C-235/89

COMMISSION v ITALY

OPINION OF MR ADVOCATE GENERAL VAN GERVEN delivered on 13 December 1991 *

Mr President, particular section 48(3), of the Patents Act Members of the Court, 1977 in so far as they provide for 'the grant of compulsory licences where a patent is not worked in the United Kingdom to the fullest extent that is reasonably practicable or where demand for the patented product in the United Kingdom is being met to a 1. The Court is asked to rule in these cases substantial extent through importation'. on the question whether various provisions of the Italian and British legislation on compulsory licences are compatible with Articles 30 and 36 of the EEC Treaty. Since the subject-matter of both actions is essentially the same and there is a considerable degree of correspondence between the pleas and arguments of the In Case C-235/89 the Commission objects parties and interveners, this Opinion will to a number of provisions, in particular deal with the two cases together, even Articles 52, 53 and 54, of Royal Decree though the Court has not joined them. No 1127 of 29 June 1939, 1 as amended by Decree No 849 of the President of the Republic of 26 February 1968, 2 in so far as they 'provide for the grant of compulsory licences where the holder of a patent for Background industrial invention does not exploit the patent by way of production on the national territory*. The Commission further objects to Article 14 of Decree No 974 of the President of the Republic of 12 August 2. For the legal context, the course of the 1975 3 in so far as it declared the abovemen- procedure and the pleas and arguments of tioned provisions on compulsory licences in the parties and interveners, I refer to the connection with patents for industrial Reports for the Hearing. However, I would inventions to be applicable also to patents like to focus particular attention on the for new plant varieties. following.

the product protected by the patent is not, such a licence has been requested, in or not sufficiently, met by production or sufficient quantity to satisfy needs in the importation (from other Member States). territory of that other Contracting State. The Commission's complaint is thus This provision shall not apply to compulsory directed solely against the Italian or British licences granted in the public interest.' legislation in so far as it does not recognize satisfying domestic demand by means of imports of products from other Member States as 'working' or 'exploitation' of the invention, or, in other words, in so far as those provisions signify that the patent proprietor can avoid a compulsory licence Pursuant to Article 77 of the Community being granted to a third party only if the Patent Convention Article 46 also applies to product protected by the patent is manu- the grant of compulsory licences for lack or factured within the territory of the Member insufficiency of exploitation of a national State that granted the patent. patent.

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COMMISSION v ITALY

Agreement by such common rules on the Under the Patents ACT 1977, in particular granting of compulsory licences.6 section 46, the effects of the endorsement 'licences of right' were that any person was entitled as of right to a licence under the patent, on such terms as might be settled by agreement or, in default of agreement, by the Comptroller General of Patents. One of the terms could be that the licensee could The contested provisions fall under the not import the patented product. An under- prohibition of Article 30 of the EEC Treaty taking which imported the product into the United Kingdom could therefore not be certain of being granted a licence while a producer established in the United Kingdom was certain of obtaining a licence. Furthermore, in proceedings for 4. I agree with the Commission that the infringement of the patent no injunction or contested provisions constitute measures interdict would be granted against someone having equivalent effect to quantitative who produced the product in the national restrictions on imports in so far as they territory without the consent of the patent provide for the grant of a compulsory proprietor if he undertook to take a licence licence when domestic demand is not, or is on the terms referred to above, while such not sufficiently, satisfied by products manu- an injunction or interdict could be granted factured in the national territory. Such against an infringer who imported the provisions are discriminatory against product from another Member State. products imported from other Member Finally, the amount of any damages which States because importers are treated less could be awarded against an undertaking favourably than producers established within which produced the product in the national the territory. Support for that view is to be territory without the consent of the patent found in the case-law of the Court of proprietor could not exceed double the Justice, in particular the judgment in the amount which would have been payable by Allen & Hanburys case. 7 it as licensee whereas no such limit applied in the case of an undertaking which infringed the exclusive right by means of imports.

