The proposal of the European Commission (COM(2018) 317) provides for a detailed derogation rule in Article 4 of SPC Regulation (EC) No. 469/2009, according to which the SPC does not protect the certificate holder against "making for the exclusive purpose of export to third countries". In particular, both production and "any related act that is strictly necessary for that making or for the actual export itself" should be free. According to recital 9 of the proposed “Regulation amending Regulation (EC) No 469/2009 concerning the supplementary protection certificate for medicinal products” (“Amending Regulation”), such related acts may include "the supply and import of active ingredients for the purpose of making the medicinal product" and "temporary storage of the product or advertising for the exclusive purpose of export to third country destinations". In order to benefit from the SPC waiver, the manufacturer must comply with certain notification obligations to the authority responsible for SPCs (e.g. in Germany: the German Patent and Trademark Office, “DPMA”) and affix a specified "EU export" logo to the packaging of the product manufactured for export.

The derogation rule will not apply retroactively to existing SPCs, but only to SPCs granted after a transitional period of about three months after the introduction of the new rule. The transitional period intends to give the parties involved (certificate holders and generic manufacturers) sufficient time to adjust to the changed legal situation and to make appropriate decisions on investments and production locations.

The Commission shall evaluate the SPC waiver every five years and prepare a report on the impact of the Regulation. Recital 20 of the Regulation states that the objectives of a balance of interests between originators and generic companies should be particularly considered. On the one hand, the aim is to restore a global level playing field for producers of generics and biosimilars in the European Union vis-à-vis unprotected third countries; in addition, after the expiry of an SPC, generic and biosimilar medicines should enter into the EU market more quickly. On the other hand, the effects of the SPC waiver on the research and production of innovative medicinal products by originators or certificate holders as well as the interest of public health should also be taken into account.

The introduction of the SPC waiver creates an exemption at the level of EU law that preempts the subsidiary national law. In Germany, Sec. 16a (2) of the Patent Act (“PatG”) contains a non-exhaustive list of the provisions in the Patent Act (PatG) which are also applicable to SPCs, including the "provisions concerning the effects of the patent and the exceptions thereto (Sec. 9 to 12)". The SPC waiver thus comes in addition to the exemptions in Sec. 11 No. 2 (experimental purposes) and No. 2b (Bolar exemption) PatG, which are particularly relevant for pharmaceuticals. In other words, the new SPC waiver in Art. 4 of the SPC Regulation will not replace Sec. 11 PatG, because it only intends to be an additional exemption for generic and biosimilar firms (cf. recitals 16 et seq. of the Amending Regulation). The exemptions of the PatG will thus continue to apply in addition to the SPC Regulation, insofar as the Regulation does not provide for certain provisions (cf. explanatory memorandum for the first Amendment of the Patent Act, Federal Law Gazette No. 12/3630).

An SPC waiver which is directly implemented in the SPC Regulation is remarkable from a structural point of view. It contradicts the principle of German patent law according to which the production of a protected product is generally prohibited in Germany, even if the production takes place exclusively for export to a third country. The basic idea of the German patent law is that the owner of an IP right should extensively benefit from the exploitation of such right. According to case law, even the manufacture of some parts of a device (which are relevant for an invention) is already an infringing act in Germany (BGH GRUR 1951, 452, 454). This is why the already existing exemptions in Sec. 11 PatG, which are particularly relevant for medicinal products, are rather relating to preparatory acts which are carried out before the start of an economically interesting exploitation of the IP right.

In contrast, the proposed SPC waiver is at the heart of economic exploitation. For this reason, the proposed amendment of the SPC Regulation clarifies in several places that production within the EU, which is actually reserved to the SPC holder, is to be carried out solely for the purpose of exporting the manufactured medicinal products to third country markets where protection does not exist or has expired. SPC holders are to retain their market exclusivity in the Member States for the entire duration of SPC protection.

However, the wording of the derogation rule to be introduced does not explicitly restrict production for export to "unprotected" third countries. Rather, this restriction arises from the fact that an export of such medicines to a third country with patent or SPC protection would result in an infringement of IP rights under the local law of such country. At the same time, the manufacturer would also operate outside the SPC waiver. As a result, production in Germany for an export (at least also) to “protected” third countries will also constitute an infringement of IP rights in Germany (cf. recital No. 14 of the Amending Regulation).

Insofar as the SPC waiver also covers related acts such as temporary storage of the manufactured product, the problem of a possible (unreasonable) extension of the exemption could arise in practice. This concern also arises against the background that the proposed exemption aims to provide EU-based manufacturers with better conditions for competition with producers in unprotected third countries as soon as an SPC expires and the domestic market can be supplied with generics or biosimilars from "day-1". From the point of view of the generics industry, the proposed SPC waiver would enable them to be more competitive at the global level and to maintain jobs within the EU without affecting the rights of originators. The originators fear that drugs that were originally manufactured and stored for export will be redirected to Germany at short notice when the SPC expires and used for domestic sale. It is obvious that such behaviour lies outside the SPC waiver, but in the event of a legal dispute it may be difficult for the originator to prove that the medicinal products specifically supplied in Germany actually should not have been produced under the SPC waiver.

Despite the restriction of the rights of originators associated with the SPC waiver, the proposed amendment is in line with the principles of the TRIPS Agreement. It has already been criticised that such an SPC waiver would go beyond the possible exemptions pursuant to Art. 30 TRIPS because it contradicts the interests of property right holders. It is important to note, however, that the SPC waiver is a restriction of an additional protection right (and not of the basic patent), whereas the protection of the SPC in the granted contracting state is fully maintained (see MPI, "Study on the Legal Aspects of SPC" of 28 May 2018, p. 30 et seqq.). The patent term of 20 years is not limited, so that Art. 33 TRIPS remains unaffected.

It is obvious that the proposed SPC waiver creates an exemption that brings strong changes for originators and manufacturers of generic and biosimilars alike.