Who’s Who Legal brings together five of the leading practitioners in the world to discuss key issues facing patent litigation specialists today.
WWL: Several lawyers have reported that patent litigation, particularly in the pharmaceutical industry, has picked up over the last year. Has this been the case in your jurisdiction and what do you see as the key reasons for this trend?
Gill Grassie: There have been signs that instances of pharmaceutical litigation/disputes are increasing in the UK generally. In the Scottish jurisdiction such litigations have tended to be less common given that it is, relatively speaking, a smaller country. However, the Scottish Court of Session has jurisdiction to hear UK and EU (UK) patent cases. It can deal with infringements of these on a UK-wide basis depending on certain jurisdictional issues and with their validity UK-wide in all cases. The Scottish life sciences sector is very healthy and is home to a large number of fledgling companies as well as some more mature ones. There are likely to be more disputes in Scotland in future as patent applications come through for what is now for the most part early-stage technology. Medical device companies in particular are on the rise in Scotland.
One of the key reasons for an increase in pharmaceutical patent disputes maybe the continuance and acceleration of a phase in which patents over blockbuster drugs are expiring – the “patent cliff”. It could be that this makes rights owners feel they need to defend the patent rights they may still retain for these, for example in the form of SPCs or improvement patents, from attack by the generics. Also as regards patent disputes more generally we believe that the more positive economic news is instilling confidence in businesses to spend more to defend their IP assets.
David I Gindler: This is definitely the case in the United States and the reason is rather basic: innovation. We are seeing entirely new market segments that, several years ago, did not even exist. For example, there is a vibrant new industry for non-invasive prenatal diagnostics, a process of DNA analysis performed on a blood sample from a pregnant woman to determine, with a very high degree of accuracy, whether the foetus is at risk for abnormalities such as Down’s syndrome. This is one of a number of new market segments fuelled by the enhanced power and declining cost of DNA sequencing. Other new important fields include RNA interference with leaders such as Alnylam Pharmaceuticals.
Simon Dack: Pharmaceutical and biotech patent litigation is busier than ever. The sector has had its share of setbacks over the years, with a meagre pipeline of new drugs, cut-throat competition in the takeover market for the smaller players with interesting molecules, and lack of certainty on the regulatory side. Much time and effort is expended on just trying to keep hold of one’s market share, and that tends to mean more litigation on secondary and tertiary patents.
The deplorable state of the law on SPCs, with a poorly drafted European instrument being interpreted by non-specialist judges at the Court of Justice of the European Union, has also led to wave after wave of unpredictable and often incomprehensible decisions issuing on the topic. It is because of the large sums at stake, and the uncertainty of the jurisprudence, that litigants continue to take SPC matters up to the highest European Court. The lack of clarity drives litigation. That means more business for lawyers, but it is a great shame for the industry: Europe’s pharmaceutical companies on both the innovative and generic side deserve swifter, more predictable, and better reasoned decisions.
Trevor Cook: From a UK perspective, if this is indeed the case it probably reflects more of a relatively quiet 2012 and 2013 in the English courts than a major trend. In 2012, in pharma, only two small molecule and one protein case went to trial in the English courts out of a total – in all areas of technology – of 16 final decisions after a full witness action; in 2013 the figures were the same out of a total, in all areas of technology, of 19 final decisions after a full witness action. There are indeed more pharma cases in the Patents Court pipeline for 2014 than that, but as for whether all of them will actually go to trial, only time will tell. But even if they do, it will still be a far cry from the days when nearly half the English patent decisions concerned pharma, which is only to be expected given the challenges that the industry has been facing globally in light of its historically reduced productivity in terms of bringing new molecules to market, meaning that we are now far down the “patent cliff” , if not necessarily at the bottom of it. Even if that productivity were to improve, it would not be manifested in more patent litigation for a long time to come.
Johanna Lilja: During the last decade there has been a steady flow of pharmaceutical patent cases in Finland. This stems from Finland’s late introduction of product patent protection for pharmaceuticals. Until recently, most blockbuster drugs on the market have been protected by so-called analogous process patents instead of product patents. This, combined with the fast-track process offered for generic pricing and reimbursement applications as well as the data exclusivity periods applicable to these products, has made Finland a lucrative country for early market entry for generic products leading to significant number of litigation cases between innovators and generics. (This litigation has also created very interesting case law on the scope of the reversed burden of proof provision based on Article 34 of the TRIPS Agreement.)
These types of patent cases will slowly cease towards the end of the decade once the last SPCs granted based upon analogous process patents will have expired, but the follow-up proceedings, including damages actions, may also continue thereafter.
