EUROPEAN GENERIC MEDICINES ASSOCIATION
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1 EUROPEAN GENERIC MEDICINES ASSOCIATION POSITION PAPER POSITION PAPER ON THE REVIEW OF DIRECTIVE 2004/48/EC ON THE ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS JUNE 2011 EGA EUROPEAN GENERIC MEDICINES ASSOCIATION Rue d'arlon, 50 B-1000 Brussels Belgium T: +32 (0) F: +32 (0) info@egagenerics.com
2 1. Introduction The EGA is the official representative body of the European generic and biosimilar pharmaceutical industry, which is at the forefront of providing high-quality affordable medicines to millions of Europeans and stimulating competitiveness and innovation in the pharmaceutical sector. The EGA is fully supportive of the new proposed patent with unitary effect, the single patent court and proper and balanced enforcement of patents. We were also involved in 2004 in the approval of the Enforcement Directive 2004/48/EC (IPRED 1) where our main concern was to secure safeguards for legitimate users of the patent system. The EGA is of the opinion that the IPRED 1 has so far not achieved a high, equivalent and homogeneous level of protection across all Member States, and that it has effectively caused further disparities between Member States regarding intellectual property enforcement measures. This has resulted in the implementation of national enforcement rules that are more restrictive of competition than the best practices of the donorstates, and in a lack of appropriate balance between the protection of intellectual property rights and the freedom of competition in the pharmaceutical sector. The current regulation of enforcement measures in the Intellectual Property Enforcement Directive 2004/48/EC ( IPRED 1 ) has unfortunately undermined legitimate competition in the pharmaceutical sector in ways that could not have been intended. Unbalanced and inconsistent local implementation of the IPRED 1 has allowed companies to use weak patent rights, weak supplementary protection rights ( SPCs ) and weak utility model rights to improperly delay the market entry of generic competitors, thereby preventing the enormous savings to be derived from generic competition in the pharmaceutical sector. In particular, bona fide generic companies, trading in high quality pharmaceutical products, are prevented by questionable patents, SPCs and utility models from contributing to healthcare at an affordable price. To keep healthcare expenditure under control and allow EU Member States to satisfy the need for public health in spite of considerable budget constraints, it is critical to re-establish an appropriate balance between originator and generic companies with regard to the local procedural laws governing IP enforcement in the pharmaceutical sector. Due to the weaknesses in the patent assessment system, there is a significant number of granted patents that should never have been granted. These poor quality patents often serve to delay legitimate market entry of generic alternatives to the originator s branded drug. For the reassessment of the IPRED 1 it is highly relevant that due account is taken of this phenomenon, because it is to a large extent that class of patents on the basis of which IPRED 1 measures are applied for. This submission proposes measures for the establishment of a proper balance in the pharmaceutical sector, which will not affect the important objective to implement effective measures against counterfeit, piracy and falsified medicines. The EGA seeks to ensure fair competition also at the level of enforcement procedures between originator and generic pharmaceutical companies, without compromising legitimate enforcement of intellectual property rights. In this context, the EGA would like to draw attention to serious shortcomings in the current IPRED 1 system and put forward recommendations for the amendment of the Directive. 2
3 2. Article 9: Current systems of interlocutory injunctions/seizures and delivery up The current systems of interlocutory injunctions (article 9 1a) of IPRED 1) and seizures and delivery up (article 9 1b) have a corrosive effect on the proper balance between protection of intellectual property rights and the freedom of competition in the pharmaceutical sector, particularly because: a. They do not provide guarantees to generic companies to properly defend themselves with an invalidity defence against poor quality patents. To ensure timely generic market entry, it is paramount that generic companies can defend themselves against poor quality patents and in interlocutory injunction proceedings. After all, if they cannot do so, generic companies will: - either have to delay generic market entry until lengthy (and costly) revocation proceedings against the poor quality patents have been completed, possibly until after expiry of the poor quality patents, - or face an interlocutory injunction on the basis of such poor quality patents if they try to legitimately enter the market after expiry of the originator company s valid (generally primary) patent(s) or SPC(s). It is reiterated that poor quality patents usually come in the form of patent clusters, the scope of at least one or more of them also encompassing the generic product. Therefore, a national court system that merely allows alleged infringers to argue non-infringement in interlocutory injunction proceedings will not provide proper defence against poor quality patents. It is therefore of crucial importance that: - defendants in interlocutory injunction proceedings can raise an invalidity defence in interlocutory injunction proceedings, - national courts will seriously consider any such invalidity defence in interlocutory injunction proceedings, and - such invalidity defence can actually prevent the handing down of an interlocutory injunction. b. They do not explicitly require an urgent interest of the applicant. It is noted that Article 9 IPRED 1 does not set urgent interest as a requirement for interlocutory injunctions, although it would seem that it was the intention of the European legislator to require such interest for such measures. Typically, such measures are deemed to serve as a temporary order to cover the period until a decision on the merits will be rendered: given the imminent harm, the IP owner cannot await the outcome of such an action on the merits, and therefore a swift interlocutory decision is needed. It is not for nothing that pursuant to Article 9(5) IPRED1, the IP owner is required to institute an infringement action on the merits within the term stated in that provision. The EGA has been advised that the lack of inclusion in Article 9 IPRED1 of an explicit urgent interest requirement has led to disparities in the Member States regarding the application by national courts of interlocutory injunction proceedings. Although indeed the IPRED1 leaves Member States a certain degree of discretion in implementing IPRED1 provisions, it must be known that particularly in Member States where interlocutory injunctions are handed down with relative ease, extreme low thresholds for urgent interest (or even the absence of an urgency requirement) will have serious negative bearing on the balance between the protection of intellectual property rights and the freedom 3
4 of competition. As a result, generic companies will face a high level of legal uncertainty when they consider entering the market. c. They do not require applicants for injunctive relief to submit evidence regarding ownership, infringement or threat thereof, or to disclose previous or pending decisions where the validity of the invoked right has been, or is being considered. The corrosive effect of these systems is even more profound in case interlocutory injunctions, seizures and delivery up are assessed on an ex parte basis, because: d. The generic company is not heard before a decision is handed down (article 9.4), and as a consequence the decision is taken on the basis of merely the biased presentation of the originator company without proper account of the potentially valid defensive arguments of the generic company. In respect of interlocutory injunctions and seizures and delivery up, it is therefore recommended in this submission to: Sub a. Pave the way for the assessment of invalidity defences before decisions are rendered. Sub b. Introduce urgent interest as an explicit requirement. Sub c. Amend Article 9(3) IPRED 1 to such extent that applicants shall be required to submit evidence to the judicial authorities regarding ownership, infringement or threat thereof, and to disclose previous or pending decisions wherein the validity of the invoked right has been, or is being considered; Sub d. Analyse the specific risks that arise in the field of pharmaceutical products from ex parte interlocutory injunctions and precautionary seizures and delivery up, and critically reassess the appropriateness of such ex parte measures; o Clarify the criteria (art ). What cases are appropriate? Does in particular mean that irreparable harm to the rightholder is a requirement, or is it merely introducing irreparable harm as an example? As an ex parte interlocutory injunction is fairly draconian, the EGA would assume that irreparable harm is not merely an example, but a condition for the granting of such an injunction. What does delay mean? The EGA would imagine that it means the time between an ex parte interlocutory injunction and an inter partes interlocutory injunction, i.e. that an inter partes assessment cannot be awaited. 1 Art.9.4. Member States shall ensure that the provisional measures referred to in paragraphs 1 and 2 may, in appropriate cases, be taken without the defendant having been heard, in particular where any delay would cause irreparable harm to the rightholder. In that event, the parties shall be so informed without delay after the execution of the measures at the latest. 4
5 What does irreparable harm mean? The EGA would imagine that this means that suffered damages cannot be recovered from the infringing party. o Introduce a harmonised European system of protective letters. The EGA recommends that ex parte interlocutory injunctions are not appropriate in pharmaceutical patent cases. However, to the extent that this approach is not adopted, then the EGA recommends at a minimum that the IPRED 1 should provide for a system of protective letters as practiced under the German legal system. For many years German law has allowed parties that suspect that an ex parte interlocutory injunction will be filed against them to file so-called Schützschrifte, also known as protective letters. Such protective letters are filed with all first instance courts where an ex parte interlocutory injunction might be applied for, and shall set forth the arguments why the court should not grant an ex parte interlocutory injunction. German courts shall take account of such protective letters before rendering a decision: the arguments that are