In this article we look at a ground-breaking decision of the Italian Supreme Court dealing with the compensation for damages caused by an abuse of dominant position through misusing the patent system.

Summary

In decision no. 9/2024 published on 2 January 2024, the Italian Civil Supreme Court confirmed that Pfizer has to pay over €13.4 million as compensation for damages to the Italian Health Ministry and Finance Ministry for having abused its dominant position in the prostaglandin drug market. The Supreme Court found that Pfizer had adopted a legal strategy aimed at prolonging the patent protection on latanoprost and delaying the entry of generic medicinal products onto the Italian market.

For this abuse of dominant position, Pfizer had already been fined €10.6 million in 2012 by the Italian Competition Authority (under Article 102 Treaty on the Functioning of the European Union (“TFEU”).

The decision ends a long battle over latanoprost dating back to 2009. It provides important guidance for originator companies operating in a dominant position by emphasising the need to consider competition law when enforcing patents against generic companies.
In a nutshell the Supreme Court confirmed the previous decision of the Court of Appeal establishing that:

• the finding of the Italian Competition Authority as to the market of reference and the abusive conduct, even if not binding, had to be treated as “particularly qualified evidence” for the purposes of civil proceedings for damages;
• Pfizer had abused its dominant position through its overall conduct which included: filing for a divisional patent and corresponding supplementary protection certificate(“SPC”); sending cease and desist letters; and filing legal actions against generic companies and the Italian Medicines Agency. This finding does not require an assessment of the validity and infringement of the relevant IP rights according to IP law, but rather an evaluation of the anticompetitive scope of a series of acts that are per se legitimate. Therefore, the confirmation by EPO Board of Appeal that Pfizer’s patent is valid and the unlawfulness of manufacturing generic medicinal product under the Italian IP Code, are irrelevant to the question of abuse of dominant position;
• the Italian Health Ministry and Finance Ministry had discharged their burden of proof in establishing the causal link between Pfizer’s conduct and the alleged delay in the launch of the generic products, based on the findings of the Italian Competition Authority and other evidence. This led to the conclusion that it was “more likely than not” that the delayed entry of generic drugs into the market was attributable to Pfizer;
• the Italian Health Ministry and Finance Ministry had also demonstrated the quantum of damages suffered on presumptions, including data from IMS Health, that judges may rely on in their discretionary assessment; to determine the losses incurred by the NHS resulting from the delay caused by Pfizer it is not necessary to prove the quantity of the originator’s sales in Italy nor the actual costs borne by the NHS.

Background

Facts underlying the case

a) The patents and SPCs on latanoprost
On 6 September 1989, Pharmacia A.B. (later acquired by Pfizer) filed a patent application at the EPO claiming a class of prostaglandin active ingredients, including latanoprost, for the treatment of glaucoma. This European patent, no. EP 0 364 417 (the “Parent Patent”), was granted on 9 February 1994.

On 7 May 1997, Pfizer requested and obtained a SPC for latanoprost in various European countries based on the Parent Patent. This SPC was set to expire on 17 July 2011. No application for an SPC based on the Parent Patent was filed in Italy.

Subsequently, on 15 June 1993, the patentee filed a divisional application, which was granted as EP 0 569 046 on 13 November 2002.

Finally, on 28 April 2002 (more than 13 years after the priority date) Pfizer filed a further divisional patent, EP 1 225 168 (the “Divisional Patent”), granted on 14 January 2009. On the basis of this Divisional Patent only, Pfizer requested an SPC in Italy on 30 April 2009. This SPC was granted with an expiry date of 17 July 2011 which was then extended via the paediatric extension until 17 January 2012.

On 6 October 2010, the EPO Opposition Division revoked the Divisional Patent. Pfizer appealed that decision and on 10 May 2012 the EPO Board of Appeal reversed it, maintaining the Divisional Patent with some amendments.

b) The conduct of the generic companies and Pfizer
Relying on the expiry of the Parent Patent and the absence of any Italian SPC based on this patent some generic companies (in particular Ratiopharm) filed applications for marketing authorisation (“MA”) for a latanoprost generic product in 2007. This was then granted in September 2009.

