Keeping pace with the ever-changing life sciences industry, Morrison Foerster stays on top of the trends and political, legal, and economic drivers to support striking the balance between innovative discovery and purposeful business planning to assure our clients continued success. MoFo Life Sciences shares timely legal and business insights and in-depth analyses on trends and the complex technologies at the heart of the global pharmaceutical, biotechnology, diagnostics, medical devices, digital health, and AgTech fields.Learn more about our <a href="https://www.mofo.com/capabilities/life-sciences-healthcare" target="_self">Life Sciences practice</a>.<h2 dir="ltr">ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

Social

Search

Subscribe

Life Sciences and Healthcare Group

Life Sciences Podcast

Patent Counseling + Prosecution

FDA Regulatory + Life Sciences Compliance

FDA + Healthcare Regulatory and Compliance 

Life Sciences Transactions + Licensing

Resources

Editors

230315-new-mofo-life-sciences-logo.jpg

Dr. Meghan Poon counsels clients on patent preparation and prosecution, portfolio strategy, and IP due diligence in the areas of biotechnology and biologics. She has significant experience in diverse technologies including antibodies, cell therapies, gene therapies, diagnostics, and gene-edited plants. She represents clients ranging from large international pharmaceutical companies to midsized companies, startups, and universities.Meghan has filed numerous Patent Term Extension applications to secure additional term for her clients’ patents, which cover FDA-approved products. In addition, Meghan has extensive experience addressing complex obviousness-double patenting and subject matter eligibility issues impacting her clients’ patent portfolios. Meghan also represents clients in both investor-side and target-side due diligence, in deals from seed funding to initial public offerings.Prior to law school, Meghan attended graduate school at the University of California, Los Angeles, where she received a Ph.D. in biological chemistry based on her work on protein-protein and protein-DNA interactions at a molecular level. Meghan is the author of several scientific publications and has presented her research at international conferences.Meghan received her J.D. from the University of Southern California Law School and spent a year as a visiting student at Santa Clara University, where she focused on intellectual property.

poon_meghan_blog_150x150.png

poon_meghan_common_640x280.jpg

poon_meghan_heroretina_2700x1160.jpg

poon_meghan_mobileretina_750x1040.jpg

poon_meghan_social_600x600.jpg

Partner

Dr. Meghan Poon counsels clients on patent preparation and prosecution, portfolio strategy, and IP due diligence in the areas of biotechnology and biologics. She has significant experience in diverse technologies including antibodies, cell therapies, gene therapies, diagnostics, and gene-edited plants.

Meghan Poon

Wolfgang advises clients on contentious and non-contentious matters involving their most valuable intellectual property assets in life sciences, digital, and high-tech industries.His subjects of focus include research and development collaborations, complex licensing agreements, and other technology transactions, as well as know-how protection strategies, and employee invention law. He also has substantial experience in litigating patents, trademarks, and other intellectual property assets, often in a multijurisdictional context. In addition, Wolfgang and his team frequently clear trademarks and ad campaigns and prosecute trademark applications.Wolfgang is co-editor of our <a href="https://lifesciences.mofo.com/" dir="ltr" target="_blank">MoFo Life Sciences Blog</a>.Wolfgang is a partner of Morrison Foerster based in our German office in Berlin.<h4 dir="ltr">Representative Transactional Matters</h4><ul dir="ltr"><li>U.S.-based BioTech fund on various research collaborations and other transactions with German start-ups or research institutions.</li><li>Negotiate multimillion-euro strategic partnership between two AgTech leaders concerning the development and commercialization of pest-resistant transgenic traits.</li><li>Craft global multi-million collaboration regarding AI-powered robotic MaaS.</li><li>UK-based digital health company on product roll-out of RPM applications in Germany; coordinate international expansion.</li><li>Advise numerous German start-ups on their U.S. expansion.</li><li>Draft diverse global patent and know-how license agreements in the areas of AgTech and life sciences—including gene licensing and licensing of genome editing technologies (e.g., CRISPR)—and medical devices; draft correlating supply and distribution agreements.</li><li>Structure IP rights in connection with joint ventures and other M&A transactions, including the carve-out of a patent-heavy semiconductor business comprising nine jurisdictions into a German–U.S. joint venture.</li><li dir="ltr">Advise on government-funded, multi-partner R&D projects and/or R&D projects with academic institutions, as well as on employee invention law.</li></ul><h4 dir="ltr">Representative Contentious IP Matters</h4><ul dir="ltr"><li>Lead counsel in an international dispute between software companies on rights and obligations following termination of a multi-million licensing and distribution arrangement; coordinate local counsel.</li><li>Defend Japanese chip manufacturer in high-profile SEP-litigation; advise on global settlement arrangement.</li><li>Represent leading internet retailer in patent infringement and concurrent invalidity proceedings in the context of a multijurisdictional dispute concerning touch-screen technology.</li><li>Represent diverse pharmaceutical and life sciences companies in national and cross-border patent infringement proceedings and other technology-related disputes, including preliminary injunctions as well as pre‑trial discovery and inspection proceedings, concerning, inter alia, drug-coating technologies, toner cartridges, medicinal gases, transgenic plants, and vaccines.</li><li dir="ltr">Conduct trademark, copyright, and false advertising litigation, including, most notably, a high-profile trademark litigation for a German bank, and a nine-country cross-border trademark litigation involving a famous pharmaceutical brand.</li></ul>

