Sun Pharmaceutical Industries Ltd, anciennement Ranbaxy Laboratories Ltd and Ranbaxy (UK) Ltd v European Commission.
Date: 2021-03-25
As regards, in the first place, the test applied by the General Court to establish that Sun Pharmaceutical and Lundbeck were potential competitors, it should be recalled at the outset that if the conduct of undertakings is to be subject to the prohibition in principle laid down in Article 101(1) TFEU, that conduct must not only reveal the existence of coordination between them – in other words, an agreement between undertakings, a decision by an association of undertakings or a concerted practice –,  but that coordination must also have a negative and appreciable effect on competition within the internal market (judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 31).
The latter requirement means, with respect to horizontal cooperation agreements entered into by undertakings that operate at the same level of the production or distribution chain, that the coordination involves undertakings who are in competition with each other, if not in reality, then at least potentially (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 32).
In order to assess whether an undertaking that is not present in a market is a potential competitor of one or more other undertakings that are already present in that market, it must be determined whether there are real and concrete possibilities of the former joining that market and competing with one or more of the latter (judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 36 and the case-law cited).
When the agreements at issue, such as the agreement at issue in the present case, have the effect of temporarily keeping a number of undertakings outside a market, it must be determined, having regard to the structure of the market and the economic and legal context within which it operates, whether there would have existed, in the absence of those agreements, real and concrete possibilities for those undertakings to enter that market and compete with the undertaking established in that market (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 37 and 39).
As regards more particularly such agreements arising in the context of the opening of a market, of a medicine containing an active ingredient that has recently entered the public domain, to the manufacturers of generic medicines, it must be determined, taking due account of the regulatory constraints that are characteristic of the medicines sector and the intellectual property rights and in particular the patents held by the manufacturers of originator medicines relating to one or more processes of manufacturing an active ingredient that is in the public domain (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 40 and 41), whether the manufacturer of generic medicines has in fact a firm intention and an inherent ability to enter the market, and that market entry does not meet barriers to entry that are insurmountable (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 58).
In order to do so, it is necessary to assess, first, whether, at the time when those agreements were concluded, that manufacturer had taken sufficient preparatory steps to enable it to enter the market concerned within such a period of time as would impose competitive pressure on the manufacturer of originator medicines. Second, it must be determined that the market entry of such a manufacturer of generic medicines does not meet barriers to entry that are insurmountable (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 43 and 45). Furthermore, the finding of potential competition between a manufacturer of generic medicines and a manufacturer of originator medicines can be confirmed by additional factors, such as the conclusion of an agreement between them even though the manufacturer of generic medicines was not present on the market concerned (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 54 to 56).
As regards, in particular, the assessment of whether there are insurmountable barriers to entry on the market concerned, the Court has stated that the existence of a patent which protects the manufacturing process of an active ingredient that is in the public domain cannot, as such, be regarded as such an insurmountable barrier, notwithstanding the presumption of validity attached to that patent, since it sheds no light, for the purposes of the application of Articles 101 and 102 TFEU, on the outcome of any dispute in relation to the validity of that patent (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 46 to 51).
Consequently, the existence of such a patent cannot, as such, mean that a manufacturer of generic medicines who has in fact a firm intention and an inherent ability to enter the market, and who, by the steps taken, shows a readiness to challenge the validity of that patent and to take the risk, upon entering the market, of being subject to infringement proceedings brought by the patent holder, cannot be characterised as a ‘potential competitor’ of the manufacturer of the originator medicines concerned (judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 46).
Furthermore, the Court has also stated that it is not for the competition authority concerned to carry out a review of the strength of the patent in question or of the probability of a dispute between the patent holder and a manufacturer of generic medicines being brought to an end with a finding that the patent is valid and has been infringed (judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 50).
