SPCs, competition and refusal to supply

SPCs are frequently viewed from the mechanical perspective of the apparently endless sequence of arbitrary steps that have to be taken to secure the formalities that are a necessary condition for extending a patent's life, if not a sufficient one. For this reason it is easy to overlook their interest to competition lawyers.

Two SPC-related items were found on the website of the International Competition Network (ICN) in the context of the Italian Competition Authority's responses last month to a questionnaire on "refusal to deal" -- something that competition lawyers dislike because of its damage to their beliefs in how markets should operate and the philosophy of "everything has its price", but which IP owners regard as part of their patrimony.

The questionnaire sought information on ICN members’ analysis and treatment under their antitrust laws of the refusal of a company to deal with a rival, to give an overview of law and practice in the responding jurisdictions regarding refusals to deal and the circumstances in which they may be considered anticompetitive. "Refusal to deal” is defined as

"the unconditional refusal by a dominant firm (or a firm with substantial market power) to deal with a rival. This typically occurs when a firm refuses to sell an input to a company with which it competes (or potentially competes) in a downstream market. For the purposes of this questionnaire, a refusal to deal also covers actual and outright refusal on the part of the dominant firm to license intellectual property (IP) rights, or to grant access to an essential facility".

"Constructive” refusals to deal, characterized here by a dominant firm’s offering to supply its rival on unreasonable terms (e.g., extremely high prices, degraded service, or reduced technical interoperability) fall within this definition, as does the "margin-squeeze,” which occurs when a dominant firm charges a price for an input in an upstream market, which, compared to the price it charges for the final good using the input in the downstream market, does not allow a rival on the downstream market to compete.

The first SPC reference is to Glaxo - Active ingredients (Italian Competition Authority case A363 Glaxo-Principi attivi, decision n. 15175 of 8 February 2006), published in Bulletin no. 6/2006:

"In February 2006 an investigation into the pharmaceutical group Glaxo concluded with the finding of abusive practices in violation of Article 82 of the EC Treaty. Glaxo refused to grant Fabbrica Sintetici Italiana (FIS), a chemical-pharmaceutical undertaking, a licence to produce an active drug ingredient known as Sumatriptan Succinato, covered in Italy by a supplementary protection certificate, for use in other Member States (in which Glaxo no longer held any patent-rights) in the production of generic drugs known as triptans for the treatment of migraines. The Authority found that Glaxo, in additipn to holding a quasimonopoly on the production of Sumatriptan Succinato worldwide, occupied a dominant position in the Spanish and Italian markets for the production and marketing of triptans sold through hospitals. In these markets Glaxo held a particularly high market-share, equal to about 96% in Italy and 58% in Spain. As for the possibility of access for potential competitors, all the products sold in the markets concerned were found to be covered by industrial patent-rights, which were due to lapse between 2008 and 2012, with the exception of Sumatriptan Succinato which was not covered by any patent in the Spanish market. Based on the investigation’s findings, the Authority deemed that Glaxo’s refusal to grant the requested licence constituted an abuse of dominant position in violation of Article 82 of the EC Treaty, since its refusal hindered the production of an active ingredient needed by producers of generic drugs, potential competitors of Glaxo, to access national markets where Glaxo did not have any exclusive rights. The Authority considered this conduct had no objective justification".

The second SPC reference is Italian Competition Authority case A364 - MERCK-PRINCIPI ATTIVI, decision no. 16597 of 21 March, 2007, published in Bulletin n. 11/2007:

"In A364 Merck the Authority, with a view to ensuring that, pending the outcome of the investigation, Merck’s behaviour would not continue to cause serious and irreparable harm in the markets concerned, adopted interim measures obliging the company to issue without delay – and at least for stockpiling purposes – licences authorising the production in Italy of Imipenem Cilastatina. In accordance with this ruling, in August 2005 Merck issued a license to the chemical firm Dobfar to manufacture this active ingredient, whose Supplementary Protection Certificate expired in January 2006. In November 2006 Merck presented a commitment under Article 14-ter of Law no. 287/1990, offering free licenses to manufacture and sell the active ingredient Finasteride and related generic drugs, even though the Supplementary Protection Certificate does not expire until 2009. The Authority deemed that this commitment was likely to result in the permanent removal of any anticompetitive effects flowing from Merck’s former refusal to grant licences".