What is TRIPS and how does it affect pharmaceutical patents?

On 15 April 1994, the European Union and its member States signed the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sponsored by the World Trade Organisation, which established rules for intellectual and industrial property (IP) rights as part of the wider harmonisation of the world’s multilateral trade system.

The Court of Justice of the European Union (CJEU) understood TRIPS as a “mixed” agreement, insofar as EU Law was not sufficiently developed in IP matters to lend the EU exclusive powers to make international agreements in this area. Hence, TRIPS was not negotiated and made by the EU alone, but also by the member States, which also had to sign.

Ruling on the interpretation of TRIPS, the CJEU found in the 2007 case C-431/05 Merck Genéricosthat the courts of the member States are competent to interpret the Agreement’s terms wherever they refer to an area that is insufficiently developed in EU law.

Meanwhile, article 207 of the Treaty on the Functioning of the European Union (TFEU), which entered into force on 1 December 2009, assigned exclusive competence for IP matters to the EU. As a result, the defendant in the suit filed by Merck Sharp & Dohme Corp. against a Spanish generics firm for infringement of the patent for the drug “Losartan” petitioned the Spanish Supreme Court, in view of the domestic courts’ unfavourable interpretation of TRIPS, to seek a preliminary ruling from the CJEU to determine whether the entry into force of the TFEU meant that the Court of Justice now had sole competence to interpret the Agreement. In line with the EU’s acte clair or “clear act” doctrine, the Supreme Court found that this question had in fact already been resolved and that there was no need to raise a preliminary question to the CJEU. The generic drugs firms were found to have infringed the patent in the final judgment issued on 5 December 2002.

Meanwhile, on 18 July 2013, the CJEU ruled in case C-414/11 Daiichi on a preliminary question brought by a Greek court, differing in its judgment only partially from the Spanish Supreme Court’s interpretation of TRIPS in the matter of patentable inventions.

Retroactivity of CJEU rulings and effects on judgments handed down by the Spanish courts

Let us recall that the CJEU in general interprets legislation ex tunc or retroactively, referring to the regulation in question as it should have been understood and applied as of the moment at which it entered into force. Hence, “the rule so interpreted can and should be applied by the court even to legal relations arising and established before the judgment ruling on the request for interpretation was issued” (case C-626/12, Vent de Colère).

In case C-453/00 Kühne & Heitz, meanwhile, the CJEU found that the ex tunc effect of its rulings could result in the revocation of government decisions, even where final, if they were contrary to the Court’s subsequent interpretation, provided the national law in question admitted the possibility of extraordinary review of such decisions, among other conditions. As a result, numerous national courts then asked whether this doctrine could be extrapolated not only to final government decisions, but also to the final judgments handed downs by the courts (i.e. with the force of res judicata).

This matter was taken up by the CJEU in case C-234/04, underscoring the force of the res judicata principle. In case C-40/08 Asturcom and the more recent Pizzaroti case of 2014, the CJEU recalled that EU law does not require a national court to reconsider any earlier ruling for it to take into consideration the eventual interpretation of a precept handed down by the Court of Justice.

In short, the ex tunc effect of the CJEU’s interpretative rulings does not apply to unalterable prior situations, including inter alia the findings of unappealable final judgments (res judicata) as determined by the national procedural law of each member State, provided such judgments respect the EU principles of equivalence and effectiveness.

Even so, the Spanish generics manufacturer found guilty of infringing the Losartan patent sought a review of Supreme Court’s judgment of 5 December 2012 based on a flexible interpretation of theKühne & Heitz ruling, in spite of the fact that this case law applies only to final government decisions, on the grounds that the outcome of the Losartan case would have been different had the later CJEU ruling in the Daiichi case been applied. While Spanish procedural law does in fact allow motions to review final judgments, this possibility is highly restrictive, requiring among other conditions the recovery after the judgment of key documents which could not be considered in the trial proceedings for reasons of force majeure, a situation that did not arise in the Losartan case.

Accordingly, the Supreme Court ruled in its judgment of 18 February 2016 in the first place that a subsequent ruling of the CJEU is not a document that would permit the review of a final judgment under Spanish procedural law, and in the second that the res judicata principle prevails over the review of final judgments handed down by the courts in accordance with the CJEU’s own doctrine.