There are, however, several active cases concerning other types of patents as well, including invalidation actions relating to SPCs and second medicinal use patents – in accordance with the general trend in Europe. It seems that the pharmaceutical sector continuously generates a significant portion of the patent cases, which is consistent with the importance of patent protection in the field. However, it is also a result of increased competition in a market situation where the pipeline of new products of many innovators has become slimmer, more stringent regulatory requirements have been introduced and the market access for new products has become slower due especially due to government budget reasons.
As to the future trends, the establishment of a specialised IP Court in Finland in September 2013 offering centralised judicial and technical expertise and faster handling times may increase the interest in having pharmaceutical patent cases tried in Finland (at least before the Unified Patent Court is up and running).
WWL: Major patent cases are routinely global in nature, with a key consideration being the interaction of differing domestic laws. Do you find that clients are increasingly comfortable using the same firm across a number of jurisdictions, or is there a stated preference for local expertise? How does your firm tackle the coordination of multi-jurisdictional cases?
Gill Grassie: It depends on the client. However, most companies that we deal with prefer to know they are getting local expertise with knowledge of the local nuances/trends that offers. They also want their key law firm to have the ability to be able to select advisers from around the world to ensure consistent quality of commercial advice and service in the area of IP. This is something that global law firms often cannot always offer due to the nature of their exclusive arrangements. We select appropriate local expertise and manage multi-jurisdictional cases for our clients acting as a single point of contact if required.
David Gindler: My own law firm is based in Southern California and has no foreign offices, so my own experience with multi-jurisdictional litigation always involves working with different firms in different countries. But I think that’s generally the rule – sophisticated clients are looking for the best practitioners in every jurisdiction, whether the matters are related or not. Even if a given firm has offices in multiple jurisdictions, I find that clients are not looking to find one particular law firm that can cover as many jurisdictions as possible. They are looking for the practitioner best suited to solve the problem that exists in any given jurisdiction.
Simon Dack: Large clients are quite sophisticated in their choice of law firms. They realise that a one-stop global banner firm, however outstanding in some jurisdictions, may not necessarily have the right level of technical expertise across all legal areas. They therefore tend to mix and match, to ensure they have the best possible team dealing with their case.
It is a fact of life that many large pharmaceutical cases are divided up in London or the US, and so for continental firms, it is imperative to have a good track record of involvement with top-tier litigation, and to maintain good relationships with English and US firms. The best way to do that is to repay the faith they had in you in suggesting that the client instruct you in the first place, by doing the very best job you can. The European patent bar is small, and refreshingly civilised. You get to know each other quite well, over the years.
For some cases, the coordination will be carried out by an English firm of solicitors, and they will decide, together with the client, on the coordination model they wish to use. Occasionally, all of the communication with the client will go via the one firm, so that the client has a single point of contact. It is often more productive, however, to have a small core team of litigators from different jurisdictions, working together closely with the client in order to manage the overall litigation strategy. That way, the danger of tunnel vision is largely avoided, and strategic choices can be discussed and challenged with input from different national perspectives. That is certainly the way we advocate running cross-border litigation if the client has asked us to take care of the coordination. Whichever model is used, communication, and the sharing of resources and intelligence, are absolutely critical. You need to be able to exploit and leverage errors made by the other side. It is often the side that is better coordinated that prevails.
Trevor Cook: What the clients value most in my experience is coordination, so that a position is not taken in one country that undermines one taken in another. Local expertise is always critical, but there are many ways of delivering that, and one should not necessarily assume that any one single way is best. As to my own firm, I’m still very new to it so I do not think it would be right for me to comment yet on the fine detail of how they go about this except to observe that what I have seen so far has impressed on me an aspect of effective coordination of which I think I had perhaps rather lost sight, namely the value to this of good forward planning.
Johanna Lilja: Generally, clients appreciate counsels with comprehensive understanding on how patent litigation and licensing strengthen the realisation of the client’s business strategy. This is exhibited by the preference to maintain strategic counsels that are close to the client on a worldwide basis and who advise the company across jurisdictions in making the best choices in a variety of IP projects. In any jurisdictions, there is nevertheless a clear preference for local expertise; clients, together with their strategic or lead counsel, usually “cherry-pick” the team in each jurisdiction best suited for the case in question. The personal qualifications of the local counsel seem more important than the brand of the firm.
In practice, coordination of litigation between various law firms has become increasingly efficient through the use of electronic tools, such as joint databases enabling seamless cross-border project management. This enables the use of a coordinating counsel as such practice does not necessarily incur additional or double fees, which may have been a concern in the past.
