But first, for those not familiar with this dispute yet, a bit of background:
“On 15 January, Mint had reported that a DRL shipment of the generic version of losartan was seized in transit in the Netherlands. This shipment, on its way to Brazil, was held by the customs authority at Rotterdam, which said it infringed the patent of the original drug—Cozaar. Losartan is not patented in India or Brazil. The patent for Cozaar in the Netherlands is held by DuPont, while US-based pharma multinational Merck and Co. holds the marketing rights.”
For those interested, listed below are the consignments of Indian companies that were seized on grounds of patent infringement by the Dutch customs authorities and the respective dates of seizure.
1. 15.10.08: Ind-Swift Laboratories Ltd (Clopidogrel Bilsulphate- API): Destined for Columbia
2. 27.11.08: Cipla Ltd, through Uni World Pharma Ltd, Dubai (Olanzapine 10 mg Tabs): Destined for Peru
3. 27.11.08: Cipla Ltd, through Uni World Pharma Ltd, Dubai (Rivastigmine 3 mg Tabs): Peru
4. 24.12.08: Dr Reddy’s Laboratories Ltd (Losartan – API): Destined for Brazil
Subsequent to these seizures which prompted India and Brazil to issue very strong statements against this action, DRL opted to back down and have its consignment returned to India. For the TRIPS implications of such seizures, see our previous post.
A recent statement by the EU labelled this seizure as a “temporary detention” and went on to express surprise at DRL’s decision to return the seized consignment to India. It notes:
“In the present case, it appears that, following a request by a company which has patent rights over the medicine in question in the Netherlands, the Dutch authorities temporarily detained (which does not mean seize, confiscate or destroy) a small shipment of drugs worth 55.000 euros in a Dutch airport, in order to control it. This action is allowed by TRIPS and is based on provisions in EU customs law that allow customs to temporarily detain any goods if they suspect that these goods infringe an intellectual property right.
The goods were not intended for the EC market and the medicines were finally released by the authorities, leaving their (Indian) owner the right to do with these goods as he pleases. There was certainly no legal obligation to send these goods back to their country of origin (i.e. India). We are still not clear as to why the company decided to proceed that way, but this is in any event beyond our authority once the goods were safely returned to their owner. We have no indication that there is a systemic problem in this respect.”
In reply, DRL takes strong issue with the EU characterisation of the action as a “temporary detention”, as opposed to a “seizure”. Here is what a letter from DRL states:
“To the best of our information and belief, the submission of the EU that the Dutch authorities had “temporarily detained” and not seized the consignment is misleading. Lovells, the attorneys of EI DuPont Nemours & Co and Merck & Co. have stated in their communication of 24 December 2008 to us that “The release of the above mentioned product (Losartan) was suspended on the basis of Council Regulation (EC no. 1383/2003 (OJ EC L 196, 2003) dated 22 July 2003.” This communication further demanded that we sign an attached “Declaration of Waiver of Rights” which stated, amongst other things, that “The infringing losartan potassium originated from India and was seized by Dutch Customs at Schipol during a transit shipment to Brazil.”
Art 16 of the above Council Regulation provides that if the goods are found to infringe an intellectual property right at the end of the prescribed procedure, such goods shall not be allowed to exported, reexported, placed under a suspensive procedure or placed in a free zone or warehouse. Admittedly, the goods in transit would infringe EU Patent EP 643704 and the corresponding SPC if it were meant to be sold in the EU, though we believed that in the present case as there would have been no infringement as the goods were consigned to Brazil. The inevitable result of an infringement of the EU patent would be the prohibition of release of goods or placement under a suspensive procedure, which in effect is nothing but a seizure.
Under the circumstances, we do not see any material difference between the “temporary detention” alleged by the EU authorities and “seizure” and this appears to be the understanding of Lovells, the attorneys of the patent holder as they have used the word “suspended” and “seized” interchangeably.”
