C-267/95

IV — Observations submitted to the Court I - 6298

A — The first and second questions I - 6299

(i) Merck and Beccham I - 6299

(ii) Primecrown I - 6300

(iii) Other observations I - 6303

B — The third question I - 6304

(v) The Commission I - 6314

V — Schema for remaining sections of this Opinion I - 6315

VI — Consideration of Question (3) I - 6316

A — Patents and pharmaceutical products I - 6316

(i) Background to the pharmaceutical industry I - 6316

(ii) The role of marketing authorization I - 6319

(iii) The specific subject-matter of a patent I - 6325

(iv) Merck v Stephar 1 - 6327

C — Reconsideration of Merck v Stephar I - 6329

(i) The flawed basis of the judgment I - 6330

(ii) Recommendation to the Court I - 6334

(iii) Case-law support for departing from Merck v Stephar I - 6334

(iii) Governmental price controls I - 6352

VII — Temporal effects of the Court's judgment I - 6355

VIII — Consideration of Questions (1) and (2) 1-6357

IX — Conclusion I - 6370

I — Introduction Member States, on the other. 1 The first two questions concern the date of expiry of cer­ tain transitional provisions contained in the Act of Accession of the Kingdom of Spain and the Portuguese Republic , which permit

1. These joined cases raise, in the form of three questions , two important but distinct 1 — The words 'pharmaceutical' or 'medicinal' products arc vari­ ously used in the Act of Accession (sec footnote 3 and issues concerning the free movement of accompanying text below), Community legislation and judg pharmaceutical products between Spain and ments of the Court. For present purposes, I find no reason to distinguish between them and 1 use them interchangeably; Portugal , on the one hand , and the remaining see further the discussion at footnote 61 below.

2. According to Articles 42 (Spain) and 202 2. This right may be invoked for a product ( Portugal ), respectively, of the Act of Acces­ referred to in paragraph (1) until the end of sion of the Kingdom of Spain (hereinafter the third year after Spam [Portugal] has 'Spain') and the Portuguese Republic (here­ made these products patentable . ' inafter 'Portugal' ) to the European Commu­ nities (hereinafter 'the Act of Accession'), 3 4 — These provisions appear in Part Four of the Act of Accession concerning 'Transitional Measures' as the first articles in sec­ tions entitled 'Elimination of quantitative restrictions and measures having equivalent effect'; Section II of Title II for 2 — Case 187/80 [1981] LCR 2063; hereinafter simply referred to Spain, Section II of Title III for Portugal. In the interests of as 'Merck v Stepbar'. brevity, where texts arc otherwise identical I have placed the 3 — OJ 1985 L 302, p. 23. Portuguese references in brackets.

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5 — Loc. cit., paragraph 14 and the operative part of the judg ment. 6 — the date of expiry assumed by the applicant Member Slates lor the transitional period contained in Article 47 of the Act of Accession. 7 In response to a written request, the Commission supplied the Court by letter of 12 February 1996 with copies of the decisions adopted, which have been published consecutively To that end, close cooperation shall be insti­ in the Official Journal; see OJ 1996 I. 122, pp. 20 to 26. This decision has since been challenged before the Court of First tuted between the Commission services and Instance by a number of pharmaceutical companies; see Case the Spanish [Portuguese] authorities; this T 60/96 Merck and Others v Commission 8 The Commission believes that they arc not experiencing dif cooperation shall also cover the problems of iculties which arc 'serious or liable to persist' and that an transition of current Spanish [Portuguese] increase of imports from Spain will not in the long term be so significant as to create such serious economic difficulties law towards new law.'

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OPINION OF MR FENNELLY —JOINED CASES C-267/95 AND C-268/95

Each of those Protocols further required the Under Article 167(2)(a) of the European removal of special features of Spanish and Patent Convention (hereinafter 'the EPC') Portuguese law which have no specific bear­ each Contracting State may reserve the right ing in the present cases. to provide that European patents covering pharmaceuticals shall be ineffective or revo­ cable. Furthermore, Article 167(3) provides that:

In this context and taking account of the ful­ filment of the undertaking entered into by the Kingdom of Spain under paragraph 1, the 'The Portuguese Republic shall accede on Member States of the Community in their 1 January 1992 to the Munich Convention of capacity as contracting States to the Munich 5 October 1973 on the European patent and Convention undertake to use their best to the Luxembourg Convention of endeavours to ensure, should a request be 15 December 1975 on the Community submitted by the Kingdom of Spain in patent.' accordance with that Convention, an exten­ sion — beyond 7 October 1987 and for the maximum period laid down in the Munich Convention — of the validity of the reserve laid down in the said Article 167 [...] it being understood that the Kingdom of Spain will, 9. The Protocols also required the two new in any event, accede to that Convention not Member States to introduce into their later than 7 October 1992.' national legislation a provision on shifting

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MERCK AND OTHERS v PRIMECROWN AND OTHERS AND BEECHAM v EUROPHARM

10 — CH 1995 M No 1712. 11 — The three plaintiffs arc: Merck & Co. Inc.. a company duly 11. Two cases involving three separate incorporated under the laws of the State ol New jersey; Merck Sharp & Dohmc Limited, a company incorporated causes of action have been brought before under the laws of England; Merck Sharp & Dohmc Inter national Services BV, a company incorporated under the laws of the Netherlands (hereinafter sometimes collectively referred to as 'the plaintiffs' or 'the pharmaceutical compa nies').

9 — Paragraph 2 of Protocol No 8 for Spain; Paragraph 2 of Pro 12 — CH 1995 M No 3239. tocol No 19 (or Portugal. 13 - OJ 1992 L 182. p. 1.

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OPINION OF MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

was granted in September 1993, whereupon those countries arc much lower than else­ the product was launched in Spain. Merck where in the European Union so that medi­ filed for its British product patent covering cines sold by the patentees to wholesalers Reniee (0012401) on 10 December 1979. It there are, instead of going to Spanish or Por­ will expire on 10 December 1999. It filed for tuguese patients, immediately exported to Timoptol (1524405) on 23 September 1976; other Member States. that patent will expire on 23 September 1996.

