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14 January 2016Big PharmaAndrew Webb and Graham Lewis

The unitary patent system: are SPCs next?

A supplementary protection certificate (SPC) can give up to five extra years of exclusivity after a patent has expired. SPCs are available in many European countries for active ingredients of human and veterinary medicinal products and plant protection products that require marketing authorisation. They were introduced to compensate patent owners whose effective patent term was eroded by delays in receiving marketing authorisation.

To qualify for SPC protection, there must be a valid authorisation to market the product in that country. In addition, an active ingredient of the product must be protected by a patent in force in the country of interest. Although a separate right, an SPC remains linked to the patent on which it is based. If the patent is revoked or surrendered, the SPC also lapses.

This raises some interesting questions regarding the interaction of SPCs with the upcoming unitary patent and concurrent Unified Patent Court (UPC) system.

Unitary patent

Despite the agreement between EU member states providing for a unitary patent, there is as yet no such thing as a European SPC with unitary effect (unitary SPC). However, industry bodies and the European Commission appear to view a unitary SPC as a logical and desirable continuation of the member states’ decision on the unitary patent.

In July 2015 a number of industry bodies (the European Federation of Pharmaceutical Industries and Associations, European Crop Protection Association and European Animal Health Industry) issued a joint proposal strongly endorsing the principle of a unitary SPC.

The proposal makes certain suggestions for how a unitary SPC might operate in practice. In particular, it places responsibility for examination and grant of unitary SPCs with a virtual body which would rely on existing, experienced SPC examiners drawn from national patent offices. This would avoid the need to establish a completely new agency.

Shortly after publication of the above proposal, the commission also explicitly endorsed the principle of a unitary SPC in a communication sent in October last year called “Upgrading the Single Market: more opportunities for people and business”. The commission noted in particular that a unitary SPC would “bring enhanced certainty to industries whose products are subject to regulated market authorisations”and that it had resolved to “explore a recalibration of certain aspects of patent and SPC protection”.

The commission indicated that it would consult, consider and propose further measures as appropriate in order to“improve the patent system in Europe, notably for pharmaceutical and other industries whose products are subject to regulated market authorisations”.

Unfortunately, no specific timescale for this process has been set. As a result, and for the foreseeable future, SPCs will remain solely national rights. This means that right owners must continue to apply individually to the national patent office of each country in order to secure protection.

However, we believe that it will be possible to make such a national application based on a granted unitary patent when such rights become available in due course.

“The commission noted in particular that a unitary SPC would ‘bring enhanced certainty to industries whose products are subject to regulated market authorisations’.”

Several national patent offices and many commentators have indicated that they do not envisage any difficulty treating a unitary patent as a “patent in force” for the purposes of an individual national SPC application, although some amendment to the SPC regulation and/or the UPC Agreement may be required to give this effect.

This interpretation is based on a combined reading of Regulation (EC) No. 469/2009 (the SPC regulation) and Regulation (EU) No. 1257/2012 implementing enhanced cooperation in the area of unitary patent protection, rather than any specific provision in the existing legislation. It is therefore to be hoped that the commission will comment further on this particular point, including proposing any necessary amendments to the regulations as may be required to provide certainty.

Such amendments should not be contingent on reaching agreement on a unitary SPC, so it is not unrealistic to expect clarification in the relatively near future. Any formal proposal for a unitary SPC is, however, likely to be a more distant prospect, but there is cause for optimism. We will be monitoring the output of the commission on this subject with interest.

UPC

Despite the status of SPCs as separate national rights, and perhaps counterintuitively, many SPCs will be affected by the UPC system. SPCs based on national patents are not affected, but any SPC based on a European patent granted by the European Patent Office, or in future on a unitary patent, is explicitly encompassed by the UPC Agreement (see article 3[b] of the agreement).

Assuming that, as outlined above, it will in future be possible to obtain an SPC based on a unitary patent, it is clear that no opt-out from the UPC will be possible for such an SPC.

However, for SPCs based on a European patent it will be possible during the transitional period for right owners to opt out of the exclusive jurisdiction of the UPC (or to withdraw such an opt-out).

Any opt-out (or withdrawal) lodged for the European patent should generally extend to the SPC (rule 5.2[a]). However, this may not apply if the two rights are not owned by the same party. It is possible for a patent to be owned by one party and an SPC to be owned by a different party, such as a licensee. In such a scenario, the opt-out (or withdrawal) must be lodged by both parties (rule 5.2[b]), irrespective of whether the patent has expired at the time.

Right owners should also be aware that it will not be possible to opt out if a court action relating to the patent or the SPC is already pending before the UPC (article 83[3] UPC, rule 5.2[c], rule 5.7). Similarly, withdrawal of an opt-out in order to pursue litigation before the UPC will not be possible if national proceedings are already pending (rule 5.2[c], rule 5.9). The possibility exists of a competitor forcing the choice of forum should a right owner not have made its own decision on UPC strategy.

The overall message is that right owners should consider at an early stage the merits of opting SPCs (and corresponding basic patents) out of the UPC. Strategy in this respect should be planned particularly carefully where basic patents and SPCs are not held in common ownership.

In the meantime

As things stand, the SPC system will continue to require national filing and prosecution in each individual country of interest. In addition to the increased cost to applicants, differences between member states in interpretation of the SPC regulation could also result in differences across Europe in, for example, the definition of the product protected by an SPC and perhaps even the term of an SPC. The October 2015 ruling of the Court of Justice of the European Union (CJEU) in  Seattle Genetics vÖsterreichisches Patentamt  (C-471/14) clarified that the term of an SPC should be calculated based on the date of notification of the marketing authorisation in the EU’s official journal, which is typically a few days later than the date of the decision to authorise the product. However, many national offices had previously calculated the term based on the date of the decision, and some have indicated that they are reluctant to recalculate the term of SPCs granted before the CJEU’s ruling.

Although variations of this type are likely to be (relatively) small, they nonetheless increase uncertainty for third parties. This uncertainty appears to be a major concern of the commission and its removal is one of the primary motivations for the development of a unitary SPC.

By contrast, and irrespective of whether agreement on a unitary SPC is ultimately reached, the advent of the UPC will provide for the possibility of central enforcement of SPCs and also (unless opted out) vulnerability to central attack. It of course remains to be seen whether such centralisation will prove to be more attractive to right owners or to third parties seeking to challenge those rights.

Andrew Webb is a partner at  J A Kemp. He can be contacted at: awebb@jakemp.com

Graham Lewis is a partner at  J A Kemp. He can be contacted at: glewis@jakemp.com