Dr. Wolfgang Schönig berät Mandanten zum Schutz des geistigen Eigentums sowohl in streitigen als auch nichtstreitigen Angelegenheiten, mit einem besonderen Fokus auf die IP-rechtliche Beratung von Unternehmen aus den Bereichen Life Sciences, Digitalwirtschaft und High-Tech.Zu seinen Beratungsschwerpunkten gehören Forschungs- und Entwicklungskooperationen, komplexe Lizenzvertragsgestaltungen und andereTechnologie-Transaktionen, sowie Know-how-Schutz-Strategien und das Arbeitnehmererfinderrecht. Er verfügt zudem über umfangreiche Prozesserfahrung zur Durchsetzung von Patenten, Marken- und anderen IP-Rechten, häufig auch in einem grenzüberschreitenden Kontext. Darüber hinaus bewertet Dr. Wolfgang Schönig zusammen mit seinem Team regelmäßig die Rechtskonformität von Werbekampagnen, prüft die Verfügbarkeit von Marken und entwickelt entsprechende Anmeldestrategien.Dr. Wolfgang Schönig ist Co-Editor des Life Sciences Blogs von Morrison Foerster.Er hat seinen Doktortitel an der Heinrich-Heine-Universität Düsseldorf und seinen LL.M. an der Fordham School of Law in New York erworben, jeweils mit Schwerpunkt im gewerblichen Rechtsschutz. Seinen MBA-Abschluss erhielt er von der European University in Barcelona.Dr. Wolfgang Schönig ist Partner des deutschen Büros von Morrison Foerster in Berlin.<h4 dir="ltr">Repräsentative Transaktionen</h4><ul><li dir="ltr">BioTech-Fonds mit Sitz in den USA bei verschiedenen Forschungskooperationen und anderen Transaktionen mit deutschen Start-ups oder Forschungseinrichtungen</li><li dir="ltr">Verhandlung einer hochvolumigen strategischen Partnerschaft zwischen zwei Technologieführern im Bereich Crop Science betreffend der Entwicklung und Kommerzialisierung von bestimmten Resistenzen</li><li dir="ltr">Gestaltung einer globalen Multi-Millionen-Zusammenarbeit für KI-gestützte Roboter</li><li dir="ltr">Ein in Großbritannien ansässiges Unternehmen für digitale Gesundheit bei der Markteinführung von RPM-Anwendungen in Deutschland; Koordination der internationalen Expansion</li><li dir="ltr">Beratung zahlreicher deutscher Start-ups bei deren US-Expansion</li><li dir="ltr">Strukturierung und Verhandlung diverser Patent- und Know-How-Lizenzen in den Bereichen Ag Tech und Life Sciences – einschließlich Fragen zu genome editing wie CRISPR-Medizingeräte, sowie Gestaltung von Softwarelizenzverträgen und Erstellung korrespondierender Liefer- und Vertriebsvereinbarungen</li><li dir="ltr">Strukturierung von IP-Rechten im Zusammenhang mit Joint Ventures und anderen M&A-Transaktionen, darunter die Koordination eines neun Länder umfassenden IP Carve-Outs im Rahmen eines Halbleiter-JVs</li><li dir="ltr">Beratung zu staatlich geförderten Multi-Partner F&E-Projekten und/oder F&E-Projekten mit akademischen Einrichtungen sowie zum Arbeitnehmererfindungsrecht</li></ul><h4 dir="ltr">Repräsentative IP-Streitigkeiten</h4><ul><li dir="ltr">Lead Counsel in einem internationalen Rechtsstreit zwischen Softwareunternehmen über Rechte und Pflichten nach Beendigung einer millionenschweren Lizenz- und Vertriebsvereinbarung; Koordinierung der lokalen Anwälte</li><li dir="ltr">Verteidigung eines japanischen Chipherstellers in einem prominenten Streitfall bezüglich Standardessentieller Patente (SEP); Beratung zu einer globalen Vergleichsregelung</li><li dir="ltr">Verteidigung einer führenden Internetplattform gegen Ansprüche eines Patenttrolls wegen vermeintlicher Verletzung von Patent bezüglich Touchscreen-Technologie sowie korrespondierende US-Streitigkeiten</li><li dir="ltr">Vertretung von Pharma- und Life Science-Unternehmen in nationalen und grenzüberschreitenden Patentverletzungsverfahren und anderen technologiebezogenen Streitigkeiten, einschließlich einstweiliger Verfügungsverfahren und vorprozessualer Beweissicherungs- und Besichtigungsverfahren, unter anderem in Bezug auf Arzneimittelbeschichtungstechnologien, Tonerkartuschen, medizinische Gase, transgene Pflanzen und Impfstoffe</li></ul>

schonig_wolfgang_blog_150x150.png

schonig_wolfgang_common_640x280.jpg

schonig_wolfgang_heroretina_2700x1160.jpg

schonig_wolfgang_mobileretina_750x1040.jpg

schonig_wolfgang_social_600x600.jpg

Wolfgang Schönig is a partner of Morrison Foerster (International) LLP based in our German office in Berlin. His practice specialty is advising on IP aspects relative to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. Wolfgang is specialized in research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

Wolfgang Schönig focuses his practice on IP aspects relative to transactions in the digital, telecoms, high tech, life sciences, and pharmaceuticals industry, as well as legal representation in IP disputes.

Wolfgang Schönig advises clients on IP aspects relating to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. His additional focus areas include research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

Wolfgang Schönig

favicon.ico

favicon-16x16.png

favicon-32x32.png

apple-touch-icon.png

MoFo Favicons

MoFo Life Sciences shares timely legal and business insights and in-depth analyses on trends and the complex technologies at the heart of the global pharmaceutical, biotechnology, diagnostics, medical devices, digital health, and AgTech fields.

life-sciences-featured-image.jpg

life-sciences-featured-image

Announcements

Welcome to Mofo Life Sciences

Blog - Terms of Use

Cookies

Blog - Privacy Policy

Blog - Blog Disclaimer

Blog - Attorney Advertising

morrison-foerster-blog-logo.png

Brings together legal insights and in-depth analyses on trends and complex issues shaping the global technology industry.

MoFo Tech Blog

MOFO TECH

Equips our clients with the most up-to-date and relevant information on employment and labor law issues.

Employment Law Commentary

EMPLOYMENT LAW COMMENTARY

Stay on top of emerging issues and stay informed of developments related to the law and business of social media.

Socially Aware

SOCIALLY AWARE

In-depth analysis of developments and trends impacting government contracting.

Government Contracts Insights Blog

GOVERNMENT CONTRACTS INSIGHTS

Provides insights and reports on the most current class actions lawsuits and product liability issues that affect consumer-facing companies.

Class Dismissed Blog

CLASS DISMISSED

MoFo Life Sciences

  Linkedin

MoFo LinkedIN

Life Sciences Blog - RSS

Stay Connected

Never miss a post from MoFo Life Sciences. Enter your email below to stay up-to-date.

Because No One is Immune to the Law

Morrison Foerster - Footer

Blogs -  Home Button

Home

Blog - Topics

AI + Robotics

Agtech

Antitrust

Asia

Bioinformatics

Biotech

Blockchain

Cell + Gene Therapy

CFIUS

Corporate + Venture Capital

COVID-19

Data Analytics

Digital Health

Employment

European Union

Financing

Global

Healthcare

Intellectual Property

Licensing + Commercial

Litigation

Medical Devices + Diagnostics

Pharma

Privacy + Data Security

Product Liability + Class Action

Rare Disease

Regulatory

Startup

United Kingdom

United States

Topics

Blog - Editors

Blog - About

About

Blog - Subscribe

Meghan McLean Poon Ph.D.

More

What is “Healthy?” Are Fats In?

Stop-Gap Spending Bill Provision Takes Aim at Biologics Patent Litigation

USPTO Fee Changes for 2025

An InSECURE Future: Court Ruling Guts USDA Regs on Genetically Engineered Plants

Uspto Withdraws Consideration of Controversial Change to Terminal Disclaimer Practice

