Opinion of Advocate General Kokott delivered on 4 June 2020.

• Jurisdiction: European Union
• Celex Number: 62016CC0591
• ECLI: ECLI:EU:C:2020:428
• Date: 04 June 2020
• Court: Court of Justice (European Union)

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 4 June 2020 (1)

Case C‑591/16 P

H. Lundbeck A/S and

Lundbeck Ltd

v

European Commission

(Appeal — Competition — Agreements, decisions and concerted practices (Article 101 TFEU and Article 53 of the Agreement on the European Economic Area) — Antidepressant medicinal products — Agreements in settlement of patent disputes entered into by a patent-holding originator undertaking and manufacturers of generic medicinal products — Concept of potential competition — Concept of restriction of competition by object — Fines — Foreseeability of the anticompetitive nature of conduct — Sales to be taken into account for the purpose of calculating the amount of the fine)

Table of contents

I. Introduction

II. Background

A. Facts and administrative procedure

1. Product and patents in dispute

2. Agreements between Lundbeck and the generic manufacturers

3. Commission decision

B. Procedure before the General Court

III. Procedure before the Court of Justice and forms of order sought by the parties

IV. Assessment

A. Existence of an infringement of Article 101 TFEU (first to fourth grounds of appeal)

1. Existence of potential competition between Lundbeck and the generic manufacturers (fourth ground of appeal)

(a) Alleged existence of legal barriers to entry to the citalopram market arising from Lundbeck’s patents

(b) Alleged errors made by the General Court in its assessment of the evidence adduced by the Commission to demonstrate the existence of potential competition between Lundbeck and the generic manufacturers

(c) The appellants’ arguments claiming that there was no potential competitive relationship between Lundbeck and each of the generic manufacturers concerned

2. Classification of the agreements between Lundbeck and the generic manufacturers as restrictions of competition by object (first to third grounds of appeal)

(a) Classification of agreements not exceeding the scope of a patent as restrictions of competition by object (first ground of appeal)

(1) Asymmetry of risks between Lundbeck and the generic manufacturers

(2) The ‘counterfactual scenario’

(3) Absence of no-challenge clauses in the agreements at issue

(4) Allegation that it was novel for a penalty to be imposed in respect of patent dispute settlements

(5) Conclusion

(b) Alleged error in that the General Court found that five of the six agreements went beyond the scope of Lundbeck’s patents (second ground of appeal)

(c) Alleged error in classifying some of the agreements at issue as restrictions of competition by object even if they are assumed to go beyond the scope of the patents in dispute (third ground of appeal)

B. Fines (fifth and sixth grounds of appeal)

1. Confirmation of the fines by the General Court (fifth ground of appeal)

(a) The ‘standard for culpability’ required for the imposition of a fine

(b) Whether Lundbeck could not have been unaware of the anticompetitive nature of its conduct

(c) Principles of legal certainty and non-retroactivity

2. Confirmation by the General Court of the fine calculations (sixth ground of appeal)

(a) Sales by Lundbeck taken into account for the purpose of calculating the amount of the fines

(b) The gravity percentage applied for the purpose of calculating the amount of the fines

C. Conclusion

V. Costs

VI. Conclusion

I. Introduction

1. A certain degree of tension is often inevitable between competition and intellectual property rights since, in order to encourage research and development, those rights grant certain exclusive privileges to inventors. That principle also applies to patent law. However, in order to promote technical progress and economic development in general, inventions must, after a period of time, fall into the public domain once patent rights expire so that everyone can make use of them.

2. That latter aspect is of particular importance in the field of medicinal products, where the promotion of research by originator undertakings must be reconciled with the public interest in the marketing of generic medicinal products, which ease the financial burden on health insurance funds and help avoid unnecessary tests on humans and animals. (2)

3. While it is true that, during the validity of a patent, the proprietor has the exclusive right to use his or her invention with a view to manufacturing products and putting them into circulation for the first time as well as the right to oppose infringements, (3) a patent does not afford protection against actions brought to challenge its validity. (4) Therefore, patent disputes between competitors are part of normal competition in sectors where such exclusive rights exist, (5) and it is common practice to resolve or avert such disputes by means of settlement agreements.

