[Exclusive] Daewoong Pharmaceutical Loses 2 Billion Won Fine Lawsuit for 'Obstructing Competitor's Generic Drug Sales'

Daewoong Pharmaceutical, which was sanctioned by the Fair Trade Commission (FTC) with fines amounting to tens of billions of won for allegedly obstructing the sale of competitor’s generic drugs, filed an administrative lawsuit in protest, but the court rejected it, ruling that "the FTC’s disposition was lawful."

According to the legal community on the 1st, the Administrative Division 6-2 of the Seoul High Court (Presiding Judge Wi Gwang-ha) ruled in the administrative lawsuit filed by Daewoong Pharmaceutical and its holding company Daewoong against the FTC that "the corrective order and the fine of approximately 2.14 billion won imposed on Daewoong Pharmaceutical are all lawful." It also stated that "although part of the fine of approximately 150 million won imposed on Daewoong is unlawful, the rest of the corrective orders are all lawful."

Daewoong Pharmaceutical, the patent holder of the gastrointestinal drug 'Albis,' is accused of abusing patent infringement lawsuits to block competitors who began developing generic drugs after the expiration of Albis’s original patent in 2013. According to the FTC, Daewoong Pharmaceutical, knowing that it did not infringe the patent rights, filed a provisional injunction related to patent rights against Pavis Pharmaceutical in December 2014 and lost the case in May of the following year. The FTC judged that Daewoong Pharmaceutical pushed forward with the lawsuit to damage the image of Pavis Pharmaceutical’s products by promoting the fact that products under litigation could be discontinued in the future when bidding for large hospitals.

Additionally, the FTC pointed out that Daewoong Pharmaceutical submitted false data to advance the timing of patent applications and obtained patents. It was investigated that Daewoong Pharmaceutical filed a patent infringement injunction lawsuit when Anguk Pharmaceutical’s generic drug was launched but ended the lawsuit by inducing a settlement after Anguk Pharmaceutical raised issues of data manipulation.

Accordingly, the FTC imposed corrective orders and fines totaling 2.297 billion won on Daewoong Pharmaceutical and Daewoong. Daewoong Pharmaceutical filed an administrative lawsuit in protest of the FTC’s disposition. The appeal process for FTC disposition disputes proceeds through two trials (Seoul High Court and Supreme Court). In court, Daewoong Pharmaceutical argued that "it never abused patent rights and did not file lawsuits with the intent to obstruct competitors’ businesses."

However, the court dismissed all of Daewoong Pharmaceutical’s claims. The court stated, "Daewoong Pharmaceutical clearly knew that the likelihood of winning was almost none but intended to use the provisional injunction solely to obstruct Pavis Pharmaceutical’s business. This is clearly evident from internal documents." It also said, "Furthermore, based on patents obtained from manipulated test data, Daewoong Pharmaceutical filed lawsuits against Anguk Pharmaceutical with the purpose of obstructing the sale of generic drugs." The court added, "Daewoong also actively participated in patent infringement lawsuits, with executives exchanging information and opinions with Daewoong Pharmaceutical in preparing the lawsuits." However, the court found some errors in the calculation of fines imposed on Daewoong and ruled that "the portion exceeding 140 million won of the imposed fines is unlawful."

Meanwhile, following the FTC’s accusation, prosecutors have sent four current and former employees of Daewoong Pharmaceutical to criminal trial on charges of obstruction of official duties by deception. Daewoong Pharmaceutical and Daewoong corporations were also indicted for violating the Fair Trade Act.