How to develop a winning strategy

In 1989, British scientists at Pfizer created a truly ‘blockbuster’ drug. Known as silendafil citrate, the drug was supposed to treat heart problems and, by 1991, Pfizer had obtained a UK patent for this purpose. But as the scientists began testing the drug, they soon realised its desired impact was minimal. Surprisingly, they found, the drug had a notable side effect—it stimulated penile erection.

In the five years that followed, Pfizer rigorously studied and tested the drug before, in 1996, it successfully applied for a US patent covering erectile dysfunction. Only two years later, the US Food and Drug Administration (FDA) approved Pfizer’s application to sell the drug. Viagra was born.

From these humble beginnings at a research facility in Kent, Viagra soon dominated the market and generated revenues of more than $1 billion a year.

It is perhaps unsurprising, then, that Pfizer’s success brings an array of challenges when enforcing its patents and protecting its market share worldwide. Faced with a determined attack by generic companies wishing to sell its drugs more cheaply, a pharmaceutical company must employ a carefully crafted litigation strategy. And although such an attack can always be expected, winning in the courts is an altogether different matter.

“Each day can mean millions of dollars or more,” says litigation specialist Bill Zimmermann, pointing towards the importance of winning in the lucrative US market. Zimmermann, partner at law firm Knobbe Martens in Washington DC, says brands typically take two approaches when facing assault from generic companies: pursue them aggressively and try to beat them, or delay their entry to market if they are likely to succeed.

Developing a winning strategy—the primary aim for any brand—first depends on a solid and diverse portfolio of patents, built over a number of years. “If you have six or seven different patents, you look at the strength of each one relative to what the generic is doing and then put forward your best case,” he says.

The “best case” typically requires a patent covering the drug’s molecule, seen as the strongest patent and one which sets the foundations for an aggressive approach to litigation.

“Generally speaking, claims covering a new chemical compound (molecule) are very simple and precise, and usually there is no debate about infringement,” says James Monroe, partner at law firm Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, in the US. “The primary debate concerns validity, and it’s harder to invalidate a new chemical compound patent than a composition or a method of use patent,” he says.

To improve their chances of winning, brands typically file in one of two district courts: Delaware and New Jersey. Sometimes, they also file in New York’s southern district court. Jonathan Singer, principal at law firm Fish & Richardson LLP, says drug companies have traditionally been clustered in these areas and, as a result, judges have become familiar with the subject matter at hand, embedding a sense of trust and security within the brands.

“If you file in an unfamiliar place, what you risk is the prevalence of the common attitude of people who like and need drugs rather than the merits of the case,” he says. “In those three courts, you tend to get what we call a ‘fair shake’. You win or lose on the merits, as opposed to losing because generic drugs are seen as being good for society.”

“AIMING TO CONSOLIDATE AS MANY CASES IN ONE COURT BY FILING AGAINST MULTIPLE GENERICS SIMULTANEOUSLY, THEY CAN KEEP THEIR OWN COSTS DOWN.”

Trying to improve their own chances of success, generics commonly ‘gang up’ on brand owners. Generics typically have fewer resources than brands, so they pool them together to pile on the pressure. They combine money and lawyers, and split up responsibility for handling different aspects of the case. “This allows them collectively to devote more attorneys and expenses than the innovator company can individually,” says Monroe.

While it is a sensible approach for generics, brands try to adopt an equally efficient strategy for litigating. Aiming to consolidate as many cases in one court by filing against multiple generics simultaneously, they can keep their own costs down and more easily keep track of what can be a very complex process.

But brands don’t have it easy. This sustained attack from generics and, possibly, the lack of a ‘strong’ patent covering a molecule, can force brands to find other approaches to litigation. As they move towards the ‘weaker’ patents—on method and formulation—brands are more willing to settle for “shortened terms”, adds Singer.

“The brand might say ‘we’ll make enough money in 10 years so we’ll let the generic company on the market after that time period, and forfeit the remaining years of patent exclusivity’. They basically say: ‘let’s split the difference’.”

