Case C-539/13, Merck Canada – prior notification under the Specific Agreement [judgment 2015, ECLI:EU:C:2015:87]

The intra-EU trade in pharmaceuticals is big business. In this case, a company bought millions of pounds worth of an asthma-treatment drug in one Member State and imported this into the UK for resale. The patent holder has objected: the drugs originated in Poland and, pursuant to the EU’s ‘Specific Mechanism’, the patent holder should have been properly notified about the intention to import the drugs. Because the notification which was communicated was neither sent by the appropriate sender nor sent to the appropriate recipient, the patent holder claimed that the imports infringed its rights in patent law. But was there a proper notification?

Facts
Singulair is an asthma-treatment drug whose active ingredient is protected by a European Patent, and a related Supplementary Protection Certificate (SPC). The patent holder is Merck Canada.

Merck Canada, and another company that would feature in the subsequent litigation, Merck Sharp & Dohme (MSD), are both members of the Merck pharmaceutical group of companies. Another company belonging to the Merck group is MSD BV, and that company put Singulair onto the market in Poland.

Quantities of ‘Polish’ Singulair were then imported into the UK between June and December 2010, and sold by a UK company called Sigma. Indeed, Sigma sold more than £2m of ‘Polish’ Singulair, held further stocks of ‘Polish’ Singulair valued at more than £2m, and, through a related-company known as Pharma XL, had repackaged much of this Polish stock for the UK market.

In December 2010, Merck wrote to Pharma XL claiming that its rights in patent law were being infringed.

In essence, Merck’s broad argument is that the stocks of Singulair originated in Poland so the rules in the EU’s ‘Specific Mechanism’ apply. The Specific Mechanism allows a patent/SPC owner to stop the parallel import of a pharmaceutical product if, in an accession state, it was not possible at the time of filing to obtain protection on a pharmaceutical ‘product’. That criterion was satisfied in this case because when the patent on Singulair’s active ingredient was filed, Polish law did not allow pharmaceutical ‘products’ to be protected by patent law.

The wording of the Specific Mechanism also states:

‘Any person intending to import or market a pharmaceutical product … shall demonstrate to the competent authorities … that one month’s prior notification has been given to the holder or beneficiary of such protection.’

Merck believed that there had not been ‘prior notification’ because the patent holder Merck Canada had not been notified of the intention to import Singulair into the UK. Therefore, Merck could object to the import.

Sigma challenged the assertion that Merck had not been properly notified. In 2009, Pharma XL had notified Merck Sharp & Dohme (MSD) of its intention to import from Poland and sell Singulair in the UK. The letter mentioned the Specific Mechanism and expressly asked whether Merck had any reason to object to that importation. MSD received the letter but did not reply to it.

Pharma XL subsequently applied for and obtained a UK parallel import licence for 5mg Singulair. As part of complying with EU trade mark law, it wrote to MSD in 2010 informing them that: (i) the necessary parallel import licence had been obtained from the UK authority (ii) it intended to import 5mg Singulair from Poland, and (iii) enclosed copies of the intended presentation of the repackaged products. MSD received the 2010 letter but did not respond.

Thereafter, Sigma began importing 5mg Singulair from Poland. The product was repackaged by Pharma XL under the parallel import licence, and was sold in the United Kingdom by Sigma.

Later in 2010, Pharma XL wrote two further trade mark notification letters to ‘the Manager, Regulatory Affairs of MSD’ indicating its intention to import 10mg Singulair from Poland, and again enclosing copies of the intended presentation of the repackaged products. MSD received these letters too but it did not respond to them.

Litigation ensued. At first instance, a judge specialised in IP law granted an injunction and ordered an inquiry as to the damage suffered by Merck or an account of the profits made by Sigma. He also ordered Sigma to deliver up its unsold stocks of Singulair, although he stayed this part of his order pending appeal.

At the Court of Appeal
Lord Justice Kitchin, also an IP law specialist, considered the appeal and delivered the lead ‘judgment’ which would result in questions being asked of the CJEU. His reasoning ran as follows. The free movement of goods rule was one of the core principles of the European single market, and any derogation from it must be interpreted strictly.

Since the Specific Mechanism was modelled upon the earlier ‘Iberian derogation’, the CJEU’s interpretation of the Iberian derogation was relevant. In Case C-191/90, Generics and Harris the CJEU appeared to have said that Articles 47 and 209 (of the ‘Act of Accession concerning certain patents’) merely conferred upon the proprietor an option of preventing such importation, and that those provisions were therefore inapplicable unless the proprietor demonstrated his intention to exercise that option.

Consequently, when it came to understanding the Specific Mechanism itself, he remarked that Merck’s submissions about not having been properly notified might be persuasive as a matter of pure linguistic analysis but that was not the correct approach to be adopted here. Rather, the provision had to be considered in the light of the overall scheme and objectives of which it formed a part. In that respect, he noted that Merck’s submissions had not addressed the purpose of the second paragraph of the Specific Mechanism nor had it engaged with the CJEU’s reasoning on the purpose and meaning of the ‘Iberian derogation’.

Kitchin LJ thought about the scheme and objectives of the derogation. He expressed his view that while it was true to say that the obligation to notify the patent holder served the function of bringing to his attention a potential infringement by the parallel import of pharmaceutical products from one of the accession States, he believed that this cannot have been the sole purpose of the paragraph – after all, a potential infringer was not generally obliged to notify a patent holder of his intention to import and market a product to which objection may be made.