In July 2009 Pfizer started to send warning letters to both: (a) generic companies that had applied for an MA, requesting for them not to launch any generic products until the expiry of the Italian SPC obtained on the basis of the Divisional Patent; and (b) the Italian Medicines Agency (AIFA), urging them not to add any latanoprost generic product to the list of the reimbursed products (lista di trasparenza).

The generic companies, concerned about being sued for infringement, filed: (a) EPO opposition proceedings against the Divisional Patent; and (b) proceedings for revocation of the Italian designation of the Divisional Patent and of the Italian SPC before the Court of Milan. Pfizer responded by counterclaiming for infringement and initiating proceedings for a preliminary injunction (“PI”).

In addition, after the launch of latanoprost generic products onto the Italian market in May 2010 and their inclusion in the list of the reimbursed products, Pfizer filed administrative proceedings to challenge the decision of the Italian Medicines Agency in granting their listing. Pfizer initially obtained a favourable interim decision by the Administrative Court (Tribunale Amministrativo regionale per il Lazio), blocking the reimbursement of the generic products for a short period from the end of June 2010 to the beginning of July 2010. Then the Administrative Supreme Court (Consiglio di Stato) affirmed that it was the correct decision to include the generic products in the list of the reimbursed products.

Earlier decisions about the abuse of dominant position

As anticipated above, the decision of the Italian Civil Supreme Court appears to be the final round of the long-lasting saga of the latanoprost case in Italy.

The below summary of all the previous decisions will be useful to understand the history of the case.

a) The Italian Competition Authority (2012)

By a decision dated 11 January 2012, the Italian Competition Authority (Autorità garante delle concorrenza e del mercato) found Pfizer had abused its dominant position in the market for prostaglandin drugs.

According to the Competition Authority, Pfizer had artificially obtained an extension of the patent protection for latanoprost in Italy by, many years after the filing of the parent patent, applying for a divisional patent on the basis of which it had then obtained an SPC. This was further prolonged through paediatric extension. In other European countries Pfizer had instead requested and obtained the SPC on the basis of the Parent Patent.

At the same time, Pfizer had started an aggressive legal campaign to enforce its exclusive rights, in particular by sending warning letters and filing legal actions against its competitors and the Italian Medicines Agency.

The Competition Authority considered that this behaviour by Pfizer constituted a very serious abuse of dominant position in the Italian market for prostaglandin drugs which had delayed the entry of the generic products into the Italian market by seven months (from October 2009 to July 2010), causing an estimated €14 million of damages to the Italian National Healthcare System (NHS). Consequently, the Competition Authority imposed a fine of over €10.6 million on Pfizer.

b) The Administrative Court (2012)
On first appeal, by a decision dated 3 September 2012, the Administrative Court (Tribunale Amministrativo regionale per il Lazio) disagreed with the Competition Authority’s assessment and held that the simple use of legal means to protect IP rights was not sufficient to amount to an abuse of a dominant position.

In particular, according to the Administrative Court, the Competition Authority had taken the revocation of the Divisional Patent by the EPO Opposition Division into particular consideration, without considering that such revocation was not definitive. In fact, the EPO Board of Appeal later confirmed the validity of that patent.

Therefore, the Administrative Court granted the appeal and annulled the fine imposed on Pfizer.

c) The Administrative Supreme Court (2014)
On further appeal, by a decision dated 12 February 2014, the Administrative Supreme Court (Consiglio di Stato) upheld the decision of the Competition Authority, reinstating the fine on Pfizer.

This court concluded that, Pfizer had actually misused its IP rights, and it was irrelevant whether the Divisional Patent and Italian SPC were actually valid and/or lawfully requested; indeed the lawfulness of the conduct from a patent law perspective was not determinative to the question of abuse.

