Posted: April 11th, 2014
Biogaran v. Laboratoires Negma, Laboratoire Medidom, cour d’appel de Paris, 31 January 2014, Docket № 12/05485, with thanks to Marta Mendes Moreira, Sophie Place and Céline Ruste, Véron & Associés, for providing the judgmen as well as a translation thereof and a summary in English
Claimant to pay €3,650,000 of damages for an interim injunction on a patent later found to be invalid and for abuse of proceedings
The decision handed down by the cour d’appel de Paris on 31 January 2014 is the first reported decision of a French court of appeal on the consequences of the enforcement of an interim injunction against an alleged infringer of a patent that is later found invalid.
It orders Laboratoires Negma, the exclusive licensee under EP 0 520 414 for France, a patent covering a pharmaceutical composition containing diacetylrhein (also known as diacerein, an active ingredient for an anti-arthritis drug), to pay damages to Biogaran, a French generic drug company.
Biogaran put on the French market a generic version of Laboratoires Negma’s drug on 23 January 2009 but was forced to withdraw its products as a result of an interim injunction granted on 10 March 2009 by the tribunal de grande instance de Strasbourg (before the November 2009 reform which gave exclusive jurisdiction to the Paris court in respect of patents for the whole of France).
However, on the merits, the tribunal de grande instance de Paris, the first-instance court, found the patent invalid on 31 March 2010 and, in accelerated proceedings, the court of appeal denied the appeal against the invalidity judgment on 30 June 2010.
The decision handed down by the court of appeal on 31 January 2014 rules on the claim lodged by Biogaran against Laboratoires Negma for the damage suffered from the enforcement of the 10 March 2009 interim injunction; more specifically, it deals with appeals against a judgment dated 27 January 2012, which can be read here.
The court of appeal affirms Laboratoires Negma’s liability for having enforced an interim injunction that was later reversed as the patent was found invalid.
It therefore finds Laboratoires Negma liable on the basis of Article L. 111-10 of the French Enforcement Civil Procedure Code (previously Article 31 of French Act of 9 July 1991) ― grounds on which the judgment is affirmed. However, and contrary to the first-instance decision, the court of appeal also finds Laboratoires Negma liable on the basis of Article 1382 of the French Civil Code (general fault liability) for abuse of proceedings with delaying manoeuvres and intention to harm ― distinct grounds of liability on which the judgment is reversed.
Liability resulting from an interim injunction on a patent later found to be invalid
The court of appeal rejected any and all of Laboratoires Negma’s arguments that liability resulting from the reversal of an interim injunction should not apply at all or, alternatively, that such liability could only occur when a fault by the claimant, the licensee, is demonstrated.
The court of appeal stated in particular that provisions of Article L. 111-10 of the French Enforcement Civil Procedure Code, establishing a strict and automatic liability against a party enforcing a judgment of a first-instance court, are clear and do not need any interpretation whatsoever, whether in relation to Directive 2004/48/EC on the enforcement of intellectual property rights or the European Convention for the Protection of Human Rights (notably Article 6 § 1 which provides the right to a fair trial).
It therefore affirmed the first-instance judgment holding that Laboratoires Negma should compensate for the damage caused by the interim injunction on the legal basis of strict and automatic liability.
Abuse of proceedings
The court of appeal took a more severe approach than the first-instance court about the way how Laboratoires Negma behaved in other respects.
It considered that Laboratoires Negma committed abuse of proceedings by carrying out wrongful manoeuvres, namely:
– intervening several times before the administrative authorities (AFSSAPS) and interfering with the grant of marketing authorisations for generic drugs;
– obliging thereby its competitors to reduce the content of aloemodine to less than 20 ppm, which falls within the scope of the patent;
– lodging various requests before the Conseil d’État (the highest court for administrative law matters in France), which were all dismissed;
– seizing the president of the CEPS (price committee);
– suing Biogaran in preliminary proceedings before the tribunal de grande instance de Strasbourg with no real basis;
– raising numerous procedural issues in the course of the proceedings causing the courts to issue more than 20 judgments;
– sending letters to pharmacists and wholesalers, which indirectly denigrated Biogaran.
According to the court of appeal, by doing so, Negma went beyond the legitimate defence of its interests, knowing that its patent only covered a specific degree of purity of diacerein and was attacked and fragile.
Assessment of damages
The court of appeal increased to €3,500,000 the damages awarded by the first-instance court (€2,997,567): this compensates for the expenses incurred for the recall of the products, the loss of profits on the lost sales for the time period when the injunction was in force and the delay in the remarketing of the generic drugs.
The court of appeal assessed Biogaran’s damage in a different way from the first-instance judges: it assumes that Biogaran would have been the only generic drug company on the market until the revocation of the patent whereas the first-instance judges had held that it would not have kept this exclusivity but for the injunction.
Moreover, the court reduced Biogaran’s incremental profit margin claimed by increasing the pharmacists’ back margin and by adding transportation costs to variable costs, whereas the tribunal had confirmed the relevance of the 56.1% margin rate, which had been certified by an external auditor.
The court of appeal took into account Negma’s faulty manoeuvres in its assessment of two heads of damage.
The icing on the cake is that the court of appeal granted €150,000 in compensation for the harm caused by Laboratoires Negma to Biogaran’s image.
Read the decision (in French) here.
Read the decision (in English) here.