Advocate General explains Specific Mechanism for parallel imports of medicines

The Court of Appeal for England and Wales has brought a case before the EU Court of Justice (ECJ) in which it seeks guidance on the application of the Specific Mechanism for parallel imports of medicines coming from Member States which joined the EU in 2004 and 2007 (the New Member States). Advocate General Jääskinen delivered his Opinion in this case on 23 October 2014 (C-539/13, Merck Canada and Merck Sharp & Dohme) setting out his views on the questions raised.

Prior notification requirement

Under the general EU principle of exhaustion of intellectual property rights, products which have been placed on the EU market by the patent holder, or with his consent, can be freely resold in the EU and thus imported into another Member State. This principle of exhaustion allows the parallel importation of protected goods without the right holder's consent.

The Accession Treaties for the New Member States (except Cyprus and Malta) contain a derogation to this general rule in the form of the "Specific Mechanism" to account for the fact that these New Member States did not have the same level of patent protection prior to accession, especially with respect to pharmaceutical products.

The Specific Mechanism allows the holder of a patent or supplementary protection certificate (SPC) to stop parallel imports of patented products from any of the New Member States, even if these products have been marketed by him, or with his consent, in those New Member States. This derogation applies only where (i) the products still benefit from patent/SPC protection in the importing Member State; and (ii) no equivalent protection was available before accession in the exporting New Member State.

The Specific Mechanism requires the potential importer to notify the rights holder at least one month before the import licence is applied for.

Questions referred to the ECJ

A number of aspects of the Specific Mechanism, and in particular the prior notification system, are unclear and have been referred to the ECJ for a preliminary ruling. More specifically, the ECJ is to answer the following questions: (i) what are the legal consequences if the patent owner remains silent for more than one month after the notification?; (ii) who is required to notify; and (iii) to whom must the notification be given to be valid?

Facts underlying the case

Merck is patent and SPC holder for montelukast sodium, the active ingredient of a medicine sold under the Singulair brand for the treatment of asthma. MSD, a company in the Merck group, had been notified on several occasions of Sigma's intention to import Singulair from Poland into the UK. These notifications were sent by Pharma XL, an associated company of Sigma responsible for applying for parallel import authorisations for the Sigma group. These notifications did not specifically refer to Sigma, nor did they refer to any potential importer other than Pharma XL.

MSD did not react to any of these notifications as a result of an administrative oversight. Having received no response, Pharma XL applied for the necessary parallel import licences and Sigma started importing and selling the product in the UK. In December 2010, Merck wrote to Pharma XL objecting to the importation and asserting an infringement of its patent rights. Sigma immediately ceased all further sales of imports from Poland.

By that time, Sigma had already imported and sold in excess of £2 million of Singulair and was left with over £2 million of stock, most of which had been repackaged for the UK market. In June 2011, Merck brought legal proceedings in the UK against Sigma's alleged unlawful importation of its product, seeking inter alia damages and destruction of stock. These proceedings have been suspended pending the ruling of the ECJ.

Advocate General Opinion

Ahead of the ECJ's judgment in this case, the Advocate General has issued his Opinion in which he suggests the following replies to the three questions.

• Legal consequences of patent owner's silence

Merck argued that imports of protected products from New Member States should be treated in the same way as imports from third countries. Accordingly, a patent owner should be entitled to enforce its intellectual property rights, even retroactively, and without having to notify importers of its intention to take legal action.

The Advocate General disagrees with Merck's broad reading of the Specific Mechanism on the basis that it would give the patent owner more protection than normally available and would harm the legitimate interests and expectations of potential parallel importers.

He concludes instead that the patent owner's right to prevent parallel imports under the Specific Mechanism is not automatic. Accordingly, if the duly notified patent owner fails to react promptly, i.e. within one month, the importer may lawfully commence importing.

This does not mean that the patent owner completely forfeits his property rights if he does not react with one month. Also, after the expiry of the one-month period, the patent holder can invoke the Specific Mechanism and notify the parallel importer thereof. This will however only prevent parallel imports occurring after the importer has been notified of the data owner's opposition. Previous imports will remain valid.

• Who is required to notify the patent owner?

Merck asserted in the UK proceedings that Sigma, being the actual parallel importer, rather than Pharma XL, should have notified Merck of its intention to import.

The Advocate General disagrees and considers that the notification may be performed by someone other than the potential importer, as long as the identity of the potential importer is clear in the notification.

• To whom must the notification be given?

Merck contended that the notification should be addressed to the patent owner who had the right to sue for patent infringement and that MSD had no such right at the time.

The Advocate General notes that, under EU law, the notification should be addressed directly to the person or entity entitled to take action under national law to enforce the patent or SPC. This would limit the group of potential addressees to the patent/SPC owner or his exclusive licensee. The Advocate General points out that this should not impose an unreasonably difficult task on the potential importer, since the identity of the rights holder can be found in public patent registers.

Nevertheless, the Opinion also acknowledges that civil law rules on legal representation and agency in some Member States, such as the UK, may make it possible in some instances to validly address the notification to an entity linked to the patent holder (e.g. belonging to the same group) where the actions of the latter create the legitimate expectation that the entity is his legal representative.

Comments

The judgment of the ECJ is still to be handed down. It remains to be seen whether the ECJ will follow the Advocate General's proposed answers which attempt to strike a balance between the patent owner's fundamental right to property and the parallel importer's need for legal certainty. Either way, the ECJ's ruling will bring much needed clarification to companies which frequently have to apply the Specific Mechanism.

Please click on the links below for the other articles in the November 2014 EU life sciences and regulatory newsletter:

• Simplified authorisation procedure applies to double importation of plant protection products
• ECJ confirms "well-established use" medicine can serve as reference product
• ECJ concludes EU Commission respected the limits of its implementing powers
• EU General Court annuls ECHA decision imposing manifestly disproportionate administrative charge
• EU Commission interpretation of extended market exclusivity for non-patented orphan medicine cannot be challenged in court
• New actions before the EU Courts