The Court of Appeal has recently handed down a decision indicating its intention to refer questions relating to the Specific Mechanism to the Court of Justice (Europe's highest court; the CJEU) on an appeal from the Patents County Court.
Legal background
One of the foundations of the European Union is the limitation
of barriers to trade between member states, so as to allow free
circulation of goods throughout the single market. Under the
relevant rules, the owner of an intellectual property right in a
first member state cannot use its rights to prevent the importation
of goods from a second member state, if the goods were entered into
circulation in the single market by or with the consent of the
rights holder.
Importation from one member state into another is known as
parallel importing. It is typically undertaken to exploit price
differences between member states, for example where a
pharmaceutical product is protected by a patent or supplementary
protection certificate (SPC) in one state but is not in another
(where prices may be lower due to generic competition).
However, where the exporting member state is one of the more
recent joiners to the EU, a derogation from the principle of free
movement is permitted for pharmaceutical products in certain
circumstances. This is due to the Specific Mechanism which was
written into the accession treaty of these states:
SPECIFIC MECHANISM
"With regard to the Czech Republic, Estonia, Latvia,
Lithuania, Hungary, Poland, Slovenia or Slovakia, the holder, or
his beneficiary, of a patent or supplementary protection
certificate for a pharmaceutical product filed in a Member State at
a time when such protection could not be obtained in one of the
abovementioned new Member States for that product, may rely on the
rights granted by that patent or supplementary protection
certificate in order to prevent the import and marketing of that
product in the Member State or States where the product in question
enjoys patent protection or supplementary protection, even if the
product was put on the market in that new Member State for the
first time by him or with his consent.
Any person intending to import or market a pharmaceutical
product covered by the above paragraph in a Member State where the
product enjoys patent or supplementary protection shall demonstrate
to the competent authorities in the application regarding that
import that one month's prior notification has been given to
the holder or beneficiary of such protection."
Similar provisions also exist for some other states, e.g.,
Bulgaria and Romania.
Thus, if equivalent patent or SPC protection could not have been
obtained in the new member state at the time the patent or SPC was
filed in the importing member state, the rights holder can prevent
the import of pharmaceutical products from the new member state
even if they were put onto the market in the new member state by or
with the rights holder's consent.
For a pharmaceutical product, parallel importation also needs to
be approved by the competent regulatory authority, which is
concerned with the product's safety and efficacy. The authority
grants a parallel import licence which allows the importer to take
advantage of an existing market authorisation (i.e. an approval
that the pharmaceutical product is safe and effective), and thus
allows marketing of the imported product on that basis. However, as
set out in the second paragraph of the above quotation, where
parallel importation might be prevented under the Specific
Mechanism, the party intending to import the pharmaceutical product
is additionally required to demonstrate to the regulatory authority
that it has given one month's notification to the rights holder
in the country of import.
Factual Background
Merck Canada Inc. started an action for infringement of a UK patent and a UK SPC (covering the active ingredient in the asthma treatment Singulair®) by Sigma Pharmaceuticals PLC, which was importing Singulair® from Poland into the UK. Sigma said that it had notified Merck of its intention to import in June 2009. On the basis that it received no response, Sigma began to import Singulair®. In December 2010, Merck notified Sigma that it objected. Sigma immediately ceased its activities. Merck in any case sued for the acts conducted by Sigma prior to ceasing its activities.
At first instance, the judge decided in Merck's favour. He
granted an injunction and ordered Sigma to deliver up its unsold
stocks of Singulair®. Before the Court of Appeal, Sigma argued
that it was not liable for infringement prior to Merck's
objection because Merck should have responded within the month set
by the letter of June 2009. Sigma also argued that the lack of
response prevented Merck from exerting its rights by estoppel under
English law.
Merck argued that the Specific Mechanism did not require that it
must exercise its rights on notice from the prospective importer
and that, in any case, Sigma had failed to fulfil its obligations
under the Specific Mechanism because the correct legal entity in
the Merck group of companies had not been notified by the correct
legal entity in the Sigma group of companies. Merck also argued
that its silence did not satisfy the requirements for estoppel
under English law.
The Judgment
The Court of Appeal agreed with the first instance judge that
there was no estoppel resulting from Merck's failure to respond
to Sigma's notification letter. It also affirmed that the judge
was entitled to make the order for delivery up, if his finding of
infringement was correct.
It appeared more sympathetic, however, to Sigma's arguments
on the workings of the Specific Mechanism than the judge had been,
noting that the "free movement rule is one of the core
principles of the European single market and any derogation from it
must be interpreted strictly". Even though the court
appeared to favour Sigma's arguments, it opined that the issues
were far from acte clair. In this situation it deemed
that, before it could decide the appeal, a reference to the CJEU
was appropriate in order to clarify the workings of the Specific
Mechanism on the following issues:
- The conditions which must be satisfied before a patent
holder may bring infringement proceedings under the Specific
Mechanism and, in particular, whether the derogation confers upon
the patent holder an option of preventing imports falling in its
scope; and whether the derogation is inapplicable unless and until
the patent holder demonstrates his intention to exercise that
option.
- The identity of the person who must give the notice under
the Specific Mechanism and, in particular, whether a notification
is compliant if it is given by an applicant for regulatory approval
in the Member State into which the products are to be imported
rather than the importer; and whether it makes any difference if
notification and importation are performed by different legal
entities within a group of companies.
- The identity of the person to whom notice must be given,
and whether when a group of companies form a single economic unit
comprising a number of legal entities, it is sufficient if the
notification is addressed to a legal entity which is the operating
subsidiary and marketing authorisation holder in the Member State
of importation rather than the entity within the group which has
legal ownership of or an exclusive licence under the intellectual
property right. This issue also raised the subsidiary question as
to whether a notification which is otherwise compliant is rendered
non compliant if it is addressed to the "the Manager,
Regulatory Affairs".
Although the exact form of the questions has yet to be decided
upon, the Court of Appeal has instructed the parties to draft
questions and a reference to the CJEU. The court considered the
issues in the case to be worthy of a reference to the CJEU because
the Specific Mechanism will continue to apply until 2019.
Further clarification of the issues raised in this case will be of interest to both originator pharmaceutical companies and parallel importers alike.
Need advice?
Carpmaels & Ransford LLP is a leading firm of European patent and trade mark attorneys based in London. For more information about our firm and our practice, please visit our website at www.carpmaels.com.
This Briefing Note was first published in the IAM IP Newsletter.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
