C-434/85
ECLI:EU:C:1987:520
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ALLEN A N D HANBURYS v GENERICS
OPINION OF MR ADVOCATE GENERAL MANCINI delivered o n 2 D e c e m b e r 1987 *
Mr President, 'any person shall . . . be entitled as of right Members of the Court, to a licence . . . on such terms as may be settled by agreement or, in default of agreement, by the Comptroller on the application of the proprietor of the patent or the person requiring the licence'. 1. By a judgment delivered on 12 December Moreover, under section 46 (3) (c), 'if in 1985 the House of Lords has asked this proceedings for infringement of the patent Court to deliver a preliminary ruling on (otherwise than by the importation of any whether certain provisions of British patent article) the defendant or defender law are compatible with the principles laid undertakes to take a licence on such terms, down by the EEC Treaty on the free no injunction or interdict shall be granted movement of goods. against him and the amount … recoverable against him by way of damages shall not exceed double the amount which would have been payable by him as licensee if such a licence on those terms had been granted before the earliest infringement'. I shall first consider the relevant provisions. On 1 June 1978 the Patents Act 1977 came into force in the United Kingdom repealing the earlier Patents Act 1949. In conformity with the European Patent Convention, the new act increased the term of exclusive patent rights from 16 to 20 years. The In the course of the main proceedings Lord original expiry dates of 'old existing patents' Diplock set out the scope and purpose of remained the same. For 'new existing that provision, with particular regard to the patents', on the other hand, that is to say powers it confers on the Comptroller. H e patents which on 1 June 1978 still had five stated that the Comptroller's decision or more years to run, an extension of four merely had the same effects as would have years was granted under transitional rules. been produced by a licensing agreement and However, from the start of that four-year 'merely makes lawful acts . . . which if done period, the words 'licences of right' were without the consent of the patentee would automatically entered in the register and on be unlawful' (Beecham Group PLC v Gist- the certificates corresponding to those Brocades W (1986) 1 W L R 5 1 ) a t p 6 1 ) patents. However, that explanation does not take account of the words in brackets in section 46 (3) (c). As a result of that rider, a British infringer who imports from another State a product covered by a patent endorsed 'licences of right' is treated The effect of that endorsement is as follows: differently from an infringer who manu- under section 46 (3) (a) of the Patents Act factures the same product within the United 1977, from the time of such endorsement, Kingdom and sells it there.
* Translated from the Italian
OPINION OF MR MANCINI — CASE 434/85
In particular, provided the latter undertakes Generics (UK) Ltd (hereinafter referred to to apply for a licence of right he is at liberty as 'Generics') is a subsidiary of a company to carry on his unlawful activity until the registered in Panama; it carries on business administrative measure is adopted; an in the United Kingdom as a distributor of infringer by importation on the other hand 'generic' drugs, that is to say drugs which may find that imports are blocked even are bought in bulk for resale either as before they have begun and even if he has branded drugs or, more commonly, under requested a licence. He will also have to their chemical name. Since those distributors pay damages whose amount, in contrast to do not engage in research, the prices of those payable by a producer guilty of such drugs are usually lower than the prices infringement, is not subject to any limit. charged by the companies which hold the patents.
