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CH – Irreparable harm discussion sparks a new debate in Switzerland

11 Oct 2019

Irreparable harm discussion sparks a new debate in Switzerland, by Simon Holzer and Kilian Schärli, Meyerlustenberger Lachenal Ltd. (MLL)

In Switzerland, by tradition, the requirements for showing not easily reparable harm in order to obtain a preliminary injunction in patent matters have never been very high. This may be because in Switzerland ex-parte injunctions are rather exceptional and only obtainable in particular situations (S2017_001, para. 5). In addition, even in preliminary injunction proceedings, the validity of the concerned patent is normally examined in detail.

However, in recent times, there have been judgments in Switzerland that have sparked a new debate regarding the existence of irreparable harm in order to obtain a preliminary injunction.

This is especially interesting when it comes to comparing the discussion of irreparable harm in different legal systems where there are different thresholds and criteria for the proof of irreparable harm. In fact, in most legal systems, preliminary injunctions in patent matters oblige the applicant to show that he would suffer an irreparable disadvantage without the approval of the requested preliminary injunction.

In Switzerland, already in the course of preliminary injunction proceedings, the validity of the concerned patent is thoroughly examined. This massively reduces the risk of having a preliminary injunction granted based on a patent that is later declared invalid. Hence, the criterion of irreparable harm in Switzerland has never been a major topic of discussion in patent matters.

Specifically, in pharmaceutical patent litigation, the Federal Patent Court regularly used to grant a preliminary injunction already if the launch of a patent infringing generic was imminent or had taken place already, provided that the patent in question was considered valid in PI proceedings and the patentee or exclusive licensee proceeded with the necessary urgency against the presumed infringer (S2013_004, para 4.7).

Hence, it is to no surprise that the following recent decisions have sparked a debate, as suddenly the criterion of “irreparable harm” was thoroughly discussed.

The first judgment (S2018_004) to be analyzed concerns a preliminary injunction that was obtained from the Swiss Federal Patent Court by ViiV (patentee) against Sandoz concerning ViiV’s SPC for the combination of the two active ingredients abacavir plus lamivudine. The original product of ViiV is Kivexa®. For reasons of transparency, please note that the authors represented the patentee in this case.

In the Kivexa® case, (S2018_004, para 4.10 et seqq.), the patentee argued that the Swiss regulatory environment leads to an irreparable damage, as both affected products are reimbursed by health insurance. Generics would be sold 20-70% cheaper than the original product. Patients would therefore switch to the generic product as a substitute, even if these products infringe patent rights or supplementary protection certificates (SPCs).

If the market entry of the defendant would not be prevented immediately, the patentee would not have only a decrease in the number of units sold of Kivexa® but he would also be affected by the fact that the Federal Office of Public Health had come to the wrong assumption that the patent/SPC protection for Kivexa® has expired. That would lead to the Federal Office of Public Health ordering an unjustified price review, which also leads to unjustified financial losses from the defendant’s generic entry into the market.

Furthermore, the patentee argued that if the defendant’s entry into the market would not be prevented, the pressure exerted by the presence of the defendant’s product also enforces a reduction of the price of Kivexa® in order to avoid loss of market share, as it is well known that it is practically impossible to return to the original price after the price of the original product had been lowered; that even if this had been illegally done in the generics introduced on the market is subsequently removed by an injunction.

Consequently, the patentee emphasized that in any event he would suffer substantial financial and other serious (in particular regulatory) losses and specifically irreparable harm would arise if the Federal Patent Court did not order the injunction immediately.

The Federal Patent Court issued a preliminary injunction against Sandoz and prevented Sandoz from distributing its generic products comprising the combination of abacavir and lamivudine in inter partes PI proceedings (both parties could comment on the validity and infringement of the SPC). Irreparable harm was made plausible.

Thereupon, Sandoz filed an appeal against the decision of the Federal Patent Court with the Swiss Federal Supreme Court, emphasizing, inter alia, that the preliminary injunction should not have been granted because the patentee would not suffer irreparable harm even without the preliminary injunction.

However, Sandoz’s appeal against the granted preliminary injunction was dismissed by the Swiss Federal Supreme Court (BGE 4A_575/2018) and the Swiss Federal Supreme Court came to the conclusion that the Federal Patent Court did not arbitrarily affirm not easily reparable harm for the following reasons:

According to the Swiss Federal Supreme Court, there was a threat that additional patent infringing products from other companies could enter the market, because they may be of the opinion that the SPC could no longer be enforced because no preliminary injunction was issued.

Additionally, according to the Federal Supreme Court, it is not arbitrary to assume that the patentee at least indirectly suffers an irreparable disadvantage if another company from the same group of companies will have unreasonable difficulties proving financial losses (in particular lost profits) and asserting them in main proceedings on the merits (see therefore already in an previous decision, S2013_004, para. 4.7 et seqq.).

The Federal Supreme Court did not require the patentee to prove that there is a license agreement in place between the patentee and the Swiss distributor that would directly affect the patentee if there were fewer sales of the original product. Also, the patentee did not have to demonstrate that it holds a direct or indirect interest in the Swiss distributing company in order to show irreparable harm.

According to the Federal Supreme Court, at least in pharmaceutical cases in which the original products are promoted by a Swiss entity of the same group of companies as the patentee, there is not easily reparable harm if patent infringing products threaten to enter the market or have entered the market recently. Yet, the Federal Supreme Court did not answer the question of whether the infringement of a valid patent causes irreparable harm automatically.

In light of the aforementioned decision of the Federal Supreme Court, it seems uncertain whether it is in fact necessary to show that the patentee is directly affected by fewer sales or license revenues. According to Swiss practice, the patent holder is entitled to the infringer’s profit or a reasonable licensee fee, even if the patentee neither markets any patent-protected products nor obtains license fees for the sale of patent-protected products. The exact amount of the infringer’s profits and in particular the reasonable royalty fee remain extremely difficult to prove. In view of that, irreparable harm seems to exist also if the patent owner does not prove lost profits or a direct involvement in the sale of patent-protected goods or services (see therefore already in a previous decision S2017_006, para 6).

In a different decision, the Federal Patent Court assumed that if at least there is no group structure and the risk that third parties with potentially infringing products may enter the market can be excluded, there is no automatic conclusion of irreparable harm in the case of a patent infringement. The Federal Patent Court examined whether the patentee could prove that it suffers a loss of income if the licensees, that are independent of the patentee and do not belong to the same group of companies, sell fewer products in Switzerland because of an alleged patent infringement (S2018_006, para 44). In that situation, irreparable harm was only assumed after the patentee was able to prove that it sold products to its licensees and was therefore affected if the licensees would generate less sales in Switzerland.

In the most recent decision, (S2019_002, para 68 et seqq.), in which the Federal Patent Court examined the requirements of a preliminary injunction, the court explicitly left the question of whether any violation of intellectual property rights would lead to irreparable harm open. Since the group of companies to which the patentee sold products on the market that competed with the infringing goods, the court found that the loss of market shares was a disadvantage that could not easily be remedied. It was sufficient that the product of the patent holder or its affiliates were effectively competing with the infringing goods.

As a result, it is unpredictable whether the discussion about irreparable harm will continue being a hot topic or whether this topic is answered simply and purposefully to the effect that a patent infringement per se triggers a preliminary injunction.

Furthermore, despite the fact that Swiss civil procedural law has an explicit provision that provides for financial compensation under certain conditions if a preliminary injunction is lifted, there is still no clarity as to how this provision is to be interpreted in patent matters.