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European Commission publishes study on options for a unified SPC system

The European Commission has published a new study from the Max Planck Institute on EU plans to create a unified procedure for granting supplementary protection certificates (SPCs).

SPCs are intellectual property rights that extend patent protection by up to a maximum of five years for specific medicinal and plant protection products. Under the EU’s current SPC Regulation, SPCs can only be granted if, in the EU country in which the application is submitted, the product is "protected by a basic patent in force" and market authorisation has been issued to place that product on the market as a medicinal product. While the EU SPC Regulation provides for harmonised framework for granting SPCs, SPCs are national rights which must be registered in individual EU member states for them to have effect there.

Problems with the SPC Regulation

In 2018, the Commission published a study from the Max Planck Institute on legal aspects of the SPC system which identified issues with the current framework and made a number of recommendations. This led the EU to amend the SPC Regulation in 2019 to introduce an SPC manufacturing waiver for manufacturers of generic or biosimilar medicines. The waiver allowed them to manufacture products in the EU during the term of the SPC for export to countries outside the EU or to launch in the EU immediately after expiry of the SPC.

Then, in November 2020, together with its IP Action Plan and pharmaceutical strategy for Europe, the Commission published an evaluation of the SPC Regulation, which found that it is still too fragmented and lacks transparency. The Commission said that the fact that SPCs are administered nationally “undermines the effectiveness and efficiency of the SPC system”, and highlighted diverging national approaches in examining SPCs and interpreting the legislation.  The Commission found this resulted in inconsistent decisions across Europe in relation to grant of SPCs applied for for the same pharmaceutical product, culminating in multiple referrals to the Court of Justice of the European Union (CJEU).

Proposed changes to the SPC Regulation

In November 2021, the European parliament adopted a resolution on the Commission’s IP Action Plan in which it called on the Commission and member states to create a unitary SPC title “as a logical extension” of the unitary patent protection. It called on the Commission to consider a possible extension of the mandate of the European Patent Office (EPO) to examine and grant such unitary SPCs, and to take measures to address the fragmentated implementation of the SPC Regulation in the EU.

As a result, earlier this year, the Commission opened a call for evidence for an impact assessment on proposals for a unitary SPC and/or a unified procedure for granting national SPCs that would make SPCs “more accessible and efficient”, with the aim of adopting a proposal for legislative changes by the end of 2022.

In its call for evidence, the Commission set out a number of different policy options, including no change to the current regime and the adoption of guidelines based on the best practices of national patent offices and the case law of the CJEU. It also suggested both the adoption of targeted amendments to the substantive rules of the SPC Regulation, or the creation of a centralised SPC system consisting in a single SPC right covering all EU member states – known as a ‘unitary SPC’. Further options included a unified procedure for granting bundles of national SPCs or a combination of a unified procedure and a unitary SPC.

Max Planck Institute study

In this context, the Commission tasked the Max Planck Institute with conducting a second study, on options for a unified SPC system. Completed in 2021, the study has only recently been published by the Commission. The fact-finding process included consultations, interviews and meetings with national patent offices and selected stakeholders, such as trade bodies for the European pharmaceutical industry (EFPIA and Medicines for Europe).

Focus on a centralised examination and grant

The institute’s research focused on the “feasibility and features” of a possible single procedure for granting bundles of national SPCs, but not on a potential unitary SPC as an accessory right based on unitary patents. It said that the introduction of a unitary SPC would have several drawbacks, including the fact that it would need to be tied to the unitary patent package (UPP) while its entry into force was still uncertain and would exclude EU member states which did not join the unified patent system. The former point is, however, unlikely to present an issue since the UPP and Unified Patent Court (UPC) is now expected to become operational in early 2023, with the Presidium and initial pool of judges having recently been appointed.   .

Three models for regional integration

The study aims to develop models for examining or granting SPCs on the basis of any national or European patent – with or without unitary effect – which could interact with the UPC but would not be dependent on its existence. This would integrate countries which did not join the unified patent system – namely Spain, Poland and Croatia.

According to the study, any model would also need to address the issues around the fragmented implementation of the SPC Regulation while maintaining the current balance, and must not simply result in an “additional avenue for obtaining protection”. The model should also not cause a “lowering of the standard of eligibility for an SPC existing in the strictest jurisdictions to the detriment of generic competition and associated public interests,” the institute said.

