Dutch Supreme Court: Patentee not liable against health insurer for patent enforcement against generic

Background

AZ markets its product Seroquel® (quetiapine) in immediate release (IR) and delayed release (XR) dosage forms. After expiry of the compound patent for quetiapine, AZ relied on a patent protecting the XR formulation of quetiapine (“XR patent”).

Sandoz initiated revocation proceedings against AZ with respect to the Dutch part of the XR patent. The District Court of The Hague in first instance upheld the validity of the XR patent. Sandoz lodged an appeal against this decision.

Pending the appeal, AZ initiated preliminary injunction proceedings against Sandoz for infringement of the XR patent because Sandoz was planning to put generic quetiapine XR on the market. Sandoz argued that the Provisions Judge should not follow the validity decision on the merits, because that decision would contain manifest errors and AZ’s initiate preliminary injunction claim would merely serve to cause harm to Sandoz. The Provisions Judge denied Sandoz’ defenses and enjoined Sandoz from marketing its generic quetiapine XR product in the Netherlands. AZ enforced the preliminary injunction by serving the decision on Sandoz.

About ten months later, the Court of Appeal of The Hague revoked the Dutch part of the XR patent for lack of inventive step. Following the revocation decision, generic launches of quetiapine XR took place and Menzis decided to adopt Accord’s generic quetiapine XR in its preference policy.

The first and second instance decisions

Health insurer Menzis held AZ liable for damages arising from unlawful act or unjustified enrichment as a result of the enforcement of the preliminary injunction. Menzis argued that it had to reimburse the price of the originator product instead of a cheaper generic product, while AZ was allegedly enriched by profits generated with use of its retrospectively unjustified market exclusivity.

The District Court held that AZ had been unjustly enriched at the expense of Menzis and ordered AZ to pay the damages suffered by Menzis. This decision was overturned by the Court of Appeal, which held that AZ was not liable towards Menzis.

The Court of Appeal considered that there is no strict liability vis-à-vis third parties, such as Menzis. The Court of Appeal found that AZ did not know nor should have known in the circumstances of the case that there was a serious chance that the patent would be revoked in opposition or national court proceedings. For this reason, the Court of Appeal did not need to answer the question whether AZ would be liable for acting unlawfully towards Menzis if AZ knew or should have known that such a serious chance was present.

The Court of Appeal also rejected Menzis’ claim based on unjustified enrichment. For the same reasons that it did not accept that AZ had acted unlawfully, the Court of Appeal considered that the enrichment did not have an unjustified nature. The profits that AZ gained with quetiapine XR were considered to be the justified result of sales agreements with respect to these products.

The Supreme Court decision

Menzis filed an appeal with the Supreme Court, arguing inter alia that the Court of Appeal wrongly decided that there was no unjustified enrichment in view of its finding of no unlawful act. The Supreme Court agreed with the basic principle that the mere ruling that AZ did not act unlawfully does not mean per se that the enrichment was justified. The Supreme Court however held that the Court of Appeal did not reject the unjustified enrichment claim solely on this ground but on the basis of various circumstances.

Menzis further complained that the Court of Appeal set too high a threshold for culpability in the context of unlawful act. The Supreme Court did not accept this complaint because the Court of Appeal took various circumstances into account when concluding that AZ did not know nor should have known that there was a serious chance that the XR patent would be revoked:

a) The District Court had held the patent valid in first instance.

b) AZ’s position with respect to the closest prior art document was not clearly incorrect.

c) The revocation decision of the UK High Court did not mean that AZ knew or should have known that there was a serious chance that the Dutch part of the patent would be revoked. In principle, a patentee may rely on a decision on the merits of a Dutch court confirming the validity of a patent. Furthermore, there were also foreign decisions that reached the same conclusion.

The Supreme Court concluded that AZ could rely on the validity decision on the merits of the District Court, also in view of the fact that several foreign courts had decided similarly.

Comment

The decision of the Supreme Court shows that liability of a patentee towards a third party, such as a health insurer, for enforcement of a preliminary injunction decision against another party, such as a generic company, is not easily accepted.

Authored by Ruud van der Velden, Gertjan Kuipers, and Dirk-Jan Ridderinkhof