LS&HC Horizons 2022 - Flipbook - Page 52
Hogan Lovells | 2022 Life Sciences and Health Care Horizons
52
Asia-Pacific
Chinese anti-monopoly issues when settling patent invalidation actions
In the life sciences industry, patent invalidation challenges brought
by generic drug companies against originators’ Chinese patents are
fairly common. Settling invalidation cases can be difficult and it is not
uncommon to have allegations of reverse-payment type arrangements,
where the generic patent challenger agrees to discontinue the
invalidation case and not challenge the patent again in return for
obtaining a licence on favorable terms or some other benefit. The
possible anti-competitive effect of such a settlement had not received
detailed consideration by courts in China, until recently when the
Supreme People’s Court (SPC), on its own initiative, looked at this
issue when deciding whether to allow AstraZeneca to withdraw an
infringement action against a generic drug maker, Aosaikang.
The SPC’s decision concerned an appeal in a patent infringement
action brought by AstraZeneca against Aosaikang for infringing its
Chinese patent covering Saxagliptin, a drug to treat diabetes. In April
2019, AstraZeneca sued in a lower court to stop Aosaikang supplying
a generic drug until the patent expired in March 2021. The lower
court dismissed AstraZeneca’s claim based on a settlement agreement
signed in 2012 between the previous patent owner, BMS and a thirdparty generic company, Vcare which provided that BMS would not
pursue Vcare and its affiliates for patent infringement in exchange
for Vcare withdrawing its patent invalidation action. The lower court
decided that the alleged infringing acts of Aosaikang were allowed
because it was an “affiliated entity” of Vcare under the settlement
agreement. AstraZeneca appealed to the SPC, but subsequently
applied to withdraw its appeal. Without either party bringing up
the anti-monopoly issues, the SPC, in exercising its own discretion,
looked at these issues in determining whether to allow AstraZeneca to
withdraw the appeal.
Julia Peng
Counsel, Hong Kong
The SPC decided that whether a “reverse payment” type of patent
invalidation settlement may have the effect of restricting or preventing
competition should be evaluated by comparing the situation where
such an agreement exists, and a hypothetical scenario where no such
agreement exists. The key point of this comparison is to evaluate the
likelihood of the patent being invalidated, had the generic party not
withdrawn its invalidation action. In particular, the SPC considered
if the patent owner provides a substantial benefit to the generic
company without a reasonable explanation, this may suggest that
the patent is likely to be invalidated. If this is the case, a further
analysis should be conducted on whether the settlement agreement
substantially extends the market exclusivity of the patent owner, by
delaying or preventing the market entry of actual or potential generic
drug providers. In the present case, the SPC decided there was no
need to evaluate any potential anti-competitive effect of the 2012
Vcare settlement agreement because the patent had expired, and there
was insufficient evidence concerning whether BMS had a good reason
to grant Vcare early entry into the market, or on the likelihood of the
patent being invalidated had there been no settlement. Thus, the SPC
allowed AstraZeneca to withdraw its appeal.
The SPC’s decision provides important guidance to Chinese courts
and administrative enforcement bodies on evaluating anti-monopoly
issues concerning “reverse-payment” types of patent invalidation
settlements. For originator companies considering the settlement of
patent invalidation cases in China, they should keep in mind that if
the invalidation action appears likely to succeed, having a settlement
agreement where the invalidation claim is withdrawn may later be
held to violate the Anti-Monopoly Law, resulting in administrative
penalties and civil claims from competitors. In particular, providing
significant benefits to the patent challenger when settling can increase
the risk.
Andrew Cobden
Counsel, Hong Kong