4. As the European Commission itself acknowledges in the decision at issue in these proceedings, (6) such patent dispute settlements are in no way unlawful per se and may even be in the public interest as a means of conserving resources and encouraging economic development. However, patent dispute settlements become problematic when they clash with the rules of competition law because their true aim is not to resolve a patent dispute, but to forestall or delay the market entry of potential competitors.

5. In the Commission’s view, which was confirmed by the General Court in the judgment under appeal, (7) that was precisely the case in relation to six agreements concerning the antidepressant medicinal product citalopram, entered into by the originator undertaking Lundbeck and several manufacturers of generic medicinal products. In its appeal, Lundbeck challenges that analysis and argues that it is based on a series of errors of law and that the agreements at issue were not such as to attract a penalty under competition law.

6. The present case thus arises in the context of the case culminating in the judgment of 30 January 2020, Generics (UK) and Others, (8) in which the Court set out the criteria for determining whether an agreement in settlement of a dispute between the holder of a pharmaceutical patent and a manufacturer of generic medicinal products is contrary to EU competition law, and the ‘Servier’ cases, currently pending before the Court, in which the Commission found that agreements in settlement of patent disputes infringed EU competition law. (9)

II. Background

A. Facts and administrative procedure

7. H. Lundbeck A/S is a company governed by Danish law which controls a group of companies, including Lundbeck Ltd, established in the United Kingdom (taken together, ‘Lundbeck’ or ‘the appellants’), specialising in the development and distribution of pharmaceuticals for the treatment of disorders in the central nervous system, including depression. (10)

1. Product and patents in dispute

8. Lundbeck’s products include an antidepressant containing the active pharmaceutical ingredient (‘API’) citalopram. Lundbeck first obtained patents for that API itself as well as for alkylation and cyanation manufacturing processes. As regards the European Economic Area (‘EEA’), the protection afforded by those original patents and, where appropriate, the supplementary protection certificates, (11) expired between 1994 (for Germany) and 2003 (for Austria). In the specific case of the United Kingdom, the original patents expired in January 2002. (12)

9. Over time, Lundbeck developed other, more effective, processes for the production of citalopram, in respect of which it applied for and often obtained patents in several EEA countries as well as through the Patent Cooperation Treaty of the World Intellectual Property Organisation (WIPO) and from the European Patent Office (EPO). In particular, between 2001 and 2003, Lundbeck obtained patents for the production of citalopram by processes using amide and iodo, respectively, and for the production of citalopram by crystallisation and film distillation (‘the patents in dispute’). (13)

10. Lastly, Lundbeck planned to launch a new antidepressant medicinal product, Cipralex, based on the API known as escitalopram (or S-citalopram), by the end of 2002 or the beginning of 2003. That new medicinal product was designed for the same patients as those who could be treated by Lundbeck’s patented medicinal product Cipramil, based on the citalopram API. The escitalopram API was protected by patents valid until at least 2012. (14)

2. Agreements between Lundbeck and the generic manufacturers

11. In 2002, Lundbeck entered into six agreements concerning citalopram (‘the agreements at issue’) with four undertakings active in the production or sale of generic medicinal products (‘the generic manufacturers’).

12. In the first place, Lundbeck entered into a first agreement covering the territory of the United Kingdom with the English undertaking Generics UK Ltd, controlled by Merck KGaA through Merck Generics Holding GmbH (taken together, ‘Merck (GUK)’), which came into effect on 24 January 2002 and expired on 1 November 2003. That agreement essentially stipulated that Merck (GUK) would deliver its stock of generic citalopram to Lundbeck and that Lundbeck would sell citalopram to Merck (GUK) for resale in the United Kingdom and make significant value transfers to Merck (GUK). In total, over the entire term of that agreement, Lundbeck transferred the equivalent of EUR 19.4 million to Merck (GUK). (15)

13. Furthermore, Lundbeck entered into a second agreement with Merck (GUK) covering the EEA, which came into effect on 22 October 2002 and expired on 22 October 2003. Under that second agreement, Lundbeck was to pay Merck (GUK) the sum of EUR 12 million, in exchange for which the latter undertook not to sell or supply pharmaceutical products containing citalopram in the territory of the EEA (with the exception of the United Kingdom) and to use all reasonable efforts to ensure that Natco Pharma Ltd, the producer of the API of its citalopram, ceased to supply citalopram and products containing...