ULF, August 2019
Pharmaceutical markets have traditionally been on the radar of the Antimonopoly Committee of Ukraine (AMCU). In recent years the AMCU has completed investigations on alleged concerted actions against pharmaceutical companies such as Alcon Pharmaceuticals Ltd, Servier Ukraine, Sanofi-Aventis Ukraine, Roche Ukraine. Furthermore, the AMCU was also involved in a number of investigations on abuse of dominance and unfair competition on pharmaceutical markets.
Business and legal experts have paid a great deal of attention to concerted actions cases to date. The AMCU and court decisions on those matters have been scrutinized and discussed widely. So here we would like to shift focus from concerted actions to unfair competition cases.
As a rule, unfair competition cases on pharmaceutical markets relate to dissemination of misleading information and illegal use of trademarks and packaging designs. It can be said that pharmaceutical companies tend to be more and more careful about advertising their products and, consequently, the number of cases on dissemination of “pure” misleading information (for example, like declaring inaccurate treatment effect, uniqueness of active substance, safety for children while there are certain age restrictions, etc.) seems to be falling in recent years. At the same time, we note that the AMCU becomes more and more demanded remedies to counter unfair competitors, which use the signs of others as well as trademarks and packaging designs without the consent of their owners.
We will provide a brief overview of existing approaches to consideration of unfair competition cases related to illegal use of packaging designs.
Market players pay a lot of attention to the packaging design of their products and invest significant sums to make their brands recognizable and popular among consumers. In particular, so as to ensure a brand’s distinctive nature it is necessary to prevent competing products with confusingly similar packaging designs from entering the market. It goes without saying that certain elements of a medicine’s packaging design are usually protected as intellectual property objects and their holders may seek legal protection in courts. However, as practice shows, unfair competitors can reproduce the packaging designs of others to the extent of confusion in such a sophisticated way that they do not directly infringe the intellectual property rights of holders. Therefore, sometimes holders do not have well-substantiated legal grounds for initiating court proceedings against such unfair competitors. In these cases, the AMCU seems to be the most effective remedy to fight against unfair competitors. It is also worth mentioning that the AMCU may initiate unfair competition investigation even if an unfair competitor has registered some separate elements of its packaging design as intellectual property objects.
Based on our practice, undertakings tend to bring to the AMCU more claims on illegal use of their packaging designs on various markets, and the pharmaceutical market is no exception.
Basic criteria for submitting a claim to the AMCU
In case a company is aware unfair competition act has been committed and decides to protect its rights in the AMCU, it is reasonable for such a potential claimant to have an initial check if the basic criteria for submitting a claim are met.
First of all, potential claimants should bear in mind that they may file a claim within 6 months of the date that they became aware of, or should have been aware of, the infringement of their rights.
Expiry of the 6-month term is a ground for the AMCU to refuse the claim, unless it finds that the deadline omission is reasonably grounded.
Secondly, the potential claimant and respondent should be the competitors, i.e. acting on the same market. The definition
of the market is one of the cornerstone issues in any antitrust proceedings. Although there are no legislative rules on approaches to the definition of market in antitrust investigations on pharmaceutical markets, practice shows that in unfair competition investigations (unlike investigations on alleged concerted actions) the AMCU is fine with the definition of market based on ATC 3. Moreover, in one of the recent cases the AMCU was rather flexible in its approaches to market definition and came to the conclusion that medicine and dietary supplement are interchangeable since they have similar therapeutic effect.
Collecting evidence to support a claim
To ensure successful consideration of claims, claimants should do their homework prior to submitting their claims, i.e.collect appropriate evidence in support of their arguments.
Given that a claimant should have been the first to start using the packaging design in its commercial activity, it needs to provide the AMCU with respective evidence on this. It should be underlined that for unfair competition cases a claimant needs to prove that he was the first to start using the packaging design in commercial activity (i.e. started sales of particular products) rather than was the first to have merely registered certain signs as intellectual property objects. Supply agreements as well as receipts usually suffice for these purposes.
Along with the evidence on being the first to have started using the packaging design, a claimant should provide the AMCU with proper arguments that consumers associate a particular medicine (sold in the “disputed” packaging design) with such claimant. Data on expenses spent for advertising a medicine, sales volumes and awards earned by a medicine may be quite helpful in this direction.
One of the most important tasks is to prove that an unfair competitor does use packaging design that is confusingly similar to the claimant’s packaging design. As a rule, claimants should present expert opinion and results of consumer surveys that confirm such confusing similarity. Any complaints received from consumers on this issue may serve as an additional argument for the AMCU.
Finally, claimants shall substantiate that their rights have been violated as a result of unfair actions by competitors. That is, through use of confusingly similar packaging designs.
AMCU investigations and possible outcome
The AMCU shall consider a claim within 30 days and thereafter decide whether to commence an investigation or to leave the claim without an action. If needed, this term may be extended by up to 60 additional days. Please note that to date there has been no clear legislative deadline set for unfair competition investigations (a draft law providing for a 1-year deadline for unfair competition investigations was initially adopted on 7 February 2019, however the President remitted it with some propositions). In practice, unfair competition investigations usually last up to a year. The term of consideration depends mostly on the nature of legal arguments and supporting evidence presented by the claimant.
As a result of an investigation, the AMCU may prohibit the use of confusingly similar packaging design and impose a rather severe fine on an unfair competitor. According to the AMCU’s Recommendations on Calculation of Fines, the fine amounts to 10% of the respondent’s income (revenue) from sales of products in violation of competition laws.
Moreover, even in the process of investigation, the AMCU is entitled to adopt a preliminary decision on prohibiting a respondent to carry out certain actions. For instance, to sell the medicine in question. Although it is not common practice for the AMCU to adopt preliminary deci- sions, it has experience of applying such measures, for example, in the “White Coal” case.
It should also be noted that the parties may reach a settlement in the course of an investigation. Our practice shows that respondents may be willing to cease in- fringement voluntarily so as to prevent negative consequences such as: payment of fines and harm to business reputation (as all decisions adopted by the AMCU are publicly available).
Undertakings should bear in mind that companies may protect their rights to packaging design against unfair competitors even if: (i) unfair competitors do not directly infringe intellectual property rights and (ii) unfair competitors have registered certain elements of their packaging designs as intellectual property objects. Based on recent practice, the AMCU has proven to be an effective instrument in the fight against unfair competitors. Still, to achieve the desired goals, claimants need to have their homework done as well as to be ready to react effectively to additional requests from the AMCU in the course of the investigation.