Indeed, in accordance with the case-law of the Court of Justice (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others,  C‑307/18, EU:C:2020:52, paragraph 44) and as the Court of Justice has stated in the judgment delivered on today’s date in Case C‑591/16 P, Lundbeck v Commission (paragraph 88), the General Court relied on a consistent body of evidence establishing, in the present case, both the objective situation of the parties to the agreement at issue on the market for citalopram and the subjective perception that each of them had of the other party and of the strength of the process patents in question, while taking due account of the regulatory constraints that are characteristic of the medicines sector and of intellectual property rights.
As regards, in the second place, the evidence taken into consideration by the General Court, it should be recalled that it follows from Article 256 TFEU and from the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union that an appeal is limited to points of law. The General Court, therefore, has exclusive jurisdiction to find and appraise the relevant facts and to assess the evidence. The assessment of those facts and that evidence does not, therefore, save where it distorts those facts and evidence, constitute a point of law which is, as such, subject upon appeal to review by the Court of Justice. Such distortion must be obvious from the documents on the Court of Justice’s file, without there being any need to carry out a new assessment of the facts and the evidence (judgment of 12 January 2017, Timab Industries and CFPR v Commission, C‑411/15 P, EU:C:2017:11, paragraph 89).
First, in so far as Sun Pharmaceutical complains that the General Court was naïve in taking the view that Sun Pharmaceutical was entirely truthful in its negotiations with Lundbeck, it must be pointed out not only that Sun Pharmaceutical fails to identify the paragraph of the judgment under appeal in which that finding is alleged to have been made, but above all fails to indicate precisely the evidence the sense of which is alleged to have been distorted by the General Court and to show the errors of appraisal which, in its view, led to the alleged distortion. Consequently, that allegation by Sun Pharmaceutical must also be rejected as being inadmissible (see, to that effect, judgment of 20 October 2011, PepsiCo v Grupo Promer Mon Graphic, C‑281/10 P, EU:C:2011:679, paragraph 78 and the case-law cited).
Second, inasmuch as Sun Pharmaceutical complains that the General Court held, in paragraph 118 of the judgment under appeal, that Sun Pharmaceutical was is no particular hurry to obtain an MA, it is sufficient to state that, in any event, that allegation is ineffective in so far as, even if it were established, it is directed against a ground of the judgment under appeal included for the sake of completeness, as is apparent from paragraphs 114 to 117 of that judgment. It is settled case-law that complaints directed against a ground expressed for the sake of completeness in a decision of the General Court cannot lead to the annulment of that decision and are therefore ineffective (judgment of 16 September 2020, Edison v EUIPO, C‑121/19 P, EU:C:2020:714, paragraph 44).
In the present case, Sun Pharmaceutical maintains, first, that both the General Court, in paragraph 242 of the judgment under appeal, and the Commission accepted that patent settlement agreements could be legitimate and lawfully concluded before any litigation commenced. It argues that that finding involves each agreement being assessed on a case-by-case basis, having regard to the facts, background and circumstances, but not the parties’ intentions, since they involve subjective assessments which are not compatible with the requirement that a ‘restriction by object’ must be easily identifiable. With regard to the latter point, in Sun Pharmaceutical’s view, it is clear from the Opinion of Advocate General Wahl in CB v Commission (C‑67/13 P, EU:C:2014:1958, points 44 and 110) that taking account of the intention of the parties to an agreement for the purposes of assessing that agreement is contrary to the requirement that the context and the parties’ intention may only reinforce or neutralise the existence of an infringement by object, as is apparent from the judgment of 11 September 2014, CB v Commission (C‑67/13 P, EU:C:2014:2204, paragraph 88). Sun Pharmaceutical claims that it was not easily identifiable that such an agreement constituted an infringement, since it was for the Commission to examine whether the agreement at issue was motivated principally by (i) the strength of the process patents in question, the soundness of which the Commission must assess, or (ii) the reverse payment.
