Judgment of the General Court Third Chamber, Extended Composition of 18 October 2023, Teva Pharmaceutical Industries and Cephalon v Commission, T-74/21

• Date: 18 October 2023
• Year: 2023

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Judgment of the General Court (Third Chamber, Extended Composition) of 18 October

2023, Teva Pharmaceutical Industries and Cephalon v Commission, T-74/21

Link to the full text of the judgment

Competition – Agreements, decisions and concerted practices – Modafinil market – Decision finding an

infringement of Article 101 TFEU – Patent dispute settlement agreement – Restriction of competition by

object – Characterisation – Restriction of competition by effect – Conditions for exemption under

Article 101(3) TFEU – Fines

In 1993, Cephalon, a United States biopharmaceutical company, obtained exclusive rights to the active

pharmaceutical ingredient modafinil, sold for the treatment of certain sleep disorders in several

countries in the European Economic Area (EEA).

The various national compound patents held by Cephalon for modafinil in the EEA expired at the

latest in 2003. However, Cephalon still owned particle size secondary patents and other modafinil-

related patents with an expiry date in 2015 in the EEA.

In 2002, Cephalon initiated patent infringement proceedings in the United States against Teva

Pharmaceutical Industries Ltd (‘Teva’) and three other generic companies, with a view to preventing

them from marketing their generic modafinil products in the United States. Since Teva launched its

generic product in the United Kingdom in June 2005, Cephalon also initiated patent court proceedings

in the United Kingdom. In turn, Teva filed a counterclaim for revocation.

At the end of 2005, Cephalon and Teva concluded a settlement agreement to end immediately their

modafinil litigation in the United States and in the United Kingdom (‘the settlement agreement’).

Under that agreement, Teva committed not to enter the market independently and not to compete

with Cephalon in the modafinil market (‘the non-compete clause’) and also not to challenge its

modafinil patent rights (‘the non-challenge clause’) (together, ‘the restrictive clauses’).

The settlement agreement also provided for a package of commercial transactions relating to, inter

alia, the granting of a non-exclusive licence from Teva to Cephalon in respect of its intellectual

property rights for modafinil, the supply of modafinil by Teva to Cephalon and the distribution by

Teva of Cephalon’s products in the United Kingdom. The payments and royalties involved in the

various transactions involved significant transfers of value to Teva. Moreover, the settlement

agreement granted a non-exclusive licence to Teva to launch its generic modafinil product, including

in the EEA, from 2012 at the latest.

Having found that the settlement agreement infringed the prohibition on agreements, decisions and

concerted practices under Article 101 TFEU and Article 53 of the EEA Agreement, the Commission

imposed fines on Cephalon and Teva amounting to EUR 30 480 000 and EUR 30 000 000,

respectively.

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Cephalon and Teva brought an action for annulment against that decision, which is dismissed by the

Third Chamber (Extended Composition) of the General Court. In that context, the Court clarifies the

recent case-law on patent disputes settlement agreements under EU competition law.

Findings of the Court

In support of their action, the applicants criticised the Commission, inter alia, for committing an error

of law and of fact in characterising the settlement agreement as a ‘restriction of competition by object’

for the purposes of Article 101(1) TFEU.

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Commission Decision C(2020) 8153 final of 26 November 2020 relating to a proceeding under Article 101 TFEU and Article 53 of the EEA

Agreement (Case AT.39686-CEPHALON) (‘the contested decision’).