Waiving goodbye to SPC rights

At perhaps no other time during the 20-year lifespan of the supplementary protection certificate (SPC) has more legislative attention been given to determining whether it is fit for purpose. Other key questions concern whether the encroachment of heightened levels of regulation into industrial sectors other than pharmaceuticals and agrichemicals justifies similar intellectual property right ‘top up’ regimes being put in place.

First there is momentum building within the EU for a small, but significant, relaxation to the scope of the SPC right granted to holders of patents where there has been a delay in bringing a pharmaceutical product to market as a result of compliance with EU regulatory requirements for medicines. The reason this groundswell has built up is that the SPC right is co-extensive with the scope of the underlying patent, insofar as the patent relates to the medicinal product that is being marketed under the SPC.

The result of this scope is that often companies outside the EU are able to set up, manufacture and prepare to enter non-EU markets where no SPC right exists, whereas EU generics and biosimilar manufacturers are not able to set up their own manufacturing because the scope of the SPC prevents manufacturing for the purposes of preparing for commercial sale, even if that sale concerned an export to a non-EU territory with no exclusivity right protecting the product.

While the manufacture of small quantities of patent-protected products might be permissible under the current scope of the EU’s Bolar exemption, such quantities can only be those necessary for obtaining regulatory approvals and not for stockpiling EU generics or biosimilars ready for EU launch or export to non-EU markets. EU-based generic and biosimilar manufacturers are therefore greatly disadvantaged compared to their non-EU-based counterparts when competing in a global marketplace.

Making matters worse

What exacerbates this situation is that EU SPCs are often exclusivity rights that expire long after the expiry of parallel patent rights in non-EU jurisdictions, which prevent sale in those non EU markets. EU-based companies therefore have two options as the SPC regime currently stands. Either these companies move the manufacture of SPC-protected products for such markets to outside the EU, or choose not to compete in these non-EU markets, many of which are becoming increasingly important sources of revenue for EU-based companies.

The European Commission is broadly in agreement with the EU generic and biosimilar manufacturing industry that the EU has much to gain from relaxing the SPC right in order to permit the manufacture of SPC-protected products for sale in non-SPC protected territories. Therefore, as currently proposed, the exemption is not intended to permit stockpiling for EU launch, but to give EU-based companies the right to compete with non-EU based manufacturers without having to move manufacturing facilities outside the EU.

What the European Commission wants

In the commission’s view, it was not an intended consequence of the SPC regime that EU-based manufacturers of generic and biosimilar medicines should be at such a disadvantage in the global marketplace in comparison to non-EU based companies. Further driving this mindset is the commission’s belief that the development of biosimilar products for export from the EU during the SPC term could contribute greatly to the establishment of high-quality manufacturing jobs in the EU and that this incentive justifies the modification of the SPC regime.

The ‘export waiver’ therefore makes it into the last published commission workplan, ranking alongside the creation of a unified SPC to complement the unitary patent in terms of priority projects in this area.

“Patentees have suggested that it will be difficult to implement such a system without providing a great temptation to use the ‘export waiver’ system for stockpiling generic products for EU launch.”

The European parliament also seems keen to keep the commission ‘on message’. Proposals to create such an ‘export waiver’ have been supported in both full session and committee within the parliament. Since the publication in May 2015 of the Mosca report recommending the creation of the ‘export waiver’, MEPs have tabled a series of questions to the commission encouraging it to formulate a proposal and begin the legislative process.

There are dangers with this approach. Patentees have suggested that it will be difficult to implement such a system without providing a great temptation to use the ‘export waiver’ system for stockpiling generic products for EU launch. The way this issue is dealt with is likely to be the biggest test for the legislators in putting together a workable ‘export waiver’ system.

The  challenge will be seeking to legislate to guard against what is currently not the intention of the ‘export waiver’, ie, to prevent stockpiling for launch in protected markets while providing an ‘export waiver’ of sufficient scope to permit manufacturing for export to countries where there is no SPC protection that restricts marketing. It is possible that the initial years of operation of the ‘export waiver’ will result in an increase in litigation as courts wrestle with the types of situations that could lead to a valid claim of infringing stockpiling on behalf of SPC owners.

If the legislative process remains on track, it is possible that this ‘export waiver’ could come into operation before the end of the decade.

Up for review

Concurrently with the suggestion that the SPC regime should be amended in this way, the commission has put out to tender a project that is intended to review the entirety of the SPC system. This is intended to be a project that will deliver an opinion on whether a ‘root and branch’ review of the SPC system is required. The scope of the review is extensive. Among other things, the commission is seeking feedback on whether:

While this project is out to tender, the timeline for completion and delivery of the final report is relatively tight (in EU legislative terms). The commission expects the successful tender party to deliver the report within around 12 months from the award of the tender, which places delivery around the end of Q2/start Q3 2017.

If further action is required, the commission will probably set up a public consultation process following a review of the tender study findings.

Gareth Morgan is a partner at  Olswang. He can be contacted at: gareth.morgan@olswang.com