'Because he fears': should generics fear the high court's quia timet injunctions?

In July 2013, the English High Court gave its judgment in an action brought by patentee Merck Sharp & Dohme, and its exclusive licensee Bristol-Myers Squibb (BMS), against generic pharmaceutical manufacturer Teva.

The issue before the court was whether Teva threatened to infringe BMS’s patent and its associated supplementary protection certificate (SPC) directed to the anti-viral agent efavirenz and so whether a final injunction ought to be granted. Quia timet (‘because he fears’) injunctions restrain harm which has not yet occurred but is imminent. These injunctions have been issued to prevent the launch of a product while a valid patent exists only on a few occasions.

Background

Efavirenz is a non-nucleoside reverse transcriptase inhibitor that inhibits viral replication and is used in the management of HIV infections. BMS’s patent for efavirenz expires in August 2013 and the associated SPC in November 2013. The product, marketed as Sustiva, is a valuable one, with UK sales of $20 million annually.

The dispute began in late 2011, shortly after Teva secured a marketing authorisation for its generic efavirenz product, Efavirenz Teva. BMS sought assurances from Teva that Efavirenz Teva would not be launched before the expiry of the relevant SPC (ie, not ‘launched at risk’). Having received no substantive response from Teva, BMS commenced proceedings in February 2012, requesting an interim quia timet injunction.

Soon after, Teva responded to state that it considered its launch plans regarding Efavirenz Teva to be confidential and would neither disclose its intentions to BMS or the court nor agree to provide BMS with notice of launch.

The legal landscape

The concept of ‘clearing the way’ was introduced into English pharmaceutical patent disputes more than 10 years ago (SmithKline Beecham). It placed the onus on generic companies to ‘clear the way’ of any relevant patents prior to the launch of their product, either by initiating litigation to revoke the patent or seeking a declaration of non-infringement. Generic companies who did not clear the way ran a high risk of facing an interim injunction.

This recognised that generic companies are aware of the existence of relevant patents and are in the best position to know exactly what their intentions are with regard to launching a product and should not, therefore, sit on their hands but rather complain when faced with an application for an interim injunction.

Over time, the position has subtly softened, with judgments stating that ‘clearing the way’ is not a principle of law, but a factor to be considered among all other relevant factors when assessing whether to grant an interim injunction (Cephalon). It became less important where a full trial could be expedited by the court.

Interim relief

The judge found that BMS had reasonable grounds for seeking interim relief and granted an interim injunction in March 2012 to prevent the launch of Efavirenz Teva in the UK. It was relevant that Teva had obtained marketing authorisation two years in advance of SPC expiry, which was considered to be an unusually long time if it really had been planning to wait until expiry.

The court was not persuaded by Teva’s submissions describing the possible delays that can occur in this process. It was also relevant that Teva would not engage in correspondence with BMS regarding its plans and had past behaviour of launching at risk with other products.

Final hearing

The test under UK law for granting quia timet injunctions is whether, at the date proceedings are commenced, there is a sufficiently strong probability that an injunction is required to prevent infringement. The defendant’s intentions before the action is brought are central to the assessment and the question is not confined to the defendant’s subjective intentions; its overt acts must also be relevant.

The market

Viewed objectively, the market for efavirenz was a large and valuable one. The judge noted the significant commercial advantage to being the first generic company on a market (the ‘first and only’). This is because there is no competition between generic companies to depress prices. In this situation, the first generic need only offer the product in question at a discount to the innovator company.

"Generic manufacturers who have elected not to take steps to clear the way in advance will need to consider showing some transparency regarding their launch plans."

Teva argued that efavirenz, which is a primary product sold to hospitals and subject to tender, was less vulnerable to a launch at risk than a secondary product (such as atorvastatin) which is sold directly to surgeries and retail pharmacies. The judge did not accept that this changed the ability and opportunity of Teva to launch at risk.

Past behaviour

The judge made multiple references to Teva’s past behaviour, for launching products before expiry and without notice to the patentee, in particular with regard to atorvastatin. In 2010, Teva engaged in correspondence with the patent holder (Warner-Lambert) stating that it intended to launch generic atorvastatin in November 2011, after the expiry of the relevant SPC. However, Teva then launched without notice in June 2011.

The patentee brought an action on the day of launch. Teva’s position was that the patent wasinvalid, but it had not previously sought to invalidate it. More than one million packets of generic atorvastatin were sold by Teva on the first day of sale.

In this case, Teva had not challenged the validity of the patent and so had not attempted to clear the way for launch. The parties agreed that the patent would be infringed by sale of Efavirenz Teva before November 2013.

Permanent injunction

During the case, Teva had informed BMS that it did not “have any plans to supply pharmaceutical products containing efavirenz” in the UK before SPC expiry. However, internal documents disclosed by Teva during the trial revealed that Teva was actively considering whether to launch Efavirenz Teva in the UK before the expiry of the SPC. The judge encapsulated Teva’s state of mind at the relevant date as follows: “it had no plans to launch efavirenz before expiry but was actively considering the option of doing so”.

The judge found that the only thing that would prevent Teva from infringing would be an injunction or Teva’s agreement to give BMS advance notice of a decision to launch in order to afford BMS time to obtain an injunction. Teva had refused to give BMS such advance warning, so initiating legal proceedings was the only option for BMS and it was appropriate to continue the preliminary injunction to restrain Teva from infringing the patent and the SPC up to their expiry.

Conclusion

Teva’s previous form for launching at risk was a recurring theme in the judge’s reasoning. Generic companies should note that previous ‘bad behaviour’, even if unrelated to the dispute, could be brought to bear against them in proceedings.

Teva’s approach is illustrative of increasingly bold behaviour by generic companies before patent expiry. The huge cost benefits of a launch at risk may be seen as potentially outweighing the penalties of an injunction and damages. This judgment suggests the English judiciary will take a strict approach to launching at risk.

The decision will be a concern for companies considering launching generic products. Generic manufacturers who have elected not to take steps to clear the way in advance will need to consider showing some transparency regarding their launch plans, including engaging in correspondence with the relevant patentee from the outset.

The risk of keeping your cards close to your chest may be that this will be held against you by the court in balancing whether to grant an injunction.

Bethan Hopewell is an associate at Powell Gilbert LLP. She can be contacted at: bethan.hopewell@powellgilbert.com

Geraldine Quinn is an associate at Powell Gilbert LLP. She can be contacted at: geraldine.quinn@powellgilbert.com