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20 October 2016EuropePaul England and Matthew Royle

Brexit: a fresh start for SPCs?

Under Regulation (EC) No. 469/2009, the exclusivity term of a pharmaceutical product protected by a patent can be extended by up to five years after that patent expires. This depends on the delay in obtaining a marketing authorisation (MA) for the pharmaceutical product and the subsequent impact that delay has on the period of exclusivity that the product enjoys on the market. This is achieved by the granting of a supplementary protection certificate (SPC) by the national offices of the EU member states in which the European patent has been on the register.

Like other European regulations, the SPC regulation is a legislative instrument that has ‘direct effect’. This means that the regulation is automatically applicable in the member states as soon as it comes into force, without the need for national implementing legislation. Brexit has implications for this.

Once the UK has notified the European Council of its intention to withdraw from the EU under article 50(2) of the Lisbon Treaty, a negotiation process is triggered by which “the union shall negotiate and conclude an agreement with the UK, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the union”.

European law then ceases to apply to the UK after two years, unless an extension to this period is agreed. The European law that would cease to apply at the end of this period includes regulations, such as the SPC regulation.

As they are rights granted and registered in the UK by the UK Intellectual Property Office, existing SPCs are unlikely to be affected. However, there will no longer be a basis for the grant of new SPCs after Brexit unless legislation similar to the SPC regulation is implemented in UK law.

Given that the SPC regulation has been widely criticised by industry, practitioners and judges in recent years, the creation of new legislation in the UK to replace the SPC regulation may be an opportunity to improve on the existing regime.

Part of the criticism of the SPC regulation is because of its status as a European regulation and because of the Court of Justice of the European Union’s (CJEU) failure to provide consistent and clear guidance on its application. This came to a head during a spell of cases concerning the SPC regulation in the English High Court. In one such case, GlaxoSmithKline Biologicals v Comptroller General of Patents, Designs and Trade Marks (2013), Mr Justice Arnold made the following remarks:

“I would observe that this is the third time in six months that I have had to refer questions of interpretation of the regulation to the CJEU. I do so with considerable regret. That this should be necessary demonstrates the dysfunctional state of the SPC system at present.

“This is primarily due to the poor drafting of the SPC regulation and to the failure of the European Commission, Council and Parliament to revise it to address the problems which have emerged. Matters have not been assisted, however, by the fact that the Court of Justice’s recent case law interpreting the SPC regulation has not provided the level of clarity and consistency that is required.”

The reason for the judge’s frustration was that he was trying to apply the SPC regulation to a vaccine—a combination product—for which the SPC was not designed. In Neurim Pharmaceuticals v Comptroller General of Patents, Designs and Trade Marks (2011), Lord Justice Jacob had experienced similar problems in the context of the application of the regulation to a second medical use case:

“Many kinds of valuable pharmaceutical research will not get the encouragement or reward they deserve if they are not [capable of SPC protection]. Pharmaceutical research is not confined to looking for new active compounds. New formulations of old active substances are often sought. Most are unpatentable but from time to time a real invention is made and patented.”

He added: “In short, if [the SPC regulation does not provide protection, it] will not have achieved its key objects for large areas of pharmaceutical research: it will not be fit for purpose.”

Indeed, although there are other areas such as biologics that were not contemplated when the SPC regulation was drafted and so will become problematic, it is cases on second medical uses and also on combination products that have done most to expose the limitations of the SPC regulation.

This has been exacerbated by inconsistent applications of the legislation by the CJEU (and national patent offices). But the nature of European legislation makes these issues difficult to fix, although the regulation itself is being revisited in the context of the Unified Patent Court (UPC) and unitary patent.

What are the pressing issues following the Brexit vote and what might a UK act do to address them?

Active ingredients and second medical use

A product capable of SPC protection is defined in the SPC regulation as an active ingredient or combination of active ingredients. But, what is an active ingredient? Until relatively recently, the CJEU had taken a strict approach, ensuring that an SPC could not be granted on the basis of an MA for a new indication of an existing therapeutic compound if that compound had already been the subject of an MA per se.

