Recent German case-law on compulsory licences and use-up periods

Further, in a recent originator-originator pharma case the enforcement of a patent injunction was for the first time suspended for a certain time-period for public health reasons.

The compulsory license and its requirements

The grant of the compulsory requires that (i.) “the licence seeker has, within a reasonable period of time, unsuccessfully attempted to obtain permission from the proprietor of the patent to use the invention on reasonable commercial terms and conditions,” and that (ii.) “the public interest calls for the grant of a compulsory licence.”

It is possible to seek the grant in a preliminary proceeding if the matter is urgent (Sect. 85 German Patent Act). Until 2016 a compulsory license had only been granted once (in the Polyferon case in 1994) by the competent Federal Patent Court (“FPC”), but the appeals court, the Federal Supreme Court (“FSC”) had reversed the decision.

The first case in which a compulsory license was upheld by the FSC was the case relating to Merck’s anti-HIV drug Isentress (FPC judgment of 31 August 2016 – 3 LiQ 1/16, FSC judgment of 11 July 2017 – X ZB 2/17).

However, in the only published subsequent case, the compulsory license was (again) rejected. This relates to Sanofi/Regeneron’s cholesterol-lowering drug Praluent (FPC judgment of 6 September 2018 – 3 LiQ /18, FSC judgment of 4 June 2019 – X ZB 2/19). The decisions, although only given in preliminary proceedings, provide some guidance.

Unsuccessful efforts for a contractual license

Serious efforts must have been made. It must therefore not have been merely negotiated for appearance sake for the sole purpose of seeking a compulsory license.

The FSC states that it is in principle sufficient if the requirements are met at the time of the oral hearing before the deciding court. However, in any event, best efforts need to be shown both time-wise and regarding the content. In the Praluent case, the courts believed that the license request had been made too shortly before filing for the compulsory license, with a too low royalty proposal and that Sanofi/Regeneron had (in the eyes of the courts) not sufficiently reacted when Amgen did not reject the license grant outright but sought further information.

In summary, the courts concluded that the license offer had been made only pro forma for the sole reason of filing for a compulsory license, i.e. not constituting reasonable efforts. Interestingly the FPC in this context held it against Sanofi/Regeneron that Amgen had in the past rejected the grant of a license several times. The court argued that this should have caused Sanofi/Regeneron to spend more effort and time on convincing Amgen otherwise. However, one could also have drawn the contrary conclusion that Amgen was, in any case, unwilling to grant a license, so that further efforts from Sanofi/Regeneron would have been superfluous.

Public interest

Due to the high threshold, the public interest requirement will basically require a showing of serious bodily harm or death if the infringing product is removed from the market. Further, the public interest is weighed against the patentee’s interest, taking into account e.g. whether the patentee has a competing product on the market.

In the Isentress decision, the public interest was considered given based on court expert evidence that there are patients who can only be successfully treated with Isentress and who face serious side-effects or therapy failure if alternative drugs were used.
The courts considered that the patentee did not have a competing product. In the Praluent case, the patentee had their own drug Repatha on the market and Sanofi/Regeneron did not, at least not to the court’s satisfaction, convince the courts that Praluent reduced patient mortality more than Repatha. Separate studies for Praluent and Repatha had been submitted which the courts found not sufficiently comparable due to differences of study collective and study design.

Licence fee

Another decision from the FPC dealing with Isentress (FPC judgment of 21 November 2017 – 3 Li 1/16), makes clear an important caveat about seeking a compulsory license. If the patent is later invalidated (like in the Isentress case), royalties remain due for the licensed period.

Conclusions for the Compulsory License

In order to have a chance for a compulsory license, the licensing offer needs to be made so timely that at least the timing until the oral hearing would have allowed for conclusion of license (had the right holder been willing).

Comparative testing or at least studies which allow for a comparison with alternatively available products should be conducted, this is particularly relevant if alternative products have the same general mode of action. Already when seeking the license, the data or some of them may need to be disclosed to the right holder.

The license seeker needs to timely reply to all correspondence from the right holder to show that he is earnestly and in good faith seeking a license.

II. Use up period

After the FSC has in the 2016 “Wärmetauscher”-decision decided that a use-up period can be appropriate in patent cases, i.e. leading to a certain suspension period for the injunction (FSC, decision of 10 May 2016 – X ZR 114/13) but rejected it in the case at hand, the Duesseldorf District Court has very recently in a decision announced on 20 September 2019 granted a one-year suspension of an injunction in a patent case between originators, apparently to allow the switching of patients to the patentee’s products.