European Union

Intellectual Property Protection

Working Requirements

The European Court of Justice has interpreted the working requirement to avoid the threat of compulsory licensing for pharmaceutical patents to signify manufacture within the Union. For third parties outside the Union, working requirements remain a significant issue in the manufacturing of a pharmaceutical.

The move towards an EU working requirement for compulsory licensing to replace individual national requirements, while preferable to the existing situation, could discriminate against US and other companies that manufacture products outside the Union if the working requirements are satisfied only by products manufactured within the Union. It is not possible to provide a reliable current estimate of the potential market size for PhRMA member companies in the European Union, if current barriers for "working requirements" were removed.

Single Trademark Policy

The European Commission (EC), supported by the European Medicines Evaluation Agency (EMEA), has taken the position that only a single trademark will be approved for use in connection with each product for which marketing authorization is granted under the centralized procedure. Therefore, applicants should submit a trademark which is valid throughout the Community.

As a result, the process of approval under the centralized procedure would hinge on the clearance of a single trademark throughout the Community, a factor which has no relationship to the safety, effectiveness or quality of a product. In effect, a fourth hurdle to marketing has been imposed and products undergoing the centralized procedure would be discriminated against, as no equivalent obstacle to approval would be raised under the decentralized or national procedures.

PhRMA strongly disagrees with the position taken with respect to a single trademark, and has drawn attention to the fact that there is no basis in Community law to support such a requirement. Instead, there is reason to conclude that such a requirement would, in fact, run counter to Community law and decisions taken by the Council of Ministers and the European Parliament. It may also violate the trademark section of the Trade Related Intellectual Property (TRIPs) provisions of the World Trade Agreement.

The Commission position is also inconsistent with policies on trademarks enunciated by the Council and the European Court of Justice (ECJ). The Community Trademark Regulation does not preclude multiple Community trademarks for the same product, and it preserves the right to seek separate national registrations rather than a Community registration. The ECJ has recognized that producers of medicinal products may have legitimate reasons to use different trademarks for the same product in different Member States. When there is evidence that multiple trademarks have been used to create obstacles to free movement of goods, the court will permit parallel imports that would otherwise infringe national trademarks.

Potential Exports/Foreign Sales

The immediate impact of the policy is to force companies to pay a registration fee of Ecu 140,000 for each application, including duplicate applications for a second trademark. And these files will require no additional evaluation whatsoever. It is not possible to provide a reliable estimate of the potential market effect for PhRMA member companies in the European Union if their costly high tech and biotech products are denied approval under the current policy.

Parallel Trade - Exhaustion of Rights

In 1981, the European Court of Justice (ECJ) issued a controversial interpretation of the doctrine of exhaustion of patent rights. The ECJ stated that if a product was placed on a market in a Member State where patent protection was not recognized, then the patent holder by that act would exhaust its patent rights with respect to that product in all other Member States. This decision was recognized as inherently unfair in that it penalized the innovator and rewarded the copier in such cases. The EJC is presently preparing a decision in a new parallel trade case, which may either reverse or confirm the 1981 ruling.

At the time of accession in 1986, Spain did not provide patent protection for pharmaceutical products. Bearing in mind the ECJ ruling, the European Commission opened the accession negotiations with a 20-year pipeline proposal, from the date of introduction of product patent protection in Spain. The 20-year proposal was eventually negotiated to three years by Spain.

As finally negotiated, Article 47 of the Spanish Accession Act prohibited cross-border trade from Spain in pharmaceutical products still under patent in other member states. The prohibition was to expire three years from the date that product patent protection was introduced in Spain. A product patent law was introduced in October 1992 and the restrictions on cross-border trade were set to expire three years later which, in the Commission's interpretation, meant December 31, 1995. Applications by six countries for an extension of the ban were turned down by the Commission.

Since January 1, 1996, the removal of the intellectual property protection granted through the ban by Article 47 is causing companies to lose patent rights in other Member States for products already marketed in Spain, and for new products marketed in other countries which are awaiting introduction in Spain.

Potential Exports/Foreign Sales

As to products already on the Spanish market, patent rights in other Member States are exhausted as of January 1, 1996. The volume of parallel trade from Spain to markets with patent protection which has taken place since January 1, 1996, has not been assessed yet. At worst, it could equal the combined sale in Spain for 12 U.S. research-based companies surveyed (about $800 million).

The same can be said of patented products now on the market in other Member States which have not as yet been introduced in Spain. These products are past the stage where a patent application could be filed in Spain. The very act of placing these products on the market in Spain will prompt the exhaustion of patent rights as to these products in other member states. Cross-border trade from Spain will then commence into the former patent protected markets.

The devastating aspect of cross-border trade from Spain for innovative products, especially those new to the market in that country, is the local national price control system. It has forced down prices to the bottom of price levels in the European Union. Upon market entry, a new innovative product is given a sales price by the government that is pegged to prices of other products in the same therapeutic category. Since the reference products are old marketed copies, the price given the new, innovative product may be the same as or lower than a commodity off-patent product.