14 — It appears that, at the date of the commencement of the national proceedings, Europharm had imported one con­ signment of the Spanish product for the purposes of apply­ ing for the requisite import licence for a pharmaceutical product from the appropriate national authority. until

I - 6294

MERCK AXD OTHERS v PRIMECROWX AXD OTHERS AND BF.ECIIAM v EUROPHARM

(a) 7 October 1995; or 2.2. first marketed in Portugal;

until (b) 31 December 1995; or

(a) 1 January 1995; or

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OPINION OF MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

in one or more Member States of the himself of the right referred to in para­ European Communities (the "Member graph 3.4. above, in particular if: State") for a pharmaceutical product (the "Pharmaceutical");

(a) the proprietor has and continues to have a legal and/or ethical obligation to market and to continue marketing the pharmaceutical in that country; 3.2. the pharmaceutical was first put on the and/or market in a country by the proprietor after that country's accession to the EC but at a time when the pharmaceutical could not be protected by a product patent in that country;

(b) that country's and/or EC legislation effectively requires that, once the pharmaceutical is put on the market in that country, the proprietor sup­ plies and continues to supply suffi­ cient quantities to satisfy the needs 3.3. a third party imports the pharmaceutical of domestic patients; and/or from that country into the Member State;

(c) that country's legislation grants to its authorities, and its authorities exercise, the right to fix the sales price of the pharmaceutical in that 3.4. and the patent legislation in the Member country and legislation prohibits the State granted the proprietor of the sale of the pharmaceutical at any patent the right to oppose by legal other price; and/or action the importation of the pharma­ ceutical from that country

provisions, the national court summarizes the arguments considered in detail later in this Opinion, and expresses a clear prefer­ ence for the earliest date, i. e. 7 October 1995 in the case of Spain and 1 January 1995 in that of Portugal. In effect, it therefore accepted Primecrown's argument. It points out that Spain, on acceding to the EPC, was permitted by the EPC's Administrative Council under Article 167(2) of the EPC to postpone the obligation to recognize the pat­ entability of pharmaceutical products for the maximum permissible period, namely until 6 October 1992; thus from 7 October 1992 such products were patentable in Spain. By 18. The national court comes to the clear virtue of Article 42 of the Act of Accession, conclusion that the transitional period for the prohibition contained in Article 30 of the Spain expired on 7 October 1995. Indeed, the Treaty was, under Article 47 of the Act of judge states that 'were it not for the warn­ Accession, to apply from "... the end of the ings often given that sometimes the Court third year after Spain has made these prod­ may, when faced with a fresh question, do ucts patentable'. something unexpected, [he] would have found the matter acte clair .

15 — Emphasis of the national court. This argument was not repeated by Merck in its written observations but was briefly raised by Beecham; sec paragraph 27 below. 16 — In response to a question put at the hearing, Merck accepted that, after the introduction of the patentability of pharmaceutical products in Spain and Portugal, it would be 17. The national court states that Merck impossible to obtain patent protection (or products already patented in other Member States for want of the essential argued that the three-year period should be clement of novelty.

21. The national court also describes Mer­ ck's arguments, regarding the need to protect 20. On the third question, the national court research and development in Europe and to notes that, of the various arguments promote a healthy European pharmaceutical advanced by Merck in favour of a reconsid­ industry, as now stronger than they were eration of the judgment in Merck v Stephar, when first advanced in Merck v Stephar. The two in particular, which were not raised in national court suggests that the Court may that case, may negative the central conclu­ need to consider limiting the retroactive sion that a free decision to market in Spain effects of any qualification of Merck v and Portugal had been made: Stephar, '... for it would obviously be wrong for the Court to depart from a previous decision in such a way as to turn parties into wrongdoers for past acts which were lawful under that decision — to make past lawful parallel imports into infringements'.

(i) the argument that pharmaceutical com­ panies have an ethical obligation to

Primccrown (defendant in Case C-267/95), Industrial Property of 20 March 1883 (as by the Governments of the United King­ revised, hereinafter the 'Paris Convention'), a dom, Belgium, Greece, Spain and Italy and person who has duly filed an application for by the Commission of the European Com­ a patent in one Paris Convention country munities. Oral submissions were presented enjoys, for the purpose of filing in the other 20 by Merck, Beecham, Primccrown, the Gov­ Contracting Slates, a right of priority dur­ ernment of the United Kingdom, the Span­ ing a 12-month period from the date of the ish, Greek, Italian, Danish, French and first filing. This provision allows an applicant Swedish Governments and by the Commis­ 12 months in which to file patent applica­ sion. tions for the same invention in the other Paris Convention countries and to claim pri­ ority over later applicants. The novelty of an invention is determined as at the date of the first filing; i. e. the invention is considered to be novel throughout the Paris Convention countries during that 12-month period. The A — The first and second questions patentability of a product in a Paris Conven­ tion country thus includes as an essential ele­ ment the right to claim the priority flowing from an application made for the same invention in the preceding 12 months in any (i) Merck and Beecham other Paris Convention country.

23. Merck submits that Article 47 of the Act of Accession applies to pharmaceutical prod­ ucts imported from Spain until 31 December 1996. It bases this contention on the wording of Article 47 ('at the end of the third year after' and not 'three years after'). Merck claims that this interpretation is supported by the fact that all transitional measures con­ 25. However, Merck maintains that, at the tained in the Act of Accession expire at the request of the Patent Office, the Spanish end of a calendar year. It refers particularly Council of State held on 18 February 1993 to Article 379 of the Act of Accession which that priority would be recognized in Spain permits the adoption of emergency measures only in respect of applications filed in other until 31 December 1995. EPC countries after 7 October 1992. 21

28. Alternatively, if the transitional period is interpreted as running from the date when 26. Regarding Portugal, Merck submits that Spain made pharmaceutical products as a Article 209 of the Act of Accession will con­ generic class patentable (i. e. 7 October tinue to apply to pharmaceutical products 1992), Beecham considers that Article 47 until 31 December 1998, namely at the end should at least be interpreted in accordance of the third calendar year after Portugal with a rule based on the calendar year. How­ effectively made pharmaceutical products ever, its favoured expiry date (31 December patentable. Effective patentability of pharma­ 1996) is reached by combining this approach ceutical products was not available in Portu­ with the priority date argument based on the gal before 1 June 1995, when the framework Paris Convention, as advanced by Merck. relating to European product patents estab­ lished in the Portuguese Decree-Law No 42/92 of 31 March 1992 was completed by the enactment of a new Industrial Prop­ erty Code permitting the grant of Portu­ 22 guese patents for pharmaceutical products.