However, in Neurim the CJEU ruled that SPC protection may be obtained for such second medical uses. This decision was not based on a literal reading of the SPC regulation, but instead a ‘teleological’, or purpose-based, approach that said the SPC regulation was intended to protect investment in new pharmaceutical breakthroughs, including new indications.

Using this approach enabled the court to stretch the meaning of active ingredient to include new indications for that ingredient. While this result was welcomed by rights owners, it created a lack of clarity about where the scope of protection offered by the SPC regulation now ends. The investment-based approach to interpretation has subsequently been argued regularly in cases in favour of expanding the scope of SPC protection, but with seemingly inconsistent results.

“The UK legislator must begin by deciding whether SPCs are to be restricted to small molecule drugs.”

For example, in one case, an adjuvant was held not to be an active ingredient capable of SPC protection, while in another—a plant protection product case under sister legislation to the SPC regulation—a safener was held to be an active substance capable of protection.

This was because it indirectly assists in the action of plant protection products. However, it is not clear why the action of a safener, in this respect, should be different from the indirect action of an adjuvant on the activity of a vaccine.

A UK act would allow greater clarity to be introduced to this balance and provide more certainty to SPC owners and those seeking to challenge the validity of an SPC.

Meeting SPC protection

A challenge has also been presented by combination product cases. The 2011 Medeva v Comptroller General of Patents, Designs and Trade Marks ruling of the CJEU established that the components of a combination must be specified in the claims of the patent in order to provide a basis for an SPC.

The CJEU quickly followed the Medeva ruling with the case of University of Queensland v Comptroller General of Patents, Designs and Trade Marks, in which the language of the CJEU regarding what subject matter the basic patent in force must disclose differed slightly from that in Medeva.

Whereas Medeva referred to the active ingredients being “specified” in the wording of the claims, Queensland University refers to products being “identified” in the wording. It is generally thought that these terms share the same meaning, but it is far from clear what that meaning is.

In particular, several further tests have been created in CJEU rulings to establish whether an active ingredient is identified sufficiently for the purpose of SPC protection. For example, do the patent claims “relate implicitly but necessarily and specifically to the active ingredient?” (Eli Lilly v HGS); is the ingredient protected “as such” by the patent claims? and is the ingredient part of the “subject matter of the invention?”

How these varying approaches can be reconciled is currently unclear.

An opportunity for change?

The often-cited reason for the problems identified above is that the SPC regulation was drafted on the assumption that the products to which it will apply are small molecule compounds—“new active compounds”. Attempts to apply the regulation to protect pharmaceutical products that fall outside that simple model have tended to stretch the interpretation of the regulation to an extent that has given rise to a lack of consistency and predictability.

This has been worsened by an apparent lack of cross-referencing between decisions of the CJEU, leading to inconsistency and lack of predictability in its rulings.

The review of the SPC regulation in the context of the UPC and unitary patent is unlikely to provide clarity—not least because any amendments are likely to be a light touch given the extensive case law of the CJEU and, should wholesale amendments be made, the guarantee of more law (and the consequent uncertainty that would follow).

Brexit may therefore provide an opportunity for the UK to clarify and improve on the SPC regulation with new legislation. The UK legislator must begin by deciding whether SPCs are to be restricted to small molecule drugs, or whether they will have a wider application. If the latter, there needs to be clarity about what is included within the definition of the product for which an SPC can provide protection and how this should be identified in the underlying patent.

Should functionally defined biologics be included, or non-active ingredients that have a synergistic effect, or even new uses for an old product? When the regulation ceases to apply post-Brexit, or even before, there is a real opportunity to address these questions and to produce a more transparent and predictable system for granting SPCs.

Paul England is a senior associate at  Taylor Wessing in London. He can be contacted at: p.england@taylorwessing.com

Matthew Royle is a partner at Taylor Wessing in London. He can be contacted at: m.royle@taylorwessing.com

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