Stephanie Pong, London trainee solicitor contributed to the writing of this article.On January 1, 2021, the UK launched its very own <a target="_blank" href="https://www.gov.uk/government/publications/participating-in-the-uk-ets/participating-in-the-uk-ets">emissions trading scheme</a> (the “UK ETS”) exercising its autonomy since departing the EU. Under this scheme, companies operating in certain sectors can trade emission allowances (also known as carbon credits). On May 19, 2021, Intercontinental Exchange, Inc. (“ICE”) hosted the scheme’s first emission allowance auctions on behalf of the UK government.The benefits of the scheme are twofold. Not only does it provide continuity from the UK’s participation in the EU’s equivalent emission trading scheme (the “EU ETS”), but it also focuses efforts to reach the UK’s <a target="_blank" href="https://www.gov.uk/government/news/uk-becomes-first-major-economy-to-pass-net-zero-emissions-law">goal</a> of reducing all greenhouse gas emissions to net-zero by 2050 as announced in June 2019, and other carbon reduction commitments.<h4>The UK ETS largely mirrors the EU ETS</h4>Similar to the EU ETS, the UK ETS works on the cap and trade principle (i.e., market participants buy or receive emission allowances within the cap and then trade those allowances with other participants), which provides economic incentives for reducing industrial pollutant production.Established through the <a target="_blank" href="https://www.legislation.gov.uk/uksi/2020/1265/contents/made">Greenhouse Gas Emissions Trading Scheme Order 2020</a>, the UK ETS currently covers the same industries as the EU ETS: 1) the power generation industry; 2) the aviation sector; and 3) other energy intensive industries. The UK government has, however, stated that it intends to expand the scope of the UK ETS to other sectors.The first auction under the UK ETS took place on May 19, 2021, on ICE, which also hosts the EU ETS. On May 10, 2021, the UK government published guidance on the supply of allowances in the UK ETS (the “Guidance”). The Guidance clarified that auctions under the UK ETS will take place every two weeks, with around 83 million allowances (divided between the fortnightly auctions) predicted to be sold this year. For the 2021 auction calendar, please follow the link <a target="_blank" href="https://www.theice.com/publicdocs/circulars/21030.pdf">here</a>. The 2022 auction calendar will be published by July 15, 2021, and the UK ETS Authority has anticipated 80 million allowances will be available for the 2022 period. The first auction saw all of the available allowances sold to 14 bidders, at a price of £43.99.The <a target="_blank" href="https://www.legislation.gov.uk/uksi/2021/484/contents/made">Auctioning Regulations</a> and <a target="_blank" href="https://www.gov.uk/government/publications/participating-in-the-uk-ets/participating-in-the-uk-ets">guidance</a> for UK ETS participants provide that the Auction Reserve Price (“ARP”) is £22 per tonne of carbon dioxide equivalent, which is the minimum price at which emission allowances can be sold at auction. The UK government will consider withdrawing the ARP later in 2021 as the scheme matures and certain amendments to the Auctioning Regulations, most notably the removal of the requirement that a natural person be established in the UK to submit, modify, or withdraw a bid under the UK ETS, have been made and came into force on <a target="_blank" href="https://www.legislation.gov.uk/uksi/2021/513/contents/made">May 19, 2021</a>. Further, the UK’s implementation of the “monitor, report, and verify requirements” under the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”) comes into force on May 26, 2021, and the UK government will hold further consultations this summer on proposals for implementing CORSIA and its interaction with the UK ETS; further developments of the UK ETS are therefore expected over the coming year.Certain sectors deemed to be exposed to a significant risk of “carbon leakage” receive free allowances. “Carbon leakage” refers to businesses transferring production to other countries with less stringent emission constraints, therefore leading to an increase in total emissions. The UK ETS uses the same benchmark to calculate free allocations as the EU ETS. The UK government closed its <a target="_blank" href="https://www.gov.uk/government/consultations/uk-emissions-trading-scheme-free-allocation-review-call-for-evidence#:~:text=Within%20the%20context%20of%20the,the%20risk%20of%20carbon%20leakage">consultation</a> in April 2021, which called for evidence on how to use its free allocations effectively under the UK ETS. The UK government published an <a target="_blank" href="https://www.gov.uk/government/publications/uk-ets-allocation-table-for-operators-of-installations">allocation table</a> setting out operators of stationary installations’ entitlement to free allowances for 2021‑25 and aims to have those under the scheme year 2021 allocated by May 28, 2021; the aviation allocation table is expected in June 2021. We expect to hear further related proposals later this year.<h4>ICE UK Allowance (UKA) Futures</h4>Coinciding with the start of the first UK ETS auction, and subject to regulatory approval, ICE plans to launch the ICE UK Allowance (“UKA”) Futures contracts, with UKA Daily Futures following on May 21, 2021. ICE UKA Futures will trade on ICE Futures Europe and clear at ICE Clear Europe alongside ICE’s global environmental complex, including European Union Allowances (“EUA”), California Carbon Allowances (“CCAs”), and California Carbon Offsets (“CCOs”). By facilitating trading in allowances through futures contracts, market participants may benefit from a more liquid market, improved price discovery, and the ability to sell or procure allowance on a forward basis and otherwise hedge market exposure.<h4>The UK ETS is more ambitious than its EU counterpart</h4>Although the UK ETS largely mirrors the EU ETS, one key difference is that the UK ETS has a more ambitious emissions reduction target. The UK’s initial cap on the total amount of certain greenhouse gases that can be emitted by the installations covered by the system (i.e., allowances) is 5% lower under the UK ETS than the UK’s share cap under the EU ETS. As the UK ETS has a smaller market than the EU ETS, a lower cap will help maintain market stability by limiting price spikes and aggressive price fluctuations. Further, the threshold for triggering the UK ETS cost containment mechanism, which would allow the UK government to intervene should price spikes occur, was set at £44.74 a tonne by the UK government on <a target="_blank" href="https://www.gov.uk/government/publications/uk-emissions-trading-scheme-markets/uk-emissions-trading-scheme-markets#cost-containment-mechanism">May 10, 2021</a>. This is a lower threshold than that under the EU ETS. Future contracts traded as high as £50.23 a tonne on the first day, however this settled back to £45.75 after the first auction. The high prices were driven by high levels of interest in the first auction, and by a small number of bidders. The initial volatility is expected to settle over time, however there remain concerns that the UK government may need to step in within the first few weeks of the UK ETS’s launch.New entrants to the UK ETS will need to ensure that they are accurately recorded on the new UK ETS registry. Further, a new permit system is expected to replace the current permit system, which was set up and managed in accordance with the EU ETS, in the near future.Enforcement of obligations under the UK ETS will be carried out by the relevant UK environmental regulators with civil penalties of £100 per tonne for exceeding emission allowances, which is a slight increase from the €100 fine under the EU ETS.<h4>The UK and EU ETSs will likely remain largely parallel</h4>The EU-UK Trade and Co-operation Agreement (the “Agreement”) does not provide much wriggle room for the UK ETS to diverge significantly from the EU ETS. Under the Agreement, the EU and UK agreed that they are both committed to cooperate on carbon pricing. “Serious consideration” will be given to linking up the UK and EU schemes, similar to how the EU and Swiss schemes were <a target="_blank" href="https://www.bafu.admin.ch/bafu/en/home/topics/climate/info-specialists/reduction-measures/ets/linking-swiss-eu.html#:~:text=Under%20the%20Agreement%2C%20flights%20from,covered%20by%20the%20EU%20ETS.&text=An%20electronic%20link%20between%20the,the%20registries%20since%20September%202020.">linked</a> in 2020. At present, aircraft operators, for instance, must comply with the UK ETS for flights from the UK to EEA countries, and the EU ETS for flights from EEA countries to the UK. Divergence of scheme rules will only make it more complex for market players to ensure compliance. Regardless, it is unlikely that the UK ETS will become substantially different, or less stringent, compared to the EU ETS, given the UK’s ambitious net zero 2050 target and 68% emission cuts by 2030, versus the EU’s 55% target.The approach to carbon pricing was addressed in a <a target="_blank" href="https://commonslibrary.parliament.uk/research-briefings/cbp-9212/">briefing paper</a> published by the House of Commons on May 4, 2021, which indicates the government’s preference to link the UK ETS with the EU ETS to ensure market liquidity and price visibility and to reduce the risk of carbon leakage. However, for this to be achievable, the two schemes must be closely aligned including both adopting net-zero targets. A risk of linking is that it may limit the policy autonomy that the UK has over its scheme in relation to governance arrangements and the proposed expansion of the UK ETS to other sectors. Alternatives suggested in the paper include having a standalone UK ETS or implementing a carbon tax.<h4>Emission Trade Schemes around the world</h4>United StatesIn contrast to the UK and EU, the United States lacks a nationalized carbon market. Rather, carbon trading in the United States takes place across a variety of fractured markets, with some being driven by voluntary private trading, and others by various government regulations.Market drivers from the federal level include the recently updated <a target="_blank" href="https://home.treasury.gov/news/press-releases/sm1227">45Q tax credit</a> for certain forms of carbon sequestration, and several programs <a target="_blank" href="https://www.epa.gov/emissions-trading-resources">administered</a> by the U.S. Environmental Protection Agency.A minority of states have also constructed state-level exchanges. These include the <a target="_blank" href="https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program">Cap-and-Trade Program</a> in California, and the <a target="_blank" href="https://www.rggi.org/program-overview-and-design/elements">Regional Greenhouse Gas Initiative (RGGI)</a>, which is a cooperative effort between eleven eastern states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia).On the private side, organizations such as <a target="_blank" href="https://verra.org/">Verra</a> and the <a target="_blank" href="https://americancarbonregistry.org/">American Carbon Registry</a> operate their own voluntary registries. These private organizations also interact with the various regulatory markets by providing standards and quantifying and verifying carbon valuations. For instance, Verra helps administer California’s Cap-and-Trade Program.AsiaKorea has the second largest in scale emission trade scheme (“ETS”), after the EU ETS, which was launched in 2015 and is also based on the cap and trade principle. This year, the scheme entered into its final phase (2021-2025), which further reduces the proportion of free allocations.China, the world’s largest emitter of greenhouse gases, <a target="_blank" href="https://www.forbes.com/sites/scottcarpenter/2021/03/02/toothless-at-first-chinas-carbon-market-could-be-fearsome/?sh=538e0e062af1">launched</a> its national ETS on February 1, 2021. China’s ETS covers the power generation sector in its initial phase. Since August 2017, China has operated seven regional ETSs that will gradually transition into a single national scheme.Similar to the United States, Japan does not have a nationalized carbon market; however, it was a pioneer in that the Tokyo metropolitan government launched the Tokyo ETS in 2010, which notably targets office buildings, educational institutions, and commercial buildings, as well as factories and other industrial/energy sector facilities. The Tokyo ETS is linked to the Saitama ETS, which was established in 2011 by the Saitama Prefecture.Latin AmericaLatin American countries including Chile, Mexico, Argentina, and Columbia have taken a different approach of introducing carbon taxes and other carbon pricing mechanisms to tackle the climate crisis. However, the efficacy of these solutions is debatable, especially given their very low carbon tax rates, which may fail to discourage carbon-intensive activities.<h4>Concluding Remarks</h4>It is clear that countries across the globe recognize the need to take extensive action to tackle the climate crisis, in particular by reducing their respective greenhouse gas emissions. A popular and effective solution that has emerged over the last 5-10 years is the emission trade scheme. However, such schemes have proved to be costly and highly complex to implement, often requiring a pilot phase.The UK ETS represents a promising test as to how a new emission trade scheme can begin to grow and develop, using established emission trade schemes (such as the EU ETS) as models. As we look to the future, more countries might begin to adopt nationalized carbon markets and schemes in order to meet their carbon reduction commitments, and we may even see major emission trade schemes linking up to unify humanity’s attempt to reverse climate change.Visit our <a href="https://www.mofo.com/capabilities/environmental-social-governance.html" target="_blank">Environmental, Social, and Governance (ESG)</a> resource center and follow our Life Sciences blog to stay informed about any progress on this matter.

