Negative term SPCs: judgment now available

Further to today's earlier post, here is the judgment of the Court of Justice in Case C-125/10 Merck Sharp & Dohme Corp v Deutsches Patent- und Markenamt.  It is surprisingly short, being just 46 paragraphs in length.  The active part of the decision reads as follows:

Article 13 of Council Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protection certificate for medicinal products, as amended by Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006, read in conjunction with Article 36 of Regulation No 1901/2006, must be interpreted as meaning that medicinal products can be the object of the grant of a supplementary protection certificate where the period that has elapsed between the date of lodging the basic patent application and the first marketing authorisation in the European Union is less than five years. In such a case, the period of the paediatric extension provided for by the latter regulation starts to run from the date determined by deducting from the patent expiry date the difference between five years and the duration of the period which elapsed between the lodging of the patent application and the grant of the first marketing authorisation.

Court of Justice gives go-ahead to negative term SPCs

The Court of Justice of the European Union gave its ruling this morning in Case C-125/10 Merck Sharp & Dohme Corporation. Infuriatingly, the recently-redesigned Curia website hasn't yet managed to make the ruling accessible -- but The SPC Blog has received the following information from Hogan Lovells LLP, which successfully represented Merck & Co. in these proceedings.  According to the Hogan Lovells media release, the Court of Justice has it ruled that negative term supplementary patent certificates (SPCs) are permissible:

" ... The decision means the SPC protection for the diabetes drug Januvia can be extended by two and a half months until mid-September 2022. This extension would reward Merck’s efforts to research and provide valuable information on the effects of Januvia in the child population. 

The issue came to the fore in 2007 when Merck applied for a negative SPC extension for Januvia in several EU countries. Januvia is Merck's registered trade mark for the active ingredient sitagliptin. 

Bulgaria, the Netherlands, and the United Kingdom granted negative term SPCs; Greece granted a zero term SPC; various other states, including Germany, refused to grant any SPC at all. 

In Germany Merck took its case against the national patent office to the Federal Patent Court, which referred the matter to the CJEU, asking whether it is permissible to grant negative or zero term SPCs. Merck was represented before the CJEU by Dr. Andreas von Falck and Miriam Gundt of Hogan Lovells' Dusseldorf office, and by Dr. Monica Heinemann of patent attorney firm Abitz & Partner. 

... In 2006 a six month extension to the SPC term was introduced to incentivize innovators to investigate and report on whether their products are suitable for use in the pediatric population. Prior to the introduction of this incentive, many products were used to treat the pediatric population without having been studied or authorized for such use ...

A negative term SPC, as the name suggests, offers a negative term of SPC protection after patent expiry because the period between filing the patent and wining marketing authorisation is less than five years. 

The value of a negative term SPC is that it forms the basis for an SPC extension of up to six months to reward studies of the medicine in the pediatric population ...".

The SPC Blog expects the judgment to be accessible here once it materialises online. At present all that is available is the Advocate General's Opinion, discussed on The SPC Blog here and indeed elsewhere.

That Merck Opinion: a handy note

The official English text of Advocate General Bot's Opinion in Case C-125/10 (briefly noted here by The SPC Blog) only become available this week, as our readers will know, and the Dutch duo of Tjibbe Douma and Gertjan Kuipers (De Brauw Blackstone Westbroek N.V.) were swift to pounce on it. Their explanation, entitled "AG's opinion in Merck C-125/10: zero/negative term: SPC may be granted in light of possibility to obtain a paediatric extension", goes like this:

"Advocate General Bot has delivered his opinion on a matter that has caused disharmony in Europe: zero/negative term SPCs. The Advocate General concluded in his opinion that a negative term SPC should indeed be granted. He further addressed an equally interesting point on the commencement date of the paediatric extension.

Why do pharmaceutical companies request a negative term SPC? 

Supplementary Protection Certificates ("SPCs") are intended to compensate pharmaceutical companies for the loss of effective patent term caused by the delay in getting regulatory approval. SPCs have a negative term if this delay is less than five years. At the time the first SPC Regulation (1768/92) came in effect, a negative term SPC was fruitless and thus not applied for.

The Paediatric Regulation (1901/2006) introduced a six-month paediatric extension of the SPC. The rationale being - among others - to promote research in the paediatric population. To obtain a paediatric extension an SPC already granted is required. After the introduction of the Paediatric Regulation, requests for SPCs were filed by pharmaceutical companies in the understanding that a negative or zero term SPC might prove useful if a paediatric extension could be obtained. The reason for this is that every day of supplementary protection after the expiry of the patent can be highly beneficial for its proprietor.

Current disharmony in Europe 

In the Merck sitagliptin case, Merck applied for an SPC throughout Europe. This resulted in different decisions, including the grant of a negative term SPC in the UK and the Netherlands. In Greece Merck was granted a zero term SPC because it was believed a negative term was not possible and should be rounded up to zero. In Germany the SPC was refused as it would have a negative term. Merck appealed this decision to the Bundespatentgericht which then referred a question to the Court of Justice of the European Union ("CJEU").