(ii) Primecrown

27. Beecham submits that Article 47 of the Act of Accession will continue to apply to pharmaceutical products such as Augmentine 29. Primecrown observes that the EPC came until three years after Spain introduces legis­ into force on 7 October 1977 independently lation to make Augmentine patentable. To of calendar date considerations, when, in construe Article 47 as providing protection accordance with Article 169 thereof, a only until the end of the third year after sufficient number of instruments of ratifica­ tion were lodged. In accordance with Article 167(5) of the EPC, the benefit of the withdrawal of a reservation under 22 — Decree-Law No 16/95 of 24 January 1995, which entered into force on 1 June 1995. Article 167(2) applies only to patent applica-

30. Primecrown then refers to Protocol No 19 to the Act of Accession providing for Portuguese accession to the EPC on 1 Janu­ ary 1992. As there was no provision for a reservation in respect of Portugal under Article 167 of the EPC, chemical and phar­ maceutical substances became patentable in Portugal on that date. The derogation pro­ 32. Primecrown submits that the words vided by Article 209 of the Act of Accession 'these products' used respectively in is linked to Protocol No 19 which refers to Articles 47(2) (Spain) and 209(2) (Portugal) the EPC. Again, a narrow interpretation of of the Act of Accession can only be inter­ the derogation requires that it be interpreted preted as referring to the generic class of as expiring three years after the date of entry products covered by Article 47. If the inten­ into force of the EPC, namely 1 January tion was to refer to a specific product cov­ 1995. ered by a specific patent, then the singular would have been used so as to agree with the references to, inler alia, 'a product' in Article 47(1). More fundamentally, Prime­ crown maintains that the reason that patents could not be obtained from 7 October 1992 for some pharmaceutical products in Spain was no longer the exclusion of pharmaceuti­ cal products as a class from the scope of 31. Primecrown argues that any person national patent law, but the individual act of wishing to obtain a patent in Portugal for a the inventor in making the invention public pharmaceutical product has been able to do at a dale before he could first have applied

34. Primecrown also maintains that the use 33. Primecrown claims that attributing a of a calendar-year method would be contrary calendar-year calculation to the interpreta­ to 'the normal and universal "anniversary" rule' for the calculation of time applied gen­ tion of the three-year period would mean 23 erally by Member States. In the United that the Member States intended at the time Kingdom, Primecrown contends that the of negotiating the Act of Accession that the 24 normal rule is the corresponding date rule, length of the transitional period envisaged in while Article 5.1 of the Spanish Civil Code Article 47(2) could vary by as much as 33 %, indicates that Spanish law also recognizes the depending arbitrarily on the time of the year concept of computing time in 'broken' years, when pharmaceuticals were made patentable. rather than starting the period from the The purpose of the derogation is to permit beginning of the next calendar year. Further­ market conditions to adjust prior to the abo­ more, Primecrown contends that, when lition of the restriction on parallel imports. Community legislation intends to achieve Primecrown submits that it cannot be con­ templated that the drafters of the derogation believed that market conditions might take longer to adjust if Spain introduced patent­ 23 — Primecrown points out, inter alia, that seven Member States (not including Spain and the United Kingdom) have con­ ability for pharmaceutical products near to cluded the European Convention on the Calculation of the beginning rather than to the end of a cal­ Time-Limits ('the Basle Convention') which provides in its Article 4(2): 'Where a time-limit is expressed in months or endar year. The reason for the general pat­ in years the dies ad quem shall be the day of the last month or of the last year whose date corresponds to that of the tern in Community Treaties of periods ter­ dies a quo or, when there is no corresponding date, the last minating with the end of calendar years is day of the last month'. 24 — Reference is made in particular to the speech of Lord historical; the EEC Treaty entered into force Diplock in Dodds v Walker [1981] 1 WLR 1027, p. 1029.

38. The Commission stated at the hearing that the broken-years interpretation was 36. The Spanish, United Kingdom, Italian more in accordance with the text of the and Danish Governments submit that the derogations; if calendar years had been expiry date of the transitional period should intended, the texts would have expressly be 31 December 1995 for Spain and Portugal. contained such an indication. Furthermore, Though variously expressed, their argument since, in its view, the precise dates upon is, in essence, that the expression 'the end of which patentability would be introduced by the third year' in Articles 47 and 209 of the Spain and Portugal were unknown at the Act of Accession refers to 31 December in time of the negotiation of the Act of Acces­ the third calendar year to elapse after the sion, it was more reasonable to adopt the broken-years approach. This was the work­ ing hypothesis of most people involved in the sector before October 1995, and certainly 25 — Primecrown cites a number of provisions of intcrnalion.il. national and Community law in support of this argument. the view expressed publicly by Commission

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OPINION OP MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

officials and underlying the applications Europe was the exception rather than the brought under Article 379 of the Act of rule, whereas it is now recognized by most Accession by various Member States. Finally, industrialized nations. Pharmaceuticals are the Commission maintained that the Court now patentable in all EEA countries except 26 should also have regard to the very clear Iceland. view of the national court in favour of this approach.

I - 6304

MERCK AND OTHERS v PRIMECROWN AND OTHERS AND BEECHAM v EUROPHARM

will apply to all pharmaceuticals originating the present case are in fact stricter than the or put on the market in these countries regime operated in Italy at the time of the (where prices are on average up to 33 % Merck v Stephar decision. lower than in the EC ).

systems operated in Spain and Portugal in 31 — Case 120/78 Rewe v Bundesmonopolverwaltung für Branntwein [1979] ECR 649.