In light of Case C-191/90 Generics (UK) Ltd and Harris Pharmaceuticals Ltd, another purpose of the provision was to give the patent holder the opportunity to decide whether to oppose the proposed importation and, if he formed the intention to do so, to demonstrate that intention. If the appropriate notice was not given, then the patent holder was under no obligation to demonstrate his intention to exercise the option.

So was the appropriate notice given in this case? Lord Justice Kitchin noted that Sigma and Pharma XL were members of the same group of companies. They had arranged their affairs so that Sigma carried on the activities of importing and marketing, and Pharma XL addressed the necessary regulatory issues. The group had decided to import, and Pharma XL had made the application for the parallel import licence. At least one month before doing so, it had notified Merck of the intention to import. True, Sigma had neither notified Merck of that intention nor demonstrated to the UK authority it had done so, but Lord Justice Kitchin wondered whether that really constituted a failure to comply with the second paragraph of the Specific Mechanism?

The purpose of the scheme was to ensure the patent holder was notified of the proposed importation at least one month prior to the regulatory application being filed so that it could act against an importer. Kitchin LJ considered it appropriate for Pharma XL to have asked for the parallel import licence for it would assume responsibility for compliance. Equally, Merck was in a position to object to the proposed importation at any time after receipt of the 2009 letter, and to demonstrate its objection to Pharma XL – Merck could then invoke its rights under the Specific Mechanism against any person operating under the parallel import licence.

Although recognising that Merck had not been notified of the name of the particular company which would actually carry out the acts of importation, Lord Justice Kitchin questioned whether this could ever have caused Merck any real difficulty because Pharma XL could in any event have been required to disclose the name of the proposed importer.

Lord Justice Kitchin also considered the issue which arose from Pharma XL actually having written to MSD, but Merck’s contention that Sigma had failed to give notice to ‘the patent proprietor or his beneficiary’. He thought that it was arguable that MSD, as the operating company in the UK, might fall within the scope of the term ‘proprietor or his beneficiary’. Indeed, in this particular case, giving notice to MSD had not deprived Merck Canada of an opportunity to invoke its rights under the Specific Mechanism. He added: ‘To the contrary, it was sufficient to enable Merck Canada to respond, but it failed to do so as a result of an administrative oversight. The question therefore turns upon the true meaning of the Specific Mechanism, how strict the notice requirement is and whether it can only be satisfied by the importer providing notice directly to the patent holder’.

Questions Referred
Although the Court of Appeal decided to ask questions of the CJEU six months ago, the final version of the questions has not yet been published.

Update – 22 November 2013
According to the website of the UK’s Intellectual Property Office, the Court of Appeal has asked:

Conditions for reliance upon the Specific Mechanism

1. May the holder, or his beneficiary, of a patent or supplementary protection certificate rely upon his rights under the first paragraph of the Specific Mechanism only if he has first demonstrated his intention to do so?

2. If the answer to Question 1 is yes:
(a) How must that intention be demonstrated?
(b) Is the holder, or his beneficiary, precluded from relying upon his rights with respect to any import or marketing of the pharmaceutical product in a Member State that occurred prior to the demonstration of his intention to rely upon those rights?

The notifier

3. Who must give the prior notification to the holder or beneficiary of a patent or supplementary protection certificate under the second paragraph of the Specific Mechanism? In particular:

(a) Must the prior notification be given by the person intending to import or market the pharmaceutical product?
or
(b) Where, as permitted by the national regulatory system, an application for regulatory approval is made by someone other than the intended importer, can prior notification given by the applicant for regulatory approval be effective if that person does not itself intend to import or market the pharmaceutical product but where the intended importation and marketing will be carried out under the applicant’s regulatory approval?; and

(i) Does it make any difference if the prior notification identifies the person that will import or market the pharmaceutical product?

(ii) Does it make any difference if the prior notification is given and the application for regulatory approval is made by one legal person within a group of companies which form a single economic unit, and the acts of importation and marketing are to be carried out by another legal person within that group under licence from the first legal person, but where the prior notification does not identify the legal person that will import or market the pharmaceutical product?

Who should be notified?

4. To whom must prior notification be given under the second paragraph of the Specific Mechanism? In particular:
(a) Is the beneficiary of a patent or supplementary protection certificate limited to persons who have a legal right under national law to bring proceedings to enforce that patent or supplementary protection certification?
Or
(b) In a case where a group of companies forms a single economic unit comprising a number of legal entities, is it sufficient if the notification is addressed to a legal entity which is the operating subsidiary and marketing authorisation holder in the Member State of importation rather than the entity within the group that has a legal right under national law to bring proceedings to enforce that patent or supplementary protection certificate, on the basis either that such legal entity may be characterised as a beneficiary of the patent or SPC. or that it is to be expected that such notification in the ordinary course of events will to come to the attention of the persons who make decisions on behalf of the patent or SPC holder?

(c) If the answer to Question 4(b) is yes, is a notification which is otherwise compliant rendered non-compliant if it is addressed to the “the Manager, Regulatory Affairs” of a company when that company is not the entity within the group that has a legal right under national law to bring proceedings to enforce that patent or supplementary protection certificate but is the operating subsidiary or marketing authorisation holder in the Member State of importation and when that Regulatory Affairs department in practice regularly receives notifications from parallel importers regarding the Specific Mechanism and other matters?