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Topics covered in our latest newsletter:
Pfizer Battles Generics Over Celebrex®
Earlier this month, pharmaceutical giant Pfizer Inc. announced it will appeal a U.S. District Court holding of Pfizer's Reissue Patent No. RE44,048 as invalid. The patent includes claims to methods for treating arthritis, pain and other conditions with celecoxib, the active ingredient of Celebrex®. The holding is the latest development in a 10-year war over the patent, with Pfizer seeking to entrain its U.S. monopoly over celecoxib, and generic manufacturers fighting to enter the drug's $2 billion/year U.S. market.
Celebrex® is famous not only for its popularity among arthritis patients but also as Pfizer's gamble, surviving a purge of fellow COX-2 inhibitors from the U.S. market in the mid-2000s for safety concerns. Pfizer launched an extensive advertising campaign to mitigate its risk, advising consumers of potential adverse effects of the drug. Infamy found Celebrex® in 2009, when a prominent researcher admitted his studies on the efficacy of celecoxib in treating pain were fabricated. While the fraudulent data was not directly used to obtain regulatory approval from the U.S. Food & Drug Administration (FDA), the research had been considered influential, leaving questions as to the credibility of the drug and a rethinking of its medical use. With solid patent and trademark protection in place, Celebrex® remains to this day one of the best-selling drugs in the world.
The on-going court battle originated from generic drug manufacturer Teva Pharmaceutical's filing for FDA approval to enter the celecoxib market in the United States. In 2004 Pfizer asserted infringement against Teva, and Teva responded with an attack against the validity of the triad of patents on record with the FDA as covering Celebrex®. The Celebrex® patents originated from a single "parent" application, divided into continuing applications during the early stages of prosecution. Two of the three patents (U.S. 5,466,823 and 5,563,165) include claims to the drug product itself, and are set to expire on May 30, 2014. The third patent (U.S. 5,760,068), directed to methods of treatment with celecoxib, was filed as a continuation-in-part of the parent application, with further information added in support of the claims. The Federal Circuit in 2008 upheld the product patents but found the method patent invalid under obviousness-type double patenting grounds in view of the published parent, discarding Pfizer's assertion that the patent should be protected by its relationship to the parent. Pfizer Inc. v. Teva Pharmaceuticals (Case No. 2007-1271, Fed. Cir. 2008). Pfizer attempted to rejuvenate the method patent via U.S. Patent & Trademark Office (USPTO) reissue proceedings thereafter, removing the new information and requesting reissue of the patent as based on a divisional application, to overcome the double patenting concern. The method patent, reissued as RE44,048, expires December 2, 2015—18 months after the product patents.
Pfizer has now asserted the reissued patent in new infringement proceedings against Teva and other generics companies, seeking to delay their entry into the U.S. market upon expiry of the product patents in May 2014. Two months shy of the anticipated date, a district court has now held that the application on which the reissue patent is based was clearly filed as a continuation-in-part and could not be corrected to divisional status through reissue, so, the obviousness-type double-patenting concern stands. G.D.Searle LLC et al. v. Lupin Pharmaceuticals et al. (Civil Action No. 2:13cv121, E.D. Va. (Norfolk), March 12, 2014). In the unlikely event that the reissue patent is found valid on appeal and allowed to retain the December 2015 expiry date, the patent will help extend Pfizer's monopoly, to the extent possible for a patent claiming only methods of treatment. Otherwise, U.S. pharmacies will soon be filled with generic versions of celecoxib, as the U.S. monopoly over celecoxib expires.
New Trademark Law in China Limits Appeals to TRAB
When Chinese Trademark Office (CTMO) issues a decision in an opposition proceeding, either party can appeal the decision to the Trademark Review and Adjudication Board (TRAB) within 15 days. This is about to change under the new trademark law.
Effective May 1, 2014, the parties will be treated differently when it comes to their ability to appeal a CTMO decision. While trademark applicants would still be allowed to appeal a refusal based on successful opposition, those seeking to block registration would no longer be permitted to appeal the decision if the opposition does not succeed at first instance.
