Russian Supreme Court rejects Gilead’s decree challenge

The Russian Federation’s Supreme Court has dismissed a claim filed by US companies Gilead Pharmasset LLC and Gilead Sciences, Inc challenging a decree that allowed a Russian generic pharmaceutical manufacturer to use inventions protected by Eurasian patents in the fight against covid-19. The court noted that the decree is temporary, aims to provide the Russian population with necessary medicines and does not violate the rights and legitimate interests of the plaintiffs.

The case has been closely watched by the international pharma community, because it could have significant long-term implications for patent owners in the market.

Background

The decree in question permitted the Russian generic company Pharmasyntez JSC to use patented antiviral compounds useful against certain types of virus, including SARS-CoV-2 for one year and for public use, without the consent of the patentees. Pharmasyntez was obliged to pay the patentees proportionate compensation. The scope and duration of the use of inventions was limited by the purpose specified in the decree, namely providing Russians with drugs containing INN Remdesivir.

Gilead claimed that the decree unreasonably violated its rights and legitimate interests - specifically, in terms of lost profits associated with the production and supply of the drug without the patentees’ consent.

The court drew on Article 1360 of the Civil Code, which was amended on 30 April 2021. This permits the government to make decisions about the use of an invention, without the consent of a patentee, in cases of emergency related to defence and security, and public health. However, in such instances, there is an obligation to notify the patentee as soon as possible and to pay proportionate compensation.

According to the court, the provisions of Article 1360 correspond to those of Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, and are also consistent with the Siracusa Principles. Under these provisions, the need to protect public health can serve as a basis for limiting certain rights.

While an appeal to the case was pending in 2021, the government announced the adoption of a methodology for determining the amount of compensation to be paid for the emergency use of a patented invention in Resolution 1767 of 18 October 2021. The resolution establishes that this is to be calculated as 0.5% of the gross revenue associated with use of the invention. If more than one patented invention is involved, then the 0.5% royalty is split up proportionately. With regard to the case in question, the government reputedly placed an order with Pharmasyntez for Rb 4 billion worth of Remdesivir (about $52 million). Using the guidelines established in the resolution, the royalty for the supply of the full amount would be a mere $270,000.

In late December 2021, the government issued another decree extending Pharmasyntez’s right to use the Gilead patents for an additional year, with compensation to be determined.