EU SPC Reform – significant changes flying under the radar?

With the focus on a new unitary SPC ("uSPC") and centralised examination procedure, it is easy to overlook that the first stated objective of the draft recast SPC Regulation (medicinal products) is to do precisely that: i.e. recast and clarify the law. We review the "other" changes in the reform proposals and query whether they will clarity or disrupt the status quo.

What are the "other" changes?

Notwithstanding the title of this article, there is no stealth or subtlety to the introduction of more extensive reforms in the recent EU package. And they will apply to all EU SPCs (i.e. not just the new uSPC). We have picked out the following 4 potentially significant reforms, with more detail below.  

• Rewording the scope of the SPC Regulation.
• New recitals - seeking to capture CJEU SPC caselaw on issues including validity and duration.
• New linkage requirements - preventing the SPC applicant/patentee from relying on third party marketing authorisations without consent.
• New conditions of SPC ownership - restricting multiple SPC ownership by economically linked entities.

Why are there "other" changes?

Before discussing the substantive issues, this is a fair opening question. The idea of re-opening the EU Regulation governing SPCs has been generally, if not universally, avoided; quickly followed by the sentiment: "don't open Pandora's box!". Indeed, the last reforms introduced significant changes (manufacturing waivers) with surgical precision endeavouring not to create collateral damage.

So why has the approach changed? Or put another way, why does the introduction of the uSPC and centralised examination require any changes to SPC law?

The explanations in the accompanying memoranda are not completely clear and, at times, seem to be internally inconsistent. For example, while there is a general objective to clarify the law, there are statements such as: "This reform does not intend to modify, nor further clarify in view of the relevant case law of the Court of Justice", justified by the risk of "trigger[ing] new fluctuations and uncertainty". Yet, these statements are immediately followed by lengthier explanations justifying the additions of many new recitals to incorporate CJEU case law, and then a number of new provisions in critical Articles, for which no explanation is provided. These changes will no doubt need to be considered carefully in the consultation process, especially where uncertainty might go up rather than down.

1. Rewording the "scope" of the SPC Regulation

What was previously Article 2 ("Scope") provided the foundation for the SPC Regulation and was subject to multiple CJEU decisions. It is now proposed to become Article 1 ("Subject matter"), plus a few more tweaks. It does not take long to discuss (or read) the few changes to the wording. But while updating legislation references may be justified, the changes go slightly further. So while this change is a not a fundamental concern, it illustrates the simple question: why make these changes? The answer is not clear and for such a significant provision, if it cannot be explained, a retreat to the previous wording seems prudent.

2. New recitals

There are over 40 new recitals included as either new or substituted provisions in the proposed recast SPC Regulation governing medicinal products. And many of the remainder are subject to edits. A number of these are needed, in particular to accompany the new centralised examination procedure. But many go beyond that edict.

For example, a number of the new recitals are explained as a means of incorporating CJEU caselaw, in particular C-121/17 (Teva), C-673/18 (Santen) and C-471/71 (Seattle Genetics). Legislating CJEU caselaw is arguably unnecessary, but might be less controversial about cases like Santen and Seattle Genetics given the reasonably straightforward message they deliver. However, Teva stands out as being far from straightforward given it refers to Article 3(a) (i.e. what it means for a patent to protect a product), which has been and continues to be the subject of multiple referrals to the CJEU and national cases as to its interpretation (e.g. see our report on recent developments in French caselaw, here).  

3. New linkage requirements

An SPC is founded on two things: a patent and a marketing authorisation ("MA"). The holder of the patent must apply for the SPC (this is clear). However, there has long been a question of whether the patentee must also own or be connected with the holder of the MA (e.g. via a licence). Where there is a disconnect, this has been so-called a "third party SPC".

An entire chapter of the 2018 Max Planck study on SPCs (here) was dedicated to this issue. That study concluded that it was a point of policy for the legislature to decide, not the courts. The latter has remained true, despite a scattering of national cases and attempts to refer questions to the CJEU, which ultimately remained unanswered. The recent reform proposals seem to have picked up the baton.