With one of the largest teams of IP and life sciences lawyers in the Nordic region, our practice at Roschier builds heavily on cross-border and cross-firm collaboration. When we coordinate patent litigation we use our network and pick the team suitable for the matter at hand. As jurisdictions vary, it is essential to have a constant flow of cross-border assignments so that you learn how your network functions best. To ensure that our clients receive the same level of service no matter where their litigation may take them, we also actively seek out and participate in business development opportunities with leading practitioners and law firms in other regions and invest in developing deep relationships with them. This collaborative, integrated approach is mandatory in this industry where patents are the key asset class and value drivers. Working closely with a cross-cultural team of experts is also highly rewarding both professionally and personally.
WWL: Many have pointed to the ever-increasing complexity of patents in the life sciences field, with questions also being raised as to what constitutes patentable subject matter, particularly in the biotechnology sector. Have you encountered these issues? How do you expect regulations and case precedent to develop in response?
Gill Grassie: I do not prosecute patents and so this issue does not come up for me in that context. Nor am I a regulatory expert. Therefore I am not best placed to comment on that aspect. The law may develop over the years to come to be more expansive in the definition of what is patentable in this sector and to narrow down the morality based exception. This may be a result of the development of more and more life-saving treatments and devices using biotech techniques in combination with a shift in the public’s view on what is and what is not ethically acceptable.
David Gindler: This issue is front and centre in patent litigation in the United States, not only in life sciences but in other areas as well. There has been recent guidance from our Supreme Court on the question of patentable subject matter in the Prometheus and Myriad cases. But the application of these principles to new technologies will raise important questions about the availability of patent protection arising from discoveries of previously unknown natural phenomena. I’ve seen this issue arise in hotly contested litigation involving a patent covering certain basic techniques to detect cell-free DNA of foetal origin circulating in the bloodstream of a pregnant woman (a technology that can be used, for example, in a process to determine whether the foetus is at risk for abnormalities such as Down’s syndrome). We were successful in invalidating all asserted claims of the patents. The case is now on appeal to the Federal Circuit, and we can expect further appellate guidance on these important questions. While there have been many proposals for new patent legislation in the United States in the past year, most of them address concerns arising from non-practising entities and none of them really addresses issues of this nature.
Simon Dack: There is a significant anti-patentee sentiment abroad at the moment. Strong lobbying by an organised group of plant breeders, for example, has led to carveouts being incorporated in some national and, significantly, future European patent laws allowing plant breeders to commit what would until recently have been regarded as acts of patent infringement with impunity in the plant breeding sector. Effectively, an area previously recognised as being subject to patent law has been disenfranchised. Plant breeders want to go even further – rather than merely limiting the patentee’s right to exploit his or her patent, they want to ensure that patents cannot be granted on plants or plant materials in the first place.
I think that is a step in the wrong direction, since it removes any stimulus on the part of the bigger agricultural players to innovate. Why would you want to develop new and better crops, if everyone – not just small breeders, but also your competitors – is free to take the fruits of your inventive endeavour without recompensing you for working with the invention? It is in some ways similar to the problems faced by the music industry. Everyone wants free content, but no one stops to think about the consequences for the creative process. The difficulty is that Brussels is a very political place, and the lobbyists know which buttons to press to obtain the results they want. Big agriculture is out of favour at the moment. The same is true of Big Pharma: one only has to think of the European Commission’s crowing about the sector investigation it carried out a couple of years ago, and the scrutiny patent settlements have been under since then.
Trevor Cook: I’m not sure that I would agree that the patents in this field are more complex than they used to be. The perception may reflect the fact that less pharma patent litigation going forward involves small molecules and an increasing amount of it will involve monoclonal antibodies and many of the basic patents in that area are complex, but they have always been that way.
Johanna Lilja: The complexity of patents is a common discussion topic with life sciences sector clients. Especially the efficiency and availability of patent protection for biotech products and personalised medicines seems to raise concerns. For personalised medicines to succeed, the patent system will need to provide adequate protection as an incentive for R&D.
Case law is slowly developing both in the US and in Europe. In the US, the Prometheus and Myriad cases have raised the threshold of what is considered a permissible patent application in the field of gene patents. In the EU, the recent referral by the UK High Court of the International Stem Corporation case in 2013 to the ECJ is expected to give guidance on stem cell patenting. Going forward, case law is likely to continue developing both at EPO and ECJ level, but case law by national courts within Europe may also have an increased significance in areas where case law is scarce and law drafting slow due to the complexity as well as the political and ethical dimensions of the questions at dispute. It is clear that the limited amount of case law does not sufficiently clarify the relevant legal issues, which inevitably leads to an increased amount of litigation. This is not optimal for the industry in terms of predictability of business opportunities and risks.
