CLIP of the month: An analysis of the CJEU’s Generics judgment

03.11.2020

This month’s CLIP is an article by Pablo Ibáñez Colomo, Professor of Law at the London School of Economics, on the Court of Justice’s January 2020 judgment in Generics (Paroxetine). As we discussed here, the Generics judgment was significant because it was the first time that the EU’s highest court provided guidance on the competition law assessment of ‘pay-for-delay’ agreements in the pharma sector.

After providing a helpful summary of the case background and the Court’s main findings, Professor Ibáñez Colomo argues that the judgment achieves an “optimal balance” that “minimise[s] the risk of Type I (over-enforcement) and Type II (under-enforcement) errors”. In his analysis, the judgment achieves this in two main ways. First, it defines the notion of potential competition relatively expansively (‘real and concrete’ possibility of market entry, as opposed to likelihood, is enough in this regard). In Professor Ibáñez Colomo’s opinion, this reduces the risk of Type II errors. Second, the judgment makes clear that reverse payment patent settlements are not necessarily restrictive of competition ‘by object’. The assessment will always be case-specific, and in certain circumstances reverse payment settlements may even fall outside the scope of Article 101(1) TFEU altogether. As such, reverse payment settlements are not to be equated with cartels; according to Professor Ibáñez Colomo, this approach reduces the risk of Type I errors.

The author also suggests that the judgment “confirms the relationship between EU competition law (and indeed EU law at large) and intellectual property”. Specifically, it is, in his view, consistent with “a long-standing line of case law according to which the application of Articles 101 and 102 TFEU does not question the existence of national intellectual property titles, but only their exercise” (emphasis added). At the same time, the judgment indicates that IP rights are not necessarily insurmountable barriers to entry. As Ibáñez Colomo explains, the Court’s reasoning suggests that the impact of IP rights on firms’ ability to enter the market depends on various factors, including the nature of the right and the features of the industry. Future case law may provide clarity on the question of whether, and if so in what circumstances IP rights can prevent market entry altogether.

In Ibáñez Colomo’s view, the judgment also makes a significant contribution by clarifying the meaning of several key concepts in EU competition law, including restriction of competition ‘by object’. In particular, the judgment confirms – together with Budapest Bank (which we commented on here) – that the evaluation of the object of an agreement is a case- and context-specific inquiry. Perhaps more helpfully still, the judgment illustrates in a concrete way how such an inquiry should be conducted.

As the article recognises, the Generics judgment will not be the final word on the approach of EU competition law to reverse-payment patent settlements. Further development of the principles established in Generics may be expected from the forthcoming Court of Justice rulings in Lundbeck and Servier. Those two cases may also give the EU’s highest court a chance to shed light on issues that were left open following the Generics judgment. In the meantime, Professor Ibáñez Colomo’s article provides an insightful analysis of the approach taken by the Court of Justice in Generics. That’s not to say, however, that everyone will agree with his conclusion that the Court got the balance just right.

Edwin Bond

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