freeman-rosenzweig_liz_blog_150x150.png

freeman-rosenzweig_liz_common_640x280.jpg

freeman-rosenzweig_liz_heroretina_2700x1160.jpg

freeman-rosenzweig_liz_mobileretina_750x1040.jpg

freeman-rosenzweig_liz_social_600x600.jpg

Associate

Dr. Liz Freeman Rosenzweig focuses her practice on patent prosecution and intellectual property and regulatory counseling in the areas of life sciences and agricultural biotechnology, including AgTech

Liz Freeman Rosenzweig Ph.D.

Liz Freeman Rosenzweig

kaufman_david_blog_150x150.png

kaufman_david_common_640x280.jpg

kaufman_david_heroretina_2700x1160.jpg

kaufman_david_mobileretina_750x1040.jpg

kaufman_david_social_600x600.jpg

David concentrates on structured transactions involving commodities and derivatives. He also has extensive experience with mergers, acquisitions, and corporate reorganizations. David works closely wit

David Kaufman

David concentrates on structured transactions involving commodities and derivatives. He also has extensive experience with mergers, acquisitions, and corporate reorganizations. David works closely with the firm’s financial institution and end-user clients in the commodity, equity, fixed income, and credit derivative markets, often assisting clients in developing and structuring products.

David H. Kaufman

mofolifesciences-uk.jpg

UK’s new emissions trading scheme hosts first auctions

UK Plans for Robust Life Sciences Regulation Post-Brexit

mofolifesciences-uk

Stephanie Pong, London trainee solicitor contributed to the writing of this article.
On January 1, 2021, the UK launched its very own emissions trading scheme (

UK’s new emissions trading scheme hosts first auctions

ASTM International recently approved a new performance standard that will tell consumers just how much protection their cloth face masks offer. Some face coverings like N-95 respirators and surgical masks must meet certain filtration requirements enforced by government agencies like the U.S. Occupational Safety and Health Administration (OSHA) and the U.S. Food and Drug Administration (FDA). But, until recently, other masks like reusable gaiters and cloth face coverings had no performance standards whatsoever, making it impossible for consumers to judge how protective their masks were or to compare one mask to another.Last month, ASTM International approved the new voluntary standard <a href="https://www.astm.org/Standards/F3502.htm" target="_blank">ASTM F3502-21</a> (F3502) for Barrier Face Coverings. It applies to cloth face masks and gaiters intended for everyday use, not to masks used in a medical setting or for worker protection, which are already regulated. The goal is to provide a baseline performance standard, but masks that do not make the cut can still be sold.Like most product performance standards, F3502 contains design, construction, and labeling requirements. It offers two classification levels based on the mask’s filtration efficiency and breathability. For particulate filtration efficiency, masks can meet the minimum requirements by filtering 20% or more of particles during testing, or the higher level 2 requirements by filtering 50% or more. Two levels are also available based on the masks’ airflow resistance, with a more breathable mask achieving a higher result. Manufacturers must verify their results at a certified test laboratory, and can then claim that their mask “Meets ASTM F3502” requirements and describe the mask’s performance levels.F3502 presents an interesting opportunity for mask manufacturers, which can now sell a high-quality face covering without necessarily meeting the high standards for medical-grade or N-95 masks. Because this is not a federal standard, the masks are not subject to federal agency approval such as FDA’s Emergency Use Authorization process for various medical face masks. Likewise, barrier face coverings do not qualify as medical countermeasures, so manufacturers are not eligible for the Public Readiness and Emergency Preparedness Act’s liability protections.Some masks have already met the F3502 standard and are available for purchase. It remains to be seen how heavily consumers will support the new standard by purchasing certified masks. In a market with no easy way for buyers to know how much protection their masks offer, this new standard may help consumers make more informed choices and encourage manufacturers to make better masks.

