Patricia Ciobanu S4946898, wg.

11

Title: Intervention of competition

authorities in patent practices via art. 101
and 102 TFEU

Name: Patricia Ciobanu

Student number: S4946898

Word Count: 998

Patricia Ciobanu S4946898, wg. 11

1. Introduction

This paper focuses on the connection between competition law and Intellectual Property Rights.
More precisely, it aims to address the interventionist and non-interventionist view on EU competition
law with respect to conduct related to patent law in the pharmaceutical sector. To this end, the paper
first addresses the dynamics of innovation in the pharmaceutical sector. Then it analyzes certain
patent practices in light of art. 101 and 102 TFEU. In this context, the focus is on their potential anti-
competitive effects and whether there is a need for competition authorities to intervene in order to
protect innovation.

2. Innovation in the pharmaceutical sector

Based on empirical studies, it is supported that patents are effective in encouraging innovation in the
pharmaceutical industry.1 This is mainly due to the fact that the costs of research and development in
this sector are extremely high, pharmaceutical companies relying significantly on patents to protect
innovation and return their investments. 2 The patent holder has the temporary monopoly on the sale of
the product, being the strong position to adjust prices and earn considerable profits. These profits
often are reinvested in developing new products, thereby resulting in more innovation. 3

3. Intervention from competition authorities

The literature has been ambivalent when it comes to the degree of intervention from competition
authorities in conduct related to patent law in order for innovation to be optimal. The supporters of the
non-interventionist approach argue that competition law should not interfere with patents because this
would negatively affect the incentives to innovate. The interventionists argue that intervention is
necessary to prevent intellectual property rights from becoming a tool for anti-competitive behavior,
which would, in turn, limit the desire for innovation. The degree of intervention needed depends on
the patent practices adopted by pharmaceutical companies.
In the Final Report of the Pharma Inquiry, the European Commission found that some patent practices
could lead to a decline in the number of innovative pharmaceutical products. 4 Further on, the paper
will examine two patent practices:1)reverse payment patent settlements and 2)patent thickets, with the
aim of analyzing their risk of restricting competition as well as assessing whether, by intervening, the
competition authorities are limiting innovation.

3.1 Reverse payments patent settlements - ‘pay for delay’

According to the abovementioned Final Report, one of the patent practices that potentially harm
competition, and limit the development of innovative products, is reverse payment patent settlements.
It involves the originator paying the generic an amount of money to settle a patent dispute. In
principle, such a settlement is not problematic under EU competition law and it does not constitute an
infringement. It will however violate art. 101 TFEU if the goal of this agreement is preventing or

1 Guellec, Dominique, Bruno van Pottelsberghe, Nicolas van Zeebroeck, 'Patent as a Market Instrument', The
Economics of the European Patent System: IP Policy for Innovation and Competition (online edn, Oxford
Academic, 2007) chapter 4.
2 Directorate for financial and enterprise affairs Competition Commitee ‘Excessive Prices in Pharmaceutical
Markets’ (2018), 22.
3 Guellec (n1).
4 European Commission ‘Pharmaceutical Sector Inquiry, Final Report’ (2009), 21. (heireinafter Pharma report)
Patricia Ciobanu S4946898, wg. 11

delaying the generic entry.5 This was ruled in the Lundbeck case, in which the General Court
concluded that pay-for-delay agreements are similar to market sharing 6 and can constitute restrictions
of competition by object. Aside from potentially violating art. 101, a settlement can also violate art.
102 TFEU. In the Servier case, the court elaborated upon the criteria which constitute a pay-for-delay
agreement as being anti-competitive by object 7 under art 101 TFEU, but also concluded that Servier
abused its dominant position, as the agreements were part of a strategy to delay generic entry. The
court deemed this to be a violation of art. 102 TFEU.

Based on the approach of the Commission, as well as on the decisions taken in respect to pay-for-
delay agreements, it is notable that pay-for-delay agreements have the risk of being anti-competitive
and delaying the market entry of generics. This, in turn, limits innovation, because the originator
maintains his monopoly, without the incentive to further innovate. It also reduces the desire for
generics to actually enter the market. Therefore, intervention by competition authorities is more often
required with regard to this patent practice.

3.2 Patent thickets/clusters

Another patent practice that could qualify as anti-competitive is the strategy of filing numerous patent
applications around the same medicine (patent clusters/thickets). 8 In principle, a patent thicket is not
illegal if all individual patents are valid. 9 So, the practice seems to be in line with the objective of
patent law, which is protecting innovation. However, in cases when it is aimed at excluding
competition, the effects of the anti-competitive behavior outweigh the intended goal of safeguarding
the product of their innovation.10

The denser the web of clusters, the more difficult it is for the generics to enter the market with their
own version of the original pharmaceutical product. This is due to the fact that a large number of
patents creates uncertainty around the product patent, as it makes it difficult for the competitors to
assess the scope of rights that the patent holder is entitled to. The legal uncertainty and the threat of
patent infringement slow down research and development, which results in delaying market entry or
even blocking competitors.11 This highlights the importance of intervention from the competition
authorities in addressing anti-competitive practices in order to promote competition and protect
innovation.

