Can Unjust Enrichment Be Used To Justify An Injunction Against Competitors During The Patent Opposition Period?

In an important ruling, the Israel Supreme Court has upheld a refusal of the Tel Aviv District Court to grant an injunction to Merck, the applicant for a pharmaceutical patent for Focalin, to prevent generic competitors from exploiting a patent during the post examination opposition period. The grounds for the injunction attempt were Unjust Enrichment. Since the1981 A.Sh.I.R. appeal where the Supreme Court upheld three decisions to grant injunctions for designs that were never registered under the Law of Unjust Enrichment, there has been a cloud of uncertainly as to whether unjust enrichment could be used as the basis for injunctions where there are no patent rights. This decision addresses this issue. 

Background

InIsrael, a patent application only publishes once it has been found patentable by the Examiners. On publication, an opposition may be filed, and if this does not happen, a patent issues three months later. If an opposition is filed, a patent will only issue if and when the opposition is rejected.

Because of the large stakes, pharmaceutical patents are very likely to be opposed. The drug developers accuse generic industry opponents to their patents as opposing everything in bad faith. The generic companies accuse drug developers of ever-greening and of filing patent applications that lack novelty and inventiveness over earlier patents. There is some merit in the positions of both sides.

The Case

Merck have tried to obtain an injunction against generic manufacturers Teva, Unipharm, Trima and Zevulun Tomer (owner of Unipharm) to prevent them manufacturing generic equivalents of Focalin 70 mg during the patent opposition. Focalin is a drug used in the treatment of osteoporosis.

The argument used by the patent applicant to request the injunction was that although the Patent Law provides for retroactive compensation for exploitation by others during the opposition period, should a patent eventually issue, the damage is irreversible and no adequate compensation is possible. Following A.Sh.I.R. ruling by the Israel Supreme Court in 1981, IP laws and Unjust Enrichment can coexist.

The generic manufacturers argued that the Israel Patent Law provides a correct balance between the interests of both sides and that of the public, and there is no logic to the courts altering the balance in the Law that the legislative have decided upon. Additionally, until a patent issues, there is no patent, i.e. no asset, so unjust enrichment by misappropriating the asset cannot happen. They also pointed out that the public interest is in competitive markets and cheap drugs. Monopolies exist only where the legislation grants them, and it was against public policy for the court to extend monopolies where the law does not provide them.

The Court of First Instance rejected Merck’s application for Unjust Enrichment, and Merck appealed to the Supreme Court claiming that the issue had been ruled on narrowly based on legal grounds without sufficient regard to the business context which was characterized by inequitable behaviour.

The Supreme Court requested that a spokesman for the government explain the govt. position. The Supreme Court went on to rule that the Patent Law offers a balance between the various interests that reflects the desires of the legislature and does not require adjustment. Furthermore, the Law of Unjust Enrichment only applies where there is no legislative solution. The Appeal was rejected.

Costs of NIS40,000 (about $ 12,000 US) were awarded against Merck.

Comment

I think the Supreme Court was correct to reject the appeal, and am happy that there is now a legal precedent in this important area.

The publication of the patent inIsraelis, of course, largely irrelevant in terms of teaching the public, since most jurisdictions publish automatically 18 months from priority. That as may be, to misquote Appeal 20/82 (Adres vs. Harlow and Jones) since the A.ShI.R decision the specter of Unjust Enrichment hung, like a vulture, over the IP playing field. I am pleased that this is no longer the case. An interesting question, not addressed in this instance, is whether the courts can and should order the opposer to file a bond to discourage unfounded oppositions and to provide a kitty should the defendant, which may be a limited company, going out of business if and when a patent issues.

The original ruling related to the fact that the generic manufacturers rely on regulatory approval based on evidence provided by the patent developer and that this was also Unjust Enrichment. This aspect was not appealed.



Categories: Intellectual Property, Israel, Israel Court Ruling, Patents, pharmaceuticals, pharmaceuticals and Biotechnology

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