Litigation: All together now

Efforts to get EU member states to adopt a unified approach to certain areas of law is a tricky business. Kevin Roberts and Alan Owens look at two reports aiming to unify a European-wide strategy.

Litigation Special Report: All together nowPharmaceutical competition

It took approximately 10 months and 6,000 submissions, but on 28 November 2008 the European Commission published its ­preliminary report into competition in the EU pharmaceutical sector.

The report focuses on patent practices that the Commission says have the effect of delaying the entry of generic medicines into the market. This, it says, increases the cost to producers and ultimately to consumers by some 5 per cent. Are these practices anti-competitive? The report does not actually say, but identifies what it calls a “tool box” of patent practices and strategies that are used to delay or block the entry of generic ­medicines to market.

These included:
• Patent portfolios created to extend the period of protection;
• Patent litigation initiated to create ­obstacles to entry;
• Patent settlement agreements for ­generics to stay out of the market;
• Administrative interventions to authorities complaining of quality issues or questions about effectiveness;
• Marketing and distribution activities designed to question the quality of a ­generic product or cut the supply of an active ­ingredient to a generic producer;
• Lifecycle strategies to launch follow-on products shortly before the expiration period for the first-generation drug ends.

These were all looked at as being either solely or largely for the purposes of delaying or blocking the entry of generic medicines.

Any attempts by the Commission to erode the ability of companies to protect their innovations are likely to prove controversial. The suggestion that these previously ­entirely legitimate practices grouped into this ­pejorative “tool box” may be unlawful will give serious concern to many and the ­Commission may wisely choose to clarify its position in general guidance later on.

The report does once again clearly make the case for a unified patent jurisdiction in Europe. It seems difficult to argue with this as in just over one in 10 patent cases, two or more courts in different member states give conflicting judgments on the same issue.

When you factor in the cost savings, there is a pretty strong case for a single European patent court. Some have argued that the 5 per cent savings are minor next to the potential 44 per cent savings that could be afforded to consumers from greater generic-to-generic competition. This is the figure from a report by the London School of Economics released the day before the Commission’s report but which it, unfortunately, did not consider.

In light of the report’s findings and the tenor of its approach, the pharmaceutical industry will need to evaluate its practices and closely monitor the Commission’s ­activity in this area for any further clarification or explanation of its position.

Consumer collective redress

Alan Owens is a partner at Morrison & Foerster

On 27 November 2008 the European Commission issued its green paper on Consumer Collective Redress. A significant driving force behind this paper is the degree of variation across the EU in approach, application, use and proposed reform of ­consumer redress mechanisms. Consumers are increasingly purchasing from across the member states and to promote consumer confidence in such purchasing, the ­Commission considers that consumers need to know that if they have a problem their rights will be enforced and they will receive adequate redress.

The options proposed by the Commission are, however, not without controversy. One of these is a binding or non-binding EU measure to ensure the existence of ­collective judicial mechanisms in all member states to enable consumers throughout the EU to obtain adequate redress in mass claims through representative actions, group actions or test cases. Only 13 member states currently have collective redress schemes and, according to a study by the Commission, the existing national collective redress mechanisms have only been applied in a few cases in recent years.

The Commission is keen to provide some sort of consistency for consumers but this is hugely difficult across so many different member states, each with hundreds of years of legal development and often underpinned by wholly different approaches to standing, damages, judicial inquiries and procedures.

Reaching a middle ground could prove difficult. The Commission has stated that it does not envisage a US-style class action being introduced in the EU.

This being so, the other options put ­forward by the Commission are:
• No Commission action where reliance is placed on the existing national and Commission measures to achieve adequate redress for consumers;
• Cooperation between member states that would extend the protection of national ­collective redress systems to consumers from other EU countries and recommend to member states that do not have a collective redress system to establish one;
• A mix of policy instruments, non-binding or binding, to enhance consumer redress by, for example, improving alternative dispute resolution mechanisms, extending the scope of national small-claims procedures to mass claims, extending the scope of the Consumer Protection Cooperation Regulation, encouraging business to improve their complaint-handling schemes and raising consumer awareness of the existing means of redress.

The Commission has called for views on this green paper by 1 March 2009.

Kevin Roberts is a ­partner at Morrison & Foerster.

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