 2/19).
Despite being handed down in preliminary proceedings, these decisions provide some guidance on compulsory licences.
The FSC has stated that, in principle, a compulsory licence will be granted if the relevant requirements are met at the time of the oral hearing before the deciding court. In any event, best efforts must be demonstrated in relation to time and content (ie, licences are negotiated not merely for appearance's sake).
In Praluent, the courts held that the licence request had been made too close to the filing date for the compulsory licence, with a royalty proposal that was too low. The courts also held that Sanofi/Regeneron had not sufficiently reacted when Amgen did not reject the licence grant outright, but sought further information. Ultimately, the courts concluded that the licence offer had been made only pro forma for the sole reason of filing for a compulsory licence (ie, not constituting reasonable efforts).
The FPC held it against Sanofi/Regeneron that Amgen had rejected a licence grant on several earlier occasions. The court argued that this should have caused Sanofi/Regeneron to spend more time and effort convincing Amgen otherwise; disregarding, however, that Amgen was arguably unwilling to grant a licence, so this additional effort would have been superfluous.
In pharma cases (which are the cases in which compulsory licenses have been sought until now), the public interest requirement essentially requires a showing of serious bodily harm or death if the infringing product is removed from the market. Further, the public interest is weighed against the patentee's interest, including whether the patentee has a competing product on the market.
In Isentress, the public interest was affirmed based on court expert evidence that there are patients who can be successfully treated only with Isentress and who face serious side-effects or therapeutic failure if alternative drugs are used. The courts took into consideration that the patentee did not have a competing product on the market with the same mode of action. In Praluent, on the other hand, the patentee had their own drug, Repatha, on the market with (arguably) the same mode of action and Sanofi/Regeneron failed to convince the courts that Praluent reduced patient mortality more than Repatha in a statistically significant way. This was based, among other things, on the fact that separate studies for Praluent and Repatha had been submitted which the courts found insufficiently comparable due to differences in how the studies were designed and carried out.
Another FPC decision dealing with Isentress (FPC judgment of 21 November 2017 – 3 Li 1/16), highlights an important caveat about seeking a compulsory licence: if the patent is later invalidated (as in the Isentress case), royalties remain due for the licensed period.
In order to secure a compulsory licence, the licensing offer must be made in a timely fashion, such that the time up until the oral hearing would have allowed for the licence to have been concluded (had the right holder been willing).
Comparative tests of products – or at least studies which permit a comparison with available alternatives – should be conducted. This is particularly relevant if the alternative products have the same mode of action as the infringing product. Data of these tests have, in principle, to be disclosed to the rights holder when seeking a compulsory licence.
Licence seekers must reply to all correspondence from the right holder in a timely fashion to demonstrate that they are seeking a licence earnestly and in good faith.
In its 2016 decision in Wärmetauscher (10 May 2016 – X ZR 114/13), the FSC ruled that a use-up period can be appropriate in patent cases (ie, leading to a certain suspension period for the injunction); however, the court rejected this in the case at hand.
In a decision on 20 September 2019 the Dusseldorf District Court also did not apply a use-up period for an injunction but granted a one-year suspension of the recall obligation in a patent case between originators, to allow completion of ongoing treatments.
For further information on this topic please contact Ina vom Feld or Behyad Hozuri at Simmons & Simmons LLP by telephone (+49 2 11 4 70 53 0) or email (email@example.com or firstname.lastname@example.org). The Simmons & Simmons LLP website can be accessed at www.simmons-simmons.com.
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Ina Vom Feld