On June 23, 2016, the United Kingdom voted through a national referendum to exit the European Union after more than 40 years of membership. One of the key arguments in favor of the so-called “Brexit” was to return full sovereign lawmaking authority to the United Kingdom. Brexit advocates argued that EU law had become bloated, arcane, and ineffective. As a result, to implement Brexit, the United Kingdom will need to determine whether and to what extent EU law should be incorporated into UK law.
The EU is a government of enumerated powers, exercising only the authority conferred to it by the EU Member States under the treaties that form the foundation of the EU. As many commentators were quick to point out after the UK referendum, some key areas of intellectual property law will be largely unaffected by Brexit because the EU has little lawmaking authority in those areas. For example, the procedure for applying for patents through the European Patent Office (“EPO”) will be entirely unaffected by Brexit because the EPO was established by a separate treaty unrelated to the EU. EU law, however, is critical to the acquisition and enforcement of other intellectual property rights, including the subject matter of this Article, Supplemental Protection Certificates (“SPCs”).
The Importance of SPCs
In many countries, certain types of inventions, like medical products, require regulatory approval before they can be sold to the public. While this requirement for regulatory approval can help to protect consumers, it can also be time consuming, and when regulated products are protected by patents, delays in obtaining government approval effectively shorten the time period in which innovators commercial benefit from patent protection.
US patent law addresses this problem through patent term extensions, which may be available if a patent covers a drug, medical product, food additive, or color additive that was “subject to a regulatory review period before its commercial marketing or use.” Typically, a qualifying patent owner is entitled to an extension equal to the time period starting with the issuance of the patent and ending with the award of regulatory approval. However, the total patent term including the extension cannot exceed fourteen years from the date of regulatory approval.
EU law addresses the potentially harmful impact of regulatory delays on patented inventions in a different fashion. Rather than extending the duration of patent protection, EU law requires countries in the EU to grant to a patent owner a separate, distinct form of intellectual property protection: SPCs. Under two EU regulations, SPCs are available when regulatory delays reduce the effective commercial duration of patent protection for medicines, herbicides, and pesticides. These regulations establish key features of SPCs. Importantly, the EU regulations require that an SPC shall only be granted for a product already protected by a “basic patent” and state that an SPC provides “the same rights as conferred by the basic patent.” Similarly, an SPC may be invalidated on the same grounds that apply to the “basic patent” (or would have applied to the patent if it has expired). The SPC regulations also define the duration of SPCs, though in a fashion markedly different than the one used in the United States for patent term extensions. Specifically, the duration of an SPC is determined by subtracting five years from the period elapsed between (1) the filing of the application that produced the basic patent and (2) the issuance of regulatory approval to market the covered product. Moreover, again unlike US law, SPC duration in most cases is limited to five years. Finally, the EU regulations also describe important features of the procedure for obtaining SPCs, listing in detail the required contents of applications for SPCs, establishing deadlines for filing SPC applications, and describing the process for filing SPC applications. SPCs are country-specific rights, and can only be obtained from the “competent industrial property office” in each EU country, not through a centralized process in the EPO.
The Impact of Brexit on SPCs
SPCs are available in all EU countries, and the UK’s departure from the EU will not impact SPC protection in the remaining EU countries. The situation in the UK post-Brexit, however, is less clear. Whether the effects of an EU law will survive Brexit will depend on whether that law is a “regulation” or a “directive.” While EU regulations have immediate effect in all countries in the EU, directives must be implemented through appropriate legislation in each EU Member State. Because EU directives have entered into force through enabling UK law, Brexit will have little impact on the effect of these directives. Once the UK leaves the EU, however, all EU regulations will cease to apply in the UK, including the regulations that define the substantive and procedural law of SPCs.
The UK could avoid the effective annulment of SPCs by enacting UK law to replace the EU regulations regarding SPCs. Indeed, the UK Prime Minister, Theresa May, recently announced plans for a “Great Repeal Bill” that would en masse “convert” all EU regulations into UK law. Because the EU has issued thousands of regulations, this approach might be expedient, but it also faces problems. To start, some members of Parliament have already threatened to oppose the Great Repeal Bill. Opposition within Parliament may be additionally difficult to overcome if the power to initiate Brexit rests with the UK Parliament rather with the Prime Minister, as the UK High Court recently held.
Unfortunately, the wholesale conversion of all EU regulations into UK law may also produce laws poorly suited to an independent United Kingdom because many regulations are grounded on the assumption that all of the countries affected by the regulations are members of the EU. Importantly, the SPC regulations are founded on an understanding that all affected countries are part of a common market. For example, the duration of SPCs is calculated by subtracting five years from the period of time that elapsed between the date that the application for the underlying “basic patent” was filed and “the date of the first authorisation to place the product on the market in the [European] Community.” In other words, if the SPC regulations were incorporated verbatim into UK law through a Great Repeal Bill, the duration of SPCs in the United Kingdom would depend in many cases upon the dates that products began to be marketed outside of the United Kingdom. Not only could this result shorten the duration UK SPCs post-Brexit, this mismatch and the similar deficiencies in many other EU regulations increase the chance that members of Parliament will oppose a Great Repeal Bill.
Ultimately, however, some form of a Great Repeal Bill appears to be the only practical approach to Brexit. In theory, the British Parliament could draft appropriate legislation to replace each EU regulation, but in practice such an approach will be difficult to achieve. To leave the EU, the United Kingdom must invoke the departure provisions of Article 50 of the EU Treaty of Lisbon, and thereafter negotiate the terms of departure. Critically, Article 50 states that EU law will cease to apply in the UK after two years of negotiation (unless the remaining EU countries unanimously agree to an extension). In light of the contentious nature of Brexit, it is highly unlikely that in just two years the British Parliament will be able to review and to adjust appropriately the thousands of EU regulations that currently apply in the United Kingdom. On the other hand, the United Kingdom is unlikely to leave the EU without establishing some legal stopgap to replace the thousands of EU regulations currently in force as the harmful effects that massive legal vacuum would be far-reaching. For instance, all SPCs in the United Kingdom might cease to exist, and new SPCs could not be obtained. Though imperfect, a Great Repeal Bill may be better than nothing.
Navigating an Uncertain Future
In the face of the uncertainty regarding the future of SPCs in the UK, businesses should consider reviewing existing licenses to UK SPCs and also reconsider their future licensing strategies. The language of existing licenses may be poorly suited to encompass post-Brexit SPCs in the United Kingdom. For instance, existing licenses might describe the licensed rights using language similar to “SPCs in the European Union” or “SPCs granted under the SPC Regulations,” and such language may not apply to post-Brexit SPCs in the United Kingdom. It is also unlikely that existing licenses account for the doomsday scenario where the UK Parliament fails to establish some form of post-Brexit SPC protection. In many cases, licensors and licensees therefore could benefit from renegotiating their existing licenses to account for the potential changes to UK SPC law on the horizon, perhaps under the auspices of existing force majeure clauses in those contracts.
Similarly, companies negotiating new licenses should account for the potential changes in UK SPC law by defining the licensed rights broadly to include both existing SPCs as well as any later UK equivalent. Companies should also address the unlikely but not impossible scenario in which SPC protection does not exist in the United Kingdom post-Brexit due to failed Brexit negotiations in the two-year window required by the Lisbon Treaty. Moreover, licensees should consider the potential reduced value of SPCs under a Great Repeal Bill resulting from SPC duration being based on marketing in the EU, not the United Kingdom. Though the impact of Brexit on SPCs remains mired in uncertainty, careful drafting can help prudent companies address these changes to these valuable intellectual property rights.