The 30-month stay

Turning to the second major strategy—delaying the entry of generics to the market—Monroe says he is unconvinced of its effectiveness. Under US patent legislation, if a company sues within 45 days of receiving a notice from a generic wanting to produce its drugs, it is automatically entitled—in most cases—to a ‘30-month stay’. This stay prevents the FDA from finally approving a generic product for the first 30 months of the litigation.

“But there is a lot of rhetoric about the 30-month stay,” says Monroe. “The bottom line is that two things are happening: courts are trying to ensure that these cases are resolved within the 30-month period and before preliminary FDA approval, ie, the 30-month stay never really comes into play; and even when a case goes beyond 30 months, it simply morphs into typical litigation, in which the generic could go ahead and market at risk, assuming it has obtained preliminary FDA approval by then.”

At that point, the case becomes like any other patent litigation.

This type of litigation, whether a 30-month stay is involved or not, is by no means restricted to the US. Brands are increasingly fighting battles across the globe, particularly in Canada, Europe and Asia.

In the context of cross-border litigation, the lack of uniform legislation is a major hurdle, and the patents themselves might differ in their wording or coverage, says Monroe. But maintaining a consistent approach is crucial. The strategic position a brand adopts in its case in one country can affect its position in another country, meaning consistency and coordination are vital.

“MUCH WILL ALSO DEPEND ON HOW THIS PROCESS AFFECTS THE RULES THAT DIVIDE UP JURISDICTIONS BETWEEN THE SOCALLED THEMATIC CLUSTERS AND THE REGIONAL DIVISIONS IN EUROPE.”

“The biggest challenge is getting people to understand that the US litigation process is different from the processes in countries such as the UK, India and Canada,” says Singer. “What you do in these countries is very different from what you can do in the US and it can be hard to explain to foreign lawyers that the extent to which they say something in, say, India can be used against the company in the US. It never goes the other way around. In fact, I had a case that recently turned in our favour on what the other side’s experts said in Canadian litigation.”

In Europe, infringing activity shows no respect for national boundaries, says Jonathan Radcliffe, partner at law firm Mayer Brown LLP in London. “Patent owners must therefore enforce their patents through a carefully thought-out European litigation strategy crafted to achieve their commercial objectives. Articulating commercial goals is vital. This will determine where to litigate in Europe, timing, what remedies to seek, who to sue, and the like,” he says.

Where to sue

While the exact strategy a brand picks is usually case-specific, he says choosing where to sue is one of the most important decisions. According to Radcliffe, the English, German and Dutch courts have an “excellent” reputation for their expertise and quality, and will be attractive choices.

For example, the English system offers highly developed and sophisticated rules enabling full documents to be fully discovered and disclosed, experts and witnesses to be rigorously crossexamined, and experiments to be conducted.

And Germany’s bifurcation system—the splitting of validity and infringement cases— often favours patentees, he says. “These split proceedings allow patentees to run slightly different claim interpretations, and limit the ability of defendants to run ‘squeeze’ arguments. The time lapse between an interim infringement injunction being granted and finally determining validity is a factor heavily in patentees’ favour.”

He adds: “Other than England, Germany and the Netherlands, however, the picture can be different, as the existence of specialist courts does not necessarily confer access to specialist judges.”

But while the bulk of “high stakes” patent litigation takes place in England and Germany, France and Italy are equally important if drug companies face a “systemic attack” across Europe. Companies such as Pfizer, which are fighting to save their prized market share in multiple markets, have been known to litigate in as many as 15 to 18 jurisdictions at once.

In practice, the different nuances of national procedures present opportunities for drug companies to exploit. One of the most important considerations is speed, which can vary widely across Europe but is generally fastest in England.

According to data compiled by Radcliffe, England, Germany and the Netherlands usually have the quickest court proceedings. The median time to trial in England is usually nine to 12 months, in Germany 10 to 15 months, and in the Netherlands it is about a year.

