Conference Report: CIPIL 2020 (Part 1)

Chaired and introduced by Lord Justice Richard Arnold, this year’s edition of the Annual Spring Conference organised by the Centre for Intellectual Property and Information Law at the University of Cambridge addressed the question: ‘Is IP Good for Our Health?’.

It would appear that Prof Lionel Bently (CIPIL) chose the theme serendipitously, as many of the topics considered how best to incentivise pharmaceutical development – which, of course, relates to the current spread of and response to coronavirus.

Dr Liddell introducing the conference theme

Dr Kathy Liddell (University of Cambridge) began by setting out the day’s objectives and set the Conceptual Framing, including the overarching motivation of bringing together practitioners and academics to share information, explore research, and promote academic shaping of the field in practice. This reflects a key research interest within CIPIL of assessing whether various legally-based incentives for pharmaceutical innovation are working well enough.

She then explained the underlying cost-benefit argument justifying IPRs, in which these exceptional rights in a competitive market are accepted in order to incentivise innovation to provide social benefits. Even strident critics of IPRs such as Bessen & Meurer accept the benefits they bring in the pharmaceutical industry. However, we can’t take the IP system for granted, and Dr Liddell moved to identifying a number of key questions which help in evaluating the overall conference theme, including how we should interpret terms such as ‘good’ – but also considering whether asking the question is helpful, even if we don’t think we will get all the answers.

With these in mind, the conference turned to consideration of two of the main incentives for research: Patents & Regulatory Exclusivities.

Katherine Moggridge presenting 

Katherine Moggridge (Three New Square), who acted on behalf of appellants ICOS, discussed Actavis v ICOS, the most recent case in the UK Supreme Court to address obviousness. The case concerned a dosage patent relating to a second in class drug, the use of tadalafil under the brand name CIALIS for the treatment of erectile dysfunction.

She explained that this goes to the heart of the matter: when and how do we assess what is ‘not obvious to a person skilled in the art, having regard to any matter which forms part of the state of the art’? Should this be considered to apply only at one ‘inventive step’, or should the court apply a holistic assessment?

She then gave an overview of the case at first instance and in the Court of Appeal, where opposing conclusions were reached. In line with Lord Justice Jacob’s point in Actavis v Merck, the Court of Appeal stated that – in certain circumstances – there is nothing inventive about routinely-taken steps even if the actual outcome had not been predicted.

While ICOS made an application for leave to appeal to the Supreme Court, Mr Justice Henry Carr determined in related proceedings as to a preliminary injunction that there was no realistic prospect of the appeal succeeding as it related to an ‘entirely routine step’ i.e. the determination of dosage.

In light of this, it was surprising that the Supreme Court granted permission to appeal. Lord Hodge spent a lot of time considering the statutory question of assessment of inventive step, including giving a list of relevant factors. These include whether the approach was obvious to try, and whether it gave unexpected results. For the first time, the burden and cost of research appeared as a factor. More interestingly, he also included the nature of the patent, while acknowledging the settled approach of the EPO that dosage patents are capable of validity.

Katherine emphasised that there was perhaps a bit of a missed opportunity to give inventive step a shakeup, saying that there has now been a full year of cases going through the patent courts since the judgment and it feels like business as usual. The question of at what stage contribution can or should be divorced from innovation – with this case concerning a drug which was held not to have cleared the inventive step hurdle, but which did also make a technical contribution to the art in the sense of dosage, side effects, and commercial success – is perhaps for another day!

Lord Justice Arnold commented the presentation by asking how we should strike the balance between innovation and unfair monopolies. Of course, we want researchers to be incentivised to tackle COVID-19, but the question is whether patents are the most appropriate way to do so.