covid_02_28_elc_blog_600px_v2-300x200.jpg

New Face Mask Performance Standard Has Consumers Covered

Virginia Becomes the First State to Adopt COVID-19 Workplace Safety Mandates

covid_02_28_elc_blog_600px_v2-300x200

ASTM International recently approved a new performance standard that will tell consumers just how much protection their cloth face masks offer. Some face coveri

New Face Mask Performance Standard Has Consumers Covered

On December 11, 2020, a SARS-CoV-2 (COVID-19) vaccine developed by Pfizer and BioNTech became the first to receive Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA). Since then, two others (produced by Moderna and Johnson & Johnson) have also been granted EUA.<a target="_blank" href="https://www.fda.gov/media/144412/download">Pfizer</a>’s and <a target="_blank" href="https://www.fda.gov/media/144636/download#:~:text=On%20December%2018%2C%202020%2C%20FDA,Section%20564%20of%20the%20Act.">Moderna</a>’s vaccines have many features in common: both utilize relatively new mRNA technology in a two-dose administration and both claim around 95% efficacy. In contrast, <a target="_blank" href="https://www.fda.gov/media/146303/download">Johnson & Johnson</a> has developed an adenovirus-based vaccine, provided in a single shot, that offers around 66% efficacy. In total, some <a target="_blank" href="https://covid.cdc.gov/covid-data-tracker/#vaccinations">260 million doses</a> of these three vaccines have been administered in the United States since December 2020, and just over one third of the population has been fully vaccinated. Though there is still a long way to go before the United States reaches herd immunity (<a target="_blank" href="https://www.nytimes.com/2021/05/03/health/covid-herd-immunity-vaccine.html">if it ever does</a>), promising <a target="_blank" href="https://www.cdc.gov/coronavirus/2019-ncov/science/science-briefs/fully-vaccinated-people.html">data</a> indicate that fully vaccinated people gain protection against different variants of COVID-19, are more resistant to developing asymptomatic infections, and may be less likely to spread COVID-19 to other people.All U.S. residents over 16 have been eligible to be vaccinated since mid-April 2021, and the Johnson & Johnson shot will likely play a key role in the nationwide rollout: as a highly effective, single-dose vaccine, it is seen as a particularly attractive “one-and-done” candidate for accessing hard-to-reach communities (for example, isolated rural areas and poorer neighborhoods in major cities). However, since the Johnson & Johnson vaccine received authorization in late February 2021, its distribution in the United States has been met with a number of setbacks that have hampered its ability to help accelerate the national immunization effort.In March 2021, up to <a target="_blank" href="https://www.nytimes.com/2021/03/31/us/politics/johnson-johnson-coronavirus-vaccine.html">15 million doses</a> of the Johnson & Johnson vaccine were contaminated by manufacturing mishaps at the Emergent Biosolutions plant in Baltimore, Maryland. Emergent, a multinational biopharmaceutical company, had partnered up with both Johnson & Johnson and AstraZeneca (whose vaccine is not yet authorized in the United States) to manufacture COVID-19 vaccines. It was discovered that workers at the plant had mixed up the two vaccines’ ingredients, meaning millions of doses of the Johnson & Johnson vaccine had to be discarded. According to an FDA <a target="_blank" href="https://www.fda.gov/news-events/press-announcements/fda-continues-important-steps-ensure-quality-safety-and-effectiveness-authorized-covid-19-vaccines">report</a> released on April 21, 2021, Emergent agreed to “pause new production while it works with the FDA to resolve potential quality issues,” meaning there could be significant delays in future shipments of the Johnson & Johnson vaccine from the Maryland production site.By mid-April 2021, more than 6.8 million doses of the Johnson & Johnson vaccine had been administered to the American public. However, following reports of six different cases of a “rare and severe type of blood clot” in recipients of the vaccine, including one fatality, the FDA and the Centers for Disease Control and Prevention (CDC) jointly <a target="_blank" href="https://www.fda.gov/news-events/press-announcements/joint-cdc-and-fda-statement-johnson-johnson-covid-19-vaccine">recommended</a> a pause in the use of the vaccine while they took time to review the available data.It is important to bear in mind that the Johnson & Johnson vaccine (like its Pfizer and Moderna counterparts) has not been approved by the FDA; rather, it has been granted <a target="_blank" href="https://www.fda.gov/vaccines-blood-biologics/vaccines/emergency-use-authorization-vaccines-explained">Emergency Use Authorization</a>. An EUA is “a mechanism to facilitate the availability and use of medical countermeasures, including vaccines, during public health emergencies” when “there are no adequate, approved, and available alternatives.” An EUA can be revoked or terminated at any time if the FDA determines that the need for emergency authorization is no longer met. Following the successful rollout of its vaccine under EUA, Pfizer-BioNTech submitted a <a target="_blank" href="https://www.fda.gov/vaccines-blood-biologics/development-approval-process-cber/biologics-license-applications-bla-process-cber">Biologics License Application</a> (BLA) for full FDA approval of their two-shot regimen on May 7, 2021, which, if granted, could have important implications for vaccine mandates and marketing strategies. Moderna and Johnson & Johnson have not yet initiated BLAs (which require six months of post-immunization safety and efficacy data) for their vaccines.Notably, even in light of the reports of blood clots in a small number of individuals, the FDA did not decide to revoke the Johnson & Johnson vaccine’s EUA—instead, it recommended that states temporarily halt the use of the vaccine while the CDC’s Advisory Committee on Immunization Practices (ACIP) convened to study the reported blood-clot cases. Following a 10-day pause, the ACIP (which is made up of medical and public health experts from across the country) and FDA released a joint <a target="_blank" href="https://www.fda.gov/news-events/press-announcements/fda-and-cdc-lift-recommended-pause-johnson-johnson-janssen-covid-19-vaccine-use-following-thorough">statement</a> on April 23, 2021 recommending that the use of the Johnson & Johnson vaccine be resumed, asserting that the vaccine’s “known and potential benefits outweigh its known and potential risks.” The FDA and ACIP further noted that the Johnson & Johnson <a target="_blank" href="https://www.fda.gov/media/146305/download">Fact Sheet</a> had been updated to explain that there is a very low risk of developing blood clots after receiving the shot, particularly in women under 50.Now that the Johnson & Johnson vaccine is back in play, many hope that it will help meet the Biden administration’s new <a target="_blank" href="https://www.nytimes.com/2021/05/04/us/biden-covid-vaccine-strategy.html">goal</a> of having 70% of American adults receive at least one shot by July 4, 2021. A further boost to the national vaccination effort came on May 10, 2021, when the FDA announced that the Pfizer vaccine EUA had been amended to permit administration to 12- to 15-year-olds.