DRL then goes on to explain as to why they opted to cave in and take the goods back to India:
“The EU claims that Dr Reddy’s was under no legal compulsion to take back the goods to India and that they are unclear about why Dr Reddy’s decided to proceed that way. The reason is that Dr Reddy’s had very little time to respond to the communication from Lovells dated 24 December 2008 and as explained in the reply to Lovells, it was impossible for Dr Reddy’s to obtain legal advice in that period, considering it was during the Christmas vacation. Further, we were mindful of the power under Art 17 for the authorities to destroy goods found to infringe intellectual property rights or otherwise dispose of them to effectively deprive any economic gains to the owner of such goods. We therefore thought that it would be more persuasive to seek return of the goods rather than release for despatch to the customer in Brazil.”
While “technically” the EU is correct that DRL need not have opted for take the goods back to India, the hard reality is that in the light of pressure from originator companies and their lawyers and the relative lack of expertise with EU regulations (EU border control in its present form has been around since 2003, but has begun to be enforced strictly only now), Indian and other developing country companies may find it easier to simply withdraw from protracted and complex legal battles.
In fact, this point may be more than borne out by the fact that Cipla, a spunky generic manufacturer that is on the constant look out for opportunities to take on big pharma decided to simply cave in and abandon its “seized” consignment in the EU. A report by Jyothi Datta of the Hindu Business Line notes:
“It is not just drug makers Ind-Swift and Dr Reddy’s Laboratories’ export consignments that were confiscated by Customs authorities in Amsterdam in the last three-odd months on the grounds of patent infringement…
Details on the size of Cipla’s consignment and the type of medicines being exported were not available, but the company official indicated that Cipla has abandoned the consignment as the cost of litigation was disproportionate to the value of the consignment.”
Recent news reports suggest that this issue may be resolved diplomatically. The Hindu stated that “the Netherlands on Tuesday assured New Delhi that it will sort out the issue of frequent seizure of generic drugs produced in India by European countries on the pretext of patent protection.
….Dutch Foreign Trade Minister Frank Heemskerk’s, who is on a week-long visit to India, said patent protection should not be used as an excuse for hampering the distribution of generic drugs among the poor people across the globe.”
Other papers including the Economic Times and the Mint also reported on the above assurances by the Dutch minister. Given these media statements, one hopes that this issue would be resolved, without a TRIPS challenge. However, diplomatic statements notwithstanding, the threat of future seizures is still present. The present wording of the EC regulation (Council
Regulation (EC) No. 1383/2003 of 22 July 2003), under which such seizures were made, leaves much to be desired and offers some scope for patent owners to insist on such seizures.
Therefore, along with exploring a TRIPS challenge, Indian companies must also ready themselves to challenge such actions under the EC regulation itself. Particularly since case law from the ECJ (European Court of Justice) suggests that the European courts may not be too sympathetic to seizures of in transit/transhipment consignments that were never meant for the EU markets and that are unlikely to impact the commercial interests of IP owners in the EU. However, most such decisions were in relation to trademarks and under an earlier regulation (European Council Regulation Number 3295/94 of December 22, 1994), that preceded the current 2003 EU regulation. If time permits, we hope to explore EU case law in this regard in a future post.
It is interesting to note that the Netherlands has sought more “clarity” on this issue from the European Commission. An ET report notes in this regard that:
“Visiting Dutch minister of foreign trade Frank Heemskerk has said his country wanted to “avoid” such incidents in future and had written to the European Commission seeking clarity on how the EU Customs regulations could be brought in sync with the international Trips regulations which gave concessions to poor countries on the ground of public health. “My country is very much in favour of providing generic medicines, especially to the very poor,” Mr Heemskerk said in an interview to ET.
As to whether the EC will end up limiting the scope of its 2003 Council Regulation in the light of the above controversy and its implications for the spirit of free trade and public health as enshrined in TRIPS, remains to be seen.