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Can unjust enrichment justify an injunction during patent opposition period?
JMB Factor & Co - Israel
15 Jun 2011
In an important ruling the 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, in order to prevent generic competitors from exploiting a patent during the post-examination opposition period. Merck cited unjust enrichment as grounds for the injunction. Since the 1981 AShIR appeal, in which 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 great deal of uncertainty as to whether unjust enrichment could be used as the basis for injunctions where there are no patent rights. This decision addressed this issue.
In Israel, a patent application is published only once it has been found patentable by the examiners. On publication, an opposition may be filed; if no opposition is filed, a patent issues three months later. If an opposition is filed, a patent will issue only if the opposition is rejected.
Because of the high stakes, pharmaceutical patents are likely to be opposed. Drug developers accuse generic industry opponents to their patents of opposing everything in bad faith. Generic companies accuse drug developers of evergreening and of filing patent applications that lack novelty and inventiveness over earlier patents. Both positions have some merits.
Merck attempted to obtain an injunction against generic manufacturers Teva, Unipharm, Trima and Zevulun Tomer (owner of Unipharm) to prevent them from manufacturing generic equivalents of Focalin during the patent opposition period. Focalin is used in the treatment of osteoporosis.
Merck argued 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. Further, since the 1981 AShIR ruling by the Supreme Court, IP laws and unjust enrichment can coexist.
The generic manufacturers argued that the Patent Law provides a correct balance between the interests of both sides and the interests of the public, and there is no logic to the courts altering the balance in the law that has been set by the legislature. In addition, until a patent issues, there is no patent (ie, no asset), so unjust enrichment by misappropriating the asset cannot happen. They also stated 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. 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 characterised by inequitable behaviour.
The Supreme Court requested that a spokesman for the government explain the government position. It went on to rule that the Patent Law offers a balance between the various interests that reflects the desire of the legislature, and that does not require adjustment. Furthermore, the Law of Unjust Enrichment applies only where there is no legislative solution. The appeal was rejected.
Costs of NIS40,000 (about $12,000) were awarded against Merck.
The Supreme Court was correct to reject the appeal, and has set a legal precedent in this important area. The publication of the patent in Israel is, of course, largely irrelevant in terms of teaching the public, since most jurisdictions publish automatically 18 months after priority. To misquote Appeal 20/82 (Adres v Harlow), since the AShIR decision the specter of Unjust Enrichment had hung, like a vulture, over the IP playing field. 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, go 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.
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