COVID-19 Vaccines: And Then There Were Three (Again)

On December 11, 2020, a SARS-CoV-2 (COVID-19) vaccine developed by Pfizer and BioNTech became the first to receive Emergency Use Authorization (EUA) from the U.

COVID-19 Vaccines: And Then There Were Three (Again)

In February, the Consumer Technology Association (CTA) announced a voluntary standard for healthcare products that use Artificial Intelligence (AI). This standard follows the Food and Drug Administration’s (FDA) recently <a target="_blank" href="https://lifesciences.mofo.com/topics/Progress-and-Concerns-of-FDAs-Plan-for-Regulatory-Oversight-of-Artificial-IntelligenceMachine-Learning-AIML-Based-Software-as-Medical-Devices-SaMDs.html">published action plan</a> for regulatory oversight of AI and machine learning-based medical software. FDA ultimately determines the regulatory process and requirements to legally market AI healthcare products, generally reviewing products to make sure they are safe and effective for the consumer market. FDA has worked to adopt a new regulatory framework for AI/ML software medical devices for years now. But as ANSI/CTA‑2090 suggests, regulatory approval is just one consideration for this novel product category.CTA’s standard focuses on the trustworthiness of healthcare AI products. While this factor is not typically a regulatory requirement, CTA claims that trust is critical to the acceptance and successful implementation of novel AI technologies, especially those in the healthcare setting. The publication represents consumer and manufacturer perspectives on the key features that AI‑based medical software should offer to build trust. The standard focuses on three main trustworthiness areas—Human, Technical, and Regulatory Trust—and outlines baseline features and requirements in each category for products to incorporate.<div class="embedded-entry redactor-component block-entry" type="entry" data-sys-entry-uid="blt7a1791e6beb824d1" data-sys-entry-locale="en-us" data-sys-content-type-uid="image_content" sys-style-type="block"><div data-reactroot=""><img src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/bltf994dfb429a553a5/627317880d4d8e1d7f10f2f6/pic.jpg?format=auto&amp;quality=60" alt="3 Trustworthiness Areas of Healthcare AI Products"></div></div><h4>Human Trust</h4>The Human Trust factors focus on facilitating transparent and smooth human interaction with the product. The standard encourages developers to provide users with clear descriptions of what the AI predicts, its clinical parameters, limitations, and performance parameters. Users should be able to understand what the system is capable of and how it may make mistakes. The product should present information that is contextually relevant and consistent with social norms. Programs should incorporate a fault-tolerant user interface appropriate for the target audience. The standard notes that the degree of human trust required increases as the level of AI autonomy increases, so clear explanations of the AI’s autonomy and human input are required.<h4>Technical Trust</h4>To build trust in the product’s ability to perform as technically expected, developers should understand potential bias in the program’s data set and mitigate it to promote system fairness. Applicable data privacy and security requirements should be followed, in addition to being transparent about what information is collected and why. Data sources and any merging or processing of the data used to train the program should also be disclosed to build trust.<h4>Regulatory Trust</h4>The final component addresses how the product is accepted within the highly regulated health care industry. Various federal and state agencies have oversight of different parts, from medical devices to provider licensure and care standards.Follow our <a target="_blank" href="https://lifesciences.mofo.com/">MoFo Life Sciences blog</a> to stay up to date with the latest developments in healthcare AI/ML policy.

mofolifesciences-ai-robotics.jpg

CTA Publishes New Standard for Healthcare AI

Patenting Artificial Intelligence in the U.S. – Considerations for AI Companies

mofolifesciences-ai-robotics

In February, the Consumer Technology Association (CTA) announced a voluntary standard for healthcare products that use Artificial Intelligence (AI). This standa

CTA Publishes New Standard for Healthcare AI

The Ninth Circuit recently weighed in on the appeal of a False Claims Act lawsuit from a relator against Medtronic. In this case, the relator alleges that Medtronic, Inc.:(1)  Engaged in “fraud-on-the-FDA” when obtaining clearance for several devices used in spinal fusion surgeries; (2)  Engaged in unlawful marketing of the devices for off-label and contraindicated use; and (3)  Paid illegal kickbacks to physicians to induce physicians to order such devices in violation of the federal Anti-Kickback Statute.The Ninth Circuit reversed the district court, in part, for the fraud-on-the-FDA allegation, and affirmed the district court’s dismissal of the unlawful marketing and kickback allegations. We discuss each of these allegations in turn.With regard to the fraud-on-the-FDA allegation, the relator alleges that Medtronic defrauded the FDA into granting it Class II clearance for the devices. The Ninth Circuit accepted the relator’s grouping of the devices into two categories: (1) “Contraindicated-only Devices,” devices that cannot be used for their intended use in the thoracolumbar spine in their clearance application, but rather can only be used in the cervical area of the spine; and (2) “Extra-use Devices,” devices that could be used for their stated intended use in the thoracolumbar spine, but are used for a contraindicated use in the cervical spine.In its decision, the Ninth Circuit dismissed the relator’s fraud-on-the-FDA allegation with regard to the Extra-use Devices; however, for the Contraindicated-only Devices, the Ninth Circuit reversed the district court, giving credence to the relator’s theory that such devices were not properly cleared by FDA for any use, and that if Medtronic properly disclosed that the devices’ intended use was in the cervical spine, then FDA would have required Class III approval, rather than Class II clearance based on a predicate device. The relator advanced this argument in an attempt to show that the fundamental requirement for Medicare or Medicaid reimbursement of a device—that there be an appropriate FDA clearance or approval in place—had not occurred in this case. We note that Medtronic countered this relator’s allegation by stating that a False Claims Act action is an improper vehicle to bring a fraud-on-the-FDA claim and plans to continue to defend itself against this remaining claim that was not dismissed by the Ninth Circuit.With regard to unlawful marketing claim for contraindicated use, the relator alleges that Medtronic marketed the devices without FDA approval or clearance for use in the cervical spine, which would be an off-label and contraindicated use, and thus a misbranding and adulteration violation of the FDCA. The Ninth Circuit affirmed the district court in dismissing the relator’s claims, more firmly establishing the standard that off-label promotion is not an inherent False Claims Act violation, particularly if the device has appropriate FDA clearance or approval and is “reasonable and necessary” under the CMS rules.In the decision, the Ninth Circuit specifically noted the well-rooted idea that a physician may use a device for an off-label purpose so long as such use is medically necessary and reasonable. The court went on to state: “As long as a doctor finds an off-label use to be medically reasonable and necessary, then the off-label use is permitted, even if the particular use is contraindicated on the label.” The court’s reasoning is in line with the concept that FDA does not regulate or interfere with the practice of medicine. Accordingly, whether a device is used off-label has no bearing on whether a federal healthcare program reimburses for such device; rather, the device must have FDA approval/clearance and be “reasonable and necessary” to be eligible for Medicare coverage, as well as meet any other pertinent regulations.Lastly, with regard to the relator’s allegations of Anti-Kickback violations, the Ninth Circuit dismissed the relator’s claims. The relator alleged that Medtronic paid illegal kickbacks to healthcare providers through the use of improper rebate agreements with hospitals and through paying physicians for food, travel, and promotional costs related to business development events.  The Ninth Circuit affirmed the district court in dismissing these two anti-kickback allegations. First, the Ninth Circuit found that the relator did not identify how the rebate agreement violated the Anti-Kickback statute, particularly in light of the fact that medical device companies may provide rebates if such rebates are properly disclosed and reflected in charges to federal healthcare programs, in accordance with existing safe harbor provisions. Second, the Ninth Circuit found that the relator identified only general allegations related to improper physician remuneration; the relator did not identify any physicians or categories of physicians who received payment in connection with these types of events or connect such physicians or groups of physicians to the purchase or use of the subject devices.This decision, therefore, only leaves open one important claim, the “fraud-on-the-FDA” claim. Our team will be monitoring this issue going forward to better understand how the courts are interpreting this important claim, where private litigants seek to enforce or prosecute issues under the FDCA.

