THE EUROPA MOOT COURT COMPETITION

Transcription

1 THE EUROPA MOOT COURT COMPETITION On 3 August 2015, the Court of Justice of the European Union received the following reference for a preliminary ruling from the Court of First Instance of Mitau, Kingdom of Courland. The Kingdom of Courland is a member of the European Union since 1 January A public hearing is scheduled to take place on 21 and 22 March 2016 in Kavala, Greece. * * *

2 KINGDOM OF COURLAND IN THE COURT OF FIRST INSTANCE OF MITAU 15 January 2015 Before Judge von Lilienfeld Judge Knyazev Judge Kettler Laboratoires Chivy SA & Ministry of Health of the Kingdom of Courland (Claimants) v Valerena Entreprises Ltd (Respondent) AFTER hearing Counsel for the Claimants and Counsel for the Respondent on 5, 6, 7 and 8 November 2014 and AFTER consideration of the written submissions filed by the parties THE COURT ORDERED THAT (1) The questions set out in Schedule 1 to this order be referred to the Court of Justice of the European Union for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union. Schedule 2 to this order sets out the factual and legal background to this reference and Schedule 3 sets out the relevant provisions of the Licensing Agreement. (2) Costs be reserved. [signature] Registrar 15 January 2015

3 Laboratoires Chivy SA & Ministry of Health of the Kingdom of Courland (Claimants) v Valerena Entreprises Ltd (Respondent) SCHEDULE 1: QUESTIONS REFERRED (1) Is a technology licensing agreement in respect of a patent that was subsequently declared invalid, which was entered into for an indefinite period of time and contains a no-challenge clause, but which allows the licensee to terminate the agreement, contrary to Article 101 TFEU? (2) In a case where a national competition authority has adopted a decision finding the existence of a cartel and imposing fines and the validity of that decision as well as the quantification of the fine is challenged before the national courts, can a national court entertain a claim and pass judgment in an action for damages under Directive 2014/104/EU in so far as article 9, paragraph 1 of the said Directive introduces an irrefutable presumption in favour of the existence of an infringement? Is that presumption compatible with Article 47 of the Charter? Is Article 11, paragraph 1 of the said Directive contrary to the principle of proportionality?

4 Laboratoires Chivy SA, Ministry of Health of the Kingdom of Courland (Claimants) v Valerena Entreprises Ltd (Respondent) SCHEDULE 2: ANNEX 1. This Annex sets out the factual and legal background to the reference and a summary of the parties submissions. 2. Valerena Enterprises Ltd is a limited liability company founded by the famous chemist Dr Irene Valerena in Zurich, Switzerland, in In 1998, Dr Valerena announced the development of a new chemical substance that would be instrumental in the fight against lung cancer. She named the substance Valeric acid after herself. The company immediately filed for patents in several jurisdictions. Thus in 1999 Valerena Enterprises became the holder of European Patent which designated ten EU Member States including Courland. The Curonian Patent issued was Patent No Laboratoires Chivy SA is a publicly traded company incorporated in Mitau, Courland. It is one of the largest European pharmaceutical companies with the biggest shareholder being the Kingdom of Courland holding 25% of the share capital. It is Courland s only pharmaceutical company. It provides the Ministry of Health of the Kingdom of Courland (hereinafter the Ministry of Health ) with pharmaceutical products, including medicine for the treatment of lung cancer containing Valeric acid, destined for the use of the national health system. 4. As Valeric acid is an essential ingredient for the production of most medicines destined for the treatment of lung cancer, Valerena Enterprises (which has no relevant production facilities itself) has entered into non-exclusive licence agreements with several pharmaceutical companies, including the big four European pharmaceutics (Laboratoires Chivy SA, Asclepius SA, Galenus plc and EudePharm AG) that control 60% of the EU market for pharmaceutical products and in particular 70% of the EU market for medicines destined for the treatment of cancer. These four companies hold about 90% of the Curonian market of medicines for the treatment of cancer. 5. The non-exclusive licensing agreements were concluded in 2000 on almost identical terms. The relevant terms of these agreements are provided in Annex The licensing agreements did not contain an expiry date but allowed Valerena Enterprises to terminate them by notice in the event that the Licensee failed to perform or observe in any material respect the obligations under the licence agreement. 7. The Licensee was also allowed to terminate the licensing agreement without providing reasons on one year s notice.