Second, Sun Pharmaceutical maintains that the General Court failed to identify any ‘experience’ showing that restrictions, such as those at issue, contained in a patent dispute settlement agreement had been constantly prohibited, as required by the judgment of 11 September 2014, CB v Commission (C‑67/13 P, EU:C:2014:2204, paragraph 51). In paragraph 279 of the judgment under appeal, it argues that the General Court referred to such experience – which the Commission did not do – without, however, providing supporting material. In addition, Sun Pharmaceutical argues that the General Court’s treatment of the agreement at issue as equivalent to a market exclusion agreement is not only inadmissible, since the Commission had not done so, but also incorrect in so far as the agreement at issue clearly differed from that at issue in the case giving rise to the judgment of 20 November 2008, Beef Industry Development Society and Barry Brothers (C‑209/07, EU:C:2008:643), which was not a patent settlement agreement and which had been concluded between actual competitors. In the present case, the manufacturers of generic medicines might have found it necessary not to enter the market because of Lundbeck’s lawful exercise of its rights or even the fact of no MA having been issued to them. Furthermore, Sun Pharmaceutical refers to a number of judgments of the Court of Justice in which it was held, in the context of intellectual property rights, that export bans, absolute territorial protection or open exclusive licences were not characterised as a ‘restriction by object’. In addition, it states that, in paragraph 235 of the judgment under appeal, the General Court found that the agreement at issue amounted to a ‘restriction by object’, in that that agreement ‘reflected the parties’ [justified] recognition that Lundbeck was entitled to the exclusivity agreed’. Such reasoning is, in its view, contrary to points 238 and 239 of the 2014 Guidelines on technology transfer agreements, under which agreements, such as the agreement at issue, concluded in the field of technology transfers are not characterised as a ‘restriction by object’, and contrary to point 17 of the Commission’s 6th Report on the Monitoring of Patent Settlements of 2 December 2015.
As regards the characterisation of a concerted practice as a ‘restriction by object’ in accordance with Article 101(1) TFEU, the Court of Justice has already had occasion to state, as the General Court pointed out in paragraphs 207 to 209 of the judgment under appeal, that the concept of restriction of competition ‘by object’ must be interpreted strictly and can be applied only to certain agreements between undertakings which reveal, in themselves and having regard to the content of their provisions, their objectives, and the economic and legal context of which they form part, a sufficient degree of harm to competition for the view to be taken that it is not necessary to assess their effects, since some forms of coordination between undertakings can be regarded, by their very nature, as being harmful to the proper functioning of normal competition (judgment of 30 January 2020, Generics (UK) and Others  C‑307/18, EU:C:2020:52, paragraph 67 and the case-law cited).
As regards agreements similar to dispute settlements relating to a process patent for the manufacture of an active ingredient that is in the public domain concluded between a manufacturer of originator medicines and a number of manufacturers of generic medicines and which had the effect of delaying the entry of generic medicines on the market in return for monetary or non-monetary transfers of value from the former to the latter, the Court has held that such agreements cannot in all cases be regarded as ‘restrictions by object’ within the meaning of Article 101(1) TFEU (judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 84 and 85), which the Commission also stated in the decision at issue, as is apparent from paragraph 218 of the judgment under appeal.
However, the characterisation as a ‘restriction by object’ must be adopted where it is plain from the analysis of the settlement agreement concerned that the transfers of value provided for by it cannot have any explanation other than the commercial interest of both the holder of the patent and the party allegedly infringing the patent not to engage in competition on the merits, in so far as agreements by which competitors deliberately substitute practical cooperation between them for the risks of competition clearly can be characterised as ‘restrictions by object’ (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 83 and 87).
For the purposes of that analysis, it is necessary, in each individual case, to assess whether the net gain from the transfers of value by the manufacturer of originator medicines to the manufacturer of generic medicines was sufficiently large to act as an incentive to the manufacturer of generic medicines to refrain from entering the market concerned and, therefore, not to compete on the merits with the manufacturer of originator medicines, without it being necessary for that net gain necessarily to be greater than the profits which the manufacturer of generic medicines would have made if it had been successful in the patent proceedings (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 93 and 94).
