On 8 September 2016, the European Union's General Court
("GC") handed down judgments dismissing actions brought
by Lundbeck and several generic manufacturers and confirmed the
fines imposed on them by the European Commission. These companies
had challenged a 2013 Commission decision that had found a breach
of Article 101 of the Treaty on the Functioning of the European
Union ("TFEU") over the conclusion of so-called
"pay-for-delay" agreements, which allegedly prevented the
market entry of a generic version of an antidepressant medicine
(see VBB on Competition Law, Volume 2013, No. 6, available
The agreements at issue involved Lundbeck's antidepressant
citalopram. The patent in the active substance citalopram had
expired, but Lundbeck still had various process patents for the
production of citalopram such as the salt crystallisation patent.
According to the Commission's decision, Lundbeck concluded in
2002 six patent settlement agreements with four generic firms
(Generics (UK), Alpharma, Arrow and Ranbaxy). Lundbeck agreed to
make a lump-sum payment while the generic firms agreed not to enter
the market for the duration of the agreement and, in some cases,
destroy their stock of generics. The Commission found that Lundbeck
and the generic manufacturers were at least potential competitors
and that the agreements constituted restrictions "by
object" in breach of Article 101 TFEU.
The GC considered first of all, that Lundbeck and the generic
manufacturers were potential competitors at the time the agreements
were concluded. The GC recalled that, in order to establish that an
agreement restricts potential competition, it must be shown that,
if the agreement had not been concluded, the competitors would have
had real possibilities of entering the market. In this respect, the
GC considered that the Commission had relied on objective factors
establishing the possibility that each of the generic manufacturers
could have entered the market, such as the investments they had
already made, the steps they had taken in order to obtain marketing
authorisations and the conclusion of contracts with suppliers of
active pharmaceutical ingredients.
The GC also held that the Commission was entitled to conclude
that the agreements constituted a restriction of competition by
object on the basis of a series of factors relating to the content,
the context and the purpose of these agreements. The GC reasoned
that the conclusion of patent settlement agreements to avoid the
cost of potential litigation was not problematic in itself.
However, the GC agreed with the Commission's assessment that
(i) the existence of reverse payments; (ii) the disproportionate
nature of these payments, combined with other factors, including
(iii) the amount of the payments calculated by reference to the
sales of the generic manufacturers had they entered the market;
(iv) the agreements did not provide a clause for the entry of the
generic manufacturers on the market after expiry of the agreement
without the risk of infringement actions being lodged by Lundbeck;
and (v) the presence of restrictions going beyond the scope of
Lundbeck's patents, were sufficient factors pointing to the
object of restricting competition.
By those payments, the GC found that Lundbeck had provided an
incentive to the generic manufacturers not to continue their
independent efforts to enter the market – thus replacing the
uncertainty as to whether the generic manufacturers would enter the
market (without being enjoined or found to infringe the patents, or
having to show the invalidity of Lundbeck's patents) with the
certainty that they would not enter during the term of the
The GC also rejected Lundbeck's claim that the
reverse-payment patent settlements did not fall within the scope of
Article 101(1) TFEU because they were ancillary to the legitimate
objective of protecting its IP rights. Under the ancillary
restraints doctrine, certain restrictions can fall outside the
prohibition of Article 101(1) TFEU if they are directly necessary
and related to the implementation of a legitimate purpose. In the
present case, the GC considered that the restrictions contained in
the agreements were not objectively necessary and proportionate, as
there were alternative means available to protect Lundbeck's
rights such as infringement proceedings or other settlement
Finally, the GC upheld the Commission's finding that the
restrictions included in the reverse-payment patent settlements did
not satisfy the conditions for exemption under Article 101(3)
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