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OPINION OF MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

32 — Merck, referring to N . Koch 'Article 30 and the Exercise of Industriai Property Rights to Block Imports' (1986) Fordham Corp. L. Inst. 605, p. 619, insists that this is not tantamount to arguing that patent protection must guaran­ tee profits above market prices but, rather, merely a right to exclude third parties from manufacture and sale, which is itself the reward. 33 — Case 19/84 [1985] ECR 2281. 34 — Joined Cases 55/80 and 57/80 [1981] ECR 147, p. 178, here­ 46. In these circumstances, Merck submits inafter simply referred to as 'Musik-Vertrieb Membran'. that a patent should be deemed to be 35 — Case 158/86 [1988] 2605, hereinafter simply referred to as 'Warner Brothers'. exhausted only where the patentee consents 36 — Case C-9/93 [1994] ECR 1-2789, hereinafter simply to the use of that patent's essential and referred to as 'Ideal-Standard'.

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MERCK AND OTHERS v PRIMECRONVN AND OTHERS AND BEECHAM v EUROPHARM

accepted that, in the absence of parallel levels 50. Firstly, pharmaceutical companies — of protection in both the exporting and unlike producers of other consumer prod­ importing Member States, Community law ucts and services — arc not free to decide should not export the legislative policy of whether or not to launch new products on a the former to the latter. Merck submits that market or to interrupt existing supplies, since this reasoning should apply a fortiori in ethical considerations oblige them to provide respect of patents. pharmaceuticals where they arc needed, even 37 where patentability is not recognized.

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OPINION OF MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

faced with unexpected clinical problems with (ii) Beecham a copy of a Merck product will look to Merck for advice.

54. Beecham submits that the purpose of patent protection is the provision of incen­ 52. Secondly, for commercial reasons, Merck tives for innovation; the inventor must be contends that it is not free to discontinue afforded the opportunity to earn a reward supplies. Withdrawal would require patients for its inventive effort through exclusive currently being treated with products pre­ market access rights. It relics upon the scribed by their doctors to switch to other Court's judgment in Centrafarm v Sterling products possibly perceived to be less well Drug 38 as the basis of the doctrine of suited to them. Such a withdrawal would exhaustion in the context of parallel patents. irremediably tarnish Merck's reputation as a In holding in Merck v Stephar that the pat­ company at the service of public health and entee's right could be exhausted by consent­ undermine its goodwill with the Spanish and ing to marketing in a country where he Portuguese medical community. enjoyed no patent protection, Beecham sub­ mits that the Court incorrectly extended the exhaustion doctrine. Beecham criticizes Merck v Stephar because its reasoning is flawed and cannot be reconciled with either subsequent case-law of the Court or Com­ munity legislative developments.

56. Bcecham submits that the judgment in development and health protection 4 and Merck v Stephar is wrong in principle particularly with the current difficult circum­ 41 because it undermines the ability of the pat­ stances of the pharmaceutical industry. entee to obtain a reward for his creative effort. In particular, the Court did not address the effects of imports from countries where no patent protection exists on the ability of the patentee to maintain prices at a level sufficient to guarantee such a reward in countries where such patentability is recog­ 39 nized. Moreover, it argues that Advocate 58. Beecham, like Merck, argues, in the General Reischl mistakenly advised the alternative, that the circumstances of the Court that there was no causal connection present case can be distinguished from those between patentability and price levels: Bee­ of Merck v Stephar; it is not free to 'consent' cham submits that, if he had carried out a or withdraw 'consent' to the marketing of general price comparison between patented Augmentine in Spain, for legal and ethical and unpatented products within each Mem­ reasons. An ethical obligation is not an ber State, rather than between different entirely subjective notion; it can arise from Member States, he would have found that objectively verifiable consumer demand. Fur­ the pricing of unpatented products, which thermore, a pharmaceutical supplier should arc subject to competition from generic cop­ not be dissuaded from meeting demand in a ies, differs from the pricing of patented particular Member State for fear that such products, which are not subject to such com­ supplies might result in parallel imports petition. jeopardizing its profitability on other mar­ kets. If it had to establish the existence of an ethical obligation before national courts, it would not be confined to drawing inferences based on the therapeutic qualities of the product, but could also offer direct evidence, such as that of physicians or pharmacists from the Member State of exportation.

might be prohibited not only by (iii) Primecrown Article 85(1) but also by Article 86 of the Treaty. Although any possible infringement of Article 86 would depend on those affected being able to show that it enjoyed a domi­ nant position in a relevant market in Spain, or some other part of the Community, Bee- cham contends that the possible success of such an action would leave it open to being ordered by a Spanish court either to pay 61. Primecrown submits that the principle damages or to continue supplies. laid down in Merck v Stephar, whereby exhaustion is based on consent to marketing, is still correct. At the time of this judgment, the Court was aware that it would apply to imports from Spain and Portugal as potential 42 new members of the Community. The principle was assumed to be correct during the negotiations concerning the conditions of accession of Spain and Portugal and, accord­ ingly, a series of provisions designed both to strengthen the Spanish and Portuguese patent systems and to permit the adjustment of pharmaceutical industries in existing Member States prior to the full application of the free movement rules to Spain and Por­ tugal was expressly adopted. Since the Act of 60. At the hearing Beecham insisted that nei­ Accession is an instrument of equivalent sta­ ther the requirement of legal certainty nor tus to the founding Treaties, Primecrown the entrenchment by the Act of Accession of contends that it was the clear intention of the the Merck v Stephar decision should prevent negotiators that only the specific and limited the Court reconsidering its previous derogations from the principle of free move­ decision, and that subsequent developments ment set out in the Act of Accession and its in the Court's case-law had cast doubt on Protocols should, henceforth, restrict free the authority of that decision. The mere fact trade between the new and existing Member that the Act of Accession was negotiated in States. In its judgment in Generics v Smith 43 the light of Merck v Stephar cannot curtail Kline & French Laboratories the limited the freedom of the Court to reassess its mer­ nature of the derogations contained in its, particularly as the effects of Merck v Articles 47 and 209 and the applicability after Stephar would, if upheld, continue to apply their expiry of the principle contained in to patented products marketed in Spain prior Merck v Stephar to imports from Spain and to the introduction of patentability for about Portugal was expressly reaffirmed by the ten years. On the other hand, reversing Court. Merck v Stephar would not affect parallel trade in newer products first marketed in Spain after its introduction of patent protec­ 42 — Primecrown notes that this fact was relied upon at the time tion. Beecham conceded that the Court by the Government of the United Kingdom and referred to might consider limiting the retroactivity of in the report for the hearing; sec [1981) ECR 2063, p. 2074, right column, middle paragraph. its judgment. 43 — Case C-191/90 [1992) ECR I-5335 (hereinafter 'Generics·).