Currently, there are no cases that have been litigated in the EU that deal specifically with patent
thickets. However, in AstraZeneca, the CJEU found that the pharmaceutical company had abused its
dominant position under art 102 TFEU, by filing a large number of patents and making misleading
representations to national patent offices, with the goal of delaying generic market entry. 12

5 Lundbeck v Commission [2016] ECLI:EU:C:2021:24, T-472/13 539.

6 ibid 401.
7 Case T-691/14 Servier and Others v Commission [2018] ECLI:EU:T:2018:922, par. 1137.
8 Simon Priddis & Simon Constantine, 'The Findings and Wider Impact of the EU Pharmaceutical Sector
Inquiry' (2010) 24 Antitrust 29.
9 Guallec (n 1).
10 Pharma report 195.
11 Katrina Perehudoff & Sophie Bloemen, 'Anti-Competitive Strategies Hamper Access to Medicines in
Europe' (2011) 3 Amsterdam LF 81.
12 Case T-321/05 AstraZeneca v Commission [2010] , ECR II-2805.
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4. Conclusion

Based on the analysis provided above, it is to be concluded that reverse payment patent settlements, as
well as patent thickets, have the risk of harming competition. Even if in principle they are not anti-
competitive, it has been proven that in certain cases the practices are aimed at delaying generic entry,
therefore being anti-competitive in nature. The relevant case law points out that in these cases
interference by the competition authorities is warranted. In order to protect innovation in the
pharmaceutical sector, the competition authorities should continue to intervene via art. 101 and 102
TFEU with regards to the patent practices discussed in this paper.

Bibliography
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Primary sources

Treaties

Consolidated Version of the Treaty on European Union [2008] OJ C115/13

Case law

Case T-321/05 AstraZeneca v Commission [2010] ECR II-2805

Case T-472/13 Lundbeck v Commission [2016] ECLI:EU:C:2021:24
Case T-691/14 Servier and Others v Commission [2018] ECLI:EU:T:2018:922

Secondary sources

Articles

Guellec, Dominique, Bruno van Pottelsberghe, Nicolas van Zeebroeck, 'Patent as a Market
Instrument', The Economics of the European Patent System: IP Policy for Innovation and Competition
(online edn, Oxford Academic, 2007)

Perehudoff K & Bloemen S, 'Anti-Competitive Strategies Hamper Access to Medicines in Europe'

(2011) 3 Amsterdam LF 81

Priddis S & Constantine S, 'The Findings and Wider Impact of the EU Pharmaceutical Sector Inquiry'
(2010) 24 Antitrust 29

Reports

European Commission ‘Pharmaceutical Sector Inquiry, Final Report’ (2009)

Directorate for financial and enterprise affairs Competition Commitee ‘Excessive Prices in
Pharmaceutical Markets’ (2018)
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Links to sources

A Bad Dream Come True: ICT Patent Prosecution against EU Competition Law
Galli, Niccolo - astra zeneca, servier case
The article scrutinizes patent prosecution practices in the ICT sector under Arts. 101 and
102 TFEU in light of the CJEU case law and economic arguments pointing to their anti- and
pro-competitive effects.

Law Journal Library - HeinOnline.org (rug.nl) patent pools, also the eu patent framework

Law Journal Library - HeinOnline.org (rug.nl) reverse patent settlements and competition eu
law lundbeck case

Law Journal Library - HeinOnline.org (rug.nl) Pay-for-Delay Agreements in the EU Pharmaceutical

Industry: Patent Law and Competition Law in Light of Lundbeck
Barazza, Stefano

Core U.S. Journals - HeinOnline.org (rug.nl) Reverse-Payment Patent Settlements in the

Pharmaceutical Industry: An Analysis of U.S. Antitrust Law and EU Competition Law

Patent settlements and competition law – guidance from Europe’s top court - Allen & Overy (allenovery.com)

Blocking Patents in European Competition Law : The Implications of the Conc...: EBSCOhost (rug.nl)

Competition and Patents (wipo.int)

ttps://www.ip.mpg.de/en/research/intellectual-property-and-competition-law/field-of-research/ii-configuration-
of-intellectual-property-and-competition-law.html
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pdf (oecd.org) Licensing of IP rights and competition law – Note by the EU

Intellectual property & Competition law: an overview of EU and national case law (cornerstone.com)

Interface between Competition Law and Patents Law: A Pandora Box