examined whether those discriminatory 6. There are obvious differences between provisions could be justified on the basis of the provisions at issue in these cases and the Article 36 of the EEC Treaty. It concluded provisions considered by the Court in (in paragraph 22): Allen & Hanburys. That case concerned licences of right which were available to anybody provided that certain conditions were met, including in some cases the obli- gation to manufacture in the national territory; these cases, on the other hand, are 'an injunction issued against an concerned with compulsory licences which, importer-infringer in the circumstances where domestic production of the protected described by the national court would product is insufficient, may be granted to constitute arbitrary discrimination undertakings prepared to manufacture the prohibited by Article 36 of the Treaty and product in the Member State in question. In could not be justified on grounds of the Allen & Hanburys the national provisions protection of industrial and commercial were detrimental to undertakings which property 5 . wished to obtain a licence to import the patented product and to undertakings infringing the patent by importing products from abroad; the present cases concern national provisions that are detrimental to That the Court regarded the abovemen- patent proprietors holding parallel patents in tioned provisions as discriminatory is also various Member States which export the clear from the answer to the fourth question product from the Member State in which in which, in examining whether the national they manufacture it to the Member State in rules could be justified on the grounds of question. imperative requirements relating to consumer protection and fair trading, the Court stated (in paragraph 34):

incompatible with Articles 30 and 36 of the Such penalization of a patent proprietor EEC Treaty. In this case too, as Italy 9 and wishing to supply the market concerned by the United Kingdom 10 concede, the imports from another Member State in provisions in question are directed to comparison with a patent proprietor who encouraging undertakings (in this case the wishes to do so by manufacturing the patent proprietor himself) to manufacture, product within that market constitutes or allow the manufacture of, the product discrimination against imports that is at least protected by the patent in the territory of as serious as the discrimination in the the Member State adopting the rule rather Allen & Hanburys case. Accordingly the than importing it from other Member States national provisions in question are to be so that the Member State concerned derives regarded as measures which both have equi- from the grant of the patent the maximum valent effect to quantitative restrictions on benefit in terms of investment and imports prohibited by Article 30 of the EEC employment. Treaty and, as will be seen, cannot be justified on grounds under Article 36 of the EEC Treaty and do not for any other reason fall outside the ambit of Article 30.

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O P I N I O N O F M R VAN GERVEN — C A S E S C-235/89 A N D C-30/90

paragraph 7 of the judgment in Article 222 of the EEC Treaty automatically Centra/arm in which the Court held that: cannot be declared incompatible with the provisions on the free movement of goods. However, as will become apparent, that supposition is erroneous. 'whilst the Treaty does not affect the existence of rights recognized by the legis­ lation of a Member State in matters of industrial and commercial property, yet the exercise of these rights may nevertheless, depending on the circumstances, be affected Article 222 of the EEC Treaty provides that by the prohibitions in the Treaty". the Treaty must 'in no way prejudice the rules in Member States governing the system of property ownership'. The Court has ruled on the scope of that provision in It also points out that the Court has only a small number of judgments. Like the repeatedly held that: recent case of Italy v Commission,M those judgments were generally concerned with the requirement that public undertakings and private undertakings should be treated 'in the present state of Community law and on an equal footing. However, one of those in the absence of Community standardi­ judgments, in Fearon,15 seems to me zation or of a harmonization of laws the particularly relevant to an assessment of the determination of the conditions and United Kingdom's argument. procedure under which protection . . . is granted is a matter for national rules'. 1 3

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COMMISSION v ITALY

The Court did not accept that view and of the EEC Treaty applies is automatically held in paragraph 7: compatible with the provisions on the free movement of goods. It will therefore be necessary to examine separately in each specific case whether a national measure forming part of a system of property 'although Article 222 of the Treaty does not ownership within the meaning of Article 222 call in question the Member States' right to of the EEC Treaty — in this instance the establish a system of compulsory acquisition United Kingdom maintains that the obli- by public bodies, such a system remains gation to manufacture a product protected subject to the fundamental rule of by a patent in the national territory is such a non-discrimination which underlies the measure — is compatible with the chapter of the Treaty relating to the right of abovementioned provisions of the Treaty. It establishment'. is apparent from the examination set out above (points 4 to 7) that that obligation is indeed incompatible with Article 30 of the EEC Treaty.