As the Court held in the judgment delivered on today’s date in Case C‑591/16 P,  Lundbeck v Commission (paragraph 121), while the conclusion by the holder of a patent with a party allegedly infringing that patent of a settlement agreement that does not exceed the scope and duration of remaining validity of that patent does constitute an expression of the intellectual property right of that holder, which permits that holder, inter alia, to oppose any infringement, the fact remains that that patent does not permit its holder to enter into contracts that are contrary to Article 101 TFEU (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 97). That is also the case even if those contracts seek to protect the commercial interests of the holder of the patent at issue which it considers to be harmed by legislation which does not protect sufficiently its intellectual property rights, since it is for the public authorities and not private undertakings both to define the relevant legal framework and to ensure compliance with it (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 88).
Indeed, as is apparent from paragraph 60 of the judgment delivered on today’s date in Case C‑591/16 P,  Lundbeck v Commission, no more than the assessment of whether the parties to a settlement agreement such as the agreement at issue are potential competitors (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 50), is the assessment of the strength of the process patents at issue of any relevance for the purposes of a characterisation as a ‘restriction by object’, where it is established that it is the prospect of that transfer of value by the manufacturer of originator medicines which has induced the manufacturer of generic medicines to refrain from entering the market (see, to that effect, judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 89).
While it is true that the existence of pro-competitive effects in the context of settlement agreements, such as the agreement at issue, is capable of calling into question the overall assessment of whether the concerted practice concerned revealed a sufficient degree of harm to competition and, consequently, of whether it should be characterised as a ‘restriction by object’, the fact remains that those effects must be demonstrated and relevant and specifically related to the agreement concerned, so that they justify a reasonable doubt as to whether that agreement caused a sufficient degree of harm to competition (judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraphs 103, 106 and 107).
While it is true that the characterisation as a ‘restriction by object’ may be applied as regards concerted practices, experience of which shows that they lead to falls in production and price increases, resulting in poor allocation of resources to the detriment, in particular, of consumers (judgment of 30 January 2020, Generics (UK) and Others, C‑307/18, EU:C:2020:52, paragraph 64 and the case-law cited), the fact that the Commission has not, in the past, considered that an agreement similar to the agreement at issue was, by its very object, restrictive of competition is not, in itself, such as to prevent it from doing so in the future, as the General Court correctly noted in paragraph 272 of the judgment under appeal. Indeed, as the General Court correctly held in that paragraph, all that matters is an individual and detailed examination of the practice concerned, which must demonstrate that that practice presents a sufficient degree of harm, in the present case the voluntary substitution of practical cooperation for the risks of competition on the merits, experience of such substitution having proven particularly harmful to free competition.
Sixth, Sun Pharmaceutical erroneously complains that the General Court relied exclusively or principally on the intention of the parties to the agreement at issue in characterising that agreement as a ‘restriction by object’. Not only, as the General Court correctly pointed out in paragraphs 212 and 265 of the judgment under appeal, may the characterisation of an agreement as a ‘restriction by object’ take account of the parties’ intention (judgment of 11 September 2014, CB v Commission, C‑67/13 P, EU:C:2014:2204, paragraph 54 and the case-law cited), but, in addition, neither the General Court nor the Commission relied exclusively or principally on the intention of the parties to the agreement at issue, taking into account principally objective factors, in particular those referred to in paragraphs 72  and 73 of the present judgment.
As regards the application of Articles 101 and 102 TFEU, there is no requirement under the law of the European Union that the addressee of the statement of objections must challenge its various matters of fact or law during the administrative procedure, if it is not to be barred from doing so later at the stage of judicial proceedings (judgment of 1 July 2010, Knauf Gips v Commission, C‑407/08 P, EU:C:2010:389, paragraph 89).