In addition, the Administrative Supreme Court recognised that Pfizer’s conduct, which had exploited the patent system to delay the launch of the generic latanoprost drugs, went beyond that of mere patent protection and was in fact anti-competitive. The main goal of Pfizer’s late application for a Divisional Patent and Italian SPC did not seem to be the protection of a new product but merely to artificially lengthen the patent protection on latanoprost in Italy. Pfizer’s strategy also included the sending of warning letters to generic companies and to the Italian Medicines Authority and the filing of civil patent infringement and administrative proceedings to try to prevent the launch and the reimbursement of latanoprost generic products.

Decisions in the follow-on damages action

Following the decision of the Administrative Supreme Court, the Italian Health Ministry and Finance Ministry filed civil proceedings claiming damages against Pfizer.

In particular, the Ministries submitted they had suffered damage caused by Pfizer’s abusive conduct corresponding to higher expenses for the reimbursement of the price of Pfizer’s Xalatan products by the NHS to patients for the period of seven months in which Pfizer was able to block the entry of generic latanoprost products into the Italian market and their inclusion in the list of reimbursed products. According to the Ministries, the amount which Pfizer had to compensate was that which had already been estimated by the Competition Authority (more than €14 million).

a) The Civil Court of Rome (2017)
By a decision dated 24 March 2017, the Court of Rome dismissed the claim of the Ministries.
First, the Court of Rome deemed that the finding of the Competition Authority was not binding for these civil proceedings for damages. This was because Article 9 of Directive 2014/104/EU (“Damages Directive”), as implemented by Article 7 of Italian Legislative Decree no. 3/2017 – which provides that an infringement of competition law found by a final decision of a Competition Authority is deemed to be irrefutably established for the purposes of an action for damages – cannot be applicable ratione temporis to such proceedings.[1]

As a consequence, the Court of Rome disagreed with the findings of the Competition Authority and found, as the Administrative Court had done in its 2012 decision, that Pfizer had not abused its dominant position but instead merely enforced an IP right legitimately, which had been ascertained to be valid by the EPO Board of Appeal.

In addition, the Court found that the Ministries had not provided any evidence of the actual damages suffered nor the existence of the casual link between such damages and Pfizer’s allegedly abusive conduct.

b) The Civil Court of Appeal of Rome (2021)
On first appeal, by a decision dated 20 July 2021, the Court of Appeal of Rome reversed the first instance judgment and awarded compensation to the Ministries amounting to €13.4 million in damages.

The Court recognised that even if not binding, the finding of the Competition Authority had to be treated as “particularly qualified evidence” (prova privilegiata). To give a definition of this concept, this would be a sort of evidence which the Judge has to take into upmost consideration for the purposes of making a decision, only being able to be supplanted by contrary evidence.[2]

Additionally, the Court of Appeal deemed it to be irrelevant that the validity of the Divisional Patent was upheld by the EPO Board of Appeal following the decision of the Competition Authority because the abuse of dominant position emerged by an overall conduct of Pfizer. This conduct included not only of the filing of the Divisional Patent years after the filing of the Parent Patent followed by the SPC application in Italy, but also sending cease and desist letters and filing legal actions against generic companies and the Italian Medicines Agency.

The Civil Supreme Court’s 2024 ruling

Pfizer appealed the decision of the Court of Appeal of Rome on the basis of seven alleged grounds.

By decision published on 2 January 2024, the Civil Supreme Court dismissed all grounds and upheld the order against Pfizer to award compensation of over €13.4 million in damages to the Italian Health Ministry and Finance Ministry.
The main topics discussed in the decision are the following:

i) The abuse of dominant position
Pfizer argued that the Court of Appeal had wrongly confirmed the abuse of dominant position. where Pfizer had limited itself to enforcing rights conferred by a lawfully obtained patent.

