The Overlap Between IP and Competition Law: Recent Lessons from Eli Lilly v. Apotex

1
The Overlap Between IP and Competition Law
Recent Lessons from Eli Lilly v. Apotex

• By Brad LimpertPartner and Co-Chair, National
  Technology Industry GroupGowling Lafleur
  Henderson LLPSuite 1600, One First Canadian
  Place100 King Street WestToronto, ON M5X
  1G5bradley.limpert_at_gowlings.com [phone]
• Presented to LES, Toronto Chapter, February 16,
  2006

2
Apotex v. Eli Lilly

• 1997 Eli Lilly commences action against Apotex
  for infringement of 7 (later 8) patents
• Patents covered processes and intermediates for
  production of Cefaclor (antibiotic)
• 4 of the patents assigned to Lilly by Shionogi in
  1995

3
Apotex Counterclaim (in part)

• Apotex alleged the 1995 assignments resulted in
  undue lessening of competition
• Contrary to s.45 of the Competition Act,
  entitling Apotex to damages under s.36 of
  Competition Act
• s.45(1)A. Everyone who conspires, combines,
  agrees or arranges with another person,
• (a) To limit unduly the facilities for
  manufacturing and supplying . . . any product
• (d) To otherwise restrain or injure competition
  unduly
• s.36(1) Any person who has suffered loss or
  damage may . . . sue for and recover from the
  person who engaged in the conduct . . . an
  amount equal to the loss or damage proved to
  have been suffered by him.

4
Apotex Counterclaim (in part)(contd)

• Twice, Apotex counterclaim (on this point) was
  struck by trial court
• First Time
• No assignment of Patent could be undue because
  authorized by Patent Act s.50
• Patent Act s.50(1) Every patent issued for an
  invention is assignable in law . . .

5
Apotex Counterclaim (in part)(contd)

• Molnlycke v. Kimberly-Clark
• Certainly the existence of a patent is apt to
  limit, lessen, restrain or injure competition
  monopolies do but its issuance and the inherent
  impairment of competition has been expressly
  provided for by an Act of Parliament, which has
  made provision for compulsory licensing in
  circumstances where it has considered the
  ordinary incidence of the statutory monopoly to
  be contrary to public policy. It is the
  existence of the patent, not the manner in which
  issue was obtained or how and by whom its
  monopoly is agreed to be enforced and defended,
  that impairs competition.
• F.C.A. Where there is something more than the
  mere exercise of Patent Rights, Competition Act
  not necessarily excluded

6
Apotex Counterclaim (in part)(contd)

• Second Time
• There was no agreement or term, in addition to
  assignment of rights,
• Assignment authorized by s.50
• Not undue
• F.C.A. Accepts Apotex argument that the
  something more was consolidation of all
  processes to make Cefaclor
• Assignment was anti-competitive because of
  Lillys existing ownership of all the other
  known, commercially-viable processes

7
What if all patents originally owned or developed
by Lilly?

• Intellectual Property Enforcement Guidelines
• S.4.2.1
• The mere exercise of an IP right is not cause for
  concern under the general provisions of the
  Competition Act
• Mere exercise is
• Exercise of right to exclude others from using IP
• Use of IP
• Non-use of IP

8
What if all patents originally owned or developed
by Lilly? (contd)

• Intellectual Property Enforcement Guidelines
• (contd)
• S.4.2.1.
• But Bureau applies Competition Act
• Where IP rights form the basis of arrangements
  between independent entities
• Transfer
• Licence
• Agreement to use or enforce IP rights

9
Open Questions

• What is relevant market?
• Would a non-exclusive licence-back eliminate
  undue market power?
• When does the limitation period start to run
• On assignment?
• When the assignment discoverable?
• When the assigned patents expired?
• Is original assignment void?
• What is basis for Apotex claiming damages?

10
Practice Points

• Where clients assign or take assignment or
  license of IP rights
• Need to warn that the arrangement or agreement
  may be contrary to Competition Act, where
  competition unduly lessened
• This may occur where all methods of supply in a
  market are consolidated
• May want to refer client to open questions

11
Practice Points(contd)

• When advising a defendant alleged to infringe IP
  rights, consider raising Competition Act
  counterclaims

12
The Overlap Between IP and Competition Law
Recent Lessons from Eli Lilly v. Apotex

• Q U E S T I O N S ?
• By Brad LimpertPartner and Co-Chair, National
  Technology Industry Group
• Gowling Lafleur Henderson LLPSuite 1600, One
  First Canadian Place100 King Street
  WestToronto, ON M5X 1G5
• bradley.limpert_at_gowlings.com [phone]