CLIP of the month: when does strategic patenting by pharmaceutical companies become anti-competitive?

11.01.2021

Strategic patenting should be subject to scrutiny under the rules of competition law”: this is the controversial thesis of the author of this month’s CLIP, Olga Gurgula. In this article, she draws on case law and the Commission’s Pharma Sector Inquiry Report to examine whether competition law should intervene when pharmaceutical companies use the patenting system strategically for their own commercial gain.

“Strategic patenting” comprises a broad spectrum of activities, some of which are clearly anti-competitive (for example, misleading a patent office in order to extend the scope of patent protection, as in AstraZeneca v Commission), and some of which are generally innocuous (for example, applying for a secondary patent that covers a process or formulation). A large number of activities fall into a grey area in-between – including so-called patent “thickets” and “product-hopping”. The strategic use of IPRs and the patent system is lawful under patent law, and it appears to fall outside the scope of competition law in most cases. However, the author argues that the potential negative effects associated with these patenting strategies are such that the Commission should be more ready to scrutinise them under Article 102 TFEU.

One such negative effect highlighted by the author is a potential reduction in incentives to innovate. The possibility that killer acquisitions may lead to a reduction of innovation in the pharmaceutical industry is a hot topic amongst competition law practitioners and pharmaceutical clients, but less frequently discussed is the potential impact of strategic patenting on innovation. The author argues that, contrary to the aims of the patent system, strategic patenting may lead to a reduction in innovation. In Perindopril, the Commission found that most of the originators’ secondary patents were not inventive, but were merely put in place to block off the market from generics, although this point only formed part of the background to the identified infringements. In the author’s view, such practices in turn have a “chilling effect” on follow-on innovation by generics.

It goes without saying that the IP rights of innovators should be protected as a reward for their investment in research and development. Such protection should in general promote dynamic competition, which is also the goal of competition law. Nevertheless, there can be a tension between, on one hand, increasing incentives to innovate through the grant of a legal monopoly and, on the other hand, encouraging competition. There have been some instances of competition authorities assessing the use of strategic patenting, in particular where the main aim is to exclude generics or other competitors from the market. In the pharma sector, delays to generic entry mean that higher drug prices are maintained for longer. Pfizer has previously come under scrutiny from the Italian Competition Authority and Consiglio di Stato for its extensive use of secondary patents, and a number of years ago the European Commission investigated Boehringer Ingelheim for filing patents designed to create blocking positions (this case was closed without a decision being taken). However, there is an ongoing debate about whether competition law is the most appropriate tool to tackle potential misuses of the patent system, or whether the patent offices are a more appropriate forum for discussions about the relative merits of different kinds of patents (e.g. divisional patents, second medical use patents etc.).

Competition authorities and courts across Europe continue to take an interest in pharmaceutical markets, and particularly in conduct that could lead to higher drug prices or the foreclosure of competitors. As the focus moves away from pure excessive pricing and pay-for-delay cases, it will be interesting to see whether the authorities will turn their attention to patenting strategies, and if so, in what situations they may be found to amount to an abuse under Article 102.

Helena Connors

Author