In November 1983, that is to say after the exclusive rights for salbutamol had been 2. I will now turn to the facts of the case. extended pursuant to the Patents Act 1977, O n 15 September 1967, Allen and Hanburys Generics asked Allen and Hanburys for a Ltd, a pharmaceutical laboratory which is a licence of right in order to import from subsidiary of Glaxo Operations UK Ltd, Italy the drug manufactured there without which in turn is owned by the multinational the consent of the inventor. That request Glaxo Holdings PLC, obtained a patent was not granted and Generics made an under the Patents Act 1949 for 'salbutamol', application to the Comptroller on 2 August a drug which is particularly effective in the 1984. Shortly afterwards, however, before treatment of asthma. the Comptroller had taken a decision, Generics informed Allen & Hanburys of its intention to import the drug immediately. Allen & Hanburys brought proceedings for an injunction which wasduly granted; Generics appealed against that judgment and the proceedings subsequently reached the House of Lords. As mentioned above, The drug is produced by the House of Lords, pursuant to the third Allen & Hanburys and in the United paragraph of Article 177 of the EEC Treaty, Kingdom it is always sold by that company referred four questions to this Court which under the proprietary name 'Ventolin'. In I may summarize as follows: the rest of the Community— including Italy — the drug is protected by parallel patents held by various members of the group who are also responsible for marketing it. However, it should be noted '(1) Is the holder of a patent which, under that until a few years ago patents could not the law of a Member State, is endorsed be granted for pharmaceutical inventions 'licences of right' prevented by Articles under Italian law. Accordingly the 30 and 36 of the EEC Treaty from salbutamol to be found in Italian chemists' obtaining from the competent national shops was not solely produced by authorities an order prohibiting the Allen & Hanburys and sold by Glaxo; it importation from another Member was also manufactured and marketed by State of goods which infringe the other undertakings, obviously without the patent, where that law makes no consent of the British manufacturer. provision for measures against a person
ALLEN AND HANBURYS v GENERICS
who infringes the same patent by acts inventor retains the power to act against a other than importation? licensee who fails to comply with the terms of the licence. In the Community context it is clear from the Court's case-law that the holder of a patent cannot be denied the (2) Under the abovementioned Community right to oppose the importation of patented provisions, are the national authorities products unless they have been marketed which grant 'licences of right' under an with his consent in the exporting country obligation to include in such licences (judgment of 31 October 1974 in Case terms permitting importation from 15/74 Centrafarm v Sterling Drug [1974] another Member State? ECR 1147; judgment of 22 June 1976 in Case 119/75 Terrapin v Terranova [1976] ECR 1039; judgment of 14 July 1981 in (3) Is the answer to Questions 1 and 2 Case 187/80 Merck v Stephar and Exler affected, and if so how, by the fact that [1981] ECR 2063). the imported goods are pharmaceutical products and originate in a Member State whose legislation does not allow That, according to Allen and Hanburys and such products to be patented? the United Kingdom, is clearly not the position in this case. The fact that salbutamol could not be patented in Italy means that it would have served no useful (4) If the answers to Questions 1, 2 and 3 purpose for Allen and Hanburys to consent are to the effect that Articles 30 and 36 to its marketing; Allen and Hanburys of the EEC Treaty do not allow such therefore had the right to oppose its imports to be prohibited, may an importation into the United Kingdom. In injunction to that effect nevertheless be the final analysis the power of the Comp- granted on the basis of the case-law of troller and the national courts to suspend the Court of Justice and in particular of importation in such situations serves to the principles it has enunciated on the strike the necessary balance between two subject of unfair competition and interests of equal weight: the public interest consumer protection?' dictating the grant of the licence of right and the protection that must still be afforded to a patent proprietor whose property rights have not yet been exhausted 3. The parties to the main proceedings, the under Community law. United Kingdom, and the Commission of the European Communities have presented written observations and oral argument in The Commission and Generics, on the other the proceedings before this Court. hand, consider that the holder of a patent endorsed 'licences of right' cannot prevent the exploitation of the invention by third parties but is merely entitled to receive a fair They have basically advanced two lines of rewardfrom the licensee. On that basis, and argument. Allen and Hanburys and the having regard to the judgment in Merck United Kingdom argue that a patent referred to above, the derogation from the endorsed 'licences of right' remains an principle of the free movement of goods industrial property right and as such may be provided for by Article 36 on grounds of protected pursuant to Article 36 of the the protection of industrial property cannot Treaty. Although he does not have absolute apply in this case. Moreover a measure control over his exclusive rights, the prohibiting the importation of salbutamol
OPINION OF MR MANCINI —CASE 434/85
into the United Kingdom is clearly dispro- exercise of those rights may nevertheless, portionate to the need to safeguard the depending on the circumstances, be rights afforded by a patent bearing such an restricted by the prohibitions in the Treaty'. endorsement. 'Inasmuch as it provides an exception to one of the fundamental principles of the common market, Article 36 in fact admits exceptions to the free movement of goods only to the extent to which such exceptions T h e conclusions that are to be drawn from are justified for the purpose of safeguarding each of the two views are obvious. The rights which constitute the specific subject- Commission and Generics consider that the matter of that property' (judgment in ban on imports is not compatible with Terrapin v Terranova, paragraph 5, my
Community law. On the other hand it is emphasis). Moreover, prohibitions or regarded as lawful by Allen and Hanburys restrictions laid down by national provisions and the United Kingdom which, however, must not 'constitute a means of arbitrary do not rely solely on the arguments referred discrimination or a disguised restriction' to above (the legal impossibility of patenting (Article 36, infine). the pharmaceutical product in Italy); they also invoke certain 'mandatory requirements' recognized by the Court in a long series of well-known cases.