64. Primecrown also submits that a claimed ethical obligation to supply cannot form the basis of an exception to Community rules regarding free movement of goods. Ethical obligations arc self-defined and, thus, inher­ ently subjective. Moreover, referring to a report, relied upon by Merck before the national court, Primecrown contends that 63. On the existence of consent, Prime- the existence of such an ethical obligation crown denies that Merck has demonstrated that either Spain or Portugal placed a legal obligation on pharmaceutical companies to introduce medicinal products on to their 45 — Primecrown points out that with Renitec, there are appar­ ently at least 19 generic equivalents of the product available markets; Merck thus chose freely to place the on the Spanish market: regarding Proscar, Primecrown drugs in issue on the market when it was alleges that there are no generic equivalents present on the Spanish market, and thus finds it difficult to see how Merck aware both of the decision of the Court in is suffering from the absence in Spain of patent protection.

has not been established. Furthermore, the Spanish prices are fixed independently of the position in Spain in respect of ethical obliga­ availability in Spain of product patent pro­ tions has not been shown to be different tection and are based on comparisons with from that of Italy described in Merck v other Member States, in which patent pro­ Stephar. The claimed ethical obligations were tection exists for pharmaceutical products. inconsistent with the complaint that the The Spanish price control system serves the absence of patent protection deprives the same social purpose as those operated in companies of the monopoly bargaining pos­ other Member States and, furthermore, as it ition in price negotiations, which implies a is applied equally to imported and domestic willingness to withdraw or curtail supplies. products, does not infringe Article 30 of the Treaty. The high consumption of pharmaceu­ tical products per head of population com­ pensates for the slightly reduced price levels in Spain. Thus, the total return to the phar­ maceutical industry from this high-volume market is favourable even if price levels have in the past been lower than in other mar­ 51 kets.

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importation will be worthwhile for traders of Intellectual Property (hereinafter 'TRIPS') or pharmacists. Primecrown claims that concluded as part of the Uruguay Round of 54 parallel importation is a temporary phenom­ GATT negotiations. enon affecting a limited number of products for a limited period. Since the Act of Acces­ sion, the prospect of free movement of goods and the introduction of patentability has resulted in a general upward trend in Spanish drug prices with a reduction in differentials. Merck, Primecrown says, ignores the large benefits accruing to it and the pharmaceuti­ (iv) The intervening governments cal industry generally from Spanish and Por­ tuguese accession.

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marketing which should be taken as leading it should not be abandoned because: firstly, to the exhaustion of patent rights. These of the need to respect the principle of legal Member States, joined by Belgium, consider certainty; secondly, of the potentially impor­ that the existence of price controls in Spain tant consequences of such a decision for and Portugal either alone or combined with trade in pharmaceutical products between legal or ethical obligations to supply or con­ Spain and Portugal and the rest of the tinue to supply these markets should be con­ Community for the next ten years, and; sidered as potentially undermining the con­ thirdly, because the rule served implicitly as clusion that the plaintiffs had freely decided the basis for accession negotiations with to market their respective products in those those countries. markets. I should emphasize the breadth of different positions adopted by these Member States. The United Kingdom, for example, considers in principle that apparently volun­ tary acts may be shown, in reality, to have been undertaken under compulsion but is unimpressed by any of the factors advanced by Merck in the instant case as sufficient to 70. The Commission, in its written observa­ establish lack of consent. tions, advanced three arguments in favour of excluding from the scope of the Merck v Stephar rule cases where there is a legal or 56 ethical obligation to market. At the hear­ ing it endorsed the observations of the Gov­ ernment of the United Kingdom regarding the difficulties inherent in attempting to develop a clear legal notion of an ethical (v) The Commission obligation, and said that Merck v Stephar should be qualified only in circumstances 57 where a legal obligation to market exists. Such a legal obligation could derive either from Community or national law. Accord­ ingly, the Commission contends that a 69. The Commission submits that although refusal to supply a market where a product is 55 not patentable could amount to an abuse of a the Merck v Stephar rule can be criticized, dominant position contrary to Article 86 of

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the Treaty. 8In respect of Spanish law, the factor in the pricing of pharmaceuticals in Commission observes that, under Article 33 the Community than differences between of Real Decreto 767/1993 of 21 May 1993 national patent laws. However, it conceded and Article 71(c) of Ley 25/1990 of that it was unlikely that there would be any 20 December 1990, the holder of a marketing harmonization of such controls at Commu­ 60 authorization is obliged to market medicinal nity level in the foreseeable future. products for which he has received an autho­ 59 rization.

58 — The Commission accepts that it is unclear whether the 60 — The Commission pointed out that Council Directive plaintiffs in the main proceedings would actually be in a 89/105/EEC of 21 December 1988 relating to the transpar dominant position on the markets in question and, further­ ency of measures regulating the pricing of medicinal prod more, whether their potential refusal to supply the market ucts lor human use and their inclusion in the scope of could be characterized as an abuse according to Article 86. national health insurance systems (hereinafter the 'Transpar 59 — It should be noted that the Commission submits that the ency Directive'); OJ 1989 L 40, p. 8, whose object is prin Merck v Stephar rule should continue to apply to cases cipally 'to obtain an overall view of national pricing where the product was patentable but, for whatever reason, arrangements' (see recital 5), is not a harmonization meas the patentee did not actually obtain patent protection. ure.

