AG advises CJEU to uphold €94 million pay-for-delay fine

The advocate general has recommended that the Court of Justice of the European Union (CJEU) uphold an almost €94 million ($106.5 million) fine imposed on  Lundbeck for its pay-for-delay scheme.

In an  opinion issued yesterday, June 4, advocate general Kokott advised the court to dismiss Lundbeck’s appeal against the EU General Court’s judgment which upheld the fine.

Back in 2013, the European Commission imposed the fine, after finding that Lundbeck and four generic companies had breached competition law by agreeing to delay market entry of generic versions of citalopram, a treatment for depression.

According to the Commission, in 2002, when the patents protecting that active ingredient were about to expire and Lundbeck was still the owner of secondary patents protecting certain manufacturing processes, the company made payments to the four generic makers.

The generic companies involved in the case—Generics UK (which, at the time was controlled by Merck KGaA), Alpharma, Arrow and Ranbaxy—were fined a total of €52.2 million.

“This constitutes the first application by the Commission of the EU’s prohibition on cartels to agreements in settlement of patent disputes entered into by a patent-holding originator undertaking and manufacturers of generic medicinal products,” said the advocate general yesterday.

Lundbeck appealed against the decision but, in 2016, the General Court  backed the Commission.

Again Lundbeck appealed against the decision, asking the CJEU to set aside the General Court’s judgment and annul the Commission’s decision.

Yesterday, the advocate general concluded that the General Court didn’t err when it upheld the Commission’s assessment that, at the time the agreements were concluded, “there was a potential competitive relationship between Lundbeck and the manufacturers of generic medicinal products”.

According to the advocate general, the General Court was right to find that the Commission had correctly concluded that Lundbeck’s process patents didn’t “constitute insurmountable barriers to the entry of the manufacturers of generic medicinal products to the market” when the agreements were signed.

Citing the CJEU’s January 2020  decision in Generics (UK) and others, Kokott noted that the existence of a process patent doesn’t mean that a generic maker who has a firm intention to enter the market and is ready to challenge the patent can’t be characterised as a ‘potential competitor’.

Kokott added that even where a generic maker doesn’t yet have a marketing authorisation for its product, this doesn’t preclude the existence of potential competition.

Secondly, the advocate general concluded that the General Court didn’t err in finding that the agreements were restrictions of competition by object.

She affirmed the court’s finding that the agreements went beyond the specific subject matter of Lundbeck’s patent rights, which includes the right to oppose infringements, but not the right to conclude agreements by which competitors are paid not to enter the market.

“Accordingly, a patent dispute settlement agreement is akin to a restriction of competition by object if the value transfer from the patent holder to the generic manufacturer has no explanation other than the common commercial interest of the parties not to engage in competition on the merits,” said Kokott.

Finally, Kokott rejected Lundbeck’s arguments that the General Court had erred in upholding the fine.

It was not unforeseeable from Lundbeck’s perspective that the agreements might be caught by the prohibition laid down in article 101 TFEU (which covers restrictions to competition), said the advocate general, “since a literal reading of that provision makes it quite clear that agreements between competitors aimed at excluding some of them from the market are unlawful”.

Kokott added that it was not necessary for the same type of agreement to have been found unlawful in the past or for that agreement to be prima facie or undoubtedly sufficiently harmful to competition.

The advocate general’s opinion is not binding on the CJEU.

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