A lawsuit filed by Novartis in 2015 against a local generic drug company took a new turn at the beginning of 2019. In a third and final instance decision, the Taiwan's Supreme Court, by adopting a more prudent standard for determining if a package design for prescription drug can be caught by the misappropriation claim under the Fair Trade Law, revoked a second instance decision of the IP Court which accepted Novartis' argument that the local defendant's design for a generic drug package misappropriated Novartis' package design for the blood pressure control drug "Exforge." Standard Chem & Pharm Co., Ltd. v. Taiwan Novartis Corp., 107 Tai-Shang 1967, Taiwan Supreme Court (January 2019).
In connection with trade dress passing-off disputes where no design patents or registered trademarks are concerned, a design holder's causes of action may include copyright infringement claim and tort claims under the Fair Trade Law. The latter can be further divided into two types: the passing-off claim under Article 22 and the misappropriation/unfair competition claim under Article 25 of the Fair Trade Law. Article 22 protects trade names, trade dresses or other business indicia and prohibits use of similar indicia on related goods or services that gives rise to confusion of source. Article 25, on the other hand, provides, "[i]n addition to what is provided for in this Act, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is able to affect trading order." The phrase "in addition to what is provided" indicates that this Article only applies to disputes out of other articles' reach. It is, in a sense, a remedy of last resort for IP infringement disputes, covering all residual types of commercial dishonesty or immorality.
Under an "all-hands-on-deck" strategy, Novartis asserted the copyright claim along with the two Fair Trade Law claims. In the first instance, it lost all three; in the second instance, the Article 25 claim was affirmed by the IP Court. According to the IP Court decision which was now revoked by the Supreme Court, the local generic drug company's package design, consisting of blue, yellow and white colors highly similar to those used on the Exforge package, was aimed to convey the same visual effect and thereby reap the fruits of Novartis' efforts. However, the IP Court pointed out, the two parties' designs were not substantially similar to merit either the copyright claim or the Article 22 claim.
||The Defendant's Design
While the IP Court's attempt to draw a line in the gray area between copyright infringement and unfair competition was a pioneering move, its reasoning (not necessarily the outcome) was not appreciated by the Supreme Court. Suppose the IP Court did not err in holding that the two package designs are differentiable in the eye of the reasonable public in the test of similarity for the other two claims, said the Supreme Court, then the IP Court's favorable holding on Novartis' Article 25 claim must be problematic (if not self-contradictory), unless it could, after the case was remanded, elaborate on what additional conduct the defendant might have done (for example, deceiving or misleading the public) so as to "affect the trade order" as provided in Article 25.
More importantly, the Supreme Court asked: had the trade order really been affected, given the dense regulation on lay consumers' access to prescription drugs? The Supreme Court's said:
The term "trading order" as used in this Article 25 refers to market economic orders of all goods or services transactions, including the horizontal competition order in the production and sales stage, the market order in the vertical trading relationship, and other trading orders in line with the spirit of fair competition.
To determine whether a conduct is "able to affect trading order," we should consider all relevant factors, which may include: relevant trading habits and industrial characteristics, number of victims, amount and extent of damage caused, the potential deterring effect on peer players and influence on the majority of potential victims, the manner in which the disputed conduct was performed, the frequency and scale of the conduct, whether there is information parity between the actor and its trading counterpart, as well as the size of the actor's market force, and whether there is dependence (of the actor's goods or services in the market).
The Respondent's drug product and the disputed drug are both medicines for chronic conditions, i.e. both being used to control blood pressure. They are prescription drugs, which are only accessible to patients having received a prescription from physicians and are only supplied at pharmacies related to the physicians. According to The Pharmaceutical Affairs Act, Pharmacists Act, and Directives on Good Drug Prescription Practices, drugs requiring prescription of a physician shall not be dispensed or supplied in the absence of such prescription, and shall not be displayed in an off-the-shelf manner; the advertisements thereof shall be published only in academic medical journals; pharmacists shall personally administer their pharmacy business, receive physician's prescription and dispense accordingly without any mistakes. As such, the Petitioner's argument that physicians, pharmacists, the general public, clinics and consumers are unlikely to get confused by the drug package design at issue is not without any merit.
However, Novartis has not lost as the case has been remanded back to the IP Court. Novartis still has a chance to prove that, following the Supreme Court's opinion, the local pharmaceutical company's design indeed constitutes an active factor to misleadingly influence the decision-making of stakeholders (exemplified by the Supreme Court to include drug dealers, hospitals, clinics, other medical and research institutions, and the general public) along the supply chain of the disputed prescription drugs.
[A Follow-up Note]
About 5 months after the case was remanded back to the IP Court from the Supreme Court, the IP Court rendered a second judgment on July 18, 2019, dismissing Novartis’ Article 25 claim. The IP Court’s new judgment closely follows the Supreme Court’s opinion, holding that the two parties’ drug products at dispute are both prescription drugs which, due to the laws and regulations cited by the Supreme Court’s opinion, are only accessible to patients with a prescription from a physician, and only supplied at a relevant pharmacy. Thus, the disputed package design is not the only factor, even less a major factor, that an interested party considers before making a purchase decision. Hence, the trading order of relevant market is not affected, particularly when the differences between the two designs are considered, the IP Court indicated. The IP Court did not address Novartis’ copyright claim or Article 22 claim based on the Fair Trade Act, because the IP Court had dismissed these two claims in its first judgment and Novartis had not appealed these parts of the said judgment to the Supreme Court.