06-11-2018 16:09
by Fast

Russia – Patent law: Compulsory license and positive right of use – options for the exploitation of dependent patents

In Russia, dependent patents provide opportunities that are often unknown to non-Russian companies, as Russian patent legislation differs from other countries in this regard. In addition, many Russian dependent patents, especially in the field of pharmacy, are patents specifically designed by Russian companies to circumvent patent protection for originator products in the Russian market. These dependent patents are therefore filed and registered exclusively in Russia without any foreign equivalents, so that the patent monitoring routine of other companies often does not discover them.

As regards the rights of the holder of a dependent patent, the Supreme Arbitration Court of the Russian Federation had stated the following (see point 9 of Information Letter No. 122 of 13.12.2007 "Overview of the Arbitration court working practice in cases where Intellectual Property Legislation applies ", confirmed by the Presidium of the Supreme Arbitration Court of the Russian Federation on 13.12.2007):
“9. In the case of the existence of two patents on a utility model which have the same or equivalent features in the respective independent claim, the actions of the owner of the patent with the later priority date must not be judged as infringement of the patent with the earlier priority date, as long as the patent with the later priority has not been invalidated in the prescribed manner."
In its Decision of 01.12.2009 in the case BAC-8091/2009, the Supreme Arbitration Court of the Russian Federation then clarified that this regulation applies not only to utility models but also to other IP rights, in particular patents for invention.

This case law of 2007 thus granted the holder of a dependent patent, in principle, a positive right of use in the sense of a permission to use.

In practice, this rule meant that the holder of a Russian patent with a later priority date could bring his patented invention to the Russian market, even if the product in question fell within the scope of another patent with an earlier priority date. An infringement claim by the proprietor of the older patent was only likely to succeed if the younger patent of the infringer has been invalidated. However, as long as such a younger patent has been granted and was in force, infringement law suits by, for example, pharmaceutical originator manufacturers against generics companies could be rejected by reference to this younger patent of the generic manufacturer and the above-mentioned case law of the Supreme Arbitration Court (see, e.g., Novartis vs. F-Synthez re. RU 2 125 992 (Imatinib) 2012; Les Laboratoires Servier vs. Canonpharma re. EA 008 223 (Trimetazidine formulation) 2008-2010).

A significant change in this practice was made with effect from 01.10.2014 to the Russian patent legislation, wherein for the first time a definition of the term "dependent patent" was included (Art. 1358.1). Moreover, paragraph 2 of Article 1358.1 was explicitly stipulating that the holder of a dependent patent may not use his invention unless he has obtained authorization from the holder of the dominant patent.

The owner of a dependent patent is since then forced to apply for a license from the owner of the dominant patent before he is allowed to use his dependent patent. If the holder of the prevailing patent refuses to grant a license "on customary market terms", then the holder of the dependent patent has the right to request a compulsory license in court.

On this basis, the Russian generics company "Nativa" recently received the first compulsory pharmaceutical license (for Celegen's Lenalidomide patent RU 2 595 250, Decision of 25.09.2018 in the 2nd court instance).

Nativa currently has a portfolio of approximately 30 dependent patents, either on specific crystal modifications of an active ingredient or new formulations thereof or the like. Some of these patents are not (yet) registered in the name of Nativa, but on Oleg Rostislavovich Michailov, a CEO of Nativa, or on Sholex Development GmbH (Seychelles), and will be transferred to Nativa only when needed.

In the infringement cases currently pending against Nativa, i.a. of Celgene (Lenalidomide), AstraZeneca (Gefitinib), Bayer (Sorafenib), Boehringer Ingelheim (Tiotropium), Orion (Levosimendan), Bristol-Myers Squibb (Dasatinib), Novartis (Fingolimod), Pfizer (Sunitinib), as a rule Nativa first argues with reference to the existence of the respective dependent patent and the above-mentioned 'old' case law of the Supreme Arbitration Court allowing for a 'positive right of use'. However, if the court concludes that the old case law regarding the positive right of use is no longer applicable and instead the new regulations about “dependent patents” of 01.10.2014 are to be applied, Nativa reverses the reasoning and files a counterclaim for grant of a compulsory license.

The position of the Russian arbitration courts as to whether or not the case law on the positive right of use of 2007 is still applicable is not quite consistent. For example, in the case of Bristol-Myers Squibb vs. Nativa (A-41-87845/17) the 2nd instance of the Arbitration Court has ruled on 17.09.2018 that the above-mentioned case law is still valid and should be applied, i.e. Nativa is allowed to market generic Dasatinib based on its own (dependent) patent RU 2 616 976, without violating the Dasatinib patent RU 2 260 592 of Bristol-Myers Squibb.

Similarly was the position of the court in the proceedings in the infringement suit of Orion Corp. vs. Nativa (A41-12551/18, Decision of 03.10.2018 in the 1st instance).

The basis for these judgments resides on various analogous decisions of higher court instances in the course of the last year (IP Court, Reg.No. A36-1404/2017, judgment of 28.03.2018; IP Court, Reg.No. A27-555/2017, judgment of 10.11 .2017, confirmed by Decision of the Supreme Court of the Russian Federation on 12.03.2018, Reg.No. 304-ЭС18-460). The argument of the IP Court in the explanatory statement for the application of the 'old' case law of 2007 instead of Art. 1358.1 of the Civil Code in the current version of 01.10.2014 is based on that the new regulations were to be applied only to those legal relationships that had arisen after said date of 01.10.2014. According to the interpretation of the higher courts, this does not refer to possible 'infringement actions' after 01.10.2014, but to rights (i.e. patent rights) created after that date. According to this interpretation, the new regulations on dependent patents may be applied only if both patents, i.e. the dependent patent and the prevailing patent have a priority date after 01.10.2014. Whereas, most of those patents that protect products which are presently on the market have a priority date long before 2014.

However, in those cases where the courts nevertheless no longer accept the 'old' case law and effectively apply the provisions of Art. 1358.1 of 1 October 2014, Nativa has the right to apply for a license from the holder of the dominant patent and, if this is denied, to apply for a compulsory license in court.

The hurdle to grant a compulsory license has been quite broadly defined in the law: a compulsory license is to be granted if the holder of the dependent patent is able to show that his invention "constitutes an important technical achievement and has significant economic advantages over the invention of the older patent". Therefore, Nativa did not have serious problems in obtaining the compulsory license for Celgene's patent RU 2 595 250 (Decision of the 2nd Instance of the Arbitration Court of 25.09.2018, Reg.No. A40-71471/17) and thus legally putting generic Lenalidomide onto the Russian market.

In summary, the current situation regarding dependent patents in Russia looks like a win-win situation for holders of dependent patents. Either on the basis of point 9 of Information Letter No. 122 of the Supreme Court of 22.12.2007, they may place their product on the market, without this being considered an infringement of the earlier prevailing patent, or, in the case of application of the newer legislation of 01.10.2014, they have the right to apply for a compulsory license in court in order to exploit their dependent patent.

For the owners of older, prevailing patents who have an originator product on the Russian market, it seems to be very difficult to prevent copycats of their products which were marketed by generic manufacturers on the basis either of the "positive right of use" or a compulsory license. In any case, it seems to be of utmost importance for those originator companies to be prepared well-ahead for possible attacks by generics companies such as Nativa and to develop counterstrategies in order not to lose their own market position.

PS: Recently, Celgene (19.09.2018) and Pfizer (03.10.2018) initiated invalidity actions against the corresponding dependent patents of Nativa before the Chamber for Patent Disputes. However, this does not have any suspending effect on the ongoing legal court proceedings and the compulsory license that already has been granted.

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