2019/02/07

New Industrial Property Code | The "new" Portuguese model of litigation concerning generic medicines v. reference medicines

Joana de Sá and Pedro Rebelo Tavares write about the new Industrial Property Code and the "new" Portuguese model of litigation concerning generic medicines v. reference medicines

With the approval of the new Industrial Property Code (Decree-Law no. 110/2018, of December 10), the legislature recognized that the circumstantialism that led to the approval of Law no. 62/2011, of December 12, which created a regime for the composition of industrial property rights litigation in the case of reference medicines and generic medicines, is overdue and the conditions for rethinking the subject are met. In that sequence, the new decree repealed the necessary arbitration regime that is currently in force, leaving the parties the option between recourse to voluntary arbitration or to the competent court.

Within the European area, for a medicinal product to be used, it is generally necessary to obtain prior authorization from the competent authorities. This authorization may be dealt with in several ways, through a: (a) centralized procedure (EMA); (b) decentralized procedure; (c) procedure and mutual recognition; and/or (d) exclusively national procedures that are before the pharmaceutical regulation authority of each member state (in Portugal, it is INFARMED, IP).

Exceptions to this rule include situations such as compassionate use under Article 5 (1) of Directive 2001/83), off-label prescription by analogy, as well as experimental use in clinical trials , in accordance with Directive 2001/20.

The process of obtaining a marketing authorization (MAA) is a complex, time-consuming process and represents a huge investment for the innovative pharmaceutical industry. It starts with the Research and Development (R&D) phase, which can last between 10 and 15 years, and represents an investment of more than 1000 million euros.

On the other hand, the marketing authorization for generics and biosimilars can be obtained through a simplified procedure, where the generic company takes advantage of the information already submitted about the innovative medicine (in these cases also referred to as the reference medicine). In fact, it is possible to assign a registration number prior to the MAI decision on generic medicinal products, subject to certain conditions and safeguarding that registration numbers may not be used prior to the decision on the application, in particular for the purposes of effective marketing or price and are only considered valid after the issue of the MAA.

It should be noted that a generic medicinal product is a medicinal product with the same active substance, pharmaceutical form and dosage and with the same therapeutic indication as the original branded medicinal product which served as a reference. Whereas the reference medicinal products are normally innovative in a given therapeutic class or are the result of an improvement of other existing drugs or treatments and are associated, as already mentioned, requiring high investments to develop and market by the pharmaceutical industry.

Thus, obtaining a patent for a particular reference medicine is an obvious and compelling competitive advantage for innovative pharmaceutical companies. However, in the case of generic medicines, since they cannot be protected under IP rights, the main competitive advantage is the first arrival in the market.

This gives rise to a special temptation to market a generic medicine even before the patent or the SPC (supplementary protection certificate) ends. The risk of this happening is especially high when there is already an MAA, an approved retail price and the approval of public expenditure.

Prior to Law no. 62/2011, which was partially required by Troika in Portugal, there was a wide range of administrative disputes, mainly of a precautionary nature, relating to the suspension of MAA granted, as well as acts of approval of the retail price and/or the public expenditure.

The legal situation was very uncertain. The courts at first instance held the thesis that such administrative acts (and their procedures) did not offend the patents and SPC in force and, in the second instance, the Portuguese Central Administrative Tribunal held the opposite argument. Both arguments were supported by the doctrine of eminent authors.

Law no. 62/2011 emerged in this context, with the main objective being to put an end to the massive litigation in administrative courts, to put an end to the inherent legal uncertainty and to create conditions for generic medicines to enter the market the day after the cessation of patents and SPCs - thus allowing the State to save money on medicines and to eliminate the problem from the State courts.

For this, Law 62/2011 operated a true separation of waters: it declared the distinction between the processes and acts concerning the obtaining of MAAs and the IP rights, considering the first ones not included in the exclusive granted by patent and/or SPC. In that sequence, it established a system of necessary arbitration to assess IP law disputes involving reference and generic medicines.

It also created a special action essentially to settle existing industrial property rights and, if appropriate, to order the defendant to comply with the decision, based on the simple publication of an application for MAA for a generic medicinal product (without presupposing the existence of an infringement or an imminent threat of infringement).

Ideally, this action would run in the arbitral tribunals, in parallel with the administrative proceeding relating to the MAA, and would terminate before it or, roughly, at the same time.

Initially things went smoothly, however, lately the process began to suffer disruption, mainly because of incidents and exceptions that prevented the legal actions to finish within the deadlines provided by law.

Along the way, a number of questions ended up being raised, which remain to be clarified, namely:

a) Knowing if the necessary arbitration applies not only to the special actions of art. 3 of Law no. 62/2011, but also for infringement actions;

b) Knowing if the limitation of the resource provided for in art. 3 (7) applies only to the special actions regulated in this precept;

c) Knowing if the course of the period of 30 days set forth in art. 3 has a preclusive effect of the right of action and, if applicable, of which right of action - whether only the right of special action or a total loss of the right to react judicially;

d) Knowing how to guarantee the practical effectiveness of an arbitral award, whenever the MAA that serves as the basis for the arbitral action is transferred (including to an entity of the same economic group).

It was also essential to know whether the arbitral tribunals had jurisdiction to invoke the invalidity of the patent or SPC. This latter question has become very controversial, although the theory of the incompetence of the arbitral tribunals seems to prevail now.

The new wording of the article now provides that an interested party seeking to invoke his industrial property right must do so at the specialized Intellectual Property Court or, in the case of an agreement between the parties, with an institutionalized Arbitral Tribunal, or request the submission of the litigation to non-institutionalized arbitration – therefore, we have gone from a necessary arbitration regime to a voluntary arbitration regime under the general terms of law, which although admissible is not mandatory, and the Intellectual Property Court is now competent.

It was also decided, with the entry into force of the new Industrial Property Code, to maintain, in Law no. 62/2011, the referred special action, exclusive for patent protection of the chemical-pharmaceutical domain. Thus, despite the end of the necessary arbitration regime, Law no. 62/2011 is maintained with the necessary adaptations. This "remedial action" represents a special guardianship for chemical-pharmaceutical patents.

It is important to know, however, how this special protection can be harmonized with art. 27 (1) of the TRIPS Agreement, that determines the non-discrimination in respect of patents in relation to technology fields. The type of protection conferred by a patent cannot, supposedly, be different between technology domains.

Such special action shall be brought before the Court of First Instance or, in the case of an agreement between the parties, before an institutionalized Arbitral Tribunal or request the submission of the dispute to non-institutionalized arbitration, within a maximum period of 30 days, counting from the date on which the may be exercised (publication of the granting of the marketing authorization of the generic drug that may be involved in a patent in force) - art. 3, no. 1 of Law no. 62/2011.

The 30-day deadline for initiating the proceeding is a judicial deadline, so the patent holder on the reference drug has only 30 days to submit his initial petition duly instructed with evidence regarding the violation of the patent right (which seems impractical for the complex nature of these technologies).

On the other hand, the MAA concessionaire has, in the same way, 30 days to exercise its opposition by deducting the corresponding challenge. And in this dispute, art. 3 (3) of Law no. 62/2011 also provides that "in the arbitral proceedings, the invalidity of the patent may be invoked and recognized only with inter partes effects".

Thus, the question of whether the Arbitral Tribunals are competent to hear about the invalidity of patents and SPCs has disappeared, and it is now certain that they can do so, albeit with only inter partes effects.

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Joana de Sá | Partner | Head of Pharmacy and Medicines Economic Unit | joana.sa@pra.pt

Pedro Rebelo Tavares | Trainee Lawyer | pedro.tavares@pra.pt