NIGEL STOATE

Solicitor, IP Department,Taylor Wessing, London

There are presently 13 nations who are in line to join the EU, namely Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia and Turkey. Ten of these ‘candidate countries’ (that is, all of the above, apart from Turkey, Bulgaria and Romania) are considered by the EU as being ready for accession in the short term.

In October 2002, the final barrier to the current expansion of the European Union was lifted when the Irish Government agreed to ratify the Treaty of Nice, following a public referendum in which 63 per cent of the voters were in favour of ratifying the Treaty. Prior to this, the Republic of Ireland was the only Member State exercising its right to veto ratification of the Treaty.

The Treaty of Nice entered into force on 1 February 2003, providing the constitutional mechanism for enlargement. For example, the Treaty establishes the weighting of votes in the Council and the distribution of seats in the European Parliament, and adjusts the size of the European Commission. However, before accession is possible, the candidate countries have to satisfy the ‘Copenhagen criteria’ (as defined by the Council in 1993):

• stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;

• the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union; and

• the ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary unions.

The last of these criteria means that the candidate countries must adopt and implement the legislation and procedure of the EU (referred to in their totality as the ‘acquis’). The acquis consists of 31 ‘Chapters’, each of which have to be ‘closed’ during the negotiations with each candidate country before accession is possible. Negotiations with the candidate countries were completed in December 2002.

The Chapter that has most relevance to the pharmaceutical industry is Chapter 1 – Free Movement of Goods. All ten candidate countries have closed Chapter 1. The EU has accepted transitional arrangements concerning the renewal of marketing authorisation for pharmaceuticals with Cyprus, Lithuania, Malta, Poland and Slovenia, and concerning medical devices with Poland. Drafting of the resulting Accession Treaty was completed on 5 February 2003. On 9 April 2003 the European Parliament voted overwhelmingly to accept the accession of the ten candidate countries. 16 April 2003 is the date for each country to ratify the Accession Treaty at a ceremony in Athens. The Accession Treaty will come into force on 1 May 2004 (which will include the formal appointment of the new members of the Commission).

Clinical trials, testing and experimentation work required to generate data are generally not permitted in the European Union prior to the expiry of a patent, as there is no clear and consistent legal application of ‘experimental use’ provisions. This is in contrast to other jurisdictions where there are specific statutory provisions allowing pre-patent expiry testing. For example, in the United States, the experimental use exemption was previously construed narrowly. In Roche Products v Bolar Pharmaceuticals, ¹ it was held that only acts performed for amusement, to satisfy idle curiosity or for strictly philosophical inquiry would not amount to patent infringement. Consequently, the US Congress introduced the Hatch-Waxman Act, which allowed the use of patented material for uses reasonably related to the development and submission of information pursuant to the regulatory laws concerning the use or sale of drugs.

The United Kingdom construes the exemption narrowly. In Monsanto v Stauffer, ² the Court of Appeal held, inter alia, that if work was being carried out to provide information to satisfy a third party, such as clinical trials aimed at obtaining regulatory approval, such work was not purely experimental and, therefore, constituted patent infringement.

In Germany, Clinical Trials I ³ decided that a collateral commercial purpose does not necessarily make true experimentation an infringing act. Clinical Trials II ⁴ confirmed that such tests are non-infringing if they are intended to yield new knowledge on the subject-matter of the patent. Consequently, a bioequivalence trial could be permitted where the trials did more than confirm the generic drug was an exact copy of a patented product, for example where they look to address any uncertainties about the activity of the patented drug.

In France, the Court of Appeal has ruled that clinical trials can be within the exemption if their purpose is to discover new applications of the patented product, for example different methods of administration of a drug, rather than merely aiming to obtain regulatory approval (Wellcome v Parexel⁵). There is subsequent dissenting first instance authority that suggests trials performed in the limited frame of an application for marketing authorisation cannot be a basis for an action for patent infringement (Science Union v AJC Pharma; ⁶ Science Union v Biophelia⁷). However, the Court of Appeal has re-established the original, more narrow approach (Parienti v Peugeot⁸).

An attempt to introduce a Bolar provision into French domestic law via a statute was also defeated by the French Constitutional Court.

In contrast, Italy has a statutory Bolar-type provision, allowing the use of a patented ingredient in order to prepare a marketing authorisation application for a drug if the registration procedure starts within one year of patent expiry.

Outside this one-year period, the leading case in Italy is Squibb & Sons v Testaguzza⁹, which decided that trials that have the intention of improving knowledge concerning a drug are true experimental studies, even if the trials are in preparation of the registration of the drug.