put forward in the protective letter, for instance non-infringement or invalidity, will be duly valued by the court when assessing the case. A protective letter will prevent an ex parte interlocutory injunction if the assessing court deems the arguments comprised therein (for instance on non-infringement or on invalidity) sufficiently convincing that it should be refused. In such case, the court will order an inter partes hearing of the case before rendering a decision. However, if the court is not convinced by the arguments, it may consider the filing party to have presented all of its argumentations within the protective brief, and render the interlocutory injunction without hearing him first; so still on an ex parte basis. In the context of an ex parte measure, where the defendant to the action is not heard before the decision is taken, protective letters serve to protect the fundamental principle of due process, which is inter alia encompassed in Article 6 of the European Convention on Human Rights (and Article 47 of the Charter of Fundamental Rights of the European Union), whilst at the same time they do not affect legitimate access to ex parte measures. 3. Article 6 to 8: Disclosure and preservation of evidence The current system of disclosure and preservation of evidence has a corrosive effect on the proper balance between protection of intellectual property rights and the freedom of competition in the pharmaceutical sector, particularly because it provides insufficient: a. Safeguards against fishing expeditions 2. In some Member States the preservation measures pursuant to the IPRED 1 are considered also to imply measures to gather evidence of infringement, contrary to the mere preservation of evidence. This leads to so called fishing 2 Provisional measures that are strategically used by the intellectual property owner to find out whether evidence can be collected from the alleged infringer that is sufficient to support infringement proceedings, or maybe even worse to gather valuable commercial information kept as a trade secret which does not concern the alleged infringement and in which the requesting party does not have any legitimate right or interest. 5
6 expeditions i, particularly in jurisdictions where aside from the criterion reasonable available evidence no additional criteria are formulated. Policy makers in the EU should be aware of the fact that several Member States do not offer sufficient procedural guarantees against unjustified fishing expeditions. Should the evidential measures not be applied restrictively, the generic company may have to face drastic provisional measures even though the patentee is unable to produce sufficient evidence or even indications of a concrete threat of infringement of a (potentially poor quality) patent. This is evidenced by the case Abbott v. Teva (The Netherlands; sibutramine 3 ) b. Safeguards for securing the confidentiality of business secrets. The corrosive effect of this system is even more profound in case an application for preservation of evidence is merely assessed on an ex parte basis, because: c. The generic company is not heard before a decision is handed down, and as a consequence the decision is taken on the basis of merely the biased presentation of the originator company without proper account of the potentially valid defensive arguments of the generic company. It is therefore recommended in this submission to: Sub a. Prevent unjustified fishing expeditions through the introduction of appropriate safeguards against the abuse of measures for gathering and preserving evidence. The EGA recommends that sufficient procedural guarantees against unjustified fishing expeditions be introduced in Articles 6 and 7 IPRED 1. These measures should particularly require the applicant to produce sufficient evidence of a concrete risk of infringement, describe the circumstances under which this infringement will take place, and specify the evidence necessary in this context. Sub b. Take additional measures to ensure the confidentiality of business secrets in the framework of IPRED 1. The EGA recommends clarifying that all information and further material obtained through Articles 6 and 7 IPED shall generally be considered confidential. Cases to which this general presumption of confidentiality does not apply should explicitly be specified in Articles 6 and 7. As the measures extend to all types of materials, such as samples, the EGA recommends to consider providing a broader definition that covers all types of materials potentially falling under Article 6 and 7 IPRED 1. To minimise the risk of illegitimate disclosure of confidential information, the EGA recommends that the national court be required: o To establish exactly in its written decision which persons are allowed to be involved in the raid (those who are not mentioned shall not be involved); o Not to enlist any person for involvement in the raid for whom it has not clearly established independency; 3 Source : EGA paper «Patent related Barriers to Market Entry for Generic Medicines in the EU», May
