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CJEU – Generics (UK) Ltd, GlaxoSmithKline and others v. Competition and Markets Authority / generics entry / settlement agreements

Posted: February 4th, 2020

Generics (UK) Ltd, GlaxoSmithKline and others v. Competition and Markets Authority, Reference for a preliminary ruling, Judgment of the Court, 30 January 2020, Case no. C‑307/18

On those grounds, the Court (Fourth Chamber) hereby rules:

1. Article 101(1) TFEU must be interpreted as meaning that a manufacturer of originator medicines who is the holder of a manufacturing process patent for an active ingredient that is in the public domain, on the one hand, and the manufacturers of generic medicines who are preparing to enter the market of the medicine containing that active ingredient, on the other, who are in dispute as to whether that patent is valid or whether the generic medicines concerned infringe that patent, are potential competitors, where it is established that the manufacturer of generic medicines has in fact a firm intention and an inherent ability to enter the market, and that its market entry does not meet barriers that are insurmountable, which it is for the referring court to assess.

2. Article 101(1) TFEU must be interpreted as meaning that a settlement agreement with respect to pending court proceedings between a manufacturer of originator medicines and a manufacturer of generic medicines, who are potential competitors, concerning whether a process patent (for the manufacture of an active ingredient of an originator medicine that is in the public domain) held by the manufacturer of originator medicines is valid and whether a generic version of that medicine infringes the patent, whereby that manufacturer of generic medicines undertakes not to enter the market of the medicine containing that active ingredient and not to pursue its action for the revocation of that patent for the duration of that agreement, in return for transfers of value in its favour by the manufacturer of originator medicines, constitutes an agreement which has as its object the prevention, restriction or distortion of competition:

– if it is clear from all the information available that the net gain from the transfers of value by the manufacturer of originator medicines in favour of the manufacturer of generic medicines can have no explanation other than the commercial interest of the parties to the agreement not to engage in competition on the merits;

– unless the settlement agreement concerned is accompanied by proven pro-competitive effects capable of giving rise to a reasonable doubt that it causes a sufficient degree of harm to competition.

3. Article 101(1) TFEU must be interpreted as meaning that if a settlement agreement, such as those at issue in the main proceedings, is to be demonstrated to have appreciable potential or real effects on competition, and, therefore, is to be characterised as a ‘restriction by effect’, that does not presuppose a finding that, in the absence of that agreement, either the manufacturer of generic medicines who is a party to that agreement would probably have been successful in the proceedings relating to the process patent at issue, or the parties to that agreement would probably have concluded a less restrictive settlement agreement.

4. Article 102 TFEU must be interpreted as meaning that, in a situation where a manufacturer of originator medicines containing an active ingredient which is in the public domain, but the process of manufacturing which is covered by a process patent, the validity of which is disputed, impedes, on the basis of that process patent, the market entry of generic versions of that medicine, there must be taken into consideration, for the purposes of definition of the product market concerned, not only the originator version of that medicine but also its generic versions, even if the latter would not be able to enter the market legally before the expiry of that process patent, if the manufacturers concerned of generic medicines are in a position to present themselves within a short period on the market concerned with sufficient strength to constitute a serious counterbalance to the manufacturer of originator medicines already on that market, which it is for the referring court to determine.

5. Article 102 TFEU must be interpreted as meaning that the strategy of a dominant undertaking, the holder of a process patent for the production of an active ingredient that is in the public domain, which leads it to conclude, either as a precautionary measure or following the bringing of court proceedings challenging the validity of that patent, a set of settlement agreements which have, at the least, the effect of keeping temporarily outside the market potential competitors who manufacture generic medicines using that active ingredient, constitutes an abuse of a dominant position within the meaning of Article 102 TFEU, provided that that strategy has the capacity to restrict competition and, in particular, to have exclusionary effects, going beyond the specific anticompetitive effects of each of the settlement agreements that are part of that strategy, which it is for the referring court to determine.

A copy of the decision (in various languages) can be read here.

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