The European Commission recently fined pharmaceutical giant Teva €462.6 million for artificially extending patent protection by pursuing divisionals and spreading misleading information about a competing product to hinder its market entry and uptake.
Margrethe Vestager, the Commission’s Executive Vice-President in charge of competition policy, commented that the decision “reaffirms the Commission’s commitment to competition enforcement in the pharmaceutical sector” and “contributes to keeping drugs affordable, preserving choice of treatment and fostering innovation, to the benefit of EU patients and national healthcare systems.”
Teva has published a statement expressing that it intends to appeal the decision, which is “based on legal theories that the company believes are extreme, untested, and factually unsupported”.
In this interview, AWA’s Mikkel Roed Trier considers the commission’s findings and what they mean for the European patent and innovation landscape.
Interview
Q: How has Teva misused the European divisionals rules and procedures?
A: The Commission decided that Teva’s playing of the “divisionals game” artificially prolonged third parties’ legal uncertainty over its patents, which contributed to Teva’s breach of competition law.
Q: Do you agree that divisionals can be used to prolong third-party uncertainty?
A: Yes. When a parent patent is granted, the patent protection from that patent itself cannot be expanded to remove legal uncertainty but only for the parent patent. If a divisional is pending when the parent patent is granted, the applicant can continue to pursue protection of anything else already disclosed in the parent application, so that surely prolongs the legal uncertainty of third parties but not beyond what was disclosed in the originally filed application. It is also important to note that the duration of any divisional patent cannot be extended beyond the duration of the parent. So the protection from filing divisional applications can never go beyond the original 20 years.
Q: What does the Commission mean when they say Teva has “artificially” prolonged legal uncertainty using divisionals?
A: The Commission considers that Teva filed the divisionals with the single purpose of keeping applications pending to prolong third parties’ legal uncertainty as to what future patents could cover when granted. It appears, the Commission found that communication among Teva’s in-house counsel proves that was its intention.
Q: Does the European patent system have any ways to discourage or prevent prolonging legal uncertainty by using divisionals?
A: Yes, there are at least three ways. First, it can be quite expensive to file a divisional application because all prior annuities must be paid upon filing, which can certainly make applicants think twice before filing. Second, whereas third parties don’t have any way to accelerate examination, third-party observations can serve to prevent invalid divisional patents from being granted and then becoming enforceable. Third, after grant, and when court proceedings are pending, examination of oppositions and appeals can be accelerated upon request, also by opponents.
Q: Have European authorities considered other attempts to prevent prolonging uncertainty by using divisionals?
A: Yes. From 2009 to 2014, Rule 36 EPC set a relatively short time limit for filing divisionals.
Q: Why was the change to Rule 36 EPC rolled back in 2014?
A: One of the official reasons for rolling it back was that the intended effect was not achieved since applicants just filed lots of early precautionary divisionals. It’s also worth mentioning that one of the arguments made against the divisionals time limit was that it was in disagreement with the trade between society and the inventor that is a fundamental principle of any patent system: By pursuing a patent application, the inventor agrees to the details of the disclosed technology being published; in exchange the inventor is allowed to seek protection on any disclosed invention. A bit simplified, the possibility to file divisional applications can be said to exist to honour that principle since only a single invention can be protected per granted patent. The large number of “precautionary” divisionals filed when the time limit was in effect shows that applicants considered the option to file divisional applications very important.
Q: Why is it important that applicants are allowed to file divisionals?
A: As with any other patent system, the European patent system exists to promote innovation. If the system does not honour society’s part of the aforementioned trade with inventors, inventors could be discouraged from using the patent system – and from inventing in the first place. In addition, it could discourage investments in innovation. If that happens, the patent system does not work as intended.
Q: Has the Commission considered if its decision could discourage investment in innovation?
A: Yes, it seems so. Vestager’s statement explicitly says that the decision contributes to, among others, fostering innovation, so it seems the Commission considers that the precedent set by the decision will not discourage investment in innovation. This is also in line with the Commission’s focus in later years on several patent initiatives to promote innovation in Europe, both to combat the climate crisis and to maintain EU competitiveness. It is important to note that, in the decision, the “divisionals game” forms part of a larger picture that the commission as a whole considers is in breach of antitrust law, including that there were no other substitute products and that it found Teva acted in bad faith. The Commission does not express any animosity against divisional applications as such. It does not seem to consider there is a need for European rules and procedures to be amended to prevent misuse. So, fortunately, I don’t expect the Rule 36 discussions to resurface because of the decision.
Q: Do you agree that Teva’s actions should be considered illegal misuse of patent procedures?
A: Based on the press release, the Commission considers that, under certain very specific circumstances, it can be in breach of antitrust law if an applicant files several divisional applications and then enforces and tactically withdraws the resulting patents, and only if there is a documented intent to prolong third parties’ legal uncertainty artificially. It’s apparently not required that those tactics are applied successfully. Governing bodies should carefully ensure antitrust law doesn’t undermine patent law. If one expects the decision could lead to certain divisionals tactics in themselves being in violation of antitrust law, it could reasonably be argued that the decision has the unfortunate potential to hinder innovation. However, I don’t think there’s currently any reason for such concerns.
Q: Considering the decision, should patentees change anything in the way they deal with European divisionals?
Yes, big pharma companies in dominant positions should be careful and take the decision into account when devising European divisionals tactics. Also, the decision emphasises that, unless you want the European Commission looking over your shoulder when devising patent tactics, it is generally advisable to involve external counsel subject to legal privilege.
Q: Can third parties do anything to mitigate legal uncertainties established by competitors’ divisionals?
Third parties experiencing legal uncertainty from a divisional can and should analyse it to ensure they don’t risk infringing a valid later granted patent, often referred to as a freedom-to-operate or FTO analysis. As mentioned, third parties can also consider filing third-party observations to prevent the EPO from granting invalid divisional patents.
Mikkel Roed Trier is a European Patent Attorney, Partner, and Team Manager at AWA and is the President of the Association of Danish Intellectual Property Advisors (ADIPA).
Any opinions expressed above are Mikkel Roed Trier’s personal opinions and are not necessarily shared by AWA.