In the first model, known as the ‘PCT model’, a single authority would receive and examine SPC applications, but the decision to grant or reject the application would stay with national patent offices. In an alternative version of this model, the single authority would issue opinions on the grant or rejection which would be binding on national patent offices. In each case, this would result in national SPC rights as they exist today.

In a second model, referred to as the ‘EPC model’, a central authority would receive and examine SPC applications and decide on grant or rejection. During a transitional period, if the basic patent is a classic European patent, applicants would have the option between applying for a bundle of European SPCs, applying for unitary SPC or a mix of both. This would be the case unless the basic patent is a unitary patent in which case only a unitary SPC would be available for countries covered by the unitary patent. After the transitional period, only unitary SPCs would be available.

In a third model, the SPC system would be fully unified, and a central authority would receive and examine applications and grant unitary SPCs, with a centralised jurisdiction being competent for infringement and revocation actions. The study focuses on the PCT model and EPC model but notes that both could be a first step towards a fully unified model.

Establishing a central authority

The study also sets out different options for how the single or central authority could be established. It suggests that it could be formed as a virtual body – with national patent offices performing the functions of a regional office – or as an international organisation like the EPO, or as an EU agency such as the European Union Intellectual Property Office (EUIPO), which currently only deals with trade marks and designs but not patents or SPCs. The study recommends the latter, with a structure similar to that of the Committee for Medicinal Products for Human Use (CHMP) that includes representatives from each national agency. Each representative would have a right to vote on each regional application and the ability to draft a dissenting opinion.

The choice made on how the authority is established would have consequences on judicial review, at least in an EPC model. If the central body is an EU agency, for example, appeals against refusals or other decisions from the agency would have to be directed to the General Court – potentially with a new, specialised, chamber – with the CJEU serving as the final instance on points of law. However, the study also recommends establishing a board of appeal within the agency that is competent to examine the applications before any appeal can be lodged with the General Court.

While it may help to avoid several complex legal hurdles, entrusting an EU agency – rather than the EPO – with the authority to grant SPCs, would not be a perfect solution. For one thing, it would mean that the General Court, which currently has no expertise on patent or SPC matters, was competent for judicial review, rather than the UPC. After all, the UPC was created as a specialised body for dealing with European patents and SPCs.

While the UPC would still retain jurisdiction to hear infringement and validity cases for SPCs granted centrally and which are based on European patents, it seems more natural for the UPC to also be competent for the judicial review of the administrative decisions of a central SPC body. In addition, offering three stages of appeal – the board of appeal, the General Court and the CJEU on points of law, with cases potentially remitted to the General Court – does not seem compatible with the relatively short duration of SPCs and may create additional uncertainty.

Increased participation of third parties

The study also recommends increased participation for third parties, which are currently not able to intervene in the application and grant process in most European jurisdictions. The study suggests allowing third parties to file observations during the examination, with an obligation for examiners to consider them and address them in their decisions. In the EPC model, the study also recommends letting any third-party to file post-grant oppositions, thereby allowing a ‘central attack’ against SPCs granted through the centralised procedure, with no deadline for doing so.

This would mark a major change to the current system in most EU countries. While it is designed to ensure that the system is balanced, it has the potential to discourage SPC applicants from using the centralised route. One way to address this would be to close the national route and make the centralised route mandatory – but this is not what the study proposes.

Another issue with post-grant oppositions is that SPCs have a relatively short duration and the length of time required for opposition proceedings and appeals may not be compatible with the need for third parties to have commercial certainty in advance expiry of the basic patent. Another option would be to have pre-grant oppositions, with strict, mandatory, timelines to ensure early certainty for all parties.

More modest proposals

The study also concluded that even a more modest reform, with a PCT model where a central body only examines regional applications and prepares an opinion on eligibility for an SPC while national patent offices decide whether to grant or refuse the certificate “would still be an improvement over the status quo” and could lead to a “more consistent approach for the grant/refusal of SPCs”.

The study does not recommend substantive amendments to the legislation or suggest that guidelines from the Commission would be an appropriate solution. This is encouraging as these options are viewed by many in the industry as having the potential to create more uncertainty and lead to new issues rather than solving the existing ones. Nevertheless, a more streamlined process for granting SPCs should help to reduce diverging practices and decisions, providing greater commercial certainty for manufacturers of medicinal products.

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