5 8. However, Article 8 of the licensing agreements prohibited the Licensee from challenging the validity of the patents before the courts of any jurisdiction. 9. The licensing agreements were made subject to Curonian law and to the jurisdiction of the Curonian courts. 10. In 2013, Dr Temple, a researcher at the University of Cambridge, published a series of articles and documents on the life and work of the late Professor Darlington, fellow of Clare College, who died in Amongst these documents was a UK patent granted in 1939 for the development of the exact same substance, later known as Valeric acid. It appeared that the circumstances of the Second World War and the death of Professor Darlington had prevented him from exploiting his patent rights. 11. Upon receipt of this news and considering that the patents of Valerena Enterprises were invalid for lack of novelty, Laboratoires Chivy, Asclepius, Galenus and EudePharm gave notice for the termination of the licence agreements to Valerena Enteprises and requested restitution of all payments made under the licensing agreements, which they considered would not have been concluded had they known that the patents were invalid. 12. The story was leaked to the press in August 2013 and immediately caught the public s attention as it was widely believed that medicine for the treatment of lung cancer was unreasonably expensive, especially by comparison to the prices of the same medicine in other Member States. In the Curonian Parliament, the Government was pressurized to take action in order to protect the interests of taxpayers and patients by seeking to recover the loss that the Ministry of Health might have suffered from the increased price of medicine containing Valeric acid. As a result, the Minister for Health declared that the Government would take all necessary measures in the public interest. 13. Reacting to these allegations, Laboratoires Chivy issued a press statement on 1 September 2013 denying any wrongdoing on its part and insisting on the fact that the price of its medicines containing Valeric acid was in reality dictated by the high fees and royalties charged by Valerena Enterprises. 14. Valerena Entreprises hired a new law firm at the beginning of After reviewing Valerena Entreprises business practices, its new lawyers became alarmed that the attendance of the company at a number of meetings with at least three Licensees, namely Asclepius, Galenus and EudePharm could be wrongly construed as participation in a cartel infringing Article 101 TFEU. On the advice of its lawyers, Valerena Entreprises filed an application for leniency with the European Commission and was granted 100% immunity. Nevertheless, the European Commission decided not to pursue an investigation in this case. 15. Shortly thereafter, a raid was conducted by officials of the Curonian Competition Authority (hereinafter the Authority ) on the premises of Laboratoires Chivy, Asclepius, Galenus and EudePharm on 15 October The Authority found evidence suggesting the existence of a cartel involving at least three Licensees, namely Asclepius, Galenus and EudePharm aimed at fixing the price of their respective products containing Valeric acid. 16. On 1 February 2014, in proceedings commenced by the Ministry of Health, the Curonian Patents Court annulled Curonian Patent No for failure to comply with the requirement of novelty with effect ex tunc. The annulment was subsequently upheld on appeal.

6 17. In its decision of 13 September 2014, the Authority found that Valerena Enterprises, Asclepius, Galenus and EudePharm had participated in a single and continuous infringement of Article 101 TFUE, consisting of an oral agreement concluded through a series of meetings held in Zurich, Switzerland, from 2001 to The Authority was unable to prove that Laboratoires Chivy had participated in the cartel. Indeed, Laboratoires Chivy claimed in the administrative proceedings before the Authority that since 2004, it had been unable to get regular and adequate supplies of Valeric acid which hampered its efforts to compete effectively with Asclepius, Galenus and EudePharm in the market for medicines for the treatment of cancer. 18. The Authority considered that at the final meeting of 1 February 2003 Valerena Enterprises, Asclepius, Galenus and EudePharm met to discuss the pricing of pharmaceutical products containing Valeric acid. 19. The Authority found that the three Licensees in question were worried about, firstly, the differences in the price control systems in the EU and, secondly, the high royalties payable to Valerena Enterprises under the Licensing Agreements. The Licensees considered that due to these circumstances they have to sell products containing Valeric acid at a loss. According to the decision, the three Licensees in question were particularly concerned about Member States, like Courland, whose price control system required a price to be negotiated with the national authorities before the medicine could be marketed. As the products in question concerned the treatment of lung cancer, the Licensees came under significant State pressure to sell at extremely low prices. The Licensees were also unable to withdraw from the market in question due to legal and ethical obligations to provide a wide range of medicines. There was also some evidence that Asclepius, Galenus and EudePharm were worried about increased competition from Laboratoires Chivy due to the latter s size and its perceived privileged relationship with the Ministry of Health. 20. As Valerena Enterprises would only agree to renegotiate and lower the royalty fee for the net sales of products containing Valeric acid from 6% to 5% if the Licensees ensured it would receive a guaranteed minimum revenue, the Licensees agreed amongst themselves in Valerena Enterprises presence a specific minimum price under which the Licensees would all refuse to sell to national health systems. 21. On this basis the Authority considered that there was a cartel aimed at price fixing and imposed the following fines on all those present at the meetings: 30 million euros on each of Asclepius, Galenus and EudePharm and 50 million euros on Valerena Enterprises. That decision is challenged by all its addressees in annulment proceedings currently pending before the Administrative Court of Mitau. 22. In the context of the proceedings pending before the Administrative Court of Mitau, Valerena Enterprises contests the validity of the Authority s decision and, in particular, the finding that it participated in a cartel in breach of Article 101 TFEU. Valerena Enterprises claims that it was not involved in the price fixing arrangement which was a matter solely between the producers of the medicines in question. In that regard it asserts that it merely attended the meetings in order to monitor the production and sale of medicines containing Valeric acid as it considered that the pharmaceutical companies were under-reporting their sales of medicines containing Valeric Acid and thus pay less royalties. In any event, Valerena Enterprises submits that as the market for the medicines in question are national and the territorial scope of its patents are also national, there is no breach of Article 101 TFEU. In the alternative, Valerena

