News from Abroad: Court of Appeal Refers Questions on Specific Mechanism to Court of Justice of European Union

Merck Canada Inc and Merck Sharp & Dohme Ltd v Sigma Pharmaceuticals plc

Prior to their accession to the European Patent Convention, several states did not allow patent protection for pharmaceutical products.  To address this, a special derogation known as "The Specific Mechanism" was put in place.  This Specific Mechanism allows the holder of a patent or a supplementary protection certificate (SPC) for a pharmaceutical product filed at a time when such protection could not be obtained in a qualifying state to prevent importation and marketing of the product in member states where the product enjoys protection, even if the product was put on the market in the qualifying state for the first time by him or with his consent.  This mechanism also applied to the patentee's beneficiary.

Any person intending to import or market a pharmaceutical product has to demonstrate to the relevant national authority that one month's notification was given to the holder or his beneficiary before he can obtain the necessary notification.

Phama XLPharma XL (a company related to Sigma Pharmaceuticals) had given a notification to MSD BV (a company in the Merck group) relating to the importation of Merck's asthma product Singulair from Poland.  No reply was received and so Pharma XL applied for and received the necessary parallel importation license, after which Sigma began importing and selling Singulair.  It was only later that Merck wrote to Pharma XL, objecting to the importation and sale and claiming that such acts were infringements of the patent rights.

Various arguments were presented by Sigma at the first instance hearing, including that the derogation provisions are inapplicable unless and until the patent holder demonstrates his intention to exercise the option and that Merck was estopped from asserting its rights having failed to respond to the notification.  Merck argued that the notification was insufficient as it had not been sent by the parallel importation licence holder to the patent proprietor or his beneficiary.  The judge found in favour of Merck, and so Sigma appealed.

MSDThe Court of Appeal considered a number of issues during proceedings.  It was held that the lack of response was not a basis for estoppel, as the notification from Pharma XL did not impose on Merck a positive duty to respond.  Merck had no reason to be aware of Sigma's misunderstanding that it did not object to Singulair being on the market and there was no action by Merck that fostered this misunderstanding.  Further, there was no contractual obligation to respond to the notification and in general, taking no action does not prevent proceedings from being brought at a later date.

However, there were three issues on which a decision was not reached.  The first issue related to Sigma's argument that the derogation provisions are inapplicable if the patent holder does not demonstrate his intention to exercise the option.  Sigma referred to an earlier case (Generics and Harris v Smith Kline and French), which related to a similar derogation regarding importation from Spain and Portugal.  This decision emphasised that the proprietor "may rely on the rights granted by the patent" and that the "derogating provisions are therefore inapplicable unless the proprietor of the patent demonstrates his intention to exercise that option."  The Specific Mechanism was modelled on this previous derogation and so it was said to have the same essential meaning, which also explains the purpose of the notification requirement.

However, Merck highlighted that the wording does not oblige the patent holder to reply and suggested that the decision was not relevant, as it related to a patent open for licenses of right.  Further, Merck argued that a patent holder would always wish to assert his rights and so demonstrating intention should not be necessary.  The judge agreed with Merck's linguistic analysis of the derogation, but indicated that it should be considered in the light of the overall objectives (as outlined in the earlier case) and that such analysis did not explain the purpose of the notification requirement.  Further, there may be situations in which the patent holder would not object to parallel imports.  He therefore indicated his agreement with Sigma's arguments.

The second issue related to the identity of the person who sends the notification.  In this case, Sigma was the potential infringer, but Pharma XL sent the notification.  The judge indicated that he did not believe this to be problematic in this case, particularly as Sigma and Pharma XL are members of the same group of companies, with Pharma XL being in charge of regulatory affairs and Sigma dealing with imports.  Further, Pharma XL would be obliged to disclose the identity of the importer and so the proprietor could still have taken action.

The third issue related to the identity of the person to whom the notification was sent.  MSD BV was not the patent proprietor or his beneficiary, although it was a related company.  However, the individual to whom the notification was sent acted in patent matters for the group as a whole and so had the authority to assert the patent and had the notification been sent elsewhere, it would have been passed to this individual for a decision.  Further, 90% of the numerous notifications received a year are sent to this individual and are then acted upon.  The judge therefore suggested that there was a real issue as to the meaning of the term "beneficiary."

The Court of Appeal decided to refer the above three issues to the Court of Justice of the European Union, on the grounds that the law is not acte clair, that the Specific Mechanism has not been considered previously by the Court of Justice and  that it will continue to be relevant until 2019.  The parties have been invited to draft questions for the court's consideration.

This report comes from European Patent Attorneys at WP Thompson & Co., 55 Drury Lane, London UK.  Further details and commentary can be obtained from Gill Smaggasgale, a partner at the firm.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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