The Guest Blog

Guest blog post by Philip Stevens is director of Geneva Network, a UK-based research organisation working on international trade and intellectual property issues.

After decades of discussions in Brussels, the European Unitary Patent System is entering its final stages of negotiations.

Companies seeking to enforce and maintain their patents across the 28 members of the European Union will be able to so once via the new Unified Patent Court, saving time, money and effort.

Before the Unitary Patent can become operational, several issues need to be resolved. Following the UK Brexit vote, placing one of the specialist divisions of the Unitary Patent Court in London will need to be re-thought, amongst other UK-specific issues. Poland, Spain and Croatia are resisting ratification as they consider discriminatory the new requirements for patents to be translated either in English, French or German.

One other major uncertainty is the fate of so-called Supplementary Protection Certificates (SPCs). These certificates are a type of intellectual property right that allow patent protection for medicines to be extended for a maximum of five years.

SPCs are currently granted on a country-by-country basis, and are designed to compensate medicine developers for delays in the regulatory process.

In the European Union, all medicines that have completed clinical trials must be reviewed and approved by the European Medicines Agency (EMA) before they can be marketed. During clinical trials, a team of physicians, statisticians, chemists, pharmacologists, and other scientists examine the data generated to assess if the product’s benefits outweigh its potential risks. This process takes on average 10-15 years from discovery to approval. Regulatory review by the EMA can take several years more.

This all eats into the twenty-year patent term, which starts from the moment a patent is filed, not from the time the product is marketed. Regulatory review delays therefore undermine the main purpose of the patent system: to incentivise innovation.

In the early 1990s, the European Commission sought to correct this by creating SPCs. These can generally only be granted to medicines that have been newly approved by the EMA, and extend the patent for a maximum of five years – thus compensating for some of the patent-term erosion caused by the regulatory review process.

SPCs are an important component of the regulatory and legal framework that has made the European innovative biopharmaceutical industry an international success. Thanks in part to intellectual property rights such as these, the sector supports over 700,000 high quality European jobs directly, and an additional two million supportive jobs in other sectors.

It’s also an export powerhouse, contributing to the EU a trade surplus of 80 billion euros. In considering how best to reform SPCs, the Commission looks like scoring an own goal against this important sector.

In April, the European Parliament adopted the Commission’s new “Single Market Strategy” in which it proposed one unitary SPC to cover the whole continent – rather than the current cumbersome country-by-country process. This simplification is welcome.

But what the Commission gives with one hand it takes away with the other.

In the same document, the Commission proposed to simultaneously dilute SPCs by creating a new “export waiver”. This would allow generic drug manufacturers to manufacture in Europe drugs covered by an SPC, as long as they are exported to a country with no such legislation.

The Commission argues that this will create new 8,900 new European jobs and 35,560 new indirect jobs in generic drug manufacturing. It bases these claims on an econometric study undertaken by… employees of a major Portuguese generic manufacturer!

The proposal is objectionable for two main reasons.

First, an SPC is intended to afford the same protections as a patent. Export waivers do not exist during the regular patent term, because patents are specifically exclusive rights: they are designed to incentivise innovation by allowing innovators a period of market exclusivity so they can recoup their R&D investments.

The creation of an SPC export waiver is a significant erosion of IPRs that would benefit the generic sector at the direct expense of the innovative sector. That hardly chimes with the Commission’s mantra that innovation is key to the continent’s continued competitiveness.

Second, there is the practical question of how to prevent diversion of products produced under the waiver back into the EU. This would be a task of significant bureaucratic complexity and expense.

It would also be difficult to prevent export of a medicine benefitting from a SPC to third countries where patents are still in force or where the patent application is delayed in the local patent office – a common scenario in many parts of the world.

With this huge potential for abuse, SPCs won’t be worth the paper they are written on.

It may well be that this market intervention would create a small number of jobs in the generic drug manufacturing sector. But by undermining the lifeblood of the innovative industry – intellectual property rights – it is likely to cost more jobs there.

Brexit notwithstanding, the unitary patent is a good idea that will make enforcement of intellectual property rights easier, faster and cheaper, in line with the European Commission’s stated commitment to innovation. Weakening the Supplementary Protection Certificate is at odds with this direction of travel and should be re-thought.

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