Introduction

On 12 February 2015, the Court of Justice of the European Union ("CJEU") delivered its decision in Merck Canada v Sigma Pharmaceuticals (Case C-539/13) concerning the interpretation of the so-called "Specific Mechanism".  The decision addresses critical issues regarding imports of patented pharmaceuticals from certain New Member States of the European Union ("EU") – for the time being mostly low-price countries – where at the time of the filing of the relevant patent or supplementary protection certificate ("SPC") no product patent protection was available into an Old Member State of the EU – for the time being mostly high-price countries – where such protection at the date of the filing was indeed available ("Specific Mechanism").  The decision will most likely result in the need to revisit common practices within the EU for both originators/rights holders and importers.  The full version of the decision can be found here.

Facts of the Case

Merck Canada, Inc. ("Merck Canada") was the proprietor of a patent and a corresponding SPC protecting the medicinal product "Singulair" (generic name Montelukast) in the UK until October 2011 and February 2013, respectively.  In June 2009, Pharma XL Limited ("Pharma XL"), an associated company of Sigma Pharmaceuticals plc ("Sigma"), notified Merck Canada's Irish subsidiary, Merck Sharp & Dohme Limited ("MSD"), the holder of the local marketing authorisation ("MA") for Singulair and Merck Canada's exclusive licensee in the UK, about the intended importation of Singulair from Poland into the UK.  In the relevant letter, no reference was made, however, to the actual importer which was supposed to be Sigma.  MSD received the letter, but omitted to reply because of an administrative oversight.  In May and September 2010, import licenses were granted in favour of Sigma, and Sigma began importing Singulair into the UK.  In December 2010, once MSD became first aware of the import activities by Sigma, MSD objected to the importation of Singulair vis-á-vis Pharma XL.  Sigma immediately ceased its activities.  Yet, the revenue already generated by Sigma with Singulair imports was substantial.

Therefore, in addition to the objection to future imports, Merck Canada and MSD brought suit against Sigma for unlawful importation into the UK based on the respective Singulair SPC and claimed, inter alia, damages for the past infringement.  Sigma did not deny that the Specific Mechanism applied for imports of Singular from Poland into the UK, but contended that the claimants had forfeited their rights, as neither Merck Canada nor MSD replied within a one-month period after having been notified about the import intention by Pharma XL.

The Court of Appeal (England and Wales), seeking guidance in the application of the Specific Mechanism, referred the following questions (simplified) for a preliminary ruling to the CJEU:

  1. Can the holder or beneficiary of a patent/SPC ("Rights Holder") rely upon his rights under the Specific Mechanism only if he first demonstrates his intention to do so and, if yes, how does this intention have to be demonstrated?
  2. Must the notification concerning the intended import/marketing be given by the person intending to import/market the product, and if not, does the notification have to identify the person that will import/market the product?
  3. To whom must the notification be given?  Must it be provided to the Rights Holder or can it be addressed to the holder of the MA?

The Specific Mechanism

Parallel trade within the EU is particularly attractive given the different price levels within the various Member States.  This, as in many other industries, is particularly the case with respect to pharmaceutical products.  Generally speaking, the principle of free movement of goods within the EU limits barriers to trade between the European Member States.  Accordingly, this principle restricts the capacity of a Rights Holder to exercise his rights to prevent importation of protected goods which have already been put on the market in another Member State by him or with his consent.  The so-called "principle of EU-wide exhaustion" generally enables (and encourages) parallel importation of protected goods across the EU, including the trade between Old and New Member States, without the Rights Holder's permission. 

The Specific Mechanism, however, constitutes a derogation from this principle as it permits Rights Holders in certain cases to rely on their patent/SPC rights to prevent imports from New Member States even if the product in question was introduced on the market in one of the New Member States by or with the Rights Holder's consent.  The derogation was included in all relevant Accession Treaties over the past years to address the imbalance in the availability of product patents/SPCs in the New Member States compared to the Old Member States.  The Specific Mechanism is codified in the New Member States' respective Accession Treaty.  The relevant section of the Accession Treaty 2003 reads as follows:

"With regard to the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia or Slovakia, the [Rights Holder] for a pharmaceutical product filed in a Member State at a time when such protection could not be obtained in one of the abovementioned New Member States for that product, may rely on the rights granted by that [patent/SPC] in order to prevent the import and marketing of that product in the Member State or States where the product in question enjoys patent protection or supplementary protection, even if the product was put on the market in that New Member State for the first time by him or with his consent.

Any person intending to import or market a pharmaceutical product covered by the above paragraph in a Member State where the product enjoys [patent/SPC] protection shall demonstrate to the competent authorities in the application regarding that import that one month’s prior notification has been given to the [Rights Holder]."

