Unipharm Against Pharma Companies: A Sequel that Failed

In a Nutshell

In Unipharm v. Sanofi,^[1] the Supreme Court accepted Unipharm’s claim for the restitution of profits derived by Sanofi in consequence of filing a patent application for a polymorph of an active ingredient of a drug that was protected by an earlier patent.

In June 2024, the Supreme Court issued a ruling in a similar lawsuit filed by Unipharm against GSK^[2]. Once again, the lawsuit was based on the grounds of unjust enrichment and on the filing of a patent application for a new polymorph of an active ingredient of a drug that was protected by an earlier patent.

The main ground for rejecting the appeal is that the claim is barred by the statute of limitations. The court also opined, albeit as obiter dicta, regarding the merits of the cause of action.

With regard to the statute of limitations barring the cause of action, it was held that the statute of limitations commenced on the day the plaintiff (Unipharm) received knowledge of the filing of the patent application, and not at a later date, such as, for example, when the patent application was rejected due to Unipharm’s opposition to the granting of the patent.

Background

The drug Seroxat, whose active ingredient is paroxetine hydrochloride, was first launched by GSK or its predecessors in 1991 in Europe and in 1992 in the USA. The drug was launched in Israel in 1995.

Development of the drug began before 1980 (by Ferrosan, with the rights being transferred to GSK in 1980). At first, the active ingredient was in the form of anhydrate. In the mid-1980s, it became clear that the crystal configuration spontaneously became hemihydrate. GSK replaced the active ingredient, so that at launch the active ingredient was in the form of hemihydrate.

In 1985, Glaxo filed a patent application with the UK Patent Office for the PH substance and its manufacturing process, which relates, inter alia, to three crystalline forms: anhydrate, hemihydrate and solvate (Application 8526407GB, hereinafter 407). Based on this application, patents were granted that protected the drug in many countries of the world. In Israel, there was no patent protection for this invention.

Subsequently, GSK discovered a new method for producing a crystalline form of anhydrate (free of water) that was stable (the “stable configuration”). However, Seroxat’s active ingredient remains the hemihydrate.

In 1996, Glaxo filed a patent application in England (2297550GB) and other countries for the stable configuration. The parallel Israeli application is Patent Application 117035 (hereafter also ‘035). Application ‘035 was accepted in 2000, and in May of that year Unipharm filed an opposition to the granting of the patent for Application ‘035.

A month later, Unipharm sent GSK a warning letter alleging that Application ‘035 had been filed improperly. Later that year, GSK filed a lawsuit against Unipharm seeking injunctive relief against Unipharm’s marketing of a competing drug (Paxxet). As a result, Unipharm stopped using anhydrate as the active ingredient of Paxxet and replaced it with a hemihydrate.

In 2009, Unipharm’s opposition to the application was accepted^[3]. It was held that failure to disclose Document 407 in the specification, and especially in the course of the examination process, constituted an improper mode of conduct and justified denying GSK a patent.

The infringement claim filed by GSK was dismissed^[4]. It was held, inter alia, that there was no overlap between the invention claimed in the Israeli patent application and the invention claimed in the earlier patent applications filed by Beecham, and that there was prima facie novelty in the Israeli patent application both in terms of the production process and in terms of the substance created. However, it was ruled that it was not proven that Unipharm took the invention that was the subject of the Israeli patent application. It was also held that the invention sought was eligible for the protection of the Unjust Enrichment Law in accordance with the A.S.I.R. ruling, but it was held that neither the element of ‘taking’ nor the existence of a requisite “additional element” were proved, and therefore the elements of the cause of action failed to materialize, in accordance with the applicable statutory law and case law.

Unipharm’s Damages Claim Against GSK

In 2011, Unipharm filed a claim for damages against GSK in the district court, for filing Application 035 and conducting the proceedings in its case as described above. This claim is the subject of the Supreme Court’s ruling last month.

The district court ruled that the claim was barred by the statute of limitations. It was determined that the actions attributed to Glaxo – the filing of the Israeli patent application, entering into agreements that, ostensibly, improperly restrict competition (exclusivity agreements with Clalit Health Fund or related entities and the settlement agreement with Teva), the legal proceedings it took against the appellant, etc., – took place between 1995 and 2001. Therefore, all of the facts forming the alleged cause of action materialized no later than 2001.

Above and beyond what was necessary, the trial court also ruled that the conditions for awarding the relief of restitution against Glaxo under the Unjust Enrichment Act were also not met. This was so because, to the extent Glaxo was enriched due to its misleading the Registrar, its enrichment was at the expense of the public and not at the expense of Unipharm, and perhaps even Unipharm itself may have enriched itself at the expense of the public. Unipharm appealed from this judgment to the Supreme Court.

Supreme Court Ruling

On June 18, 2024, the Israeli Supreme Court issued a ruling in which it rejected Unipharm’s appeal, thus upholding the district court’s ruling, which had rejected Unipharm’s claim against GSK.

The damages claim has been barred by the statute of limitations

The Supreme Court unanimously upheld the lower court’s determination that the claim had been barred by the statute of limitations.