The 1996 Resolution of the European Parliament on ‘Industrial Policy for the Pharmaceutical Sector’ has encouraged the development and testing work in anticipation of registration of a generic product, as well as the manufacturing, to take place in the EU rather than in countries where this is commonly permitted on the basis of so-called ‘Bolar provisions’ (named after the US case). The resolution asked the European Commission and Member States to introduce legislation that would enable generic medicines to be tested and registered in preparation for the expiry of the original product’s market monopoly.

In the past, one of the principal reasons for not supporting a Bolar exemption in Europe was that such a provision was considered inconsistent with the EU’s obligations under TRIPs. However, in March 2000, following the WTO dispute settlement procedure between the EU and Canada, ¹⁰ the WTO upheld Canada’s patent law provision allowing generic companies to conduct development work before patent expiry on the basis that it was in line with TRIPs. It was held that a patent-holder’s rights would not be impaired as long as the exception is confined to conduct needed to comply with the requirements of the regulatory approval process – the impact would be small and narrowly bounded.

On 26 November 2001, the European Commission officially transmitted to the European Parliament and the Council three legislative proposals¹¹ concerning the review of European Pharmaceutical Legislation.

Article 10.4 of the proposed amended Directive 2001/83/EC introduces a Bolar-type amendment and reads as follows:

However, some wondered whether it would be more appropriate to include this provision in patent-specific legislation (for example, the proposed Regulation on the Community Patent). The Commission has explained that the proposal should be seen in the context of the Single Market with the aim of harmonising national legislation and that, since it concerned medicinal products alone, it should appear in the legislation on medicinal products. However, during the 9 April 2002 parliamentary debate, Commissioner Bolkestein did discuss the inclusion of a Bolar provision in connection with the proposed Community Patent Regulation and confirmed that the Commission will carefully consider the issue.

The European Parliament and the Council are currently considering the Directive under the co-decision procedure. The Directive received its first reading in the European Parliament in October 2002. The European Parliament made a number of amendments to the Commission’s proposals, although none relating to the Bolar provision in Article 10. The Directive is currently with the Council, who are yet to reach a common position. It appears the Council has been concentrating on a proposed Regulation on the proposed centralised procedure for authorisation of medicinal products and on the composition of the Management Board of the EMEA. The proposed Directive does not seem to be high on the Council’s agenda.

The Working Party on Pharmaceuticals (the body responsible for the review of pharmaceutical legislation) is due to meet in March, April and May 2003. However, there are fears that the new legislation will not be implemented before enlargement, leading to yet further delays as a new European Parliament is elected in 2004.

Pending implementation of these reforms, the law relating to pre-patent expiry infringement is yet to be harmonised across the EU and the case law of individual Member States prevails. Because of this, some perceive the competitiveness of the Member States and the EU as a whole to be weakened.

Some of the candidate countries currently have express Bolar-type provisions in their national legislation (namely Hungary, Poland, Slovakia and Slovenia). Notwithstanding the WTO decision on Bolar-type provisions, it appears that the EU negotiators were attempting to have these provisions abolished as a condition of accession. This seems contradictory to the current draft Directive that seeks to include such provisions in some form, and it remains to be seen what provisions, if any, have been included in the Accession Treaty.

The proposed accession of the candidate countries has re-opened an issue that arose at the time of the previous accession of Spain and Portugal in 1986, namely parallel importing.

Based on the principle of the free movement of goods, the European Court of Justice has developed a concept of exhaustion of patent rights, which makes parallel importing possible. Essentially, once a product has been marketed somewhere within the EU by the patentee or with his consent, the patentee cannot use his patents in other Member States to prevent the importation or sale of the product into those other Member States. This concept still applies even where there was no patent protection available for the product in the first country (Merck v Stephar). ¹²

When Spain and Portugal joined the EC, neither country allowed for the effective patenting of pharmaceutical products (these countries had previously only allowed process patents). They were required to change their domestic laws, but this could not be retrospective and there were products in respect of which the R&D pharmaceutical companies did not have patent protection. At the same time, the accession of these countries meant that the patentee companies could not object to the product put on the market by them in these countries being parallel imported around the rest of the EC.

By way of compensation, the Act of Accession for Spain and Portugal contained transitional provisions that provided derogation from the principle of exhaustion of rights for a period of three years. This meant that products that had been marketed in Spain or Portugal could not be parallel imported into other EC states if there was patent protection.

Once the transitional provisions period expired, pharmaceutical countries attempted to challenge the concept of patent exhaustion in situations where it had not been possible to obtain patent protection in the country where the product was first marketed. However, the European Court of Justice, in the case of Merck v Primecrown, ¹³ held that the rule in Merck v Stephar was the correct interpretation of community law and the doctrine survives.

