United States v. Glaxo Ltd Neil Chang UC Berkeley Bioengineering IEOR 190G Fall 2008

Overview Glaxo Group Ltd. and Imperial Chemical Industries (ICI) each held patents that covered various aspects of the antifungal drug griseofulvin ICI had the patent on the orally ingested form of the drug, Glaxo had the manufacturing patents Glaxo and ICI cross-licensed their patents and sublicensed three brand-name companies to sell the drug In 1973, the U.S. Department of Justice Antitrust Division sued, claiming that the two companies were illegally monopolizing the sale of the drug and that one of the patents was invalid

Parties – Glaxo (now GlaxoSmithKline) Founded in 1904 in the U.K. as a baby food manufacturer Became Glaxo Laboratories and began researching pharmaceutical products, acquiring several smaller pharmaceutical research companies Merged with Burroughs Wellcome in 1995 to become GlaxoWellcome, and merged with SmithKline Beecham in 2001 to become GlaxoSmithKline Currently the second largest pharmaceutical company in the world by revenue

Parties – Imperial Chemical Industries Founded in the U.K. in 1926 as the merger of four smaller companies Produces and develops chemical products, such as paints, food ingredients, specialty polymers, electronic materials Currently one of largest chemical producers in the world Acquired by Dutch conglomerate Akzo Nobel in 2007

Parties – U.S. Dept. of Justice, Antitrust Division Responsible for enforcing all federal antitrust laws Has joint jurisdiction with Federal Trade Commission over civil antitrust cases and complete jurisdiction over criminal antitrust cases

Mechanism of griseofulvin Binds to keratin (protein which make up skin, hair and nail cells) When fungus infects these cells, griseofulvin enters the fungal cells and binds to their tubulin

Mechanism of griseofulvin Tubulin is the building block of the microtubule, which is an essential part of the mitotic spindle With tubulin bound and inhibited by griseofulvin, fungal cell division is inhibited

The Patents U.S. Patent No. 2,900,204, owned by ICI, issued 1959, claims a method of curing humans/animals of fungal diseases via administering an internal dosage of griseofulvin via capsule, tablet or pill U.S. Patent No. 3,330,727, owned by Glaxo, issued 1967, claims a way to manufacture a finely ground or “microsize” form of griseofulvin, which has proven to be the most effective form of the drug in treating fungal diseases

Pooling agreement ICI and Glaxo agreed to pool or cross-license their patents ICI and Glaxo then sublicensed the patents to three brand-name companies to produce and sell the finished drug This effectively closed the market to other companies that wanted to sell the drug form of griseofulvin, because of the effective monpoly ICI and Glaxo had on the related patents

Patent Case USDOJ Antitrust sued, claiming that the pooling of the patents violated Sec.1 of the Sherman Act Sherman Antitrust Act: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal” USDOJ Antitrust further claimed that the ICI patent was invalid because their patent was not specific enough: their claim on the dosage form did not specify an “effective amount” of the drug, and did not specify the diseases that could be cured

Ruling by district court District court of the District of Columbia ruled in favor of USDOJ Antitrust on the antitrust charges but dismissed patent invalidity claim because the government lacks standing to challenge patent validity Denied USDOJ Antitrust’s request for mandatory selling and compulsory licensing, on reasonable terms (a measure to reopen the griseofulvin market to competition) USDOJ Antitrust appealed to the Supreme Court

Ruling by U.S. Supreme Court Supreme Court ruled 6-3 that USDOJ Antitrust had standing to claim patent invalidity in antitrust cases because the validity of the patent can significantly affect which remedies are appropriate Ruled that mandatory selling and compulsory licensing should be used to remedy the antitrust situation

Effects Government now has the ability to challenge patent validity in antitrust litigations “Mandatory selling on specified terms and compulsory patent licensing at reasonable charges” are suitable forms of relief for antitrust situations involving patents

Questions?