7 o To motivate its choices in the written decision. The EGA also recommends that the European Commission consider: o Including extra requirements into Article 7 IPED to ensure that national courts shall put persons who will become involved in a raid under a proper secrecy obligation by way of a court order. o Including extra requirements into Article 7 IPED to ensure that evidence is preserved in such a way that third parties cannot have access, including the requesting party. o Including extra requirements into Article 7 IPED to ensure that the raided party (or relevant third parties) shall have the right to object in court proceedings to disclosure of any such confidential details/ trade secrets before the disclosure is made, and to ensure that no disclosure will be made before a judgment is rendered by the relevant court. Also in respect of article 8 IPRED 1, confidentiality issues may arise. Confidentiality needs to be secured since article 8 IPRED1 provides for a broad right of information that may include valuable commercial information kept as a trade secret by the alleged infringer. There can be significant harm to the alleged infringer if the court prematurely and inappropriately orders the alleged infringer to provide such sensitive and valuable information to the right holder. The EGA recommends that Article 8 IPED be clarified such that it may only be invoked after infringement of a valid IP right has been established and not beforehand. Sub c. Analyse the specific risks that arise in the field of pharmaceutical products from ex parte preservation of evidence, and critically reassess the appropriateness of such an ex parte measure in this particular field (article 7): Clarify the criteria for such ex parte measures Introduce a harmonised European system of protective letters 4. Articles 7(4) and 9(7): Compensation for injury The current system of compensation for injury, has a corrosive effect on the proper balance between protection of intellectual property rights and the freedom of competition in the pharmaceutical sector, because the IPRED 1 in some cases does not guarantee, and in others insufficiently guarantees adequate compensation of injury caused by revoked, or otherwise unjustified IPRED 1 measures. The EGA recommends that a balanced system, which includes measures for preserving evidence and provisional and precautionary measures, should make compensation mandatory if such measures are revoked or lapse or where it is subsequently found that there has been no infringement of valid intellectual property rights. For instance, alliance could be sought with the UK system of cross-undertakings. This requires amendment of Articles 7(4) and 9(7). 7
8 It is therefore recommended in this paper: That the IPRED 1 should make compensation mandatory if such IPRED 1 measures are revoked or lapse or where it is subsequently found that there has been no infringement of valid intellectual property rights. To further clarify the term appropriate compensation in relation to injuries suffered from unjustified measures. Moreover: o appropriate compensation should not only be awardable to the directly affected party, but also to third parties who have or will suffer loss as a consequence of unjustified measures, e.g. national health services and health insurance companies. IPRED1 should provide an explicit basis. o to secure that appropriate compensation will indeed be paid to the directly affected party and to affected third parties, the IPRED 1 should expressly adopt the system of cross-undertakings as implemented in the UK which explicitly also refers to losses of third parties 4. Such mandatory appropriate compensation should not be limited to unjustified measures pursuant to Articles 7 and 9 only, but rather relate to all measures enforceable under Article 6 up to and including Conclusion The EGA proposals to improve IPRED1 and achieve a proper balance in the pharmaceutical sector will not affect the central objective to implement effective measures against counterfeit, piracy and falsified medicines. Parties that conduct criminal acts of this type will for instance - generally not raise invalidity defences. Further, sufficient evidence against these parties can easily be collected without fishing expeditions or compromising the confidentiality of business secrets. Parties involved in criminal acts will not file protective letters. Moreover, the measures taken against those parties are unlikely to be revoked at a later stage. On the basis of the EGA s suggestions, competition in the pharmaceutical sector can be enhanced in order to substantially reduce the costs of public healthcare. At the same time, the central task of pursuing the fight against counterfeit, piracy and falsified medicines can be accomplished. To achieve this double goal, however, it is indispensable to consider both objectives during the review procedure on IPRED 1. The present submission sheds light on this latter aspect. It seeks to ensure fair competition also at the level of enforcement procedures between originator and generic pharmaceutical companies, without compromising enforcement of legitimate intellectual property rights. Finally, the EGA hopes that raising the bar at the EPO with regards to the examination and inventive step of patents will help reduce the number of weak patents. However, a proper review of IPRED1 is also necessary to ensure a proper use of the litigation system. 4 When the court makes an order for an injunction, it should consider whether to require an undertaking by the applicant to pay damages sustained by a person other than the respondent, including another party to the proceedings or any other person who may suffer loss as a consequence of the order. Civil Procedures Rules, Practice Direction 25A, para.5.1a. 8
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