In the words used in the Dassonville judgment, 17 all trading rules enacted by Member States which are capable of Nor is it thus possible to accept the hindering, directly or indirectly, actually or argument that a system to which Article 222 potentially, intra-Community trade are to be considered as measures having an effect 16 — See the judgment of 4 October 1991 in Case C-246/89 equivalent to quantitative restrictions. That Commission v United Kingdom [1991] ECR 1-4585, is plainly the case where a rule discriminates paragraph 12, in conjunction with the Member States' powers regarding registration of ships. See also the against imports of products from other judgments in Case 57/86 Greece v Commission [1988] ECR 2855, paragraph 9, and in Case 127/87 Commission v Greece [1988] ECR 3333, paragraph 7, in conjunction with 17 — Judgment in Case 8/74 Procureur du Roi v Dassonville the Member States' powers in monetary matters. [1974] ECR 837.

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OPINION OF MR VAN GERVEN —CASES C-235/89 AND C-30/90

In the latter eventualities, the effect of the national rule in question is that the market 3. The argument that the contested rules are of the Member State applying that rule is no justified pursuant to Article 36 of the EEC longer supplied by imported products but by Treaty domestic products, leading to a curb on free inter-State trade. The Commission rightly points out in this connection that the Court of Justice in the 'Buy Irish' judgment 18 held that a programme defined by the Irish 12. The United Kingdom submits, in the Government was incompatible with Article event that the Court should consider that 30 of the EEC Treaty since it was 'intended the British rule falls within the scope of

18 — Judgment in Case 249/81 Commission v Ireland 119821 19 — Judgment in Case 166/82 Commission v Italy [1984] ECR ECR 4005. 459, paragraph 24.

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COMMISSION v ITALY

Article 30 of the EEC Treaty, that the rule the conditions under which he markets his is justified on grounds of the protection of products'. industrial and commercial property.

'includes the exclusive right for the patent proprietor to use an invention with a view to manufacturing industrial products and In the light of those judgments I am unable putting them into circulation for the first to see how national rules which, under time, either directly or by the grant of certain circumstances, deprive the patent licences to third parties, as well as the right proprietor of a major part of the protection to oppose infringements'. afforded him by the patent could be justified on grounds of protection of industrial and commercial property. Furthermore, the Court has held in the Moreover, even if it were possible to rely on Pharmon judgment 2 3 (paragraph 25), as one of the grounds for justification under regards the grant of a compulsory licence, Article 36 of the EEC Treaty, pursuant to that: the second sentence of that article the national rule in question may not constitute a means of arbitrary discrimination. The Court has held in Allen & Hanburys 'Such a measure deprives the patent (paragraph 22) in connection with the proprietor of his right to determine freely conditions imposed on importers by the British legislation regarding licences of 20 — Judgment in Case C-10/89 CNL-SUCAL v HAC [1990] rights (point 5 supra) that such restrictions ECR 1-3711. 21 — Cited above, footnote 8. 'would constitute arbitrary discrimination 22 — Judgment in Case 187/80 Merck v Stephar and Exler [1981] prohibited by Article 36 of the Treaty". ECR 2063. 23 — Judgment in Case 19/84 Pharmon v Hoechst [1985] ECR 24 — Cited above, footnote 12. 2281.

The argument that the contested rules 4. The argument that the Commission's promote competition between domestic and position would not benefit the free movement imported products and therefore contribute of goods to consumer protection cannot be accepted since the relevant rules in the Member States concerned also fail to protect consumers against the exclusive rights of a patent proprietor who manufactures the 13. Italy, supported by Spain, points out patented product within the national that the Commission's contentions are not territory. That shows that the contested directed to ensuring the free movement of rules are aimed not at promoting compe- goods within the common market. tition and protecting consumers but, on the According to Italy, they rather aim at contrary, at boosting investment and protecting the rights of the patent employment in the national territory.

The removal of such discrimination is certainly in accordance with the aims underlying the free movement of goods between the 14. According to Italy the contested provisions are consistent with the Paris 25 — Since it is noi in issue here, I can leave open the question Convention, 26 in particular with Article whether the grant of a compulsory licence may be justified 5(A)(2) which provides: on one of the other grounds mentioned in the first sentence of Article 36 of the EEC Treaty, for example for reasons of national defence pursuant to the protection of 26 — Paris Convention for the protection of industrial property public security under Article 36 (in conjunction with of 20 March 1883, as revised at Brussels on 14 December Article 223) of the EEC Treaty. In this connection I would 1900, at Washington on 2 June 1911, at The Hague on 6 point out that the second sentence of Article 46 of the November 1925, at London on 2 June 1934, at Lisbon on Community Patent Convention provides that the rule in 31 October 1958 and at Stockholm on 14 July 1967 the first sentence of Article 46 does not apply to (United Nations Treaty Series, Volume 828, N o 11851, compulsory licences granted in the public interest p. 306).