The rationale for the change is to speed up the registration process. Currently, appealing a rejected opposition decision to the TRAB, even if the appeal is ultimately unsuccessful, can delay registration for up to four years. This delay is sometimes used strategically by brand owners who are hoping that the applicant will lose interest in the mark during the process.
Under the new law, the party that opposes a trademark application and fails at the CTMO level does not have the right to appeal to the TRAB. Instead, the only option for the opposing party is to file a cancellation action with TRAB based on the applicant's violation of one of several other articles of the Trademark Law. These include absolute grounds such as prohibition on trademark registration for country names, discriminating or immoral terms, terms that lack distinctiveness. Anybody can file a cancellation action based on absolute grounds.
Only interested parties can file cancellation actions based on relative grounds such as copy or imitation of a famous mark, application without authorization, or a bad faith application. The most practical base for most brand owners is the "bad faith" application in Article 32, which states: "a trademark applicant shall not infringe another's prior rights, or use improper means to register another's trademark which has already been in use and has certain influence."
As a practical matter, the first part of Article 32 is relatively easy to prove, since "infringement" is defined in Article 57 with more detail than in the old law. Other than using identical or similar marks to a prior trademark on identical or similar products, aiding and abetting the infringer will also be considered as infringement.
The second half of Article 32 is more difficult to prove, since "improper means," or "certain influence" are subject to different interpretations. The CTMO has required strong evidence to prove these actions. For example, to prove that a prior mark has "certain influence," brand owners must submit a large amount of evidence and disclose financial information such as sales volume, profit, expenditure on advertising and marketing.
Another problem for brand owners who lose an opposition at the CTMO level is that the opposed mark will proceed to registration, and even if the brand owner files a cancellation action immediately, there will be a period when the opposed mark is registered and can be used legitimately.
In the past, most successful oppositions came at the appeal stage, not at first instance, especially for complicated cases where more careful and comprehensive examination is required. Under the new law, right holders will have only one bite and in what has traditionally been a less friendly forum. Thus, the change would seem to put prior right holders at a significant disadvantage to applicants. Moreover, a cancelation is less advantageous than an opposition because the mark is presumed to be valid and use of it is a defense to infringement. Therefore, under the new law, trademark owners will have to be prepared to put a lot more effort into their first round opposition pleadings.
Attorneys General Possible New Tool for Fighting Counterfeiting
Attorneys general of two U.S. states have taken a nudge from Microsoft Corp. and stepped up to the plate in the international piracy battle. This latest move targets foreign companies using Microsoft's unlicensed software by taking away their U.S. business until they comply with Microsoft's license agreements. In the past, options for defending against foreign piracy and counterfeiting have typically involved pursuing such companies on their own soil. Making an impact typically comes at a high price and involves a strategy employing multiple tactics over a number of years. This new strategy definitely takes a different, somewhat passive-aggressive, approach.
So far, Microsoft has convinced attorneys general in Oklahoma and Louisiana to pursue this route by shining light on how overseas piracy can lead to job losses in their own states. The effort was led by Louisiana Attorney General James Caldwell who reached a settlement with Chinese company Guangdong Canbo Electrical Appliance Co., Ltd., the manufacturer of Char-grill® and Char-broil® barbeque grills, after sending a demand letter threatening suit and a complete ban of their goods in Louisiana. Canbo did not hesitate to settle after receiving the threat, paying over a quarter million dollars to legalize its software and agreeing to an audit next year. Oklahoma Attorney General E. Scott Pruitt subsequently filed a lawsuit against Chinese oil equipment supplier Neway Valve Company for selling equipment in Oklahoma at artificially low prices. The complaint alleges Neway pirated software that is also used and paid for by Oklahoma Companies, and in particular global equipment manufacturer Kimray Inc., to sell its equipment at a lower price. The lawsuit seeks penalties and in injunction for violating Oklahoma's Antitrust Reform Act and other laws.
State attorneys general do not typically assist in resolving foreign matters. However, the effects of counterfeiting and piracy are hitting close to home. A recent study by Harvard Business School Professor Dr. William Kerr and National Association of Manufacturers Chief Economist Dr. Chad Moutray estimates that piracy by foreign companies has cost American manufacturers nearly $240 billion in revenue from 2010 to 2012 alone, and has resulted in the loss of 42,000 jobs.
