Background

The Commission's decision

The European Commission (the Commission) imposed a fine of EUR60 million on AstraZeneca in 2005 for abuse of a dominant position by misusing the patent system and the procedures for marketing pharmaceuticals to delay market entry of a generic form of its ulcer drug Losec as well as to restrict parallel trade.

The Commission concluded that AstraZeneca had:

• engaged in a pattern of deliberate misrepresentations to patent offices and national courts by giving the wrong date for calculating the length of supplementary patent protection in relation to Losec in order to secure longer protection, despite being aware that a first authorisation had been awarded months earlier;and
• misused rules and procedures applied by the national medicines agencies by selectively deregistering the market authorisations for Losec capsules in Denmark, Norway and Sweden with the intent of blocking or delaying entry by generic firms and parallel traders.

In the decision, the Commission repeatedly emphasised its view that AstraZeneca was pursuing a co-ordinated strategy adopted at a high level to exclude or delay generic entry to the market. This was central to its finding of abuse.

Both abuses in the AstraZeneca case were novel and many practitioners and commentators were surprised at the high fine imposed on AstraZeneca. However, the decision was a strong indication of the willingness of the Commission to intervene in this area.

The General Court's judgment

AstraZeneca appealed to the General Court of the European Union (the General Court) claiming that the Commission erred in finding that:

• there had been abuse, as the making of misleading representations in the course of applications for intellectual property rights cannot amount to an abuse of a dominant position, unless or until the dishonestly obtained rights are enforced or are capable of being enforced;
• the withdrawal of the marketing authorisations was abusive. AstraZeneca claimed that Article 102 TFEU does not impose an obligation to maintain a marketing authorisation for a product that is no longer marketed just to make it easier for generic companies and parallel traders to compete with it; and
• the Commission failed to prove the alleged abuses to the appropriate legal standard and to demonstrate that there was a selective strategy to change from Losec capsules to tablets or to withdraw the marketing rights.

The General Court largely confirmed the Commission's decision by a judgment of 1 July 2010. The General Court found that any representation to public authorities made by AstraZeneca should have been properly justified, leaving no room for ambiguity. According to the General Court, AstraZeneca's submissions to patent offices were characterised by a "manifest lack of clarity" and the Commission was therefore right to find that they constituted abusive conduct.
The General Court also agreed with the Commission's decision that AstraZeneca abused its dominant position by voluntarily deregistering Losec capsules and replacing them with a new formulation in a limited number of national markets. The General Court ruled that AstraZeneca could not "use regulatory procedures in such a way as to prevent or make more difficult the entry of competitors on the market" without objective justification, irrespective of whether the alleged conduct is otherwise lawful under branches of law other than competition law. The Commission's decision was, however, modified inasmuch as the Commission had failed to establish that the deregistration of Losec capsules was capable of preventing parallel imports in Denmark and Sweden. On that basis, the fine imposed on AstraZeneca was reduced from EUR60m to EUR52.5m.

The Court of Justice's judgment

On appeal before the Court of Justice of the European Union (the Court of Justice), AstraZeneca raised four grounds of appeal relating to errors of law allegedly made by the General Court in respect of the definition of the relevant product market, the first (misrepresentations) and second (deregistration) abuses, and the fine. AstraZeneca's application was supported by the European Federation of Pharmaceutical Industries and Associations (the EFPIA).

All grounds were dismissed in the judgment rendered by the Court of Justice on 6 December 2012.

The Court of Justice concurred with the General Court that AstraZeneca's submissions to patent offices were constantly characterised by misrepresentations and a lack of clarity by which AstraZeneca deliberately attempted to mislead patent offices and judicial authorities in order to preserve its monopoly on the market. Dominant companies have an obligation not to use regulatory procedures "in such a way as to prevent or make more difficult the entry of competitors on the market, in the absence of grounds relating to the defence of the legitimate interests of an undertaking engaged in competition on the merits or in the absence of objective justification".

Owing to that 'special responsibility', arising from the mere possession of a dominant position, AstraZeneca was under a duty to disclose "all the relevant information", including a justification for the (allegedly) legally defensible interpretation of the law it adopted when dealing with patent offices. According to the Court of Justice, doing otherwise would be tantamount to pretending that "where an undertaking in a dominant position considers that it can […] lay claim to a right, it may use any means to obtain that right, and even have recourse to highly misleading representations with the aim of leading public authorities into error".

The language used by the Court of Justice is intentionally very broad and is in no way limited to patent offices and/or pharmaceutical regulatory authorities.

Lessons for dominant companies

Does the judgment in AstraZeneca mean that a dominant company should always get it right? The Court of Justice does not go that far: dominant companies cannot be expected to be infallible, and the Court adds that any assessment of alleged misconduct by a competition authority or a judge should be made in concreto, taking into account the specific circumstances of each case. 

The judgment does not provide much guidance on how pharmaceutical companies can effectively and safely manage product life cycle strategies. It is nonetheless interesting to note that:

• preparing a strategy which intends to minimise the erosion of a company's sales and  enable it to deal with competition from generic products as such is legitimate and is part of the normal competitive process, provided that the strategy remains within the limits of competition on the merits;and
• onerous pharmacovigilance obligations can constitute objective justification for conduct that may otherwise be deemed anticompetitive.

The ruling deals with the misuse of regulatory procedures, rather than the misuse of IP rights themselves, and therefore does not directly contribute to the current wider debate on the relationship between antitrust enforcement and IP laws. However, the Court of Justice reiterates the value granted to and legitimate protection afforded by intellectual property rights: in the words of the Court of Justice, "the taking into account of intellectual property rights for the purposes of finding that an undertaking has a dominant position does not mean that companies introducing innovative products on the market should refrain from acquiring a comprehensive portfolio of intellectual property rights or from enforcing those rights. It is sufficient to point out in that regard that a dominant position is not prohibited, only its abuse". 

Links

The Commission's decision COMP/37.507 - AstraZeneca
The General Court's Case T-321/05 - AstraZeneca / Commission
The Court of Justice's Case C-457/10 P - AstraZeneca / Commisson
Our previous e-Alert