mofolifesciences-medical-devices.jpg

Ninth Circuit Weighs in on Fraud-on-the-FDA Theory, Marketing Devices for Off-Label Use, and Kickbacks

FDA Clinical Decision Support Software vs. EU’s Medical Device Regulation

mofolifesciences-medical-devices

The Ninth Circuit recently weighed in on the appeal of a False Claims Act lawsuit from a relator against Medtronic. In this case, the relator alleges that Medtr

Ninth Circuit Weighs in on Fraud-on-the-FDA Theory, Marketing Devices for Off-Label Use, and Kickbacks

By now you are likely aware of the new safe harbor provisions of the federal anti-kickback statute (AKS), which the U.S. Office of Inspector General (OIG) finalized as of January 19, 2021. Among other changes to the AKS regulations, OIG created new safe harbors for: (i) value-based arrangements and (ii) arrangements related to the Centers for Medicare & Medicaid Services (CMS) sponsored model arrangements and modeled patient incentives. These new safe harbors emphasize the idea of value-based care and involve some level of risk sharing between entities in the provision of health care or services adjacent to health care.Prior to the promulgation of these new safe harbors, parties found it difficult to creatively structure arrangements to neatly fit into an AKS safe harbor. However, since the beginning of the new year, and the finalization of the new safe harbors, we have witnessed a sharp uptick in these types of value-based arrangements, as health care providers, medical device companies, and insurers attempt to get more creative with partnerships and their delivery of health care services. Accordingly, in order to take advantage of the more flexible pricing structures that these safe harbors allow, we expect to continue to see these types of arrangements increase.While the CMS-sponsored model safe harbor clearly maps out specific models adopted by CMS, the value-based arrangement safe harbors allow parties to innovate in their relationships to provide care that aligns with a “value-based purpose.” Under the AKS safe harbor language, value-based purposes include: coordinating and managing the care of a target patient population; improving the quality of care for a target patient population; appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target population; and transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.Notably, OIG prohibits medical device manufacturers from utilizing two of the new value-based safe harbors: value-based arrangements with substantial downside risk and value-based arrangements with full financial risk safe harbors. However, there are still two additional value-based safe harbors that medical device manufacturers may employ. Specifically, medical device manufacturers can utilize: (i) the safe harbor for care coordination arrangement to improve quality, health outcomes, efficiency, and patient engagement; and (ii) the safe harbor for support to improve quality, health outcomes and efficiency.The care coordination safe harbor focuses on digital health tools. The AKS regulations define digital health tools as “hardware, software, or services that electronically capture, transmit, aggregate, or analyze data and that are used for the purpose of coordinating and managing care; such term includes any internet or other connectivity service that is necessary and used to enable the operation of the item or service for that purpose.” Effectively, this safe harbor allows a company wider flexibility in structuring arrangements, particularly for new products that may assist health care providers with care coordination and provide higher quality health care services at lower costs, particularly where these products may be untested and could therefore benefit from a risk-sharing arrangement until the true impact and value of the products becomes known.For the new AKS safe harbors pertaining to substantial downside and full financial risk, we expect to see insurance companies and various types of health care providers employ new digital health tools when providing health care services. These companies will test the tools against patient populations to examine whether the tools increase the quality of health care services provided while simultaneously lowering health care costs. When risk sharing, both sides have skin in the game to incentivize providing high-quality care at lower costs.With the influx of innovation and new health care delivery models, it is important to note that all of the new AKS value-based safe harbors contain guardrails to ensure that health care providers and ancillary companies enter these arrangements for a value-based purpose; health care providers do not ration medically necessary care; parties do not prevent health care providers from making decisions in the best interests of their patients; parties do not limit patients’ preferences for different practitioners, providers, or suppliers; and that arrangements have clear outcome-based benchmarks and measures for evaluating the value-based arrangements.

healthcare.jpg

Is 2021 the Value-Based and Shared Savings Revolution?

Is 2021 the Value-Based and Shared Savings Revolution?

1023224308

By now you are likely aware of the new safe harbor provisions of the federal anti-kickback statute (AKS), which the U.S. Office of Inspector General (OIG) final