The Civil Supreme Court deemed this ground of appeal unfounded by pointing out that the Court of Appeal, (recalling what already had been found by the Competition Authority and Administrative Supreme Court) had deemed that the Divisional Patent and the corresponding SPC acted to artificially extend Pfizer’s patent protection on latanoprost to delay the entry of the generic products. This distortion also emerged though the following circumstances:

(i) the timing of the filing of the Divisional Patent that occurred 13 years after the filing of the Parent Patent and at the same time as two analogous prostaglandin drugs entered the market;
(ii) the corresponding subject matter of the Divisional patent with that of the parent Patent (both on latanoprost);
(iii) the validation of the Divisional Patent only in Italy;
(iv) Pfizer’s failure to file an SPC on the Parent Patent as in the other European countries, resulting in uncertainty for generic companies as to the legitimacy of their launch at the expiry of the Parent Patent in September 2009;
(v) Pfizer’s failure to market a new drug following the filing of the Divisional Patent;
(vi) the application for SPC on the Divisional Patent only in Italy; and
(vii) the subsequent request for the paediatric extension of the Italian SPC.

All these acts were lawful per se but together with the legal actions taken by Pfizer against the generic companies and the pressure put on the Italian Medicines Agency cumulatively turned out to be abusive conduct.

In addition, Pfizer complained that the Court of Appeal of Rome, applying the principle of the “particularly qualified evidence” for the decision of the Competition Authority, did not re-assess the alleged abuse of dominant position in light of the decision of the EPO Board of Appeal. In fact, Pfizer recalled that the EPO Board of Appeal’s decision had been issued after the publication of the Competition Authority’s decision and had reversed the decision of the EPO Opposition Division deeming that the Divisional Patent was invalid. According to Pfizer, the assessment of the relevance of the EPO Board of Appeal carried out by the Administrative Supreme Court should instead not have any qualified effect in the civil proceedings for compensation in damages.

The Civil Supreme Court deemed this ground of appeal inadmissible, pointing out that the Court of Appeal had re-assessed the finding of the Competition Authority in light of the subsequent decision of the EPO Board of Appeal, deeming the latter not relevant for the purpose of the ascertainment of abuse of dominant position. Indeed, such ascertainment did not imply an assessment of the validity of the patent according to IP law, but instead an evaluation of the anticompetitive scope of a series of acts which are legitimate per se.

ii) The existence of damages and of the casual link with Pfizer’s conduct
Furthermore, Pfizer complained that the Court of Appeal had wrongly inferred proof of the casual link between Pfizer’s conduct and the alleged delay of the launch of the generic products from the decision of the Competition Authority and had wrongly held that the Ministries had satisfied the burden of proof to demonstrate the existence of the damages and the casual link with Pfizer’s conduct.

The Civil Supreme Court established that such ground of appeal was inadmissible and unfounded.

In particular, the Civil Supreme Court deemed that the Court of Appeal had correctly considered the findings of the Competition Authority on the existence of harm caused by that infringement and the causal link between that harm and the infringement, having a value of an indication of evidence (and not as “particularly qualified evidence” as with the ascertainment of the abusive conduct).

Moreover, the Court of Appeal properly took into consideration several other elements of evidence, considered serious and consistent, that led to the conclusion that it was “more likely than not” that the prospected harmful event at which the anticompetitive conduct was aimed, namely the delayed entry of the generic drugs into the market, was attributable to Pfizer. In particular, the Court of Appeal considered proven that the generic companies and in particular Ratiopharm had taken into consideration the risk of legal actions explicitly threatened and then filed by Pfizer which had caused a delay of the launch of the generic products until July 2010.

Pfizer specifically complained that the Court of Appeal, in establishing the casual link, did not take into consideration that Ratiopharm Italia had only obtained the grant of the MA for the latanoprost generic product in March 2010 which was then launched for the first time on the Italian market in May 2010. Indeed, the MA granted in September 2009 was in name of the German Ratiopharm entity and referred to a medicinal product containing different excipients. Pfizer argued that this meant that the delay of the launch of generic products which it could have caused would have been at most for two months (from March to May 2010) and not seven months from September 2009 (when the Ratiopharm GmbH obtained the other MA and the parent patent expired) to May 2010 (when Ratiopharm Italia launched its generic medicinal product into the Italian market).

