REGULATORY & MARKETPLACE
What the Unitary Patent Means for
the Pharmaceutical Industry
After nearly four decades in the
pipeline, the countries of the
European Union have finally signed
an agreement that is expected to
lead to a system of Unitary Patents.
They will have pan-European effect
and an associated Unified Patent
Court to enable enforcement of the
Unitary Patent across Europe. If the
agreement is ratified by European
member states, this will represent
the most radical change to the patent
landscape in Europe of the past
40 years. Patent Attorney, Martin
MacLean, examines the issues
surrounding its implementation and
how it will affect the pharmaceuticals
industry.
While other industries are likely to
watch the development of the Unitary
Patent system from the sidelines, the
pharmaceutical industry is likely to see a
more immediate impact (with potentially
far-reaching effects) on daily operations
and patent strategies, once the Unitary
Patent system comes into force.
While the Unitary Patent system will
enable pharmaceutical companies to
simplify maintenance and enforcement
of their rights across Europe, and is also
likely to reduce their patent costs in
Europe, the Unitary Patent also comes
with significant risks and uncertainties.
Thus, the pharmaceutical industry will
most likely be the first to test many of
the new legal and procedural aspects
of the Unitary Patent. It is therefore
important for the industry to be aware
of the issues surrounding the Unitary
Patent and to monitor developments as
implementation details of the system are
revealed.
Although full implementation of the
proposed system is likely to be some
years away, patent applications filed
today are likely to fall under at least
parts of the regime. Therefore, it is not
too early to consider how the anticipated
changes will likely affect your patent
strategy and thus to consider how patent
applications that are filed now might be
enforced within the next few years.
22 INTERNATIONAL PHARMACEUTICAL INDUSTRY
What is the Unitary Patent?
In summary, the Unitary Patent system
will enable applicants to obtain a single
patent with unitary effect across up to 25
of the 27 member states of the European
Union. The agreement (of the UPC),
which will bring the Unitary Patent into
effect, has been signed but now needs to
be ratified by at least 13 member states
(including the UK, France and Germany).
Under the current European system,
grant of a patent by the European
Patent Office (EPO) provides a “bundle”
of national patent rights, requiring
validation of the granted patent in
each individual state in which the
patentee requires protection. Translation
requirements for each state in which the
patent is validated can add significant
costs for the patentee. By contrast, the
Unitary Patent will cover all participating
member states, with the aim of offering
a pan-European ‘one in, all in’ approach.
In addition, the translation requirements
will be much reduced, and eventually
eliminated altogether.
The Unitary Patent will exist alongside
the current, “traditional” European
patent system, which will allow patentees
to obtain patent protection in countries
that are not party to the Unitary Patent
(including Spain and Italy) and in the non-
EU territories that are also covered by the
European Patent Convention (including
Norway, Switzerland and Turkey). In
addition, it will remain possible to pursue
individual national patent applications
outside of the European system entirely,
by filing directly with national patent
offices.
Once granted, any revocation, transfer,
or lapse of a unitary patent will take effect
in all member states at once. However it
will be possible to license a Unitary Patent
in different territories.
The Unified Patent Court
Unitary Patents will be enforced and
litigated in a new Unified Patent Court
(UPC), which will have jurisdiction across
all of the EU member states that sign the
Agreement. London will host a branch of
the UPC dedicated to hearing chemical
and pharmaceutical cases. The rules and
fee structures associated with the new
court have not yet been finalised and are
still under discussion. Many questions
remain as to how the UPC will operate and
what the costs of using the court are likely
to be, but the basic structure is now clear.
As well as litigating Unitary Patents, it
is intended that the UPC will eventually
also have exclusive jurisdiction over
“traditional” European patents covering
participating EU member states.
Therefore, European patent applications
that are filed today, and many that are
already in existence, are likely to fall under
the jurisdiction of the UPC. Ultimately,
patentees will not be able to avoid the
jurisdiction of the UPC even if they opt not
to use the Unified Patent system.
Once the UPC is brought into force,
however, there will be a transitional
period of at least seven years in which
a patentee can opt out their traditional
European patent from the jurisdiction
of the UPC. It is expected that most
patentees will wish to opt out their
existing traditional European patents
from UPC jurisdiction as soon as the UPC
is brought into existence to avoid the
possibility of competitors applying for
central revocation of the patent. Under
current proposals patentees will have the
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REGULATORY & MARKETPLACE
ability to opt back in and initiate litigation
centrally, so it seems there is little
disadvantage in opting out. However,
there are rumours that a fee may be
charged for opting out a patent.
