Archive | 2012, March | (4) posts

India Grants the First Compulsory License

The Compulsory License Application No. 1 of 2011, the first of its kind in the history of the Indian Patents Act 1970, concerns the anti-cancer drug Sorafenib, where the patentee is Bayer Corporation and the applicant for a compulsory license is Natco Pharma Limited.

The anti-cancer drug Sorafenib, sold under the brand name NEXAVAR, is used for treatment at advanced stages of kidney and liver cancer. The drug is not a life-saving drug, but a life extending drug. The cost of the drug is very high – around Rs. 280,000 per month, a sum that is unaffordable to many of the patients in India. Natco wanted to sell the drug for around Rs. 8880 per month.

According to the Indian patents act, a compulsory license is to be granted at any time after the expiration of three years after the grant of the patent, on any one of three grounds:

(a)    that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or

(b)   that the patented invention is not available to the public at a reasonable affordable price, or

(c)    that the patented invention is not worked in the territory of India.

According to the decision, the requirements for each of the three grounds were separately met and a compulsory license was granted. In view of the fact that India has such a huge population and also a huge pharmaceutical industry, the decision to grant a compulsory license is of great importance.

The Controller General of Patents was in the decision influenced by the high price and low sales by Bayer, and concluded: “It stands to common logic that a patented article like the drug in this case was not bought by the public due to only one reason, i.e. its price was not reasonably affordable to them”.

Regarding item (c) above, this, according to the decision, is to be construed in that the drug must be manufactured in India, i.e. not imported to India, since it was concluded by the Controller General of Patents that ‘worked in the territory of India’ means ‘manufactured to a reasonable extent in India’.

The conditions of the license were many, including for instance that the price of the drug covered by the patent, sold by the licensee shall not exceed Rs. 8880 for a pack of 120 tablets, required for one month’s treatment, and that a royalty at the rate of 6% of the net sales of the drug is to be paid by the licensee.

The decision can, and will be most probably, appealed by Bayer. I look forward to the outcome of a future appeal!

Jeanette Jakobsson, European Patent Attorney

Getting Personal in Sweden: Liability of Directors, Officers, and Owners for their Company’s IP Infringement

1. Introduction
Picture a scenario where a plaintiff in an IP infringement case in Sweden has received a well earned final ruling in its favor, or perhaps gotten a preliminary injunction issued against an accused infringer.

As the plaintiff is celebrating its success, it receives news that the infringer recently emptied its warehouses of infringing goods at dumping prices, filed for bankruptcy, or went into administration. The on-going infringing business, apart from the shares in the defendant company, has been sold to a third party. The plaintiff is left with not only the losses due to the infringement, but also the costs for the litigation.

Curtain falls and the show is over, or is it not? What actions are available now, and what could have been done to prevent this bleak outcome?

 2. Follow the money – pursue a claim for personal liability
Among the actions available to avoid the unlucky scenario, there is one that stands out from the crowd. This is to pursue the officers, directors or owners involved in the infringing business with claims for personal liability (to pay damages for the infringement). 

In direct contrast to the prevailing misconception that there is practically never any personal liability, Swedish law provides a forceful set of legal tools for a plaintiff to avoid much of the above-mentioned problems with an elusive defendant in IP cases. These tools will be outlined in the next section of this article.

3. Swedish law does give a basis for personal liability
Swedish case law provides a clear precedent that injunctions can be issued against representatives of a company on the same grounds as against the company to avoid possible defiance.

Although a director is not typically personally responsible for the company’s acts and undertakings, personal liability for IP infringement can be established under certain circumstances. 

The basic rule in Sweden is that officers, directors and (active) owners, or board members, of a company who have taken part in, or have furthered, or have failed to prevent an IP infringement can be held directly personally responsible for their company’s IP infringement. 

Personal liability for IP infringement in Sweden can be established on mainly two different grounds, either by the so-called piercing the corporate veil doctrine, or by direct personal liability. These two counts will be discussed in turn below.

3.1 Piercing the corporate veil
The conditions for piercing the corporate veil are not clearly specified under Swedish law. However, from existing case law the following conditions can be listed as important: undercapitalization, lack of independence, undue organization or influence over the business by the owner (“Alter Ego”), and conduct directed against and disloyal to the creditors or other parties who have suffered a loss.

One of the problems with the piercing the corporate veil theory is that undercapitalization does not have any legal, commercial, or even fiscal definition in Sweden. And what is more: undercapitalization is not as such prohibited under Swedish law.

3.2 Direct personal liability
The basic rule of direct personal liability is more straightforward. It applies if a company has infringed someone else’s IP and a director, owner or board member has participated in the decisions or activities leading to the infringement, supposing also at least negligence on part of the director, owner or board member.

The Swedish Supreme Court ruling in NJA 1986 s 702 (“Demonstration music”) together with successive rulings has cemented the principle that a leading representative, such as a CEO, of a limited liability company can be liable to pay damages because of negligent corporate copyright infringement. Intent or gross negligence are not necessary prerequisites.

The duty to investigate whether a product can be protected by IP rights is extensive in Sweden, and to stay uninformed about possibly existing IP rights is normally deemed sufficient to establish negligence in itself.

Nevertheless, even though negligence can be thought to come almost free of charge, most judges in Sweden would not perhaps readily hold that the burden of proof rests solely upon the defendant (to exculpate himself), i.e. the plaintiff makes best by tainting the defendant by dressing him up in culpa.

