The pharma industry has at last got a reason to hear the abbreviation 'ADR' with a smile, as it no longer refers only to "adverse drug reaction" but also to "alternative dispute resolution," thanks to the new intellectual property rights (IPR)/patent protection era.
Considering the high cost of patent infringement and enforcement litigation, the scope for and trend of "out of court settlements" are increasing. Another perceived advantage of settlements through negotiations, arbitrations or conciliations, bilaterally or with third party assistance is the certainty on the desired outcomes. With the number of cases pending in all the courts - from district level to supreme courts - ever increasing or even exploding, litigation is no more a first option, especially when the period of protection starts from the date of application and not from the date of final judgment. There are examples of patent litigations in India as well as in USA, where the patent expires before the last and final judgment is pronounced.
Yet another welcomed feature of dispute settlement is the model of negotiation or arbitration, which offers an opportunity for direct communication, devoid of misunderstandings, legal threats and counter threats, which often emerge from prejudices with out any root in ground realities. In this model, accessibility to all relevant background information, such as prior art data, prosecution history, patent family status etc., make an informed individual judgment possible with reasonable success much prior to the result of a court order on the patent suit in litigation.
However, there is a new realisation among the patentee community so as to work together with competitors to leverage maximum benefits. Since the ultimate object of the patent protection is to facilitate success at the market place, the patentee community feel that it is advisable to work together with the competitor to extract maximum mileage and penetration of the product within the available period of protection as well as the pre-obsolesce period of the therapeutic effectiveness of the molecule or composition, before a more effective drug reaches the market place.
A few examples of recent 'out of court settlements' will throw more light on the advantages of ADR. The patent challenge of Floxmax (Tamsulosin), the prostate drug by Ranbaxy was settled out of court by Astellas Pharma of Japan and Boehringer Ingelheim. As per the terms of the settlement, Ranbaxy was entitled to earn up to US $200-$250 million in 2010, through exclusive marketing of drugs for two months prior to patent expiry.
Similarly, Wockhardt had filed a Para IV challenge against Allegra (Fexofenadine), which (along with few others) ended up in an out of court settlement between Avnetis and Wockhardt. Besides, the settlement between Sun Pharma and Novartis on Exelon exclusivity has now become a trendsetter. In mid 2007, the patent infringement suit filed by GSK against Ranbaxy on Valtrex (Valacyclovir) was settled amicably after GSK offered and Ranbaxy accepted the authorised generic option. Another instance of settlement through authorised generic option is the case of Dr Reddy's settlement with GSK on Imitrex (Sumatriptan). Also, the dispute between Mayo foundation and Toshiba on artifact-suppression (on MRI Machine) patent infringement was settled out of court.
Going by the records, settlements of Lupin's dispute with Abbott and Astellas on Omnicef (Cefdinir), Dr Reddy's fight with Glaxo on Imitrex, Ranbaxy's row with Cephalon and GSK on Provigil (Modafinil) and Valtrex (Valacyclovir), respectively, have all received wide spread attention.
The authorised generic options offered consequent to out of court settlements yielded risk free revenue options to Dr Reddy's, Ranbaxy and Sun Pharma and the like. Settlement income of Matrix, Sun, Glenmark and others has also swelled in recent times.
Out of court settlements were, however, looked down by US Federal Trade Commission (FTC) in an attempt to deny the benefits of price reduction, which would otherwise be possible through early introduction of generics to patent challenges. In mid 2005, the FTC had threatened to play a "spoilsport" role for out of court settlements on patent disputes and Para IV challenges. However, the Supreme Court of USA dampened the "public-interest" cause espoused by FTC, by denying the Writ of Certiorari filed by FTC against the decision of Court of Appeals of the Federal Circuit (CAFC) on the settlement involving K-Dur. Invoking of the anti trust law to counter out of court settlements as consumer non-friendly was not appreciated by the SC. On the contrary, the US Supreme Court chided the FTC and observed that FTC should favour settlements rather than encourage disputes and patent litigations.
Earlier, FTC had made a study of patent disputes settlements out of court. According to the study and findings, approximately 40 per cent of all patent disputes were being settled out of court. The terms and objectives as well as financial deals and "quid pro quos" that were probably concealed and were confidential, were queried by FTC and fell within the preview of anti trust laws. Consequent to the proactive policy of FTC (Cow-boy shotgun approach according to some critics), the settlement had come down sharply in early 2000s. The trend has now reversed into revenge.
Lately, after the rejection of Certiorari by SC and the consequent silence from FTC, the out of court settlements of patent disputes have gained momentum once again as seen in recent times. The Plavix (Clopidogrel) settlement between Apotex and Sanofi/BMS, the Effexor (Venlafaxine) settlement between Teva and Wyeth as well as the Provigil (Modafinil) and other settlements are indicative of a definite trend towards patent suit settlements out of court in days to come. Several such settlements have also brought economic benefits to Indian pharma coffers and shores.
The recent proposal for amendment of the 35 USC (the US Patent Act) by US patent and trademark office (USPTO) and its likely adverse impact on weak, indefensible frivolous patents is also likely to have contributed to increased trends for opting the out of court settlements route. Even though, the USPTO's patent amendment was put on hold consequent to a stay obtained by GSK, the trend of US courts to view potential patent abuses and unfair attempts at patent term extensions adversely may also be prompting the out of court settlement trend.
There still remains some major and frequently encountered hurdle to settlements. Public Interest Lawsuits (PIL) on grounds of anti trust are still a likely dampener to mutual agreements to settle patent disputes out of court.
In the overall analysis, out of court settlements of patent disputes is the most ideal option in the current scenario. Energies and much needed funds need to be preserved and focused on R&D spends rather than on high cost, high rise patent litigations. There is a natural fit for alternate dispute resolution mechanisms in the context of not so bright NCE/ IND/ NDA pipelines, overcrowded ANDAs for the large number of patent expiries of blockbuster and other orange book listed drugs, highly escalating new drug research costs, ever-increasing litigation expenses and inherent uncertainties and multilevel unpredictability relating to pharma patent challenges.
The 'Gleevec' case in India is an example right in our own legal domain. While US patent litigants have learned a lot from exposure and precedents, the Indian learning curve is yet to emerge. Once the pros and cons of out of court settlements are dawn and the merits/demerits of litigation vs. settlements emerge, it is expected that Indian patent litigations may also tend more towards settlements. However, it is essential that there has to be an optimal patent dispute and case laws in India, on which the lessons can be made.
(The author is CEO of GNA Patent Gurukul & Gopakumar Nair Associates, Mumbai.)