Due to a loophole in the current
proposed regulations, there may be a
short window in which a revocation
action against a patent could be brought
in the UPC before an “opt-out” for the
patent is registered. If the proposals
are not changed, this could provide
an important window of opportunity,
which is likely to be exploited in the
pharmaceutical industry in particular, to
bring central revocation actions against
patents at the UPC.
The UPC will consist of a central
division split into specialist branches,
to deal with infringement and
validity actions, and several local and
regional divisions. The central division’s
specialist branches will be subjectmatter dependent, with pharmaceutical
and chemical cases being heard in
London. Although the details have yet
to be agreed, it is likely that at least
some European Patent Attorneys, who
www.ipimedia.com
often have significant experience in
both attacking and defending European
patents in Opposition proceedings at the
European Patent Office, will have rights
of audience at the new UPC Courts.
The UPC will also have jurisdiction to
hear infringement cases for Supplementary
Protection Certificates (SPCs), commonly
used in the pharmaceutical industry to
extend protection for medicinal products
beyond the 20-year term of a patent.
The Unitary Patent and the
Pharmaceuticals Industry
The pharmaceutical industry traditionally
seeks to validate its European patents
across as many European territories
as possible. This is in part due to the
nature of pharmaceutical products: while
the costs incurred during research and
development of a new drug can run
into hundreds of millions of dollars, the
manufacture of generic copies of a new
molecular entity may be relatively cheap.
Thus, it is vitally important to obtain as
wide a territorial scope of protection as
possible. By contrast, other industries
often limit European patent protection
to major territories such as the UK,
Germany, France and the Netherlands to
capture the main markets and import/
export routes of Europe.
The new Unitary Patent system will
therefore provide obvious benefits for
industries such as pharmaceuticals who
seek the broadest patent protection
across Europe. These benefits will
include a streamlined grant and validation
procedure, and the ability to enforce a
patent across all territories participating
in the Unitary Patent with a single crossborder injunction.
The simplified process will mean the
validation and management of European
drug patent portfolios will be much more
straightforward, as the system will be
administered centrally at the EPO. Only
one European representative will be
needed, and a single renewal fee will be
payable to cover all the member states.
Although the fee levels have not yet
been set, it is highly likely that the cost
of obtaining and maintaining a Unitary
Patent will be significantly less than the
corresponding costs for patents in each
separate European state.
INTERNATIONAL PHARMACEUTICAL INDUSTRY 23
REGULATORY & MARKETPLACE
Risks and Rewards –
Central Revocation and Enforcement
A key feature of the Unitary Patent,
which will have a significant impact on
the pharmaceuticals industry, is the
ability to enforce the patent across all
Unitary Patent countries at a single court
in a single action. For the first time,
European-wide injunctions and damages
will be available so, overall, enforcement
procedures are likely to be cheaper,
simpler and potentially also quicker. This
may increase levels of patent litigation
in Europe and reverse recent trends
towards mediation and licensing.
However, for all its benefits the Unitary
Patent has one very major downside. The
new UPC will have the power to revoke
patent rights across the entire European
Union in one blow.
With the very real possibility of central
revocation, the Unitary Patent route
could involve serious risk for a drug
patent of any serious value.
This is quite evidently a major
change from the existing European
patent system, under which, once the
centralised opposition period has passed,
separate national revocation proceedings
must be undertaken in the courts of the
individual states.
However, for any pharmaceutical
companies typically engaged in opposition
actions against their competitors, the ability
to bring a single revocation action may
prove very useful. It is likely that, at least
at first, central revocation of a granted
patent will be faster than the current
opposition procedure, which typically
takes around six years to conclude (three
years at first instance, with a further three
years when under appeal). In addition,
there is no restriction on launching a
revocation action against a patent that
has already been successfully opposed
in European Opposition proceedings.
Therefore, there is a second opportunity
for attack against a competitor’s patent.
A Confusion of Languages and
Legal Regimes
Some of the most confusing and
controversial aspects of the proposed
UPC system are the complicated
arrangements for determining where a
case is to be heard, in which language
and under which law.
The proposed UPC system does
not include detailed provisions on
infringement, so the law that applies in a
24 INTERNATIONAL PHARMACEUTICAL INDUSTRY
particular case will depend on the place
of business of the patent proprietor,
with a default of German law for non-EU
businesses.
