The issue of compulsory licenses for patent rights to pharmaceuticals is becoming more and more controversial in Russia, due to the growing number of important court rulings involving compulsory licenses affecting leaders of the pharma industry over the last few years.
Key Elements of the Russian Rules
According to the Russian Civil Code, the court can uphold the claim of a claimant (i.e., the intended compulsory licensee) to be issued a license for the invention, utility model, or industrial design (objects) owned by the defendant (i.e., the patent owner), in two scenarios: (1) if those objects are not used or are insufficiently used by the patent owner for four years from the patent issuance (for patents and industrial designs), and for three years from the patent issuance (for utility models), which results in such products being insufficiently offered on the market. If the claimant is willing and ready to use such objects but the patent owner refuses to grant to the claimant a license on fair market terms, the claimant can bring a claim for a compulsory license; (2) if the owner of a later-registered patent (a second patent or dependent patent) cannot use the patented invention without violating the rights of the earlier-registered patent (the first patent), and the first patent owner refuses to grant the second patent owner a license on fair market terms. The claim of the second patent owner in that case will be granted if the second patent owner proves that the invention patented by the second patent owner represents an important technical achievement and possesses significant economic advantages over the invention possessed by the first patent owner.
Practical Application of the Rules
In practice, the most sensitive disputes over compulsory licenses in Russia have arisen in connection with patents on pharmaceutical substances mostly owned by multinational pharma companies such as AstraZeneca, Bayer, Bristol-Myers Squibb, Pfizer, etc.
A common claimant in these disputes is Russian-based company OOO Nativa, which is involved in the commercialization of generic medicines. Within the last five years several such court disputes took place, usually involving hearings in multiple court instances, and all very complex. Each case has raised questions about how exactly the criteria of insufficient use, important technical achievement and/or significant economic advantages should be approached in order to achieve a fair balance of rights.
At present, Russian court practice is shifting towards more frequently supporting claimants against senior patent owners. The state tends to support local manufacturers of generics, partly because of a lack of financing for clinical trials and the development of medicines. On the other side, generic manufacturers are themselves acting aggressively on the market and often have their medicines registered with the Russian healthcare authorities even before the expiry of the original patent validity terms (this was repeatedly recognized as patent infringement by courts), and then file a court claim to obtain a compulsory license against the original patent owners.
In one prominent case, OOO Nativa and Mr. Mikhaylov vs. Celgene Corporation, the court partially satisfied the claimant’s claim to have Celgene issue a compulsory license on the following terms: (1) the volume of use includes the manufacture, application, offer for sale, sale and storage of pharmaceuticals containing lenalidomide as an API; (2) the amount of license fees is 30% of the revenue part of the price; and (3) the payment is to be made annually.
Celgene unsuccessfully appealed and only thereafter were the parties able to amicably settle the dispute.
In another case, OOO Nativa vs. Sugen LLC and Pharmacia/Upjohn Company, OOO Nativa claimed that its patented invention is dependent on the defendant’s invention, and won. The courts of several instances supported OOO Nativa’s demand for a compulsory license from Sugen in connection with the preparation based on sunitinib as an API. The latest development in the case was the higher court’s refusal to consider the case at the Economic Dispute Collegium of the Supreme Court.
These examples signal the controversial trend and apparent difficulties for pharma patent owners to protect their rights on the Russian market. Such vague criteria as “important technical achievement” are still assessed very subjectively by different experts and courts, and it is difficult to rely on any solid position here. There is also no doubt that Russian authorities often tend to support local generic manufacturers due to political reasons. Nevertheless, all industry participants hope that the higher courts will eventually elaborate more solid approaches that would be of benefit in making the concept of compulsory licenses more balanced and transparent.
By Julien Hansen, Partner, Julianna Tabastajewa, Counsel, and Pavel Arievich, Legal Director, DLA Piper Moscow