7 Enterprises pleads that even if it were involved in a cartel then the fine of 50 million euros is disproportionate to the gravity of its participation in the alleged infringement. 23. Valerena Enterprises also considers that the Authority failed to take into account its leniency application which was instrumental in the discovery of the alleged cartel thereby breaching Article 41 of the Charter and the general principles of proportionality, legitimate expectations and good administration by imposing a fine on it. 24. The Authority in its defence claims that Valerena Enterprises fully participated in the cartel as it wished to ensure higher prices of medicines containing Valeric acid and thus higher royalties. It also claims that it is not bound by the leniency application to the European Commission and the grant of immunity. 25. By its action against Valerena Enterprises lodged at this Court on 1 December 2014, Laboratoires Chivy seeks to condemn Valerena Enterprises to refund all the sums paid to the latter under Article 4 of the Licensing Agreement. It alleges that the Licensing Agreement concluded with Valerena Enterprises is contrary to Article 101 TFEU and is thus void because it was required to pay royalties for a substance that should not have been patented due to lack of novelty, without having the ability to challenge the validity of the patent. 26. In its reply, Valerena Enterprises contends that the 2000 Licence Agreement is compatible with Article 101 TFEU pursuant to the case-law of the Court of Justice and the Commission s Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer. It considers that as the said Agreement provided for the possibility of termination by the Licensee on one year s notice, it complies with Article 101 TFEU. 27. On 23 February 2015, legislation entered into force transposing Directive 2014/104/EU of the European Parliament and the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (OJ L 349, p 1). 28. By its action for damages against Valerena Enterprises lodged at this Court on 23 March 2015, the Ministry of Health alleges that Valerena Enteprises is jointly and severally liable to pay full compensation for the harm caused to the Ministry of Health through the price fixing of pharmaceutical products containing Valeric acid. It considers that, since the national health system does not charge the patients for prescription medicines for the treatment of lung cancer, it has suffered harm from Valerena Enterprises participation in the cartel established by the Authority s decision. It requests that Valerena Enterprises be condemned to pay 150 million euros in compensation. 29. In its reply, Valerena Enterprises contests the validity of the Authority s decision as far it is concerned by it because it could not have had any involvement in the fixing of prices which was a matter solely for the producers of the medicines in question. It contends that this Court cannot condemn it to pay damages while its action for annulment of the Authority s decision is pending before the Curonian Courts. It also contests the irrefutable nature of the presumption contained in article 9, paragraph 1, of Directive 2014/104/EU as contrary to Article 47 of the Charter and Article 6 of the European Convention on Human Rights. It further contends that the Ministry of Health cannot have suffered any harm from the behaviour of Asclepius, Galenus and EudePharm because the former essentially dictates the prices of medicines to be sold on its market, including the medicine destined for the treatment of lung cancer that it

8 purchases for the Curonian national health system. Lastly, Valerena Enterprises considers that Article 11, paragraph 1 of Directive 2014/104/EU is invalid because it breaches the principle of proportionality. 30. The cases have been joined in accordance with Rule 42(3) of the Curonian Civil Procedure Rules.

9 Laboratoires Chivy SA, Ministry of Health of the Kingdom of Courland (Claimants) v Valerena Entreprises Ltd (Respondent) SCHEDULE 3: ANNEX Article 1 Under this Agreement and according to these terms, the Licensor hereby grants the following license rights to the Licensee, which hereby accepts these license rights. The following license is a non-exclusive, worldwide license under this Agreement to make and have made, to use and have used, to sell and have sold, to offer to sell, and to import the Valeric Acid Formulations, identified for all fields of use as well as the right to practice or have practiced the Valeric Acid Formulations, as well as methods for making and using the Formulations in all fields of use: A. As used hereunder the term Formulations shall mean a combination of natural products developed by the Licensor for the treatment of lung cancer, including any components of and modifications made to such formula for any reason, including, but not limited, to addressing any governmental restriction that prohibits the sale of the unmodified formulation for any reason. [ ] Article 4 The Licensee agrees to pay to the Licensor the following monies (in Euros): A. As a base amount: (1) The amount of for the Valeric Acid Formulation. [ ] B. The Licensee will also pay to the Licensor each calendar year, the following: (1) A royalty of 5% of Net Sales of the products containing the Valeric Acid Formulation; Net Sales means the total revenues of the Licensee based on gross invoiced sales of products containing the Valeric Acid Formulation, excluding sales and similar taxes, discounts, allowances, credits for returns, rebates, import duties and other governmental charges, freight and transportation charges, and insurance.

10 [ ] Article 8 The Licensee undertakes not to challenge the validity of Curonian Patent No before any competent court. [ ] Article 10 The Licensor further agrees that it shall not compete with the Licensee in any commercial or business venture in the Kingdom of Courland regarding the production, development and marketing of the Valeric Acid Formulation.