In recent years, there have been various antitrust investigations in the pharmaceutical sector resulting in decisions of the European Commission (EC) and the European Courts.[1] In two recent rulings – “Lundbeck”[2] and “Paroxetine”[3] – the European Court of Justice (ECJ) dealt with settlement agreements between originator companies and generic companies aimed at delaying the introduction of generic drugs to the market, so-called “pay-for-delay” or “reverse patent settlement” agreements. In these agreements, the generic companies usually commit to refrain from entering the market for a relevant medicine protected by a (possibly contestable) patent that the originator company holds while the originator company is obliged to pay a certain compensation. The recent ECJ judgments indicate that most of the “pay-for-delay” agreements likely constitute anti-competitive agreements by object and hence violate EU antitrust laws.<h4>Facts/Background</h4>The ECJ provided fundamental guidance regarding questions on “pay-for-delay” agreements in its preliminary ruling in “Paroxetine” on January 30, 2020. In this case, the British Competition Appeal Tribunal (“CAT”) referred various questions to the ECJ for a preliminary ruling. The background for the legal proceedings were settlement agreements with respect to patent disputes between GlaxoSmithKline (the holder of a patent for the paroxetine anti-depressant) and certain generics companies, in which the generics companies agreed to refrain from entering the market with their own generic medicines for a certain period of time and GlaxoSmithKline promised payments in return.In its “Lundbeck” decisions of March 25, 2021, the ECJ applied the principles established in “Paroxetine” to a fine decision of the EC. The ECJ confirmed the previous EC decision including the ruling of the General Court to fine Lundbeck (originator company of the citalopram anti-depressant) and producers of generic medicines for their anti-competitive settlement agreements. After the original compound patent expired in 2002, Lundbeck (still holding a number of secondary patents) and several generic companies entered into “pay-for-delay” agreements. The generic companies committed not to enter the citalopram market and Lundbeck made in return significant payments and also purchased their stocks of generic products. Those agreements led to investigations concluded by the EC’s decision of June 19, 2013[4] to fine Lundbeck and the generic companies. Their appeals before the General Court were dismissed by various judgments of September 8, 2016. Finally, the ECJ dismissed the appeals against the Court’s decisions.<h4>The ECJ Decisions</h4>The ECJ’s decisions mainly focus on the standards of the European cartel ban (Article 101 TFEU) and the rules on abuse of dominance (Article 102 TFEU, see particularly “Paroxetine”) applying to “pay-for-delay” agreements. They particularly provide clarity in which cases generic manufacturers could be considered as potential competitors and in which cases “pay-for-delay” agreements constitute a restriction of competition “by object” (or effect). While the preliminary ruling in “Paroxetine” provides the guidelines to assess “pay-for-delay” agreements in general, the ECJ confirmed and applied those guidelines to a specific fine decision in “Lundbeck.”Potential CompetitorsThe “pay-for-delay” agreements are only anti-competitive if the companies involved are at least “potential competitors.” According to the ECJ in its “Paroxetine” ruling, the relevant potential competition between the originator companies and the generic companies needs to be assessed with “regard to the structure of the market and the economic and legal context within which it operates.” To establish potential competition, the ECJ emphasized that there is no need for certainty that the generic company will in fact enter the market, but the generic companies must have “real and concrete possibilities of entering the market at the relevant time.” More precisely, according to the ECJ, this means that a potential competitor must have taken sufficient preparatory steps to enter the market at the time of the conclusion of the “pay-for-delay” agreement and must show a firm intention as well as an inherent ability to enter the market. Moreover, there shall be no “insurmountable barriers” for entering the market, but the ECJ clarified that the existence of a patent alone cannot be regarded as such an “insurmountable barrier” as long as the potential competitor shows a readiness to challenge the validity of that patent. According to the ECJ, it is not required to assess the “strength of the patent” or how likely it is that a court would find that the patent is valid and has been infringed. Restriction of Competition by ObjectRegarding the question when there is a “restriction of competition by object,” the ECJ pointed out that the agreements must reveal a sufficient degree of harm to competition, considering the agreement’s content, objectives, and economic and legal context. According to the ECJ, such a harm to competition is strongly indicated when the agreed transfers of value cannot have any explanation other than the commercial interest of the parties not to engage in competition on the merits. For this purpose, it is crucial to assess whether the net gain arising from the payments in question is high enough to act as an incentive to the generic companies to refrain from entering the market. However, the net gain is not required to be higher than the profits the generic company would have made if it were successful in the patent proceedings. As with the assessment of a “potential competition,” it is not necessary to assess the strength of the respective patents or of the party’s prospects of success in a patent process, if the transfer of value is significant enough.Abuse of DominanceIn its “Paroxetine” decisions, the ECJ also specified the conditions under which a “pay-for-delay” agreement constitutes an abuse of a dominant market position (Article 102 TFEU). According to the ECJ, the definition of the relevant product market must take the generic versions of the medicine into account, although the generic companies would not be able to legally enter the market. The ECJ further clarified that the exercise of an IP right, including the conclusion of patent settlement agreements, is not per se abusive, but that negative effects for competition arise if this exercise prevents access to the market. Finally, the ECJ pointed out that adverse effects on the market might be counterbalanced by efficiency advantages that also benefit consumers.<h4>Conclusion and Outlook</h4>After the EC and the General Court established the first principles for the assessment of “pay-for-delay” agreements in the pharmaceutical sector under EU antitrust law, the two ECJ rulings provided now more clarity and final guidance on this topic for various issues. This particularly concerns the qualification of the companies involved as “potential competitors,” the relevant test for assessing whether there is a “restriction of competition by object,” and the (non‑)relevance of the likelihood of success in patent proceedings. There are still some open questions, particularly regarding the defense of the companies involved with respect to potential pro-competitive effects or efficiencies. But this could also have been deliberately left open as, in general, the ECJ seems to put “pay-for-delay” agreements under close scrutiny. And while it does not generally prohibit those agreements, they are subject to a critical assessment resulting in “tough (antitrust) times” for any “pay-for-delay” agreements. [1] See prior client alert.[2] Judgments of the ECJ of March 25, 2021 in Cases C-586/16 P, C-588/16 P, C-591/16 P, C-601/16 P, C-611/16 P, and C-614/16 P.[3] Judgment of the ECJ of January 30, 2020 in Case 307/18.[4] EC Decision of June 19, 2013, Case AT.39226 – Lundbeck. in Cases T-460/13, T-467/13,, T-469/13, T-470/13, T-471/13, and T-472/13.

hackl_jens_blog_150x150.png

hackl_jens_common_640x280.jpg

hackl_jens_heroretina_2700x1160.jpg

hackl_jens_mobileretina_750x1040.jpg

hackl_jens_social_600x600.jpg

Counsel

Jens is a counsel at Morrison Foerster’s German office in Berlin. He advises clients in all areas of European and German competition law, including merger control filings, cartel authority investiga

Jens Hackl

Jens Hackl is a counsel at Morrison Foerster’s German office in Berlin. He advises clients in all areas of European and German competition law, including merger control filings, cartel authority investigations, cartel damage claims, distribution cartel law, antitrust compliance programs and unfair competition law. Jens has particular industry-specific experience in the areas of media, technology, telecommunication, transport and aviation. In addition, he advises in the fields of state aid and public procurement law.

andreas_gruenwald_blog_150x150.png

andreas_gruenwald_common_640x280.jpg

andreas_gruenwald_heroretina_2700x1160.jpg

andreas_gruenwald_mobileretina_750x1040.jpg

andreas_gruenwald_social_600x600.jpg

Managing Partner, Berlin

Andreas is managing partner of Morrison & Foerster’s German office in Berlin and a member of the firm’s worldwide board of directors. He heads the German antitrust and regulatory practice from our Ber

Andreas Grünwald

Andreas Grünwald is a partner in the Global Antitrust Law Practice Group, and head of Morrison & Foerster’s German antitrust practice. He covers a wide range of antitrust and regulatory matters, with a particular focus on the telecommunications, media and technology (TMT) sector. Based in our Berlin and Brussels offices, Mr. Grünwald provides antitrust advice on M&A strategy, represents public and private corporations in merger control proceedings before the German Federal Cartel Office and the European Commission, and he has notable experience in coordinating multi-jurisdictional merger filings involving European, U.S., and Asian authorities. He also advises on other transactional matters such as sector-specific permit requirements as they often arise in regulated industries.

mofolifesciences-eu.jpg

Pay-for-Delay has a tough (antitrust) time at EU Top Court

Fourth Circuit’s Decision Revitalizes First Amendment Challenge to the TCPA

mofolifesciences-eu

In recent years, there have been various antitrust investigations in the pharmaceutical sector resulting in decisions of the European Commission (EC) and the Eu

Pay-for-Delay has a tough (antitrust) time at EU Top Court