“But it is not just the time to trial that’s important,” he says. “In some countries the appeal process takes far longer than the trial process and should not be overlooked, especially when in many countries appeals are almost automatically permitted.” An appeal in France can take 18 to 24 months, and one to two years in Italy; German validity appeals can take two to four years.

Radcliffe adds: “England has a ‘rocket docket’ procedure that can be invoked for urgent cases. I have personally taken a fully fledged life sciences case through trial and appeal in eight months—thought to be a record by the Court of Appeal.”

Radcliffe says patent owners place a premium on taking active steps to disrupt competitors’ markets and supply chains. This means injunctions. “A first strike interim injunction can be very effective, although temporary pan-European injunctions of the kind recently issued by the Dutch and German courts will be discharged as soon as the patent’s validity is challenged, handing a public relations and psychological victory to the defendant.”

He adds that patent owners can operate outside the court to “considerable effect” by using the pan- European customs procedures to detain and destroy imported products from outside the EU.

It should not be forgotten, however, that national boundaries can impose unwanted choices on patent owners. Usually they can dictate the choice of battlefield by controlling where to sue and the timing of litigation, but this is not always the case. Radcliffe says generics will often trigger pan-European disputes by launching litigation aiming to revoke patents and obtain a court declaration that their products do not infringe.

Drug companies must be prepared for this, and they will have specialist in-house counsel to deal with whatever is thrown at them. Radcliffe says that because modern, multinational litigation can move at a very fast pace, companies cannot afford to allow their competitors to keep them off balance.

“Even the best in-house teams rarely have the resources or the time to handle all the work involved in global or pan-European litigation themselves, and so must engage external counsel,” he says.

Day-to-day management of pan-European patent litigation is a full-time occupation, he says, so it is common to appoint an external law firm to act as primary external counsel—reporting directly to the in-house counsel and managing the law firms in various countries involved. It is not essential for there to be litigation in that firm’s country, although that is often the case, he adds.

Radcliffe says acting as lead counsel does, however, require a proper understanding of the European landscape, and the chosen firm must have the resources available to bring in more staff during the “inevitable peaks” of work, manage a potentially large electronic document management system, operate a secure intranet, and be able to support the local national litigation teams.

“Although it is desirable for lead counsel to have offices in multiple countries, it is not strictly necessary, but such large international firms will usually have the resources necessary to manage pan-European patent litigation— particularly if there is US discovery to digest and disseminate,” he says.

Looking ahead, Europe may soon be welcoming a new patent court: the Unitary Patent Court (UPC). The court is part of the ‘unitary patent package’, which is currently on hold after the European parliament postponed a vote on it following a dispute over Articles 6 to 8 in the draft regulation. A unitary patent is intended to make it easier and cheaper for IP owners to obtain protection across the EU.

But while the wrangling over specific details of the package continues, it looks certain that Paris will host the court’s central division. In a vote by the European Council in June 2012, government ministers awarded Paris the gold medal, adding that London and Munich will act as ‘thematic clusters’, specialising in chemistry and pharmaceuticals, and mechanical engineering, respectively.

While these developments are likely to affect litigation strategies, it may be some time before we can witness change. “I think that there is still sufficient uncertainty about the precise shape and form of the UPC’s rules and process—in particular Articles 6 to 8—that patent owners will be waiting to see how this plays out before making firm decisions,” says Radcliffe.

“Much will also depend on how this process affects the rules that divide up jurisdictions between the so-called thematic clusters and the regional divisions in Europe. As Paris, London and Munich will now specialise, I can see patentees actively considering taking structural steps to ensure that they will have cases involving them (especially as defendant) heard in specialist venues,” he adds.

He notes that patent owners in sectors where there are “regular competitor challenges” will be deciding whether it is better to be sued in a regional venue with less expertise, or to “position themselves” so they enter a specialist, thematic cluster. “Inevitably, this is a granular and multifactorial exercise.”