BREXIT: Leaving the EU could trigger a recalibration of UK patent law to support UK life sciences, says expert

Out-Law Analysis | 04 Apr 2016 | 9:38 am | 6 min. read

FOCUS: Some aspects of patent law of relevance to life sciences companies could come back under the control of UK law makers if the UK votes to leave the EU.

This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum. Sign up to receive our Brexit updates by email. 

The UK market could be effectively closed to parallel imports and, by the adoption of appropriate legislation, the UK could remove uncertainty and encourage investment in the sector.

A vote to leave, though, has the potential to delay the introduction of the planned new unitary patent and Unified Patent Court (UPC) regime and could negatively affect the attractiveness of this new form of patent protection and court system in the eyes of businesses.

In the event of a leave vote it would be at least two years between the point of the UK notifying its intention to exit the EU and the UK actually leaving the EU. The UK's freedom to set its own rules would be determined by the type of relationship it would have with the EU in the event of an exit.

It is likely that new trade agreements would be negotiated, either individually by the UK with each different EU country or with the EU as a whole. It is possible that, as part of negotiations, the UK could be required to honour principles of EU law to gain better trading terms.

Parallel imports of drugs

If the UK leaves the EU, patent owners may have a real opportunity to stem the flow of patented products into and out of the UK.

Rules on parallel imports stem from the EU principle of the free movement of goods. At the moment, under the principle of 'exhaustion of rights', intellectual property rights owners that place their goods for sale in one country within the European Economic Area (EEA) generally cannot use their intellectual property rights to prevent these goods from being bought and sold within the EEA.

Parallel import rules have particular relevance in the pharmaceuticals market where the price of drugs can vary significantly across Europe. The point of parallel imports of pharmaceuticals is arbitrage between countries with different prices - buying in low-price markets and selling in high-price markets.

If the UK had a complete exit from the EU and was not subject to the rules on the free movement of goods then it could become easier for drugs manufacturers to prevent other businesses exploiting price differences between the UK and other European countries. The principle of exhaustion is not enshrined in UK patent legislation and is instead solely founded on Court of Justice of the EU (CJEU) case law. English courts, devoid of a legislative basis for applying the doctrine, would likely apply the law as it is currently applied to goods from outside the EU.

Redefining patent protection – biotech patents

Few areas of EU patent law are harmonised. At the moment, patent laws across the EU are largely defined by national laws and international agreements such as the European Patent Convention (EPC).

One of the areas where EU laws do shape national approaches is in relation to biotech patents.

The Biotechnology Directive aims to clarify what is patentable and what is not. The Directive has been implemented by all EU member states and incorporated into the European Patent Convention (EPC), although there was no obligation to do so since the European Patent Office (EPO) is not an EU institution. It forms the basis for deciding on the patentability of biotechnology applications at the EPO and the UK Intellectual Property Office (IPO).

This Directive and decisions around patentability are seen to be undermining confidence in the EU commitment to create a favourable place for life sciences companies to do business. There have already been calls for the UK to withdraw from EU jurisdiction in biosciences to escape what has been termed "anti-science" politics in Europe.

Opinions on the availability of patents in the field of biotechnology remain divided.

If the UK voted to leave the EU there could be greater freedom for national law makers in the UK to set out a revised national policy on biotech patenting that differs from that which the EU promotes and which is governed by the Biotech Directive.

The UK government could choose to revoke all or some of the regulations that currently implement the Biotech Directive in the UK and implement a new or revised legal framework. Its appetite to loosen UK rules on patentability would likely depend on whether it wished to reignite debate on the various moral and ethical issues that already surround this area of science.

Redefining patent protection – exemptions to infringement

Similarly, if the UK votes to leave the EU, UK law makers could look afresh at current exemptions to patent-infringing activity in the field of life sciences.

The existing European Bolar exemption allows drugs companies to do certain work necessary for obtaining market approval for their products without that work constituting an infringement of others' patent rights. The exemption stems from EU law. However, the nature and scope of the exemption varies significantly between countries. A fresh look at the EU Bolar legislation has being proposed by the European Commission but there is as yet no timetable.

Currently, some generic drugs manufacturing bodies are lobbying for a Bolar-style exemption to let businesses manufacture rival medicinal products using patented inventions without it being deemed an infringement. As proposed the waiver would allow export to patent-free countries and possibly some stock-piling during the additional period of protection awarded under a supplementary protection certificate (SPC).

The idea behind this is to ensure that European generic and biosimilar manufacturers are not disadvantaged and can compete with companies operating in countries outside the EU where there is no SPC protection. There is currently no timetable for the introduction of this waiver in Europe. An EU exit would give the UK the option to embrace such a change on its own, and steal a march on the EU, although it would need to be mindful of its wider impact onthe sector as a whole.

Redefining patent protection – supplementary protection certificates

What status supplementary protection certificates (SPCs) would have if the UK votes to leave the EU is unclear.

SPCs are rights relating to medicinal products, and are designed to last for a maximum of five years. They have to be applied for separately in each EU country.

SPCs are underpinned by an EU Regulation which is directly applicable across the whole EU. If the UK left the EU new UK legislation would be needed to preserve the legal status of SPCs already registered in the UK. This may open up the opportunity for a debate in the UK about whether SPCs are needed at all and also be an opportunity for the UK to lead on redrafting what is seen as flawed legislation.

Unitary patents and the UPC

The introduction of new unitary patents and a new Unified Patent Court is likely to be unaffected by the outcome of the referendum other than perhaps the potential delay to ratification and possibly a perceived lack of appetite from patentees due to the loss of the UK from its coverage.

The system is currently scheduled tolaunch in early 2017. Unitary patents will offer protection to businesses for inventions across almost all of the EU, as currently planned, through a single patent application to the European Patent Office.

At the moment go-ahead for the UPC and therefore the commencement of the new system of unitary patents depends on UK ratification. Legislation has been prepared for this purpose.

However, if the UK votes to leave the EU then the UK will not be a participating country in the new unitary patent system. Participation in the new system is only open to EU member states. At an early stage of the negotiations, and following a decision of the Court of Justice of the EU (CJEU), the UPC Agreement was amended to exclude the participation of non-EU member states.

UK businesses should note, however, that even if the UK is not a participating member of the unitary patent and UPC framework, any European patents they hold in other EU countries could still potentially be drawn into the jurisdiction of the UPC unless expressly opted out.

As long as the UK is a member of the EU, its ratification is likely to remain mandatory in order for the UPC to proceed

One issue that remains a possibility is that the UK could move to ratify the UPC after the referendum and notification has been given to follow through on leaving the EU but before any formal exit. During this period of limbo the UK would still be classed as an EU country and so would not be precluded from being a participating member of the unitary patent and UPC framework. It seems unlikely that this path would be followed, though, in the event of a vote to leave.

The European Commission has also announced that it is planning to explore a new unitary SPC right. It is possible, as with the unitary patent, that this will be restricted to member states and would not extend to the UK.

The existing system of European patents would be unaffected if the UK left the EU unless it also resigned from theEPC. European patents are different from the new unitary patents that are proposed. European patents are registered at the European Patent Office but are only valid in an EU country where they are subsequently validated.

The system of national UK patents would also be unaffected if the UK left the EU.

Helen Cline is a patent and life sciences lawyer at Pinsent Masons, the law firm behind

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