Patent Strategies in the European Union for the Pharmaceutical Industry

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Since 2000, there has been animated discussion within the European Union (EU) on the need for a community patent. It currently remains a “work in progress.”

The community patent will theoretically cover the entire European Union with one unitary patent as opposed to the present system of the European patent, which on grant becomes a bundle of national patents. The advantage of the community patent is obvious: lower translation costs and a unitary mechanism so enforcement takes place across the EU rather than on a country by country basis. Further, a community patent will result in only one set of renewal fees, rather than 15 sets, one for each member state. As a result, the cost of obtaining patent coverage in the average number of countries validated (under the European patent there are presently eight EU countries) should be reduced from approximately US$40,000 to a figure somewhat nearer the US cost of obtaining a patent which is approximately US$8,000. In practice, we suspect the cost of obtaining a community patent will be nearer the Japanese figure of approximately US$13,000.

There is strong political pressure for the community patent to be implemented, because the cost differential in obtaining patent coverage between the European Union and the United States is not sustainable. In the long term, the position will get worse with the enlargement of the EU on 1 May 2004 for 10 candidate states in Eastern Europe, Cyprus and Malta. There are an additional two candidate states in slated to join in 2007: Romania and Bulgaria.

A community patent requires a community court of first instance to compliment it. This means that there should be only one court with one procedure which can grant one community-wide injunction and one set of damages for all infringement cased across the community. This is currently being planned.

There are several issues which are delaying the community patent. The first relating to the community patent itself is the question of whether people should be liable for patent infringement in respect to instruments not in their own native language. That is being resolved by requiring any translations of the claims to validation, but prior to suit the patent must be translated into the local language and presumably a defendant given a chance to back down.

The main issue of difficulty (other than the obvious monetary issue as to how to share renewal fees) concerns the European Court of First Instance for Intellectual Property matters and its location.

The European Commission wants the Court of First Instance centralised in Luxembourg whereas the users want the court to function through a series of local districts, just like they do in the United States. There is good reason for the latter, even though it is administratively less convenient. It means that users will have confidence in the Court of First Instance. Its procedure will be similar to the procedure in the European Patent Office except that it will deal with infringement and damages. The procedure will be written, and the language will generally be either an agreed language or that of the defendant. There will be no cross-examination or discovery, but there will be a presumption that a process patent is infringed unless the defendant proves otherwise. Thus, the procedure is likely to be reasonably inexpensive and will evolve to slowly meet the needs of litigants.

For example, Germany has an inexpensive system for patent litigation which is reasonably speedy but where justice is often imperfect. Germany does not want to give up the low-costs, at least not to the UK system which is expensive but has a deeper consideration of issues to an extent approaching that known in the United States. UK users of the Patents Court do not want to give up cross-examination and limited disclosure, as well as the ability to find out about the defendant’s process, but they are fond of German’s low costs. It may take some considerable time to resolve this issue.

Another important issue for consideration is the possibility of a compulsory licence on a community-wide basis in relation to a blocking patent which subsists across the community. This has important ramifications for those who take out master patents and will have to consider whether the community route is indeed the best.

Patentees should now be applying for patents in every community country including all candidate countries. A decision as to the scope of validation only needs to be made on grant. That happens naturally on an application for a European patent but an application also needs to be made in Malta which is outside the European patent system. The choice has to be made on grant as to whether, when it comes into force, the patent applied for should be a community patent or the present European patent, which is a bundle of national patents. The latter means that some member states can and probably should be dropped. The community patent is good for major inventions particularly when supported by a series of secondary patents around them. Forcing infringers of a strong patent to the community intellectual property court will mean a community-wide injunction with community-wide damages. Meanwhile, national and European patents will be limited to certain member states, where it may be enough to create a fortress around the master patent. Further national European patents are useful over European and community patents in countries such as in the UK where an individual national patent can go to early grant and be litigated before the corresponding European and community patents have been granted.

Choice of patent form is particularly important in the pharmaceutical world where regulation means that the exploitation periods are short, even with supplementary certificates of protection. Markets in medicines at the wholesale and retail levels will remain fragmented within the EU for the foreseeable future because health care will be one of the last areas to be harmonised. The principles of free movement of goods and exhaustion of rights means that pharmaceutical products put on the market in one part of the EU can travel freely throughout the EU provided those goods were put on the market by the patentee or with his authority (e.g. by a licensee or distributor). This means that for example a UK patent cannot be used to stop a product put on the market in say, Italy, and after May 2004 and subject to any transitional provisions, countries such as Malta and Estonia. Pharmaceutical companies therefore need a patent strategy which may include the individual national patent such as a British national to act as a pathfinder for early litigation purposes as the failure of the GB patent will not effect the European or community patent provided grant has not already taken place at the time of that failure. However the exact relationship between national patents (opposed to European patents under the European Patent Convention) and the community patent is not something that has been fully addressed by the European Commission.

Consideration, therefore, needs to be given to the importance of the invention as to which countries in Europe to designate and whether to make a parallel application in Malta and possibly in one of the individual national countries for a quick grant to test the patent. In practice, all EU countries are designated at the time of filing, and it is only on grant that the question of limiting validation applies. At present there is no community patent, but when there is, strategies to use it should be in place.