Question referred to CJEU 

In the Merck Sharp & Dohme Corp. v. Deutsches Patent- und Markenamt C-125/10 case, the CJEU has to answer the question whether an SPC can be granted if it would not result in a positive term. This question was referred in light of the possibility to obtain a paediatric extension which would result in effective supplementary protection. Further, the Bundespatentgericht addressed the issue of the duration of such an SPC: should it be a negative term or rounded up to zero. However, this particular question was not referred to the CJEU.

Advocate General Bot rendered his opinion on 9 June 2011. Although not binding, such opinion is more often than not followed by the CJEU.

Why are negative or zero term SPCs allowed in the opinion of the AG 

The Advocate General concluded that it should be possible to obtain a negative or zero term SPC because – in short – (i) the SPC Regulation and the Paediatric Regulation do not require a positive term SPC, (ii) not allowing it could result in attempts to delay the marketing authorisation process which delay could harm public health, (iii) SPCs which, when extended, result in a positive term serve a useful purpose, and (iv) it would serve the objective of the Paediatric Regulation.

When should the paediatric extension commence? 

Further, the Advocate General took the view that it should also be specified when the six-month paediatric extension would commence, even though a question in this respect was not specifically referred to the CJEU. The issue was if the extension should start on (i) the date determined on the basis of the negative term of the SPC, or (ii) the date on which the patent expires (and thus rounding up the negative term of the SPC to zero).

The effect of a decision in this respect is as significant as the question actually referred to the CJEU. In the first case only an SPC with a negative term up to six months could benefit from a paediatric extension as the resulting term would be positive. In the second case, however, every proprietor of a patent with an SPC could benefit from a six-month paediatric extension, regardless of the time it took to obtain the marketing authorisation.

The Advocate General stated that on the basis of the SPC Regulation and the Paediatric Regulation, the maximum period of marketing exclusivity is 15 years and six months. Allowing a commencement date on the date of expiry of the patent could result in a total period of protection that would exceed that maximum. This would, according to the Advocate General, not be in conformity with the SCP Regulation. Therefore, he concluded that the negative term SPC should not be rounded up and thus a paediatric extension should commence on the date determined in accordance with the negative term SPC (i.e. prior to patent expiry). Specific to the Merck case: the SPC would have a protection period of minus three months and 14 days, adding the paediatric extension would result in a protection period of two months and 16 days following the expiry of the patent protection.

Practical significance 

This opinion could have far-reaching consequences if it were to be followed by the CJEU. Innovative pharmaceutical companies can benefit from paediatric extensions of their SPCs even when the SPC itself is not beneficial.

Further, it is currently unclear if the CJEU will limit its decision to the question referred by the Bundespatentgericht, or render a decision on the issue of the commencement date of the paediatric extension. If the CJEU does not decide on the issue, we will probably see a disharmonious European legal landscape or a new question referred to the CJEU.

If the CJEU does decide on the issue, it could go even further than the AG's opinion by concluding that the paediatric extension should commence on the date of expiry of the patent protection. An argument in favour of that position would be that this would best serve the objective of the Paediatric Regulation. The SPC is granted to compensate for delay in obtaining a marketing authorisation. A paediatric extension is, however, among others granted to serve as an incentive to do research on the paediatric population. Because of the different rationale and to meet the objective of the Paediatric Regulation, it could be argued that the commencement date of the paediatric extension is separate from the term of the SPC.

Overall it can be said that the AG's opinion is positive for both the innovative pharmaceutical industry and the paediatric population. Pharmaceutical companies should file for SPCs and apply for paediatric extensions as long as the combination could result in supplementary protection".

AG's Opinion in Merck: what's your opinion?

Last week's Opinion of the Advocate General in Case C-125/10 Merck (noted briefly here on The SPC Blog) is still not available in English, but that does not mean that the English have not been commenting on it.  Via media releases this blog has received two opinions from the local profession:

* Maria Isabel Manley (Head of Bristows’ Regulatory Practice)

“So far the approach to negative/zero SPCs has been very fragmented across the EU and, in this sense, the AG’s opinion is to be welcomed by the innovative pharmaceutical industry. For the first time, the CJEU will have the opportunity to look into this crucial area of negative SPCs and to harmonise the contradictory national interpretations. It will be great news for the industry if the CJEU decides to follow the AG’s opinion (which is usually the case) and rules in favour of the grant of SPCs with a negative term.

This outcome will also be beneficial to the paediatric population as there is no doubt that it will encourage bio/pharma companies to invest in the conduct of paediatric studies. Indeed, the reward consisting of a 6-month extension to the SPC is an absolutely necessary incentive, as it will assist in partially recouping the investment made by the industry in generating the paediatric data which is so important to the paediatric population.”

