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28 February 2014EuropeBernd Allekotte

The Bolar exemption: the question of third parties

By order dated December 5, 2013, the Court of Appeals in Düsseldorf (docket no. I-2 U 68/12) referred various questions to the Court of Justice of the European Union (CJEU). The court asks for guidance on whether (and under what conditions) the supply of patented compounds by a third party to a (domestic) generic company, which intends to use the compounds for obtaining a marketing authorisation for a generic drug, is covered by the Bolar exemption.

Legal background

Generic companies are allowed to use a patented compound/substance in the studies and trials that are required for obtaining a marketing authorisation. European pharma legislation (Directives 2004/27/EC and 2004/24/EC) provides for respective EU-wide provisions that shield the generic company from being held liable for patent infringement when using the compounds/substances for these purposes (so-called “Bolar exemption”).

The EU member states have incorporated the respective provisions in their national laws. However, it is undecided whether not just the generic company, or also third parties that supply a patented substance / compound to the generic company, may benefit from the Bolar exemption.

Düsseldorf case

In the case at hand, a third party domiciled in Poland shipped and offered patented compounds into Germany. Upon being sued, it provided the plaintiff/patentee with a cease and desist declaration with respect to any offering and sale of the patented compound. However, it expressly carved out any deliveries and offers of the compound if they served for “test purposes”.

In first instance, the District Court in Düsseldorf held that this supply by a third party was exempted by the (German) Bolar provision only under very limited conditions. According to the court, the third party needed to act as co-organiser of the trials and studies carried out in order to be exempt.

It would not suffice for the third party to know that its customer intended to conduct trials and studies, nor for the third party to put its customer under a contractual obligation to use the delivered compound just for these purposes. In the case at hand, the third party was held to not benefit from the Bolar exemption by the district court.

The Court of Appeals in Düsseldorf discussed two exemptions that may apply under German law: first, whether the delivery of the third party may be privileged under Sec. 11 no. 2 of the German Patent Act, relating to trials conducted by the customer. However, this provision only applies if the trials relate to the patented invention.

"Throughout Europe the same rules should apply. It is hardly acceptable that third party deliveries are exempt in one country, but held to infringe in another."

In the case at hand, the customer wanted to conduct bioequivalency studies (which are usual for generics seeking to bring their products to market based on the authorisation for the original). Such studies aim at proving that two drugs that contain the same active pharmaceutical ingredient (API), but differ with respect to their manufacturing process and/or the compounds contained, can be substituted without any risk to the patient.

Therefore, such studies do not aim at findings regarding the patented compound, but serve the sole purpose of establishing that the generic drug has the same (reliable) effect as the original. Therefore, the studies and trials conducted by the customer were held not to benefit from the exemption according to Sec. 11 no. 2 German Patent Act.

This part of the decision is hardly surprising.

Second, with respect to the Bolar exemption (which is contained in Sec. 11 no. 2b German Patent Act), the decision of the Court of Appeals in Düsseldorf’s decision is long overdue.

As noted above, in Germany, the Bolar exemption relates to:

“Studies and trials and the respective practical requirements that are necessary for obtaining drug authorisation for the bringing into commerce in the European Union or for obtaining drug authorisation in the EU member states or in third countries.”

What is not addressed explicitly in this provision is whether deliveries of third parties—and if so under what conditions— may benefit from the exemption. Against this background, the Court of Appeals Düsseldorf refers the following questions to the CJEU:

“1. Must Article 10 par. 6 of Directive 1/83 EC be interpreted as meaning that acts of delivery from a third party are also covered, ie, exempted from patent protection, if such third party offers a patented active substance to a generic company, which uses it to obtain market authorization according to Article 10 par. 6 of Directive 2001/83 EC?

2. If this is to be answered in the affirmative: a) Does the privilege status of the third party depend on whether the delivered compound is actually used for privileged studies / trials, or does it depend on whether the third party may assume that they are used accordingly? b) Is the party obliged to take precautions that the substance is indeed used for privileged studies / trials? Or do the precautionary measure differ, depending on whether the substance is merely offered or actually delivered.”

[Questions abbreviated by the author]

implications in practice

It would seem that the Court of Appeals in Düsseldorf correctly regards the wording of Sec. 11 no. 2b German Patent Act (which is, in essence, identical to the wording of Article 10 par. VI Directive 2001/83/EC) to be unclear with respect to deliveries of third parties. Whether and under what conditions such deliveries may benefit from the privilege has been discussed for years.

It should be noted that the Court of Appeals in Düsseldorf endorses, at least in general, that such deliveries may benefit from the privilege. However, the court says it is necessary to safeguard that the compound is actually used for the privileged studies and trials.

The decision of the CJEU will be important for the pharmaceutical market in the EU. Often, generic companies are dependent on supplies of APIs from third parties. This is particularly true for midsized generic companies that cannot manufacture the compounds by themselves. But there are also relatively big generic companies that have compounds delivered from third parties.

Whether supplies of patented compounds are permitted under the Bolar exemption remains unclear until now. Throughout Europe, the same rules should apply. It is hardly acceptable that third party deliveries are exempt in one country, but held to infringe in another. This would lead to significant competitive advantages for certain EU member states over others, which is contrary to what EU-Directives 2004/27/EC and 2004/24/EC aim at. Therefore, the referral should be welcomed. A decision is expected in 2015.

Dr Bernd Allekotte is a partner at Grünecker. He can be contacted at allekotte@grunecker.de