WWL: What do you foresee in the coming year in terms of major trends in the life sciences patent litigation sector?
Gill Grassie: As the sector grows and matures in Scotland certainly patent disputes are likely to ensue and increase. Thus, there is likely to be a continual drive by patent proprietors for a wider scope of patentable subject matter.
The outcome of all of the recent UPC developments in terms of who will opt out is uncertain and Big Pharma seems for the time being keen to stay out at least initially to avoid the risk of pan EU validity attacks. To the extent that the UPC becomes favoured by the pharma and biotech companies clearly the London Central Division will be the hub for this type of patent litigation. Choices in filing strategies will become more complex given the various different EU/UK regimes that will apply as well as transitional provisions. Forum shopping will also continue and become more prevalent as the UPC will offer some interesting tactical options.
David Gindler: I think we will continue to see more and more litigation over the issue of patentable subject matter. As scientists look for genetic and other markers that correlate to disease states, we will see patents that test the boundaries between discoveries of natural phenomena (which are generally not patentable) and novel applications of those natural phenomena (which may be patentable). Another important area will be the nascent market for biosimilars, and the inevitable storm of litigation that will arise as new players (and some old players) seek to reap substantial new economic rewards that will become available in the field of biologics.
Simon Dack: Technically, we have already seen some of the biotech litigation coming through, and a slight tail-off in small molecule work. Biotech litigation will continue to grow, as products pass the regulator hurdles and approach market-readiness. So there will be rather more antibody and genetics cases reaching the courts. Some of the older patents seeking to monopolise binding sites, or biological mechanisms of action, or screening methods are likely to be litigated over the coming years.
Another growth area over the next few years is likely to be biosimilars. It is a developing area, and one in which the traditional boundaries between innovator and generic are becoming blurred. Innovative companies are realising they too should be involved in the action. Where companies like Samsung and Biogen are partnering in order to come up with a biosimilars programme, high-end patent litigation is almost inevitable.
On the other hand, I don’t see the new unitary patent system bringing about much a change in the near to medium term. It is an untried and untested formula, and it would take a lot of courage to commit one’s protection strategy to it at this embryonic stage. It is sometimes suggested that pharmaceutical and biotech companies may wish to experiment by using the new system for their less important portfolios, but I don’t really see that happening. It is impossible to know which patent is likely to be the crucial one further down the line.
I can, though, well imagine pharmaceutical and biotech companies engaging in “gaming” activities, and doing all they can to keep their options open. So we will see them splitting off divisional applications from a European patent application and turning them into unitary patents in order to obtain a swift cross-border injunction, without however risking the entire patent estate. And they will make more use of the cross-border possibilities already open under the present system. Forum shopping – an ailment the new system was supposed to cure – will be elevated to an art form.
It is also possible that there will be a shift back to national means of protection, to ensure the risk is spread. If European, unitary and national protection means are used, the result will be that patent protection and enforcement will become more expensive than it was before: an unfortunate and unintended consequence of the new system. We will see how it pans out in practice.
Trevor Cook: Now that we are starting to see more biosimilars or biobetters, notably monoclonal antibodies, coming to market we will see more litigation in that area, although given the age of some of the basic patents in that area much of that litigation may concern more traditional issues such as new medical uses.
Johanna Lilja: Increased business opportunities within the medical devices and biotech sectors are likely to increase the amount of patent litigation in these fields too.
As to pharma patents, litigation on the validity of SPCs and second medical use patents continue to be topical in the coming year, and so will be the issue of “skinny labelling” by generics in patent infringement cases; it remains to be seen to what extent injunctions will be granted in various jurisdictions in cases of carving out indications. Disputes relating to biosimilars are likely to be an increasing trend in the future changing the traditional battle field in pharma litigation between innovators and generics somewhat. Patent settlement agreements will continue to be in the spotlight.
As a strategic question, pharma companies will need to decide on how to prepare for the new patent litigation era in the EU and decide upon new patenting strategies, which may have an impact on both enforcement possibilities and vulnerability of key patents.
In light of these trends, clients increasingly expect that their external counsels have a comprehensive understanding of the client’s business, and that they are able to combine IP, regulatory, competition and strategic expertise to ensure that the clients’ product strategy is as successful as possible.