They argue that the prohibition is justified by the need That said, it seems to me that the main to protect such interests as public health, problem in this case is not to determine fair trading and consumers' rights. what effect a patent subject to the endor- sement 'licences of right' actually has in Community law and whether the first part of Article 36 applies in such circumstances but to ascertain whether the rules at issue 4. It is trite law that the provisions of the fall within the scope of the last sentence of Treaty on the free movement of goods, in Article 36, that is to say whether the ban on particular Article 30, preclude restrictions imports to which the grant of the licence on imports and measures having equivalent is subject constitutes in itself arbitrary effect, that is to say all national provisions discrimination or a disguised restriction on capable of hindering directly or indirectly, trade. actually or potentially, intra-Community
trade. Equally, it scarcely needs saying that such restrictions and measures are lawful under Article 36 in so far as they are justified on certain grounds, including the It should be borne in mind that under the protection of industrial and commercial Patents Act 1977, during the four-year property. extension of the term of a new existing patent, any person who produced or imported the patented article could obtain a licence and that, in the words of Lord Diplock, such a licence 'merely makes However, it is evident from the context and, lawful acts . . . which [otherwise] would be in particular, from the second sentence of unlawful'. It has also been seen that no such Article 36 that 'whilst the Treaty does not equality exists in cases of patent affect the existence of rights recognized by infringements inasmuch as the competent the legislation of a Member State in matters authority does not have the power to enjoin of industrial and commercial policy, yet the an infringer who produces articles within
ALLEN AND HANBURYS v GENERICS
the country to suspend his unlawful oper- provision. In any event by making the grant ations whereas it may adopt restrictive of the licence subject to a requirement that measures having analogous effect with imports are to be suspended the nature of regard to an infringer by importation. that grant as an individual right is ultimately negated (or to a large extent debased) and thus the licensee is denied the possibility of subsequently legalizing his own situation. We have already seen, however, that where Asked by the Court to explain the reasons the term of a patent has expired but has for that disparity, the United Kingdom been extended by operation of law, 'any stated that an infringer within the country person [including an importer therefore] can always obtain a licence as of right and s h a l l . . . be entitled as of right to a licence' thereby bring his infringement to an end. and that one of the effects of such a grant is That outcome is thus 'inevitable'; since the to regularize any prior infringements by the delay in granting the licence is due not 'to licensee. any right of the patentee to prevent the grant' but 'to the failure of the parties to agree terms' it would be wrong to grant the patentee an' injunction pending the grant of
the licence. But that is not all. The explanation furnished by the United Kingdom implies that the holder of a patent whose term has been extended continues to enjoy, as against an infringer by importation, all the rights In the case of an infringer by importation, enjoyed by the proprietor of a patent with the United Kingdom goes on, it may on the full validity and whose rights are not other hand be appropriate to prohibit exhausted. Such a result is not merely importation as a term of the licence. But contrary to the letter and the spirit of such a measure will be adopted only in section 46 but, from the point of view of exceptional circumstances, in particular Community law, it is manifestly a discrimi- 'where damages would not be an adequate natory measure. The justification for the
remedy'. In that situation 'to deny a patentee enjoying full rights is that the patentee relief by way of an interim infringement in question consists in the injunction would be to allow importers a importation of goods from another Member period of grace' which would give rise to State. the risk of unlicensed articles flooding on to the market which in turn would necessarily have irreversible consequences if it were later found that imports should have been It may also be noted that the measure in prohibited.