The new provision is in a new Article 6(2) under the heading of 'Entitlement to an SPC' (with a corresponding provision in the Regulation governing uSPCs):

"...where a basic patent has been granted in respect of a product that is the subject of an authorisation held by a third party, a certificate for that product shall not be granted to the holder of the basic patent without the consent of that third party"

So the word is: no more third party SPCs (without consent).

The above provision is mirrored in a new recital, but not expanded upon. And there is no further detail or explanation in accompanying memorandum either.  So this fundamental point of policy about SPCs has simply, and arguably rather suddenly, appeared.

The aforementioned Max Planck study ran a survey of national patent offices on whether third party SPCs were allowed in practice, to which the answers were almost universally: yes. This was accompanied by confirmations that there was no examination of MA ownership at all. In the latter respect, the reforms remain unclear how the new requirement under Article 6(2) will be handled (either centrally or nationally) - as it does not expressly form part of the admissibility or examination requirement in the proposed recast/new Regulations. Similarly, the new proposed opposition procedure (discussed in our last article here) does not allow oppositions based on Article 6(2) either - so third party MA holders cannot not oppose grant on this ground.

As the final comment on this policy decision, we turn again to the Max Planck study, which posed a clear fork in the road for policy makers based on assessing the fundamental purpose of SPCs:

• If SPCs are "intended to reward the pharmaceutical research that leads to a patentable invention" - then allow third party SPCs; or
• If SPCs are intended to reward "research that leads to a marketable product after an invention is made, and in this way to compensate for the time and resources invested in the clinical trials required by public legislation" - then prohibit third party SPCs (or require consent).

This suggests that the Commission has opted for the second purpose. Interestingly, one of the issues debated in the Max Planck study was the concept that permitting third party SPCs might one day enable patentees to obtain SPCs based on any biosimilar MAs obtained during the term of their basic patents. With the increasing development and competition in biologic / biosimilar drugs in Europe, it is tempting to speculate whether this possibility might have factored in the Commission choosing to rule out such practice. We may never know. And of course, we may not need to subject to the finalisation and adoption of this provision, which remains uncertain (for now).

4. New conditions of SPC ownership

Like the linkage point above, this is another arguably fundamental point of policy introduced into the reforms, again via a freestanding provision: a new Article 3(2) (again with a corresponding provision in the uSPC Regulation):

"The holder of more than one patent for the same product shall not be granted more than one certificate for that product. However, where two or more applications  concerning the same product and emanating from two or more holders of different  patents are pending, one certificate for that product may be issued to each of those  holders, where they are not economically linked."

This provision seems to try to cover the current, arguably radical, change that CJEU caselaw has already made to what is currently Article 3(c) - i.e. rather than there being only one SPC per product, there can be one SPC per product per patentee. (To summarise briefly, this was justified on the basis that separate inventions could be made in relation to a single product, each leading to a patent that merited an SPC.)

Again like the linkage point above, there is a web of complexity surrounding this issue, and a number of outstanding questions that have never been addressed by the CJEU. For example, things gets complicated when dealing with transfers or patents and/or MAs, especially depending on the timing of the assignment and whether the inventions underlying the patents arose independently or were linked.

The new provisions seem to apply this requirement at the time of SPC issuance (rather than filing when the other validity requirements are assessed). The selection of the term "economically linked" is implicitly to avoid related entities from obtaining multiple SPCs on the same product. However, this is not further explained or defined, and while presumably seeking to cover group entities, it is not clear if this might also cover e.g. licensor/licensees and collaborators. This uncertainty will need to be resolved. However, it seems likely that an attempt to codify the current caselaw will persevere, which (while arguably unnecessary) should nonetheless be welcomed by applicants (especially given the alternative was presumably the reversion to otherwise very restrictive, original wording of Article 3(c)).

Summary

Upon closer examination, it becomes clear that the EU SPC reform proposals house significant changes/codifications on fundamental points of law and policy governing EU SPCs. These are arguably as significant as the creation of the uSPC and centralised examination procedures. And they will need to be assessed with equal scrutiny to ensure that the objective of achieving clarity wins out over their disruptive potential. And questions might even be raised as to whether any of these reforms exceed the objectives, re-raising the ultimatum of whether it is better for the lid to remain shut on this Pandora's box.