Hence, the derogation only applies where the patent/SPC protection held in the relevant Old Member State was filed at a time when equivalent protection could not be obtained in the relevant New Member State.  To enable the Rights Holder to verify whether or not the Specific Mechanism applies to the importation of a particular product from a New Member State into an Old Member State, the relevant clauses in the Accession Treaty 2003 provide – at least – for an obligation of the importer to notify the Rights Holder one month prior to the start of the importation.

The Decision of the CJEU

The CJEU ruled that:

  1. The Specific Mechanism applicable for [Accession Countries 2003] must be interpreted as not requiring the Rights Holder to give notification of his intention to oppose a proposed importation before invoking his rights.  However, if such a Rights Holder does not indicate such an intention during the one-month waiting period laid down in the Accession Treaty 2003, the person proposing to import the pharmaceutical product in question may legitimately apply to the competent authorities for authorisation to import the product and, where appropriate, import and market it.  The Specific Mechanism thus denies the Rights Holder the possibility of relying on his rights with regard to any importation and marketing of the pharmaceutical product carried out before such an intention was indicated.  Nevertheless, in such a situation, the Rights Holder cannot be regarded as having forfeited the right to rely on the Specific Mechanism.  Although he may not obtain compensation for the loss suffered as a result of the parallel imports which he failed to oppose in the appropriate timeframe, such a Rights Holder remains, in principle, free to oppose future importation and marketing of the pharmaceutical product protected by the patent/SPC.
  2. The Specific Mechanism must be interpreted as meaning that the notification must be given to the holder of the patent/SPC or its beneficiary.  The term "beneficiary" designates any person enjoying the rights conferred by law on the holder of the patent/SPC, in particular licensees.  Mere holders of a relevant MA or any other company that may reasonably be regarded as acting on behalf of the patent holder that does not enjoy the said rights shall, however, not be regarded as "beneficiaries" within the meaning of the Accession Treaty 2003.  It should be noted that, subject to applicable rules on public disclosure, any person may easily ascertain the name of the patent or SPC holder.
  3. It is not required that the person intending to import/market the pharmaceutical product in question give notification himself, provided that it is possible from the notification to identify the importer/marketer clearly.

Impact and Outlook

It does not come as a surprise that the CJEU established a duty for Rights Holders to proactively object within one month after receipt of a compliant import notification so as to prevent the temporary forfeiture of respective patent rights under the Specific Mechanism.  In the closely related context of the EU-wide exhaustion of trademark rights in case of (re-packaged) EU-internal re-imports of branded pharmaceuticals, the CJEU – already back in 2001 – held that the functioning of the Common Market in light of potentially conflicting local trademark rights "presupposes that each of the parties concerned is to make a sincere effort to respect the other’s legitimate interests", i.e., to duly object within a reasonable time to the other party's legally required notification of an intended parallel import (c.f., CJEU judgment of 23 April 2002 in Boehringer v Swingward [Case C‑143/00, paragraph 62 et seq.] where 15 days in trademark cases were found appropriate).  In this vein, for instance, the German Federal Supreme Court ("BGH") held in 2007 in its famous Aspirin II decision that in trademark cases, a trademark owner is prevented from enforcing his rights and recovering damages against a parallel importer of an illegitimately re-packaged pharmaceutical, if and as long he has not duly objected upon receipt of a notification of a re-packaged/re-imported product.  The CJEU decision in Merck Canada v Sigma Pharmaceuticals fits well into this line of cases.

The decision of the CJEU will, however, most likely not alter the currently well-established case law, according to which the Rights Holder is not obliged to provide the parallel importer with registration numbers of the patent/SPC covering the relevant product (currently leading case for Germany Higher Regional Court of Hamburg judgement of 26 February 2009 in Neuroptin [Case 3 U 75/08]).  Assessing the patent situation in the desired country of importation remains the sole duty of the parallel trader.

However, given that import notifications to the MA holder (as common practice thus far) will not constitute an effective notification if the holder of the MA is not at the same time the holder or beneficiary (e.g., licensee) of the relevant patent(s)/SPC(s), it is likely that parallel importers will – just to be on the safe side – address their notifications (at least as well) to the registered owners of the relevant patent/SPC.  In this context, it is likely that they will be able to rely on the ownership information and contact details provided in the relevant patent registers.  As a result, Rights Holders will have to ensure (i) that patent registers across Europe remain up-to-date, and (ii) internal processes are in place enabling them to react within a one-month period after the receipt of a proper notification from a parallel trader, even if such notification is addressed, for instance to an off-shore IP Holding Entity.