Trevor Cook

Trevor Cook (WilmerHale) then gave an overview of regulatory exclusivities in the EU and US, mainly focussing on data exclusivity and market exclusivity. He noted that supplementary protection certificates aren’t really a form of regulatory exclusivity, as they require a basic patent and their legislative framework was designed really to incentivise the development of new molecules rather than new uses of old molecules. He also considered that more permissive case law such as Neurim had been cut back by Abraxis and there are indications that Santen will do the same, if the Advocate General’s Opinion is followed.

He therefore primarily focused on data exclusivity, or regulatory data protection, and market exclusivity, or orphan medicinal product protection. In the former case, he argued that it should be seen as a very different type of protection from trade secrets law nowadays despite their common origin. In relation to the latter, he considered that it is a much more absolute form of regulatory exclusivity than data exclusivity.

He then moved to explaining the 8+2+1 system in place in Europe since 2005 for human medicinal products, noting that the assessment of ‘significant clinical benefit’ is not especially transparent.

Dreaming of enhanced
protection for Kat health

However, he used the case study of ZYTIGA and how market authorisations were granted nearly 20 years after the initial patents to illustrate that data exclusivity can be a more effective incentive than patent protection. He then noted the tailored regimes in place for Veterinary Medicinal Products, which are geared towards promoting development of products for bee and fish health – especially in the wake of Regulation 2019/6.

Finally, he considered the question of ‘similarity’ in orphan exclusivity, as the condition of ‘same or similar’ product applies in Europe by comparing Imatinib and Nilotinib. In the US, it is only the same drug – not similar – where there are restrictions.

Overall, his overview stated that SPCs don’t incentivise new indications, and regulatory data protection is most valuable as an incentive to seek the first market authorisation for a product which has weak, old or non-existent patent protection. The question of ‘similarity’ in orphan provisions is a bit murky, but overall, regulatory exclusivities may offer greater incentives than patents in certain circumstances.

The third topic of the day was Drugs, Competition Law, Parallel Trade and Brexit, which Lord Justice Arnold identified as some of the limits on IP law which seek to provide balance in the system.

Chris Stothers (Freshfields Bruckhaus Deringer) brought insight from his work as a patent litigator, including challenging the basic idea of the market for a given drug as (1) the patent owner having exclusivity, (2) the patent running out, (3) many others jumping in, and (4) the price crashing as not actually being the optimal strategy for a generics manufacturer. Instead, such a company wants to be ‘first and alone’ on the market, with key – distinct but often merged! - topics in the area including patented drugs settlements, patented drugs discounts, and off-patent drug price rises.

Patented drugs settlements are often considered exciting, but the cases aren’t throwing up many surprises. After the Commission’s Pharma Sector Inquiry, which was followed by monitoring up to 2016, the big topic was ‘pay for delay’ settlements, where a generic company threatens to launch imminently unless the innovator pays them a lot of money. Generics (UK) for instance, was concerned with pretty old conduct, reflecting the pace of competition law. Therefore, while we might have quite a few EU cases coming out, they’re not really telling us much new. On the other side of the Atlantic, the ongoing case of Baltimore v AbbVie is interesting as it represents a challenge to differential entry settlements (i.e. where a generic company is allowed to enter certain markets but not others). This may ultimately put settlements at risk – but Chris emphasised that he doesn’t think it will or should do so. He also identified another case prodding the edges of competition law as Gilead, where the court said that there might be a competition problem with ‘most-favoured entry plus’.

In relation to discounts and other schemes for patented drugs, he criticised regulators’ approach in several cases. In MSD/Remicade, the CMA didn’t make a definitive finding but did tell the companies not to enter such an agreement again. Essentially, the CMA said that the parties tried to make an anticompetitive agreement which didn’t work on the facts. In relation to AstraZeneca, Chris considered that the objection was basically that the company was insufficiently transparent – but he said it was hard to see how it could actually be considered anticompetitive. Finally, he saw the approach of the Italian Competition Agency and ultimately the Italian Supreme Court in Pfizer as very difficult to understand from an IP lawyer’s perspective. Using divisional patents after failing to file SPCs may be anticompetitive, but that merely reflects what patents do in practice!