3.3 Swedish law on personal liability for IP infringement – brief conclusion
The discussion above shows that there are still some pitfalls and surprises left when it comes to personal liability for a company’s IP infringement in Sweden.

For one thing, and as surprising as it may be, personal liability for a company’s IP infringement has not been put to the test by the Swedish Supreme Court in a patent, trademark or design case.

It is also uncertain what it would take for a finding of negligence in cases where the infringing goods only fall within the mere formal scope of protection of, say, a trademark or design right, and where it is clear that blatant copying has not taken place.

However, having said that, the basic rule under Swedish law is still clear. The directors, officers and owners, or board members, of a company who did not do what they should have done can indeed be personally liable to pay damages for their company’s IP infringement.

4. Conclusion: How to deal with an evasive infringer
The situation under Swedish law makes it clear how an IP owner plaintiff should deal with an evasive infringer.

The best way to pursue a claim in such a case is obvious – make thorough preparations and go after everyone already from the start.

There may be challenges along the way, but aggressive action probably gives the best chance for success at the least risk and for a reasonable premium (i.e. initially higher litigation costs, but with the prospects of recovery if the case is won).

It should also be clear that a well founded claim for personal liability is the perfect platform for a good amicable settlement. Clearly, the bravado and confidence in defending an infringement case is usually much higher when the personal belongings and private welfare is not at stake.

Robin Berzelius, Attorney at Law

The art of being both introvert and extrovert

One of the most exciting and challenging things being a patent attorney is the mix of on the one hand having to be quite introvert (reading, writing, reviewing text, comparing inventions, writing some more) and on the other hand having to be rather extrovert handling relations with customers, customers-to-be, giving lectures and talks.

The last two weeks of theory, we had lectures and workshops on both of these sides of our profession.

We had a group assignment studying the European Patent Convention – the law that from now on will rule most of our working life. We also tried to write one of the papers of the European Qualifying Examination. To become an authorized European patent attorney, you have to pass four exams, paper A being one of them. The task of paper A is to write claims and part of the application. During a whole day we wrote and discussed the paper and – according to our excellent supervisor Tommy Somlo – we did OK. It´s good though that we still have a few years of introvert practicing before we will sit the exam … 

We also had two days of sales training, preparing us for the more extrovert part of our profession. During these days we discussed different scenarios and were given some hands-on tips on how to handle different situations.

Now we´re back at our home offices trying to combine the art of being introvert and extrovert (almost) at the same time. It´s an interesting challenge!

Maria Weineisen, Associate at Awapatent

At the time, it seemed like a really good idea…

The subject of our latest annual trademark and marketing conference, Årets Mærkedag, was Brand Grooming. The skill of maintaining your brand and still be able to evolve it without losing your customers or built-up goodwill.

We heard how especially established brands have to tread carefully when keeping a brand and its identity up-to-date and how newly established brands have to get things right from the beginning.

One thing is theory, another practice.

NetFlix is probably fairly unknown here in Europe. In North America it has been a fast rising star. Netflix’ product is the rental of DVD by post. You would also receive personalized recommendations. The business has developed into on-demand streaming too. The idea is that you pay a monthly flat fee as a subscription. You then receive the rental DVDs by mail and return them to Netflix or download the films. Netflix became hugely successful and beat out Blockbuster because it rode the technological wave of the Internet and DVDs successfully. It did this by building a business model around web-based browsing of selections, prompt delivery, on-line recommendation systems and exploitation of “the tail of the distribution” by stocking DVDs that appeal to a small percentage of the viewing population.

In last autumn NetFlix decided to split the business in two: the streaming service would continue as NetFlix and the rental service would be called Qwikster. It would still be the same company but customers would now have to subscribe to two different kinds of service. Probably nothing uncommon or even strange when we are talking business development, actually it seems quite a reasonable move. Netflix even had substantive research showing that the change made sense.

Before this, Netflix had raised the prices from $9.99 per month to $15.99. There was an outcry from the consumers and a mass exodus.

Within two months NetFlix lost almost a million customers and its shares plummeted. NetFlix quickly killed off Qwikster and went back to the good old ways, trying to reassure the market and their customers. To this day Netflix has regained neither costumers nor share value.

So, apart from the significant price hike, what went wrong? Consumers form strong bonds with brands and expect consistency from them.  Brands are promises built on a trusting relationship and if they abruptly veer in another direction you will risk goodwill and to lose you loyal customers.

For guidance, they could have looked to Coca-Cola who once made a monumental branding blunder that still haunts the company.  It is the case study of trying to change what works. In 1985, Coca-Cola announced the launch of New Coke. It flopped massively, evidenced by the company being flooded by calls and letters disapproving of the decision. The known Coca-Cola was then reintroduced as “Classic.” 

Last year, Gap attempted to refresh their logo doing away with the old blue box. In this case, the consumer outcry was not over price or distribution but over something as simple as the typeface of the new logo. After only one week of brand disparagement, the company rescinded the new and went back to the previous blue.

Maybe this shows that the predilections of your customers are not something you can measure or assess; you need to know it intuitively. This also emphasizes that the changes you make to your business and/or brand have to be made carefully; the more iconic your brand and the more loyal your customers, the more carefully you may have to tread. And not the least: be aware that decisions that were made under one set of circumstances may not be good under another – even if you have customer surveys to back things up.

Thorbjørn Swanstrøm, Attorney at Law at Awapatent