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OPINION OF MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

general considerations governing the aban­ the exclusivity which would have flowed donment by the Court of the reasoning from such protection. underlying an earlier judgment and the alter­ natives to departing from Merck v Stephar. I will then address in Section VII the need, should the Court follow my principal rec­ ommendation regarding the rejection of the reasoning underlying Merck v Stephar, tem­ porally to limit the effect of the judgment. A — Patents and pharmaceutical products Penultimately, I will deal in Section VIII with Questions (1) and (2) before, finally, stating my general conclusions in Section IX.

75. Many companies in the pharmaceutical industry operate on a world-wide basis. They are concentrated principally in the 74. The primary contention of the pharma­ United States, the European Community and ceutical companies is that they should be Japan. permitted to invoke their rights under the patent law of the United Kingdom to oppose parallel imports from Spain and Portugal of the pharmaceutical products at issue for which they hold patents in the United King­ 76. While the fact-finding function is the 61 dom. They rely above all on the absence of preserve of the national judge, there are large patent protection for pharmaceutical prod­ areas of agreement on the facts, particularly ucts in Spain and Portugal which deprived those concerning the essential role and soar­ them of the opportunity, when first market­ ing cost of research and development as they ing the products in those Member States, of affect the industry. This has been recognized by Community institutions, and has influ­ enced legislation. 61 — As stated in footnote 1 above, I use interchangeably the terms 'pharmaceutical' or 'medicinal products/ preparations'. Both the Court and Advocates General have in the three previous most relevant cases also used other terms including 'medicaments' and 'drugs' while some of the observations submitted in this case refer to 'pharmaceu­ ticals'. These terms can all be understood as referring to 77. On 2 March 1994, the Commission com­ proprietary medicinal products for human use which essen­ tially were the subject of the Parke, Davis v Centrafarm municated to the Council and to the Euro­ (Case 24/67 [1968] ECR 55, hereinafter simply referred to pean Parliament a report 'on the Outlines of as 'Parke, Davis'), Centrafarm v Sterling Drug and Merck v Stephar cases and arc again at issue in the present cases. The an Industrial Policy for the Pharmaceutical words 'proprietary medicinal product' arc borrowed from Council Directive 65/65/EEC of 26 January 1965 (hereinaf­ Sector in the European Community' (herein­ ter 'the 1965 Directive') on the approximation of provisions 62 laid down by law, regulation or administrative action relat­ after 'the 1994 Report'). Although not ing to proprietary medicinal products, OJ, English Special Edition 1965-1966 (I), p. 20. The term 'patentee' is used for convenience to describe the person who is entitled to the benefit of a patent right, whether as the proprietor of the patent, his assignee or licensee. 62 — COM(93) 718 final.

64 — Acetylene Illuminating Company Ltd v United Alkali Co. Ltd [19051 RPC 145 and 153, I louse ol Lords. This judg ment would, at the time, also have been applicable in Ire 63 — Ibid., first paragraph on p. 5. In its resolution in response to land and would have remained a persuasive authority after lite Commission communication, the European Parliament independence in 1922. stated that it 'expects' the development by the Commission 65 - Federal German Patent Law of 9 May 1961, Section I(I)(2) of guidelines for 'a realistic industrial policy' that will as amended by the Law on the Amendment ol the Patent 'direct European research more towards real innovation' Law, Trademark and other Laws of 4 September 1967, through, inter alta, 'protecting new medicinal products by Bitmlvigesetzblatt I, No 56, p. 953. intellectual properly rights both in the EU and in third 66 Order of the Ministry of Industry No 45C of 16 December countries' (point 10); adopted at the plenary session of 16 April 1996, to date not yet published in the Official Jour 1983. nal. See also generally the Economic and Social Commit 67 Article 1(3) of Resolution 1043 of 13 October 1989. tec's Opinion on the 'ľrec Movement of Medicines in the 68 — Sec Articles 1 and 2 of Decree 932/1987, a decree concern European Union - Abolition of Existing Barriers', ing the granting of patents to nutritive and medicinal sub OJ 1996 C 97, p 1. stances.

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OPINION OF MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

In pharmaceutical product patenting possible, particular, once the periods of reservation because of lack of novelty. 70 permitted by the EPC have been exhausted, there will be a common 20-year period for patents for pharmaceutical products in all signatory countries to that Convention and, therefore, in effect, in all EC Member States. Consistently with that trend, the other Member States, by the Act of Accession, required Spain and Portugal, subject to tran sitional provisions, 'to provide the level of protection of industrial property attained in the Community' subject to a limited power to postpone that effect in the case of chemi cal and pharmaceutical products.

Merck's written observations provide a wealth of detail, into which I will not enter, on the 71 — European Intellectual Property Review Supplement, Volume obligation to introduce patentability 16, Issue 11, November 1994. Article 27(1) provides that 'Patents shall be available for any inventions, whether prod imposed on a number of Central and Eastern ucts or processes in all fields of technology, provided they arc new, involve an inventive step and arc capable of indus European States from the beginning of the trial application'. While it is arguable that Merck v Stephar 1990s by agreement with the European is inconsistent with this provision, this issue is not raised by the questions referred. It should be noted that on 22 Community. Primecrown referred to TRIPS December 1994, the Council adopted Decision 94/800/EC concerning the conclusion on behalf of the European Com munity, as regards matters falling within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994); OJ 1994 L 336, p. 1.

I - 6318

MERCK AND OTHERS v PRIMECROWN AND OTHERS AND BEECHAM v EUROPI I ARM

72 — The 1994 Report, loc. cit., footnote 62 above, p. 14. 73 — These concerns arc equally reflected in Council Regulation 75 — OJ 1987 L 15, p. 36. (EEC) No 2309/93 of 22 July 1993 ('the 1993 Regulation·) 76 — Sec Article 1 at point 8(a)(iii) as introduced into the 1965 laying down Community procedures for the authorization and supervision of medicinal products for human and vet­ Directive. erinary use and establishing a European Agency for the 77 — COM(90) 101 final — SYN 255. Evaluation of Medicinal Products; OJ 1993 L 214, p. 1. 78 — Ibid., paragraph 1. 74 — Loc. cit., footnote 61 above. 79 — Sec paragraph 5 of the memorandum.

