[Ip-health] Georges and Bay on "the Italian Case"

[James Packard Love]

* Ultimately, relying on Article 82 of the EC Treaty (which, as of
May 1, 2004, all EU member states' competition authorities can also
apply in parallel to their domestic antitrust provisions), the IAA
ordered, by means of an interim measure decision, that Merck must
grant Dobfar a license within seven days of a request from Dobfar. In
the absence of an agreement between the parties, the IAA itself will
determine with the assistance of an independent expert the terms of
the license.

* Despite objections from Merck, which had provided evidence to the
contrary, the IAA found that Merck's patent was an =93essential
facility.=94 More specifically, the IAA found that (1) there were no
alternatives to Merck's key ingredient because, even though it was
produced elsewhere, the quantity and quality of the production
outside Italy was insufficient to satisfy the demand of EU-based
generics producers; and (2) moving Dobfar's production of the key
ingredient outside Italy, that is, to countries in which the patent
rights had expired and where Dobfar also had production plants, would
have resulted in excessive costs and could therefore not be
considered a viable alternative to the license. The IAA rejected as
unfounded all justifications put forward by Merck.

Essential Facilities: A Doctrine Clearly in Need of Limiting Principles?
By Alain Georges and Matteo F. Bay
Volume 17 =95 Number 12 =95 December 2005 Intellectual Property &
Technology Law Journal 1

The Italian Case

In Merck,1 the IAA decided on Merck's refusal to grant Dobfar, a
large Italian manufacturer of chemical and pharmaceutical products, a
license to produce a key ingredient for carbapenem antibiotics for
which Merck has patent rights in Italy expiring at the end of January
2006. As Merck's patent rights have expired in all other European
countries and outside the European Union (except in the United
States), Dobfar had requested a licence to produce the ingredient in
its Italian plants for export to generics manufacturers outside Italy.
2 Dobfar needed a license from Merck because it planned to produce
the key ingredient in Italy, where Merck still enjoyed patent rights.

The IAA found that Merck was dominant in the market for carbapenem
antibiotics. Moreover, it found that, besides Italy, Merck's refusal
to license affected the markets in several other EU member states,
including Germany, France, Spain, and the United Kingdom, where
Merck's patent had already expired. Merck's refusal delayed entry
into these countries of generics produced outside Italy by the drug
manufacturers that would purchase the key ingredient from Dobfar. In
turn, the delayed entry of competing generics precluded the price
decreases that typically follow the entry of a generic drug on the
market.

The IAA calculated that, in the absence of a license granted to
Dobfar in 2005, the delay of entry into the market of generics
competing with Merck's carbapenem antibiotics would be of about one
year, starting from January 2006 (i.e., the date of expiry of Merck's
patent in Italy).

Ultimately, relying on Article 82 of the EC Treaty (which, as of May
1, 2004, all EU member states' competition authorities can also apply
in parallel to their domestic antitrust provisions), the IAA ordered,
by means of an interim measure decision, that Merck must grant Dobfar
a license within seven days of a request from Dobfar. In the absence
of an agreement between the parties, the IAA itself will determine
with the assistance of an independent expert the terms of the license.

Despite objections from Merck, which had provided evidence to the
contrary, the IAA found that Merck's patent was an =93essential
facility.=94 More specifically, the IAA found that (1) there were no
alternatives to Merck's key ingredient because, even though it was
produced elsewhere, the quantity and quality of the production
outside Italy was insufficient to satisfy the demand of EU-based
generics producers; and (2) moving Dobfar's production of the key
ingredient outside Italy, that is, to countries in which the patent
rights had expired and where Dobfar also had production plants, would
have resulted in excessive costs and could therefore not be
considered a viable alternative to the license. The IAA rejected as
unfounded all justifications put forward by Merck.


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James Packard Love
Knowledge Ecology International
http://www.keionline.org
james.love@keionline.org
Washington, DC +1.202.332.2670

"If everyone thinks the same: No one thinks." Bill Walton"