Microsoft and numerous other companies have long struggled to defend against online piracy and counterfeiting in China. While there are several enforcement options that are often utilized, none are without their limitations.
Most companies conduct some sort of online surveillance. Illegal software can easily be found on China's various online marketplaces such as Alibaba, targeting wholesalers, or its subsidiary Taobao which targets retailers. Both websites have a complaint and take-down procedure similar to eBay. This can be effective in the short term, but does not stop an offender from taking up shop and selling the goods on these websites under a different seller name down the road. Where details on a particular seller are known, cease and desist letters are also an option, but have very little impact unless a company is willing to take its enforcement quite a bit further.
Surveillance can also focus on particular geographical regions in China known for producing spurious goods. However, it can be difficult to navigate through all of small retailers to find the major players actually producing fake goods in large enough quantities to warrant the cost of taking action. Moreover, many outfits know that small quantities will not be targeted and thus store only small amounts or schedule frequent shipments. When a major player is found, companies will commonly take administrative action with assistance from one of China's Administrations for Industry and Commerce (AICs), located in each province, the Copyright Office, or local Quality and Technical Supervision Bureaus (QTSBs). These bodies are empowered to raid a suspected counterfeiter's premises, seizing and destroying counterfeit items, impose injunctions, and levy fines. Where large quantities of counterfeit goods are involved, local Public Security Bureau's (PSB) may also decide to pursue the matter criminally and arrest and detain a suspected counterfeiter. There is a similar option for targeting online counterfeiters by which local AIC will receive and investigate complaints and issue administrative punishment decisions.
The problem with these actions, however, is that decisions and warrants can go unenforced because an offender flees and cannot be located after the RAID action. Many offenders, both brick-and-mortar and online, will also simply move and pick up shop under a different business name. So, a company can end up running around in circles over the same offender.
Another tactic is for a company to record its intellectual property rights with China Customs. Under this program, Customs officials will monitor products entering and leaving the country and detain those suspected to be counterfeit. The requirements are relatively onerous, however. Trademark owners must provide and keep up-to-date a complete listing of all local parties authorized to import or export their products. If Customs becomes aware that the listing is not being maintained, it will cease monitoring and it may be very difficult to secure its cooperation again in the future. The other problem is that officials are just as likely to catch genuine goods as it is counterfeits. Since detention often results in products being denied shipment, recordal can be disruptive to regular business operations.
Finally, if a real impact is to be made on the marketplace in China, litigation is the most effective, and costly, option. Favorable decisions are often publicized, can lead to the recovery of damages, and can often result in the offender going out of business. The downside is that, aside from the cost, one suit can take between two and three years to run its course, and five or six are typically needed in order to have the desired outcome. Litigation in China can also be challenging as local corruption and other considerations can be an issue. It is often necessary to appeal to higher courts in order to get the right decision. Moreover, getting a favorable judgment is often a starting point; actually executing the ruling can be another round of effort and expense.
It is not clear that enlisting the help of state attorneys general presents a better option than any of the above tactics. However, it could be a new strategy that sends a strong message to use in conjunction with the above as part of an overall strategy for fighting counterfeiting and piracy in China. The motivation for involvement is there. Intellectual Property theft can affect a state's economy, making it harder for local businesses to compete and difficult for its residents to keep jobs, as well as health and safety, particularly when it comes to pharmaceuticals and mechanical devices. State attorneys general bring to the table a mix of civil and criminal enforcement options to fight counterfeit products from within the United States, without relying on some of the difficulties that can be encountered enforcing rights in China.
Disclaimer: The contents of this newsletter are presented for information purpose only, and as such are not intended to constitute legal advice and should not be construed as such or acted upon without seeking advice of legal counsel. This information is not intended to and shall not create an attorney-client relationship of any kind or nature with IpHorgan Ltd. Please contact the firm with queries, concerns or for further details regarding the information presented herein. The entire contents are current only as of the date of the newsletter and are not to be interpreted as the opinions of our clients past, present, pending or future. (c)2014, IpHorgan Ltd. All Rights Reserved.