Infringement actions themselves will
be heard either in a court present in
the country where the infringer has a
principal place of business, or in the
country where infringement takes place.
As a result, there is likely to be a wide
choice of courts where the patentee may
choose to bring infringement proceedings.
The language of proceedings will
depend on the language of the court in
which the action is brought or the language
in which the patent application was filed.
While this sounds clear enough, it sets
up a rather complicated system in which
different legal regimes may be applied
in different languages in various courts
across Europe, even for a relatively
straightforward infringement situation.
For example, a US pharmaceutical
company operating predominantly in
Germany may file a European patent
application in English. An infringement
occurs in Portugal by a Dutch company.
The US patentee could then bring an
infringement action against the Dutch
company in the Dutch regional division
of the court in Dutch, on the basis of
the English-language patent, but under
German law. Alternatively, assuming
there is no Portuguese local division of
the UPC, the US company could bring
the infringement action in the central
division in London in English, but also
following German national law.
In addition, many questions arise
that will be particularly pertinent
for international industries, such as
pharmaceuticals. For example, will a
US patentee that has many places of
business throughout Europe be able to
select which infringement laws apply to
their patent?
In theory, national infringement laws
should be harmonised throughout
Europe, however there are some crucial
differences that will be critical in many
pharmaceutical cases, for example
with regard to the interpretation of
the “experimental use” exception. At
present, under national infringement
laws countries such as the UK have taken
a narrow view of the “experimental
use” exceptions that pertain to trials
conducted in order to obtain marketing
authorisation for generic pharmaceuticals
(so called “Bolar” provisions), whereas
other countries such as Germany have
taken a broader interpretation of the
exemption. This raises the possibility
that the scope of protection of a given
patent might differ depending on the
proprietor’s place of business.
The complexity of the proposed rules,
together with the lack of harmony
of European patent law, means that
‘forum shopping’ by patentees to
bring infringement actions in the most
favourable courts is likely.
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Costs
As yet there has been no public disclosure
of the costs for the Unitary Patent, though
requesting a Unitary Patent is expected
to be as much as 80 per cent cheaper
than validating patents in all countries.
The translation requirements will also
be reduced, ultimately to dispense
with translations in favour of machine
translations.
Renewal fees for the Unitary Patent
will be managed centrally by the EPO,
requiring only a single renewal fee to
be paid each year. Although the level at
which renewal fees will be set remains
to be decided, current expectations are
that the renewal fee for a Unitary Patent
(covering 25 European states) will be
equivalent to somewhere between six
and 15 national renewal fees. For the
pharmaceutical industry, this represents
a potentially significant cost saving,
as patents for new drugs are typically
validated in all available European states.
Hurdles to Introduction
Whilst there has been much fanfare
from the European Parliament about its
approval of the Unitary Patent and its
potential to dramatically reduce the cost
of acquiring patent protection across
Europe, there are still a number of
hurdles to be overcome.
With the requirement for the UPC
agreement to be ratified by at least 13
member states including the UK, Germany
and France, it is unlikely that the process
of ratification will be complete by January
2014, the date predicted by the European
Parliament. Formal proceedings are
expected to delay implementation until
late 2015 or even 2016, and elections in
both Germany (in 2013) and the UK (in
2015) may also lead to delays in approval
of the UPC agreement.
Some member states, like Poland,
have expressed concerns regarding the
Unitary Patent’s effect on their economy
and an increase in domestic competition.
This very real concern may see more
countries back out, reducing the scope
and value of the Unitary Patent package
before it is even introduced.
If the Unitary Patent ever comes into
being, it will undoubtedly change the
patent landscape in Europe, whether
through the regulation of unitary and
non-unitary patents or its ability to
reduce the level of investment required to
achieve pan-European patent protection.
The extent to which the pharmaceutical
industry may want to embark upon such
a high-stakes gamble, in spite of the
cost-saving benefits, remains to be seen.
Dr Martin
MacLean,
Patent Attorney,
Mathys & Squire LLP
Martin is a qualified
Chartered Patent
Attorney and
European Patent Attorney. He specialises
in technologies including the retargeting of bacterial toxins, vaccines,
expression systems, microbial detection
assays, cytokine-based therapeutics, and
agrochemicals. Martin is also a member
of the Life Sciences Committee for the
Chartered Institute of Patent Attorneys,
and acts as a tutor for the UK and
European Qualifying Examinations.
Email: [email protected]