* Gareth Williams (Partner, Marks & Clerk LLP)

“This is a slightly surprising Opinion, given that the notion of a negative term right goes against legal convention in general. However the Advocate General’s logic makes good sense, and this solution is in both the commercial and public interest in this particular case. The whole point of the Paediatric Extension is to incentivise R&D into drugs for use with children. This aim is compromised if we punish companies for marketing to children simply because the adult version of their drug went through marketing approval quickly, which is what would happen if we were to insist that SPCs should have a positive term. On the other hand, the Advocate General is right to reject zero term SPCs as compromising the public interest, as this approach incentivises companies to delay marketing approval for their products in order to get the extra six months protection, effectively encouraging companies to withhold treatments from the needy. 

Importantly, Europe needs a harmonious approach, and the ECJ ruling – if it follows today’s Opinion – will provide the basis for that. 

However, the concept of a negative term SPC is still rather odd, and one wonders whether this whole issue wouldn’t be better dealt with by simply separating the two rights, so that Paediatric Extensions can be applied for separately without having to be bolted onto an existing SPC.”

This weblog would be delighted to hear what other comments have been received, including from different countries and industrial sectors around Europe and beyond.  Do let us know.

Incidentally, voting was close in the opinion poll: 26 respondents said "yes", there could be negative term SPCs; 25 said "no" and a very small number answered "it all depends".

Negative term SPC duration: a business intelligence consultant's perspective

Martin Paltnoi (Principal Consultant, Martin Paltnoi Associates) has written to The SPC Blog with the following observations:

"As a business intelligence consultant covering pharmaceuticals in general and patents in particular I have been following the SPC situation since its inception in 1993. Also in my capacity as joint editor of Pharma Patent Bulletin,  reporting in that journal on SPCs on a regular basis, I have obviously noticed the existence of negative SPC duration.

This phenomenon has been incurred through the existence of the paediatric investigation plans (PIP) through the Paediatric Use Marketing Authorisation (PUMA). This has evoked raised eyebrows and objections, the latest coming from Greg Perry, the EGA's Director General,  who is quite naturally concerned about giving more exclusivity to originators and thereby holding up access to generic activity. In the EGA's press release "Better Patents Make Better Medicines..." it was stated that "zero or negative term SPCs should not be extended".

This prompted me to look a little closer into the whole matter. It must be understood that the extra exclusivity time allowed was as an incentive and/or reward to conduct more work on paediatric medicines. This reward was to be by adding extra time (six months) to the SPC, but is this the right way? We have seen that there have been those originators whose patents give more than the minimum fifteen years exclusivity and thereby do not qualify for an SPC. But should they be excluded from qualifying for the extra six months for extra paediatric work? I suggest not. The way this has been dealt with is to allow negative duration SPCs.

Should the argument against negative SPCs be successful, this could have a negative effect. If there is no reward there will be no activity, which would be contrary to the objectives of PUMA. On the other hand, should these objections be noted by the European Commission's pharmaceutical sector enquiry, one possible outcome is that the extra six months be allowed either on the SPC or patent, whichever has the later expiry. This would definitely be against the intentions of the EGA, but would be more realistic as a means of rewarding paediatric product development".

The SPC Blog invites readers' comments, which may be posted below.

EGA opposes zero- and negative-term SPCs

The European Generic Medicines Association (EGA) issued a press release late last week under the heading "Better Patents Make Better MedicInes/ Improved Efficiency of the European Patent System Would Stimulate Innovation and Competition in the Pharmaceutical Sector". This press release reported on the opening speech of EGA's DG Greg Perry, at the 5th EGA Legal Affairs Forum, highlighting the generic medicines industry’s role in European healthcare and warning of increasing hurdles to competition and real innovation if the European patent system is not reformed. Perry welcomed welcoming the European Commission's pharmaceutical sector inquiry, supported initiatives to improve patent quality and urged the tightening of rules for filing divisional applications.

On SPCs the press release had this to say:

"A lengthy discussion on Supplementary Protection Certificates also took place during the day’s proceedings. The possibility of modifying the Regulation on Paediatric Medicines was raised in order to clarify that a paediatric extension should not be granted when there is no SPC granted with a positive term. Mr Perry stated “that zero or negative term SPCs should not be extended”".

Sitagliptin - NL - negative term

The SPC Blog recently reported the Netherland Patent Office's positive decision to grant an SPC for Sitagliptin. On that occasion, the Blog noted that a zero-term SPC was granted. However, after a more detailed look at the register (and the decision - the Blog isn't fluent in Dutch), it appears that the Netherland Patent Office granted an negative term SPC. So the score is now 2:3:1 (negative term SPC - UK and NL; rejected - PT, SI, DE; zero term SPC - GR) .

Let's see how the other patent offices decide.

Recent publication

The most recent issue of the Bio-Science Law Review (BSLR, published six times a year by Lawtext Publishing) carries a short note by Taylor Wessing Associate Catherine Drew. This note, "Patents -- SPC Regulations", discusses the recent decision of the UK IPO in Merck & Co. Inc, BL O/108/08, on whether a SPC can have a negative or zero term.

Details of the BSLR here, and of Lawtext here.