The accession of the current candidate countries will raise similar issues to Spain and Portugal. Once these countries are members of the EU, it will be possible to parallel import the products marketed by the patentee companies in those countries. The situation is possibly less dramatic for this round of accessions, since the candidate countries have been anticipating and preparing for accession for several years and have pre-emptively been bringing their patent laws into line with those of the present Member States.

However, the trade organisations representing the pharmaceutical companies are pressing for a free movement of goods derogation. It is not presently clear whether any such derogation will appear in the Accession Treaty.

With regard to enforcing any such derogation, in March 2000 the Council of Ministers agreed to ask the candidate countries for a specific mechanism whereby a patent holder could rely on a patent or SPC filed in a Member State when an equivalent product patent or SPC could not be obtained in an accession country, to prevent parallel trade from such accession country.

It was initially suggested that such a mechanism would be enforced by litigation in the domestic courts. That is to say, the holder of such a patent or SPC would be allowed to assert those rights to prevent the importation or marketing of a drug from an accession country.

However, as an alternative to domestic patent litigation, the proprietary industry subsequently proposed a ‘regulatory ban’ as the mechanism to prevent parallel imports.

This was the proposal being pushed by the European Federation of Pharmaceutical Industries and Associations (EFPIA). As a practical matter, EFPIA suggested that when the parallel importer applies for an import licence, there should be a limited period during which the patentee can object to the grant of the licence. This essentially means that the domestic regulatory authorities would refuse a parallel import licence for a product that, under the derogation, has unequal patent protection in the ‘new’ Member State as compared to the ‘old’ Member State.

Perhaps not surprisingly, given the strong generic presence in many of the candidate countries, the idea of any derogation from the principle of the free movement of goods in the Accession Treaty was met with resistance (including from Poland, Hungary and the Czech Republic). The High Level Group on Innovation and Provision of Medicines (‘G10 Group’) produced a report on 7 May 2002. Recommendation 14 calls for a derogation which explicitly deals with parallel imports to be included in the Accession Treaties in order to cover, in G10’s words, ‘the differences between public health, marketing and economic conditions between existing Member States and the accession countries’.

So what is the approach that will be adopted here? As the accession of the ten candidate countries nears conclusion, it appears that the most likely format to be adopted in the Accession Treaties is the one based on a derogation from the principle of exhaustion of patent rights, similar to when Spain and Portugal joined the EC. That is to say, a patent-holder will be able to rely on his patent or supplementary protection certificate to prevent the import or marketing of a pharmaceutical product from one of the accession countries if such protection could not previously have been obtained in that accession country. It remains to be seen how long these transitional provisions will apply for. There will also be a requirement that the importer demonstrates to the regulatory authorities that one month’s notice has been given to the patentee.

The current round of European enlargement is in its final phase, with the current ten candidate countries due to ratify the Accession Treaty on 16 April 2003 and become full members of the European Union from 1 May 2004.

It is expected that there will be some form of transitional provisions to limit parallel imports from the accession countries, at least in the first few years of membership.

It is also expected that a form of Bolar provision will be introduced, permitting generic companies to prepare for market pre?patent expiry.

1. 1984) 733 F.2d 858.

2. (1985) RPC 515.

3. (1997) RPC 623.

4. (1998) RPC 424.

5. TGI Paris, 3rd Chamber, 20 February 2001, PIBD 2001 No 729, III, 530.

6. 12 October 2001.

7. 25 January 2002 PIBD No 747, III.

8. 3 July 2002.

9. 12 June 1995, Giur. Annot. di Dir. Industriale 13.

10. WTO Decision WT/DS114/R.

11. These three proposals were:

    (1) Proposal for a Regulation of the European Parliament and of the Council laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Agency for the Evaluation of Medicinal Products (EMEA);

    (2) Proposal for a Directive of the European Parliament and of the Council amending Directive 2001/83/EC on the Community Code relating to medicinal products for human use; and

    (3) Proposal for a Directive of the European Parliament and of the Council amending Directive 2001/82/EC on the Community code relating to veterinary medicinal products.

12. [1982] FSR 57.

13. [1997] FSR 237

To make any comments on this article, or to ask a question of the author, please contact the publisher. If you would like to submit an article, please contact the editors.

The opinions expressed in the articles published in this section do not necessarily reflect those of Pharmalicensing or UTEK Corporation. No actions including proposals to or agreements with other companies should be taken by any reader without obtaining specific business or legal advice. Neither the publisher nor the authors accept any liability for any actions or activities undertaken by any reader or other third party as a consequence of these articles or for any errors or omissions therein.