Legal Update

Intellectual Property – Patents – Generic Products – Pharmaceutical Products – “Clear the way” – English Patents Court

The recent decision in the case of Cephalon Inc v. Orchid Europe [2011] may be the first signs that the UK are about to remove the burden on generic pharmaceutical companies to “clear the way” before launching a generic pharmaceutical product.

What is “clearing the way”?

The concept of clearing the way concerns instances where generic pharmaceutical companies are about to launch generic pharmaceutical products and the patent owner seeks to prevent this (usually by injunction).

Those generic pharmaceutical companies are required by the Court to show that they have attempted to clear the way by using the procedures for revocation and/or declaration of non-infringement. This ensures that when the generic product is launched, all the problems of an interim injunction are avoided. Otherwise, the Court is entitled to/may draw adverse inferences.

This differs to the general rule in patent litigation where if a potential defendant anticipates it is about to be sued, there is no obligation upon it to seek a declaration of non-infringement and/or revocation and no adverse inferences will be drawn.

The process of clearing the way is a cumbersome and risky one for generic pharmaceutical companies as they must make the tough commercial decision of either:-

• Taking a risk of an injunction being brought against them when they launch the generic products; or
• Finalise their products well in advance of being able to enter the market and challenge the incumbent patent holders.

The risk of an injunction being brought immediately upon launch is substantial because the Court is likely to interpret the patent more widely than, for example at trial. This is because when deciding whether to award an injunction, the Court must determine whether there is simply “an arguable case” as opposed to a more detailed examination of patent infringement or invalidity.

Injunction

The main legal requirements to be considered by the Court when deciding whether to grant an interim injunction are whether:-

1)      There is a serious question to be tried; and

2)      Whether the balance of convenience lies with ordering the injunction.

A major consideration of the Courts when deciding whether the balance of convenience lies with ordering the injunction is whether irreparable harm has been done to the claimant; one which, if the claimant succeeds at trial, the award of damages would be an adequate remedy. If it would be adequate, the Court is not likely to grant the injunction.

Facts

• Orchid and Generics UK sought to launch generic products of modafinil (used to treat narcolepsy), whose patent is owned by Cephalon.
• An application was made for an interim injunction by Cephalon to prevent Orchid and Generics UK infringing its patent.
• Although regulatory approvals had been obtained by Orchid and Generics UK, Cephalon centered its attack on their failure to clear the way.

Held

• Cephalon had narrowly demonstrated a good enough arguable case of infringement and validity and “just about clear[ed] the threshold of establishing … a serious question to be tried”.
• In this case the Judge based his decision on the questions of irreparable harm and the balance of convenience. This involves deciphering whether damages would be an adequate remedy to the claimant if the claimant were to succeed at trial and weighing the likely injustice of granting an injunction which it later turns out should not have been granted against the injustice of withholding one which should.
• One of the factors considered relevant in this analysis was “clearing the way”. However, the Judge made the point that clearing the way is not a legal doctrine, but only a “theme … which has emerged from the cases [as] a factor in the balance of convenience”, but may not necessarily outweigh other factors.
• The Judge ruled that no injunction should be granted, although he did order an expedited trial.

Further points that emerged include the following:-

• Whether clearing the way should apply at all would depend on the evidence.
• Pharmaceutical companies seeking an injunction should be more attentive to their arguments on irreparable harm rather than the generic pharmaceuticals company not clearing the way.

The balance of convenience was in favour of allowing Orchid and Generics to continue to sell its product. Some factors considered when reaching this were:-

• That there was a strong likelihood that Orchid and Generics would lose the unique market opportunity of being first to market if an injunction was granted; and
• The market for modafinil was a mature one where any lost profits suffered by Cephalon could readily be assessed.  

The other considerations were therefore deemed more important than clearing the way.

Comments

Clearing the way has always been seen as unfair. It only applies in pharmaceutical cases (and in no other sector), and puts the entire burden to start litigation on the would-be competitor when that competitor may be firmly of the opinion that it does not infringe and/or that the patent may be invalid.

This case may be the first sign that clearing the way is only “a theme that has emerged from the cases”, as described by the Judge. However, the Court of Appeal’s judgment in SmithKline Beecham v Apotex will still stand until overruled; clearing the way can still be an important factor.

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© RT COOPERS, 2011. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.