The Civil Supreme Court declared such ground of appeal inadmissible and unfounded for the following reasons.

First, the Civil Supreme Court pointed out that Pfizer did not explain whether the alleged difference between the first MA obtained in September 2009 by Ratiopharm GmBH and the second MA obtained in March 2010 by Ratiopharm Italia actually concerned latanoprost and not simply the excipients.

Second, the Civil Supreme Court highlighted that such a fact was not decisive for the Court of Appeal to establish the casual link for the damages over the entire period from September 2009 to May 2010. Due to the legal steps taken by Pfizer, the generic companies had slowed down their filing (and therefore the obtaining of the application for MA) and consequently the launch into Italian market, which could have occurred in September 2009 at the expiry of the Parent Patent.

Pfizer counterargued that this was not correct because the generic companies might anyway have not started the commercialisation of their products in September 2009 without infringing the Divisional Patent and the Italian SPC. The Supreme Court also deemed this argument groundless, pointing out that this did not take into consideration that obtaining the Divisional Patent and the Italian SPC fell within the abusive conduct. As a consequence the assessment of the lawfulness under patent law of the manufacturing and sale of generic products during the period in which the Divisional Patent was obtained with an abusive purpose was irrelevant, since the assessment must be made by evaluating what would have happened without such abusive conduct.

iii) The quantification of damages
Finally, Pfizer complained that the Court of Appeal had found that the Ministries had discharged their burden of proof to demonstrate the amount of the damages actually suffered. According to Pfizer, the Ministries had not proved the quantities of Xalatan actually sold in Italy and the relevant real expense borne by the NHS.

The Civil Supreme Court dismissed this ground of appeal pointing out that the Court of Appeal had lawfully based the quantification of damages on the presumptions to which the Judges may give relevance in their discretionary assessment.

In particular, the Court of Appeal deemed the documents sufficient. These included data provided by IMS Health confirming the volume of sales of Xalatan from September 2009 to May 2010. To determine the higher expense incurred by the NHS considering, the difference between the reimbursement granted by the NHS before the generic drug entered the market and after such entry, multiplying the relevant amount by the number of packages of Xalatan.
Moreover, the Court of Appeal held that such amount had to be reduced – on an equitable basis – by 5%, considering that in part, albeit minimal due to the continuity of use dictated by the pathology concerned, the sales of Xalatan might not be the subject of a request for reimbursement to the NHS.

Takeaways

This is the first decision of the Italian Supreme Court dealing with compensation for damages caused by abuse of dominant position comprising misusing the patent system.

While the facts underlying this case appear very peculiar, originator companies – who may find themselves in a dominant position in the period prior to patent expiry – should consider their strategies on patent filing and enforcement against generic companies through the lens of competition law. This could help to avoid circumstances which may result in fines by the Competition Authority and liability for the higher expenses borne by the NHS for the reimbursement of their products instead of generic medicinal products.

[1] On the binding effect of final decisions by Competition Authorities before national Courts when the Damages Directive is not applicable, see also paragraphs 39-46 of the judgment of the Court of Justice of the European Union (CJEU) dated April 20, 2023 (Case C-25/21) (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62021CJ0025).

[2] The quality of “particularly qualified evidence” of the findings of the Competition Authority appears in line with that recognized in the above mentioned CJEU decision in C-25/21 establishing that “in the context of both an action for a declaration of nullity under Article 101(2) TFEU and an action for damages for an infringement of Article 101 TFEU, by the applicant until proof to the contrary is adduced, thereby shifting the burden of proof defined by that Article 2 to the defendant, provided that the nature of the alleged infringement that is the subject of those actions and its material, personal, temporal and territorial scope coincide with those of the infringement found in the said decision”.