gavel-and-lawyer
28 March 2013Big Pharma

The likely role of the UPC in pharma patent litigation

For good or ill for industry in Europe, it now seems likely that the new Unified Patent Court (UPC) will open for business in the next few years and will start to transform European patent litigation. Indeed, the European Commission is talking up the prospect of it opening in 2014, although most think it will be 2015 at the earliest, given all the preparations that have to be made to establish the new court.

Once it does open, the European Patent Office will also start providing the option for applicants of designating a European patent once granted as having unitary effect (the unitary patent, UP) throughout those countries of the EU which have ratified the UPC agreement (other than Italy, which although having signed the UPC Agreement, has, along with Spain, indicated its intention not to participate in the UP.

This article outlines the likely effect of the UPC on pharmaceutical patent litigation in Europe, and the subsidiary question of what role in this will be played by the central division of the UPC, the London branch of which will have jurisdiction over patents in the areas of chemistry, metallurgy and “human necessities”, thereby giving it jurisdiction over patents in the life sciences sector.

The agreement establishing the UPC was signed on February 19, 2013, but as it is an international treaty rather than an EU legislative measure it must also be ratified by the requisite number of EU member states before it comes into effect. Although, in addition to its jurisdiction over the UP, the UPC will also have jurisdiction over already existing European patents that designate those EU member states that ratify the UPC agreement, its immediate effect is likely to be slight.

This is because owners of European patents with national designations (and of supplementary protection certificates [SPCs] issued for products protected by such European patents) will be able to opt out of UPC jurisdiction during an initial transitional period of seven years, with the option, should they so wish, of opting back in at any time. The UPC agreement envisages that the sevenyear transitional period may be extended by a further seven years, but no decision as to this will be made until after five years.

By opting out, owners of European patents with national designations and of SPCs avoid the risk of being subject to centralised revocation proceedings in the central division of the UPC. They will need however to opt out at the earliest possible opportunity as once any proceedings are brought in the UPC the patent will stay in the UPC system.

If they do opt out, owners of European patents with national designations and SPCs can then avail themselves of the flexibility of either enforcing their patents in separate national proceedings as at present, or of opting back into the UPC to enforce their patents centrally, in the local or regional divisions of their choosing (depending on where the alleged infringement takes place or is threatened or where the proposed defendant is based).

Such local or regional divisions can either hear counterclaims for revocation themselves (as is at present the case in most national jurisdictions) or refer the issue of validity to the central division while deciding, based on a preliminary assessment of the strength of the patent and the likelihood of its surviving scrutiny by the central division, whether or not to stay the infringement proceedings pending the decision of the central division (bifurcation of this sort as between courts assessing infringement and validity is the system that applies currently in Austria and Germany).

If holders of European patents with national designations fail during the transitional period to opt out of the UPC, these patents can, (as with the new UP at any time), be the subject of a centralised revocation proceeding in the central division of the UPC.

It is likely eventually that those seeking to launch generic versions of medicinal products on the expiry of the regulatory data protection period (namely 10, or occasionally 11, years after the date of the first marketing authorisation for a particular active substance in the EU) will make considerable use of this facility in advance of launch.

This will be particularly so if it becomes necessary for potential generic entrants to ‘clear the path’ of potentially troublesome patents in advance of launch because the local or regional divisions come to take the same view as the English courts have for the last 10 years in the context of applications for interim injunctions pending full trial against prospective generic entrants—namely that given the likelihood of massive and irremediable price depression the balance of interests in such cases so favours the innovator that such an injunction will nearly always be granted.

Once a product has been launched so that an infringement action can be brought, the local or regional divisions will in general be able, in the context of an infringement action, to seize jurisdiction back from the central division, the workload of which will then be in the gift of the local or regional divisions.

The above discussion has focused on European patents with national designations. What, however, will be the attitude of companies in the pharmaceuticals sector to the new option which will become available once the UPC comes into effect: the UP?

The attitude of many from all sides of the pharmaceuticals sector has been critical of the package of proposals but one senses that much of the concern relates to the untested nature of the UPC rather than the UP, although as that can only ever be litigated in the UPC the two are very much linked.

To put the concerns into context one must disentangle the reality of patent protection in Europe today from the hyperbole of politicians and bureaucrats, and most notably the European Commission, about how much of a saving in cost the UP will provide.

This is because today fewer than 20 percent of European patents with national designations are in force in countries outside the ‘big three’ of France, Germany, and the UK—indeed some companies in the information and communications technology (ICT) sector take the view that they can control the European market with patents that designate only its largest market: Germany.

The pharmaceuticals sector is different, however, as it can be worthwhile to fight even in the smaller markets, and so in general patents in this sector are more geographically widespread in Europe than those in others sectors and in particular in ICT, as is demonstrated by the fact that there is a much higher proportion of patent litigation in the pharmaceuticals sector in the smaller European markets than in the larger ones.

Thus, and although prospective patentees in the pharmaceuticals sector will naturally be reluctant, at least initially, to ‘put all their eggs in one basket’ by using the UP, there is a likely to be a considerable cost driver encouraging them to seek UPs rather than European patents that designate individual member states. They will also want to know that they can secure SPCs on UPs, which will require amendment of the SPC Regulations, but this will surely happen in the not too distant future.

In summary, it seems that the central division of the UPC in London may well, eventually, attract a considerable body of pharmaceutical patent revocation proceedings.

But, because it seems almost inevitable that all pharmaceutical companies will avail themselves of the opt-out for European patents with national designations, this is unlikely to happen for many years. Instead, the effect of the UPC will first be felt in infringement proceedings brought in local or regional divisions by the holders of existing European patents with national designations opting back into the UPC and choosing the most suitable such local or regional division in which to enforce their patent.

It will only be in those infringement cases in which the local or regional division decides to bifurcate proceedings as between validity and infringement that the central division in London will become involved.

Trevor Cook is partner at Bird & Bird LLP. He can be contacted at trevor.cook@twobirds.com

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