I-6319

OPINION OF MR FENNELLY — JOINED CASES C-267/95 AND C-268/95

86. The fruit of this proposal was the SPC Article 13 provides, in effect, that the lapse regulation. 0The first four recitals in the between the filing of the original patent preamble to that Regulation state: application and the grant of the first market­ ing authorization is to be added to the period of protection given by the patent, but subject to a maximum of five years.

'Whereas pharmaceutical research plays a decisive role in the continuing improvement in public health;

87. Thus the Community as an integral part of a new industrial policy is committed to promoting the protection of industrial prop­ erty rights, the most important of which in Whereas medicinal products, especially those relation to the pharmaceutical sector is that are the result of long, costly research patent protection. will not continue to be developed in the Community and in Europe unless they are covered by favourable rules that provide for sufficient protection to encourage such research;

89. Article 222 of the Treaty provides that the Member States' 'system of property ownership' is unaffected by the Treaty. In so far as the status of industrial and commercial 'The fact that an industrial property right is property (hereinafter 'industrial property') is the creature of the national laws of the State concerned, the Treaty does not lay down any granting the right necessarily places limits on exhaustive code of rules; '[i]t merely pro­ the territory within which such right is effec­ vides a skeleton. The task of putting flesh on tive. This has been referred to as the "terri­ the bones falls to the Community legislature toriality principle" of industrial property 82 and to the Court of Justice'. The rules on rights, ... but it is really no more than a nec­ the free movement of goods, however, essary reflection of the territorial limit to the 'articulate a conflict between two competing sovereignty of the State concerned. In the 83 interests', namely the fundamental objec­ present context no English court can enter­ tive of free trade in the establishment of the tain an action under the Copyright Act 1956 common market and the need to safeguard by a plaintiff who is the author of a work the national interest in respect of industrial entitled to copyright under that Act in property rights. Whereas the common mar­ respect of acts complained of as being com­ ket is concerned with the fusion of national mitted in France, even if being committed by markets into one single market, the Member a defendant who is within the jurisdiction of 86 States' industrial property laws are inher­ the English Court... .' ently territorial. In order to identify national laws which contravene the principle of free­ dom of movement of goods expressed, in particular, in Article 30, the Court developed the doctrine of the exhaustion of the specific subject-matter, object or substance of such 84 rights. While the precise policies underlying national patent laws may vary, there is a rea­ sonable level of agreement that patents are intended to '... make it worthwhile for inven­ tors and their capitalist backers to make their 90. Copinger and Skone James on Copyright, for example, referring to the Opinion of 85 — 12th cd. (London, 1980), p. 1016. 86 — The same principle applies mutatis mutandis for patents. Thus, for example, in Ireland Section 40 of the Patents Act 82 — Sec the Opinion of Advocate General Jacobs in Case 1992 provides that '[A] patent while it is in force shall con­ fer on its proprietor the right to prevent all third parties not C 10/89 HAC GF (hereinafter simply referred to as 'HAC having his consent from doing in the State all or any of ...' II') [1990] ECR I-3711, paragraph 10 of the Opinion. a number of things which constitute the essential protection 83 — Ibid., paragraph 9 of the Opinion. of the patent. Sec also the references to the words 'in the 84 — The Court appears to have used these terms interchange United Kingdom' concerning infringement actions brought ably in its case law but, henceforth, the expression 'specific before courts in that Member State under Section 60 of the subject-matter' will be used in this Opinion. Patents Act 1977.

efforts and risk their money [. . .]. The sim allowed to use such products under the plest, cheapest and most effective way for fiction that an implied licence is granted on society to hold out these incentives is to their sale by the patentee. This implied grant temporary monopolies in the form of licence may, however, be restricted by con 87 exclusive patent rights in inventions'. tract. 90 More significantly, all of the original Member States' laws recognized generally that the effect of the territorial nature of pat ents was that the marketing abroad of the patented product, even with the patentee's consent, did not negate the patentee's right to oppose imports of such products as

88 to the first sale of the patented product whether as a result of the statutory definition 90 — Such restrictions must be explicit: 'When a man has pur of patent infringements or as a result of an chased an article he expects to have control of it, and there 89 must be some clear and explicit agreement to the contrary express exhaustion doctrine. The accession to justify the vendor in saying that he has not given the of the common law Member States to the purchaser his licence to sell the article, or to use it wherever he pleases as against himself'; sec the speech of Lord Community altered somewhat the underly Hatherley in Betts v Willmott (1871) LR 6 Ch App, 239, p. 245.

. .', Chartered Institute of Patent Agents, C. I. P. A. rights of the Committee of the Judiciary, US Senate, 85th Guide to the Patent Acts, 4th ed. (London, 1995), p. 420. Congress, Study No 15 (Washington), p. 21. See the inter esting examination of this and other formulations of the 91 — See Demaret, loc. cit., footnote 89 above, and Alexander, policy justification underlying patent systems by the late 'L'établissement du Marché commun et le problème des René Joliet, Professor and Judge of the Court (hereinafter brevets parallèles' (1968) RTD E 513, pp. 516 to 521.

I - 6322

MERCK AND OTHERS v PRIMECROWN AND OTHERS AND BEECHAM v EUROPHARM

the observations of the Dutch Government on grounds of the protection of industrial in the seminal industrial property rights case property, but subject to the expressly stated of Parke, Davis. In the event of the reservation that these "shall not, however, Court's now departing from Merck v constitute a means of arbitrary discrimi­ Stephar, it will naturally be for the national nation or a disguised restriction on trade court to decide whether a similar approach between Member States'". 94 ought to be adopted in relation to the prod­ ucts at issue in the instant cases, namely those manufactured under licence (we are told by local subsidiaries of the patentees) in circumstances where no patent protection was available in either Spain or Portugal.