It is the rule that a claim is barred by the statute of limitations upon the lapse of seven years. The court explained that “the statute of limitations commences at the time when all the facts necessary to prove the claim have materialized. To this end, it is necessary that the conditions required by substantive law that entitle the plaintiff to the performance of an obligation towards him should be fulfilled […]Another condition for the commencement of the statute of limitations is the existence of a ‘power to bring a claim’, i.e., a real possibility of filing a claim and obtaining the relief sought. Therefore, it is also necessary that the prerequisites for the right itself and for the actual and procedural ability of the plaintiff to have recourse to the courts and obtain what he seeks.”

As stated, the district court determined that the actions attributed to the respondents were carried out no later than 2001. The appeal ruled that “the fact that some of the legal proceedings continued beyond 2001 (the opposition proceedings in respect of the patent application and the appeal from the judgment on the infringement claim) does not change the conclusion that the facts forming the cause of action materialized no later than 2001.” The court explained in this context that “the formation of the causes of action on which the appellant based its claim was not conditional on obtaining a decision of the Registrar on the appellant’s opposition. It was not the Registrar’s decision that gave rise to the element of deception, since the question of whether or not the patent application filed by the Respondents was an application based on incomplete and misleading information is a question of law. As such, it does not depend on the Registrar’s decision or on the question whether he was actually misled.”

Indeed, had Unipharm filed a claim for damages together with the notice of opposition to the granting of the patent, the proceedings in the district court might have been delayed until after the decision on the opposition. However, since Unipharm chose not to file such a lawsuit, the statute of limitations was not halted.

Additional dicta of the Supreme Court

Since the statute of limitations issue was sufficient to dismiss the appeal, the court’s other comments are incidental dicta.At the same time, some of them are worth noting.

The operative result of the Sanofi-Unipharm ruling had been the opposite. Sanofi was ordered to restitute whereas the lawsuit against GSK was dismissed. Yet there is considerable similarity between the two cases. In both cases, it was determined that the patent applicant failed to meet the disclosure obligation toward the Registrar of Patents. In both cases, liability for damages was recognized in principle.

However, it seems that the judges of the panel in the GSK case, who rejected the lawsuit, were willing to give the Sanofi ruling a broad interpretation, and even expand the ruling.

Thus, it was held that there was no need to prove that, but for the deception, the Registrar of Patents would have rejected the patent application or that there would have been no acceptance of the application.^[5]

Without making a final decision, two of the panel’s three judges were prepared to assume that liability such as that found in Sanofi could be imposed not only in the case of a patent application intended to extend the period of protection for a drug that had enjoyed earlier patent protection, but also in the case of an ordinary new application, “where the application contains misleading information that could have impeded competitors’ ability to assess the chances of the application, in a way that affected their ability to compete with the patent applicant.”

Likewise, “prima facie and without laying down the law on this issue,” it was noted that, apparently, “it is not necessary to prove that the person who filed the patent application had a monopoly in the field of the claimed invention.”

On the other hand, it was held that in the GSK case no causal relationship was proven between the deception and the enrichment: “In addition, in order to prove the existence of a causal relationship between the deception and the enrichment, the appellant had to prove that the alleged deception disrupted its own ability to evaluate the patent application and the risk involved in launching a preparation competing with this drug, in a way that affected its decision whether to launch at risk.” In this context, the district court had made a factual finding that the appellant did indeed possess the ability to assess the chances of the patent application, and that it even acted in accordance with its risk assessment. “It is well known that the appellate court will be reluctant to interfere with factual determinations made by the trial court, other than in exceptional cases […] In the present case, the adoption of the trial court’s factual finding means that the appellant has not proved the existence of a causal connection between the alleged deception of the Registrar and the unlawful enrichment.”^[6].

Unipharm vs. Pharma Companies, Round III?

In its debut appearance, Unipharm succeeded in obtaining the recognition, in principle, of the liability to restitute. The preceding quantifying the amount of restitution returned to the district court, and in January 2024, a decision was made in which a court-appointed expert was appointed. In the sequel show involving GSK the lawsuit was dismissed. However, some of the court’s dicta lead us to expect a third case to come before the court involving a claim for compensation due to the alleged misleading of the Registrar of Patents. Be alert.

[1] ACH 5679/21 Sanofi S.A. v. Unipharm Ltd. (Nevo 26.12.2023). This was an additional hearing in the judgment in Civil Appeal 2167/16 Sanofi S.A. v. Unipharm Ltd. (12.7.21). For the ruling in the District Court, see Civil Case 33666-07-11 Unipharm Ltd. v. Sanofi Aventis (4.2.16).

[2] Civil Appeal 5474/18 Unipharm Ltd. v. Glaxo SmithKline p.l.c. (Nevo 18.6.2024).

[3] Opposition to patent application No. 117035 SmithKline Beecham plcv. Unipharm Ltd. (Nevo, April 16, 2009).

[4] Civil case 2417/00 Unipharm Ltd. v. Glaxo SmithKline P.L.C . (Nevo 25.4.2006).

[5] With all due respect, this appears to be an expansive reading of the judgment in the Additional Hearing in the Sanofi case.

[6] This factual finding sheds new light on the district court’s factual analysis of the causal connection in the Sanofi case.