Singulair and the Specific Mechanism for accession states: some questions for the CJEU

Merck Canada Inc and another v Sigma Pharmaceuticals plc [2013] EWCA Civ 326 is yet another SPC-flavoured case to go to the Court of Justice of the European Union (CJEU) -- but it's quite different from the rest.  It involves the "Specific Mechanism".

In short, in 2004 a number of new Member States (the 'accession states') joined the European Union. Some of those states had not historically permitted the patenting of pharmaceutical products. By 2004, such patents were permitted, but there remained a number of cases where patents or supplementary protection certificates had been granted in other Member States for pharmaceutical products at a time when no such protection had been available in one or more of the accession states. Accordingly, a special derogation from the normal free movement rules was negotiated as part of the accession arrangements.

This derogation, known as the 'Specific Mechanism', was appended to the Act of Accession. It permitted the owner of a pharma patent or SPC to prevent the parallel importation of the patented product from one of the accession states if, at the time of filing, such protection was unavailable in that accession state. It also anyone who intended to import such a product to demonstrate to the relevant national authority that he had given notice of that intention to the holder or beneficiary of the protection.

Merck Canada, which was incorporated in Canada, was the registered proprietor of apatent and SPC for montelukast sodium, an active ingredient in a product called 'Singulair'. The second claimant, Merck Sharp Dohme, was a UK company and its exclusive licensee. Merck filed for protection when montelukast sodium could not be patented in Poland.

Sigma, a parallel importer of pharma products into the United Kingdom. In June 2009 Pharma XL, an associated company of Sigma that was responsible for applying for parallel import authorisations for the Sigma group of companies, sent a letter to Merck Sharp Dohme which stated that it intended to import Singulair into the UK from Poland. This letter referred to the Specific Mechanism and asked whether there were any objections to importation. Merck Sharp Dohme did not respond. In September 2009 PXL applied to the Medicines and Health Regulatory Agency (MHRA) for parallel importation licences. This application required confirmation that either the Specific Mechanism did not apply or that one months’ prior notification had been given to the patent holder. Pharma XL indicated that one months’ notice had been given. In May 2010 the MHRA granted Pharma XL a licence in respect of the 5mg dose of Singulair. In June and July, Pharma XL wrote to Merck Sharp Dohme, saying it planned to import Singulair from Poland and enclosed copies of the intended representation of the repackaged products. Again Merck Sharp Dohme did not respond, so Sigma began to import 5mg Singulair. In September, Pharma XL was granted a second licence in respect of the 10mg dose. Pharma XL wrote two further notification letters to Merck Sharp Dohme in respect of the 10mg dosage, but again there was no response, so Sigma began to import the 10mg form of Singulair too.

In December, Merck Canada wrote to Pharma XL objecting to the importation of Singulair under the specific mechanism and asserting that its patent had been infringed. Sigma stopped its activity, but Merck Canada nonetheless sued for infringement of both the patent and the SPC.

Sigma's primary defence was that the Specific Mechanism merely conferred upon a patent holder the option of preventing imports: the derogating provisions were inapplicable unless and until the patent holder demonstrated his intention to exercise that option -- which did not happen till December 2010. In any event, having failed to respond to the letters from Pharma XL, Merck Canada was estopped from asserting its rights.

When the case came before the Patents County Court, Judge Birss QC rejected both these defences. In his view, the Specific Mechanism did not require the patent holder to demonstrate his intention to oppose importation before that activity was rendered an infringement -- and he declined to refer any issue concerning the proper interpretation of the Specific Mechanism to the CJEU. Also, he found on the facts that Merck Canada was not estopped from relying on its patent rights. He granted an injunction and ordered Sigma to deliver up its unsold stocks of Singular. Sigma appealed.

The Court of Appeal for England and Wales (Lord Justice Patten, Lady Justice Black and Lord Justice Kitchin) upheld the trial judge's decision relating to estoppel: this was because there was no suggestion that Merck Canada had been, or ought to have been, aware of Sigma's existing state of mind and, in particular, the misunderstanding which Sigma had already formed as to Merck Canada's attitude to the importation of patented pharmaceutical products from Poland. There was no pre-existing relationship, contractual or otherwise, that could have imposed a duty on Merck to respond to Pharma XL's letters and Merck Canada had not acted unconscionably in delaying its decision to bring proceedings within the legal time limit.

The Court of Appeal also agreed that Judge Birss QC was right to make the order for delivery up, on the basis that his finding of infringement had been correct.

However, this action raised three groups of questions that concerned the proper interpretation of the specific mechanism.  These had to be answered by the CJEU before the Court of Appeal could decide the appeal.  As Lord Justice Kitchin, giving judgment for the Court, explained:

1. Under Article 267 of the TFEU this court may submit a request to the Court of Justice for a ruling on a question concerning the interpretation of a rule of EU law if it considers it necessary to do so in order to resolve a dispute before it. In my judgment this case raises three groups of questions concerning the proper interpretation of the Specific Mechanism which must be answered for this court to decide this appeal.
   


2. The first concerns the conditions which must be satisfied before a patent holder may bring infringement proceedings under the Specific Mechanism and, in particular, whether the derogation confers upon the patent holder an option of preventing imports falling in its scope; and whether the derogation is inapplicable unless and until the patent holder demonstrates his intention to exercise that option.
   


3. The second concerns the identity of the person who must give the notice under the second paragraph of the Specific Mechanism and, in particular, whether a notification is compliant if it is given by an applicant for regulatory approval in the Member State into which the products are to be imported; and whether it makes any difference if the notification is given and the application for regulatory approval is made by one legal entity within a group of companies which form a single economic unit, and the acts of importation are to be carried out by another legal entity within that group under licence from the first legal entity.
   


4. The third concerns the identity of the person to whom the notice must be given under the second paragraph of the Specific Mechanism and, in particular, whether, in a case where a group of companies form a single economic unit comprising a number of legal entities, it is sufficient if the notification is addressed to a legal entity which is the operating subsidiary and marketing authorisation holder in the Member State of importation rather than the entity within the group which has legal ownership of or an exclusive licence under the patent. A subsidiary question also arises as to whether a notification which is otherwise compliant is rendered non-compliant if it is addressed to the "the Manager, Regulatory Affairs".
   


5. I recognise that this court is not obliged to make a reference but I believe it is appropriate to do so for the following reasons. First, these questions are not acte clair. Second, the Specific Mechanism has not yet been considered by the Court of Justice and, although its Iberian predecessor was considered by the Court in Case C-191/90 Generics and Harris Pharmaceuticals, there is uncertainty as to how the decision of the Court in that case should be understood. Finally, the parties helpfully provided to us after the hearing an agreed table which shows that the Specific Mechanism will continue to be relevant until 2019. In all these circumstances I believe it to be desirable that the questions raised in this case are answered authoritatively as soon as possible.
   


6. I would therefore make a reference to the Court of Justice for a preliminary ruling on each of the three groups of questions posed at [97], [98] and [99] above. They are currently formulated in general terms on the basis of questions originally proposed by Sigma. We have not had the benefit of any comments from Merck. Accordingly, I would invite the parties to consider them further in the light of this judgment and to propose draft questions and a draft reference for our consideration.

The SPC Blog awaits the questions with keen interest.