The United Kingdom therefore question comes nowhere near to meeting considers that it is unjustified to maintain the conditions laid down in the Terrapin v that section 46 (3) (c) is protectionist in Terranova judgment. The reasons are aim; as this case bears out, that provision obvious. The United Kingdom states that a seeks merely to defend the patentee against patentee must also be able to obtain an unfair competition. 'adequate r e m e d / in cases of infringement
by importation. However, prohibition of imports would preclude any possibility for the importer to exploit the invention and thus pay to the patent proprietor the It is a clever reply but it does not suffice to remuneration and damages to which he was resolve the contradictions underlying the entitled by law. It seems to me that it would
OPINION OF MR MANCINI —CASE 434/85
be difficult to conceive of any derogation may be justified on the basis of: (a) the fact which is less 'justified' or even less appro- that it was impossible to patent the product priate than this for protecting industrial in the exporting country; (b) mandatory property rights in the form of a patent requirements such as the protection of fair whose term has been extended. trading and the consumer.
All in all there are thus reasons enough for T h e answer can only be in the negative. concluding that the power given to the With regard to (a), it is undeniable that at Comptroller and the national courts to the time when salbutamol was invented it prohibit imports encounters an inescapable could not be patented in Italy. Notwith- obstacle in the letter of Article 36 and the standing that fact, there is no need to interpretation of that provision by the Court examine whether the Community principle of Justice. concerning the exhaustion of exclusive rights applies in this case. On the contrary, the problem here concerns the position of a person who, on the basis of the law of his State, wishes to exploit an invention 5. In the light of the foregoing it is an easy pursuant to a 'licence of right' which under matter to resolve the problem raised by the that law may be granted invito domino, that second question. If, during the extension of is to say without the consent of the the term of a new existing patent, 'any proprietor of the patent. In other words the person' is entitled to exploit the invention in fact that the salbutamol was produced question as he sees fit, it is obvious that, in Italy without the permission of Allen and leaving aside the question of infringement, Hanburys is irrelevant to the position of the national authorities cannot make the someone who, like Generics, is entitled to grant of licences subject to terms that are obtain a licence to exploit that invention. likely to affect imports of goods from another Member State. Apart from denying importers alone the right to exploit the invention, such terms would ultimately act exclusively against products originating in Finally, as regards the possibility of the rest of the Community; they would thus invoking any mandatory requirements, it is in effect constitute a restriction on intra- sufficient to point out that the Court has Community trade and as such be contrary consistently held that such requirements to the prohibition laid down in Article 30 of must have been laid down for reasons which the Treaty. Once that conclusion is estab- are in the public interest; they can be relied lished, it is for the national authorities to upon as derogations from Article 30 only in determine precisely what means are most so far as the national rules apply without appropriate to ensure that the licences are distinction to trade in domestic and granted in a manner compatible with imported products and are not protectionist Community law. in nature (judgment of 17 June 1981 in Case 113/80 Commission v Ireknd [1981] ECR 1625, at paragraph 11; judgment of 6 November 1984 in Case 177/83 Kohl v T h e third and fourth questions seek to Ringelhan & Rennett [1984] ECR 3651, at establish whether, leaving aside the dero- paragraph 14). As we have already seen, gation on grounds of the protection of however, those conditions are not satisfied industrial property, the measure at issue in this case.
ALLEN AND HANBURYS v GENERICS
6. On the basis of the foregoing considerations I propose that the Court should reply as follows to the questions referred to it by the House of Lords by judgment of 12 December 1985 in the proceedings brought by Allen and Hanburys Ltd against Generics (UK) Ltd:
'(1) Articles 30 and 36 of the EEC Treaty are to be interpreted as meaning that the prohibitions laid down therein apply to the case where a national provision enables the proprietor of a patent endorsed 'licences of right' to obtain from the competent authorities of that State an interim injunction prohibiting the importation of goods produced without his consent but n o analogous measure can be obtained against an infringer operating within that State.
(2) The aforesaid Articles 30 and 36 prohibit the national authorities which are competent to grant a licence of right from including in that licence terms apt to hinder the importation of goods from other Member States. It is immaterial that the goods in question are pharmaceutical products which were not patentable in the exporting Member State.
(3) Mandatory requirements relating to fair trading and consumer protection may justify derogations from the prohibition laid down by Article 30 of the EEC Treaty only in respect of national provisions which apply without distinction to trade in domestic products and imported products and do not have protec- tionist effects.'