One of the most controversial aspects of the Trans-Pacific Partnership Agreement (TPPA) was the prospect that New Zealand would be forced into allowing extensions to the term of patents and that this could result in higher prices for medicines. In this article we talk about what patent term extensions are, how they are calculated and compare the present proposals for extensions in New Zealand to other jurisdictions.

What are patent term extensions?

The normal full term of a standard patent is 20 years, although the patent owner has to pay renewal fees to keep the patent alive, so it can lapse earlier.[i]

At the end of its term the patent expires and information in the patent is free to be used by anyone else. This is usually the point at which generic manufacturers will enter the market, unless there are any other patents blocking their way.

Some countries allow extensions to the 20 year term of a patent under certain circumstances. New Zealand is presently not one of them, but to meet the obligations of the TPPA will need to start doing so.

When are extensions allowed?

There are two general types of patent term extensions:

  1. an extension allowed because the patent office was slow to examine and grant the patent; and
  2. an extension allowed for a patent related to a pharmaceutical type product because regulatory approval must be obtained before the product can be sold.

The first type of extension is partly dependent on the backlog of patent applications waiting to be examined by a patent office and partly dependent on the actions of the patent office examiner and patent applicant during examination. There is usually some form of calculation which will lengthen or shorten the extension based on the actions of each party. In the United States, where there is a long backlog of patent applications waiting to be examined, this type of patent term extension is common and can extend the patent by months or even years.

The second type of extension is dependent on how long it takes for a pharmaceutical product to obtain marketing approval via a country’s regulatory process. As a pharmaceutical product cannot be sold until it has the appropriate approvals (e.g. via Medsafe in NZ), patent term extensions are made available to compensate.

The law around how the Intellectual Property Office of New Zealand (IPONZ) will deal with patent term extensions is still being finalized and will only come into effect if the TPPA is ratified by enough countries. However, at the time of writing this article it appears that it will be very difficult to get the first type of extension in New Zealand. This is partly because IPONZ is presently very quick to examine patent applications. It is also partly because in the present proposals for how the extension would be calculated, any periods of time during examination that are outside the direction or control of IPONZ will be discounted from the extension calculation.[ii]

The first type of extension would be available for all patents, no matter what the subject matter. Whereas the second type of extension is only available for pharmaceutical-type patents. So what is the reasoning for this special treatment for pharmaceuticals?

Pharmaceutical-type patent extensions

Pharmaceutical-type patent term extensions are generally viewed as a form of compensation for the very prolonged development and regulatory time required to bring a new pharmaceutical to market.

A patent application is generally filed very early in the development process because it must be filed before the invention is made publically available or before anyone else patents the invention.[iii] For a simple mechanical type invention, there may be some industry standards to meet, but often the product can be put on the market soon after the patent has been filed. For a pharmaceutical-type product, before it can be put on the market it must get regulatory approval which is usually obtained by showing safety and efficacy through a series of long and expensive trials. Thus a pharmaceutical often cannot be put on the market for several years after the patent is filed. The pharmaceutical-type patent extension is a means to compensate for the delay in being able to sell the product.

For convenience this type of extension is often referred to as pharmaceutical-type extension, but depending on the laws of the country in question, they can apply to other products that require regulatory approval. In the United States human drug products, animal drug products, medical devices, food additives or colour additives can attract patent term extension. In Australia, a patent term extension is only available for a patent related to a product which is a pharmaceutical substance per se or a pharmaceutical substance produced by the use of recombinant DNA technology.

How are pharmaceutical-type patent term extensions calculated in other countries?

Pharmaceutical-type extensions are calculated in different ways in different countries. However, in the main they are calculated based on the difference between (i) the filing date of the patent or the grant date of the patent and (ii) the date of regulatory approval.

For example, in Australia the extension time is calculated as the amount of time between the filing date of the patent and the first regulatory approval, minus 5 years. In addition, the extension can never exceed five years. For example, if regulatory approval was granted 8 years after the patent was filed, the extension time allowed would be 3 years. The term of the patent would be 23 years but the patent term in which the product can be sold, sometimes called the effective patent term, is 15 years.

The extension is to provide additional time during which the patent can be exploited because for a pharmaceutical the effective patent term can be short.

How will the pharmaceutical type extensions be dealt with in New Zealand?

As noted previously, the law around how IPONZ will deal with patent term extensions is still being finalized. However, the present proposals for the new law are that this type of extension will, like Australia, only be available for patents related to a product which is a pharmaceutical substances per se or a pharmaceutical substance produced by the use of recombinant DNA technology.

However, the proposals for calculation of the extension are very different to Australia and our larger trading partners. The calculation will be based on compensating for delays by the regulatory body (i.e. Medsafe) in processing the marketing approval rather than the overall length of time for a pharmaceutical to get to market.

The proposals are that an extension will only be available if marketing approval is allowed after the patent is granted and it takes more than 3 years between the date marketing approval is applied for and the date it is granted (or 5 years for the pharmaceutical substance produced by the use of recombinant DNA technology). Any time during the marketing approval process which is considered outside the direction or control of the regulator can also be disregarded for the purposes of calculating the extension. For example, if the applicant is asked by the regulator for more information the time it takes for that information to be supplied will likely not be included in the calculation.

The length of the extension will be the shortest of:

  1. length of time it takes to get marketing approval over the 3 or 5 years (minus time periods outside the control of the regulator); or
  2. the time between grant of the patent and obtaining marketing approval, or
  3. 2 years.

In effect, the extension could be a maximum of 2 years but will likely be much shorter, if allowed at all. This method of calculating the extension is very different to the way the extensions are calculated in Australia. The proposed New Zealand approach is much closer to the present method used in Singapore, but allows for fewer extensions.[iv] It seems likely that using this approach much fewer and shorter extensions will be granted than is the case in Australia, where they are still rare.

If the TPPA is ratified New Zealand will have to allow patent term extensions, but it seems that the proposed options will rarely provide any significant extensions. While the prospect of extensions was controversial, it appears in reality that they are unlikely to have a major effect in New Zealand. Whether the current proposals will meet New Zealand’s actual obligations under the TPPA (if it is ratified) is a question that will probably be raised at some point.

This article is published in Chemistry in New Zealand (CiNZ) is the journal of the New Zealand Institute of Chemistry (NZIC).  The NZIC represents member involved in the chemistry profession including those who study, practice, teach, promote and manage chemistry.