Introduction
The European Commission (EC) is expected to adopt a new legislative package making material changes to the "regulation of compulsory licensing of patents" and the "revision of the legislation on supplementary protection certificates (SPCs)". While the draft package has not yet been published1, its impact on the life sciences sector is expected to be significant. The EC is expected to adopt the compulsory licensing and SPC package during the second quarter of 2023. In the same period, the UP framework will enter into force.
Main insights
The package is expected to create an expedited process for compulsory licensing, and to provide for shared common grounds, scope, procedure, and criteria for the grant of such licences.
Additionally, the package will create an EU-wide unified SPC grant procedure and a unitary SPC to (i) strengthen the single market for pharmaceuticals and plant protection products, (ii) lower costs for companies and reduce the administrative burdens on both applicants and national administrations, and (iii) enhance legal certainty regarding the scope of SPC protection, to the benefit of both SPCs users and generic manufacturers.
The Unitary Patent (UP) system will offer broader and more aligned territorial protection within the EU. The European Patent Office (EPO) will act as a "one-stop shop" for UPs administration in the participating EU member states. The Unified Patent Court (UPC) will have exclusive jurisdiction over UPs and European Patents (EPs) designated in participating member states that have not been opted out. The UP system is intended to be more business-friendly, e.g. in terms of both renewal costs and procedures and associated costs. Ultimately, UPs are expected to enhance legal certainty from both the maintenance and litigation standpoints.
New legislative package
Compulsory licensing of patents
The compulsory licensing of patents2 enables a government or court to (i) authorise the use of a patented invention without the consent of the patent holder, or (ii) use the patent-protected invention itself3. Compulsory licences are granted to certain applicants on specific grounds.4 Today, each member state regulates compulsory licensing for its own territory, despite many value chains operating across the EU. This is a source of legal uncertainty and contributes to the fragmentation of compulsory licensing of patents within the EU (other than in the narrow circumstances addressed by Regulation 816/2006).5
In July 2022, the EC launched a public consultation to seek views and input on the compulsory licensing of patents,6 with a view to ensuring a more efficient and coordinated system, and to ensure that the EU is better equipped to address EU-wide crises. The consultation also sought views on the procedure for the grant of compulsory licences for the manufacture of pharmaceutical products for export to non-EU countries (currently regulated by Regulation 816/2006).
Following this consultation, the EC published a summary of stakeholders' views7. The majority of them thought that current national laws are fit to tackle crises. However, a large number of respondents considered that a compulsory licence should enable (i) manufacturing of products across several EU countries or (ii) export to a member state other than the country in which products are manufactured. Almost all stakeholders believed compulsory licensing should be allowed in crises. A majority of those who considered that it should be allowed in specific crises only, thought that health-related crises are relevant such crises. Three-quarters of respondents agreed with compulsory licensing as a last resort (where voluntary agreements have failed or are unavailable).
Almost half of stakeholders were in favour of enhanced communication and information sharing between EU countries8. Others favoured (i) alignment of national rules, and (ii) issuance of non-binding guidelines9. Respondents also provided their views on applying uniform compulsory licences rules for crisis management, particularly aligning the rules addressing (i) grounds, (ii) scope, (iii) procedure, and (iv) conditions for the grant of a compulsory licence. Respondents also favoured decisions at (i) EU level for a crisis affecting more than one member state, and (ii) at national level for a national crisis.
Regarding compulsory licensing for export outside the EU, the vast majority of respondents believe that Regulation 816/2006 provides a speedy and efficient procedure, but that it needs to be more flexible.
Supplementary protection certificates
SPCs offset the loss of patent protection for pharmaceuticals that occurs as a result of the lengthy testing and clinical trial processes,10 compensating developers for their investments in R&D.
Currently, SPCs are regulated through regulations including (i) Regulation 469/200911 on the SPC for medicinal products, and (ii) Regulation 1610/9612 on the creation of an SPC for plant protection products (PPPs). The EC's 2020 evaluation of these two regulations prepared the ground for the current legislative initiatives, identifying the main issues with the current regulatory framework.
While the EC considers the SPC system to be reasonably balanced in terms of efficiency13 and the SPC regulations to be internally coherent14, it is focused on ensuring that the system:
- Encourages global R&D in new active ingredients of medicines and PPPs;
- Attracts R&D centres and jobs to the EU and prevent R&D relocation;
- Promotes a uniform SPC system in the EU15.
In fact, despite the EU common framework, SPCs are administered at national level. This is seen as the SPC system's main shortcoming, generating fragmentation, which leads to extra costs for, and administrative burden.16 Further, differences in the scope of protection across the EU creates uncertainly, reducing the effectiveness of the SPC regime.
The lack of transparency in the SPC regime is another issue of concern.17 According to the EC, this suboptimal transparency creates difficulty in identifying what SPC protection exists, for which products, and in which member state.18
However, despite the fragmentation, the view is that the SPC system creates "added value" for the EU, given the broadly consistent incentives it creates. To improve the system, and to deal with these issues, the EC plans to create a unified SPC grant procedure and a unitary SPC (which would strengthen the single market for pharmaceuticals and PPPs).19
The creation of a unified SPC grant procedure and of a unitary SPC will enable patent owners to reduce the costs associated with that procedure, and the related administrative burden. It will also harmonise the scope of protection of these certificates, and increased transparency will enable innovators and generics manufacturers to know exactly what the SPC protection covers.