'Each country of the Union shall have the EEC Treaty. In Conegate27 (paragraph 25) right to take legislative measures providing the Court held that: for the grant of compulsory licences to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.' 'Article 234 is intended to ensure that the application of the Treaty does not affect either the duty to observe the rights of non-member countries under an agreement previously concluded with a Member State, or the observance by that Member State of its obligations under that agreement. Agreements concluded prior to the entry The signatory States thus retain the power into force of the Treaty may not therefore to grant a compulsory licence when a patent be relied upon in relations between Member is not being worked, in so far as this can be States in order to justify restrictions on regarded as an abuse of the patent right. trade within the Communit/. However, the Paris Convention does not define 'working' and it certainly entails no obligation to interpret it as meaning manu- facturing the patented product in the same Since the Paris Convention was concluded country. An abuse within the meaning of the before the entry into force of the EEC Paris Convention consists in the population Treaty and it has been ratified by all the of a country being denied the products Member States, its provisions cannot serve protected by the patent. No such abuse to justify restrictions on trade between exists if the product is imported in sufficient Member States. For that reason too, the quantities into the country in question. argument based on the Paris Convention Having regard to Article 5 of the EEC must be rejected. Treaty and the first sentence of the second paragraph of Article 234 of the EEC Treaty, which is a specific embodiment of the former, it behoves the Member States which have also signed the Paris Convention to 6. The argument that the Commission's interpret the power they retain pursuant to position is at variance with the Community Article 5(A)(2) of the Paris Convention in Patent Convention accordance with Article 30 of the EEC Treaty and regard 'working' as also including the importation of patented products from another Member State. 15. Italy and the Untied Kingdom, supported by Portugal and Spain, rely on the Community Patent Convention in order to refute the Commission's objections. I discern two arguments in this plea.

One argument, primarily expounded by 'Considering that it is essential that the . Spain, is based on Articles 77 and 83 of the application of this Agreement must not Community Patent Convention. As stated operate against the application of the above (point 3), Article 77 provides that provisions of the Treaty establishing the Article 46 applies mutatis mutandis to the European Economic Community and that grant of compulsory licences for lack or the Court of Justice of the European insufficiency of exploitation of a national Communities must be able to ensure the patent. Article 46 prohibits the grant of uniformity of the Community legal order'. compulsory licences in respect of a Community patent if the product covered by the patent is imported into the Contracting State in which a compulsory licence is sought from another Contracting It follows that the Community Patent State in sufficient quantity. Article 77 Convention must be interpreted in the light would, according to Spain's reasoning, be of the EEC Treaty rather than the other superfluous if the grant of compulsory way round. The fact that the Commission's licences for lack or insufficiency of exploi- interpretation of Articles 30 and 36 of the tation were already prohibited by Article 30 EEC Treaty would signify that certain of the EEC Treaty. Moreover, Article 83 of provisions of the Community Patent the Community Patent Convention enables Convention are superfluous, or even invalid, the signatory States to refrain from applying is not in itself a decisive reason for rejecting Article 77 for a certain period. That that interpretation. provision would be incompatible with the EEC Treaty if the Commission's view were well founded. 16. The second argument, primarily expounded by the United Kingdom, lays emphasis on the major differences between That argument must, in my view, be the national rules on compulsory licences, rejected. Article 2(1) of the Agreement whose harmonization is envisaged by the relating to Community patents signed in Community Patent Convention. Without Luxembourg on 15 December 1989 such prior harmonization, the object expressly provides: pursued by the Commission cannot be achieved and initiating a number of proceedings under Article 169 of the EEC Treaty will only create new disparities.

Conclusion

Having regard to the foregoing, I propose that the Court:

In Case C-235/89:

1. Uphold the Commission's application;

2. Order the Italian Republic to bear the Commission's costs;

3. Leave the Kingdom of Spain, the United Kingdom and the Portuguese Republic to bear their own costs;