Lastly, he noted that the conference was not so timely in relation to Pfizer/Flynn – as the Court of Appeal was then still pending (see Tuesday 10 March’s judgment here). While there was clearly an agreement between Pfizer and Flynn in breach of Article 101 TFEU to put the price of a very old epilepsy drug up, the CMA chose to go after them on the basis of Article 102 (abuse of dominant position). The Competition Appeal Tribunal chose to say that a consistent framework is needed – even if the parties have behaved badly. This case should clarify the point on when price increases are abusive pricing or indicative of a cartel. The problems arising here are typically nothing to do with innovation per se, but more to do with market structure and regulation.

This presentation sparked some fairly lively discussion, with Chris emphasising that patents are much less black and white than they are typically considered. Instead, they are ‘grey’ in terms of validity until a final court decision comes out. However, as Lord Justice Arnold observed, we should try to promote out-of-court compromise – but Chris identified that this is very difficult when we remove incentives to negotiate by doing things like deeming differential entry settlements to be anticompetitive.

However, he did note that just because parties have agreed to a course of conduct, it doesn’t make them free of competition regulation. There are other factors at play, especially when we’re considering what is best for ‘our’ ‘health’ – and he said that often he looks at cases and thinks, why else would that money have been paid if not for nefarious anticompetitive purposes?

Following that discussion, Katharine Stephens (Bird & Bird) flagged that there can be equally strong feelings about her topic of ‘Exhaustion, Parallel Trade and Brexit’. This concerns the balance between right-owners’ interests and the broader interests of free and fair competition when talking about the point at which right-owners’ control of goods expires in the sale of genuine goods. Firstly, she identified two approaches: Betts v Wilmott and an implied licence, and exhaustion, i.e. that IPRs are extinguished after sale. She then identified national and international flavours of exhaustion and considered them in an EU context.

Where there are harmonised rights, there are typically harmonised rules as to exhaustion; however, Katharine observed that the question of when it is legitimate to oppose further dealings in the goods has been tested to destruction by the pharma community. This has been done in a variety of ways, such as repackaging in different markets and debranding – giving the example of Mitsubishi v Duma, where not using a trade mark was determined to be affecting the function of the trade mark.

Following Brexit, it’s not clear whether there is any opportunity to reconsider the rules. When EY produced a Government-commissioned report on this, they made no real recommendations or suggestions except to note that most stakeholders want the status quo to be retained. Pharma companies argue that arbitragers make unfairly high levels of profit just by moving goods around the EU, and that parallel import rules encourage them not to supply to poorer countries as well as impacting safety by making it hard to tell between genuine parallel imports and counterfeit products. On the other hand, pro-exhaustion arguments turn on promoting competition and consumer access; the NHS saves huge amounts of money every year through purchasing parallel imports. Therefore, if we end up with a post-Brexit regime of only national exhaustion, there may be drug shortages and increased prices.

While the Intellectual Property (Exhaustion of Rights) (EU Exit) statutory instrument would essentially preserve the status quo from the UK’s point of view, the UK can’t do anything about what stance the EU will take. The SI is also silent about goods imported from third countries, though it makes provision for the retention of existing EU caselaw on lack of recognition of international exhaustion unless the Supreme Court decides otherwise. This point prompted discussion on the scope of such retention: where will it leave the UK if it adopts EU caselaw which is overtaken by developments by the CJEU? Lord Justice Arnold gave an explanation of what this may mean in response to a question at the end of Katharine’s presentation, including warning that the position of the European Union (Withdrawal Agreement) Act 2020 could result in leaving the UK open to having many different interpretations of the same caselaw if any court in the three UK jurisdictions can apply its own interpretation.

Stay tuned for Part 2, on the afternoon's proceedings!

With thanks to Dr John Liddicoat for photos of the conference and to Dr Kathy Liddell for those of her cats!