Unitary Patents
The 2012 UP system is expected to come into effect on 1 June 202320, as the regulations21 apply only after entry into force of the UPC agreement (UPCA.)22
Currently, if an inventor wants to patent an invention in the EU, she can apply for national patents or an EP. If she chooses the latter, the EPO will carry out a centralised examination of the application. However, EP applications passed to grant are recognised as national parts by EPC member states, such that the national parts need to be maintained individually in each EPC member state. This process can be complex and very expensive, if the patentee chooses many countries, and can lead to legal uncertainty. Litigation and competition concerns regarding (the validity of) patents in the pharmaceutical sector are not uncommon23.
In contrast, the UP system will offer comprehensive territorial protection24 together with a single renewal fee.25
The EPO will act as a "one-stop shop" for obtaining,
maintaining and managing UPs, which means that a UP will enable
inventors obtaining uniform and territorially broad protection in
the participating member states. Finally, UP transfers, licences
and other rights will be subject to a single registration entered
in the EPO's register for UP protection.
The UPC will accompany the UP system, operating as the forum for
enforcing and challenging UPs. It is intended to enhance legal
certainty through a harmonised body of case law, and to provide
simpler, quicker and more efficient judicial procedures compared to
member state courts.
However, because it will take years for the UPC case law to
develop, many pharmaceutical companies are hesitant to subject
crown jewel patents to an unproven new system. In addition, the
centralized approach does also create the risk of a revocation of
the UP or the EP (which has not been opted out from the UPC) in all
member states in one stroke.
Innovators, therefore, need to develop a strategy to decide whether
and which EPs they will introduce into the new system and whether
they will chose unitary protection in the future. Strategies could
include the filing of EP divisional applications or national
patents in important countries alongside UPs.
The new framework will change how life sciences companies consider patenting their inventions and their European patent litigation strategies. When filing new patents, life sciences companies may consider applying for an UP, instead of or in addition to a conventional EP or national patents, weighing the risk of central revocation of the UP or not opted out EPs.
The authors wish to thank Julien Haverals and Luca Ghafelehbashi, International Trainees at Norton Rose Fulbright LLP (Brussels) for their contribution.
Footnotes
1. However, in February 2022, the EC launched a consultation on the SEP-part of this package. Link, accessed on 11 January 2023.
2. E.g. in Germany via Sec. 13 or 24 German Patent Act.
3. See e.g.: WTO, Compulsory licensing of pharmaceuticals and TRIPS. Link, accessed on 11 January 2023.
4. Such as public health or lack of exploitation of the patent, and so on.
5. Regulation EC/816/2006 of the European Parliament and of the Council of 17 May 2006 on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems, O.J., L 157/1.
6. European Commission, Commission seeks views and input on compulsory licensing of patents, 7 July 2022. Link, accessed on 11 January 2023.
7. European Commission, Intellectual property – revised framework for compulsory licensing of patents. Link, accessed on 09 January 2023.
8. For example, by setting up an official forum.
9. This option was considered to a lesser extent.
10. European Commission, Supplementary protection certificates for pharmaceutical and plant protection products. Link, accessed on 09 January 2023.
11. Regulation EC/469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, O.J., L 152, as successively amended.
12. Regulation EC/1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products, O.J., L 198.
13. Considering that SPCs may delay the market entry of generic medicines and PPPs, thus negatively affecting accessibility and affordability of drugs and PPPs. See: European Commission, Commission Staff Working Document – Executive Summary of the Evaluation of the Regulation (EC) No 469/2009 of the European Parliament and of the Council concerning the supplementary protection certificate for medicinal products, and Regulation (EC) No 1610/96 of the European Parliament and of the Council concerning the creation of a supplementary protection certificate for plant protection products, SWD(2020) 293 final, 25 November 2020. Link, accessed on 13 January 2023.
14. As well as coherent with the future UP and with regulatory legislation on pharmaceuticals and PPPs (such as the EU Bolar exemption). See footnote above.
15. See footnote no. 14.
16. Especially SMEs.
17. See footnote no. 14.
18. See footnote no. 14.
19. European Parliament, Revision of the legislation on supplementary protection certificates (REFIT). Link, accessed on 09 January 2023.
20. Unified Patent Court, Adjustment of the timeline – Start of the Sunrise Period on 1 March 2023. Link, accessed on 11 January 2023.
21. Already entered into force on 20 January 2013.
22. Agreement on a Unified Patent Court 2013/C 175/01; The prerequisite for the entry into force of the UPCA (which will be preceded by a provisional application phase) is the ratification of the agreement by 13 Member States, as accomplished on 18 January 2022 following Austria's signing of the UPCA.
23. See e.g.,: A431 - RATIOPHARM/PFIZER case – provision no. 23194 by the Italian Competition Authority (AGCM), as upheld by the Italian Supreme Administrative Court (State Council) with the judgment no. 693 of 12 February 2014.
24. The aligned territorial protection however reduces flexibility in maintenance strategies, as the patentee is not able to drop the patent in individual countries in order to reduce costs.
25. Despite the advantage of a unified and central fee system, it is not uncommon for an applicant to only require protection for 2-3 specific countries/markets, such that national patents/an EP would be cheaper. Further, due to the BREXIT, GB is no longer part of the UP system, so patentees need to apply for national protection either through a GB part of an EP or a national GB patent.
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