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OPINION OF MR FENNELLY - JOINED CASES C-267/95 AND C-268/95

trial property rights to be exercised which crucial paragraph of the judgment, the Court were 'justified for the purpose of safeguard­ stated: ing rights which constitute the specific 97 subject-matter of such property'. The dis­ tinction between the 'existence' and the 'exercise' of rights can, at times, be quite unreal; it has not been referred to in recent case-law, such as HAG II, and may now, at least in so far as the interpretation of Articles 30 to 36 of the Treaty is concerned, 9S 'If a right related to copyright is relied upon be discarded. However, the identification to prevent the marketing in a Member State of the rights which constitute the specific of products distributed by the holder of the subject-matter of the national intellectual right or with his consent on the territory of property is central to the Community notion another Member State on the sole ground of 'exhaustion', though not under that name, that such distribution did not take place on developed by the Court in Deutsche Gram- the national territory, such a prohibition, mophon — admittedly in respect of a form which would legitimize the isolation of of copyright, but one which bore all the national markets, would be repugnant to the usual features inherent in a patent. " In the essential purpose of the Treaty, which is to unite national markets into a single market.'

I endorse 101 the view expressed by Advocate General Gulmann in 'Mag- the owner of the industrial property right. ill', loc. cit., footnote 81 above, that 'an exercise of rights that falls within the specific subject-matter of an intellectual property right will relate to its existence. In other words the distinction between the existence and the exercise of rights and the application of the concept of the specific subject- 100 — Loc. cit., paragraph 12 of the judgment. matter are basically expressions of the same conceptual approach (and that] the distinction between the existence 101 — Advocate General Roemer, in his Opinion, referred to the and exercise of rights has no independent significance for exhaustion of rights in circumstances such as those of resolving specific questions of delimitation'; paragraph 31 Deutsche Grammophon: 'Here it should be decisive that of the Opinion. See also, for example, the Irish High Court the objective of the industrial property was attained when judgment of Mr Justice Kenny in Central Dublin Develop- the goods were first placed on the market, since it was ment Association v Attorney General (1975) 109 ILTR 69, possible to use the monopolistic opportunity for gain.

. .'; [1971] ECR 487, p. 508. It was thus clear quality of the technical service and in view of the consider even from this case that the version of the exhaustion doc able economic expenditure required to produce sound trine which Community law was in the process of adopt recordings suitable for marketing and that 'this function ing bore essentially only a nominal resemblance to the made the monopoly at issue quite similar to a patent'. Dutch and German laws which largely inspired it.

(iii) The speafic subject-matter of a patent subject-matter of the property'. No doubt influenced by Advocate General Trabuc­ 103 chi, the Court defined the specific subject-matter of the patent as 'the guarantee that the patentee, to reward the creative effort of the inventor, has the exclusive right to use an invention with a view to manufac­ turing industrial products and putting them into circulation for the first time, either 94. The Court defined the specific subject- directly or by the grant of licences to third matter of a patent for the first time in Cen- parties, as well as the right to oppose trafarm v Sterling Drug. A New York com­ 104 infringements'. pany (Sterling Drug Inc.) owned parallel (process) pharmaceutical patents in both the United Kingdom and the Netherlands. In the United Kingdom the patent was owned and the product was manufactured by a British subsidiary (Sterling-Winthrop Group Ltd), whereas in the Netherlands it was distrib­ uted through a subsidiary of the British company. Centrafarm imported into the Netherlands consignments of the patented 96. The Court proceeded to rule that the product, which had been lawfully put on the application of a principle of national law market by Sterling Drug's subsidiaries in the whereby 'a patentee's right is not exhausted United Kingdom and Germany; Centrafarm when the product protected by the patent is v Sterling Drug was thus clearly a case where marketed in another Member State, with the parallel patents existed in the United King­ result that the patentee can prevent importa­ dom and the Netherlands. tion of the product into his own Member State when it has been marketed in another State' would constitute an obstacle to the free movement of goods. It recognized that such a right might be invoked subject to the dual conditions of absence both of patent­ ability and of consent to marketing in the 105 exporting Member State. Invoking such a right would not, on the other hand, be justi­ 95. On the basis of Dutch law, Sterling fied 'where the product ha[d] been put on to Drug's Dutch subsidiary was entitled to the market in a legal manner, by the patentee block the marketing of these products as the himself or with his consent, in the Member patentee's Dutch patent was not exhausted by the sale in the exporting countries, but the national court asked whether the Treaty's free movement of goods rules would prevent 102 — Ibid., paragraph 8 of the judgment. this. The Court in reliance on Deutsche 103 — 'The real essence of the protection conferred on the patent owner is the exclusive right to manufacture and market the Grammophon held that Article 36 of the patented product, given to compensate him as the inventor Treaty 'only admits of derogations from the of a process and bring him a financial reward for his efforts and the commercial risks he runs, and it is recog- free movement of goods where such deroga­ nized on a purely temporary basis ...'; paragraph 4 of his Opinion. tions are justified for the purpose of safe­ 104 — Paragraph 9 of the judgment. guarding rights which constitute the specific 105 — See paragraphs 10 and 11 of the judgment.

98. Does the guarantee of exclusivity recog­ nized in Centrafarm v Sterling Drug consist, as Beecham claims, of the right of first mar­ keting the product with the benefit of patent protection? In view of the pivotal place of this decision in the developing case-law of the Court, it is important to address this question. The explicit basis of the question referred was that the patented product had been marketed in the exporting Member State both with the benefit of patent protec­ 97. It follows in my view that once the pat­ tion and the consent of the patentee. This entee has enjoyed guaranteed exclusivity at was the question answered. On the other the point of first marketing, which is not a hand, the language used applies to a wider guarantee of any monopoly profits, the spe­ set of circumstances. At paragraph 11 of its cific subject-matter of its patent is exhausted. judgment the Court acknowledged one situ­ Unlike national patent laws which (to vary­ ation in which an obstacle would be permis­ ing degrees) permit a patentee to oppose sible, where both the conditions of patent­ imports of the patented product marketed ability and consent were absent and referred outside the national territory, the cumulatively to an import 'coming from a Community-law version of the exhaustion Member State where it is not patentable and doctrine now developed permits the patentee has been manufactured by third parties with­ merely to choose the place where he wishes out the consent of the patentee' (emphasis first to market the relevant products in the added), which of course was the actual situ­ Community; once that choice is made the ation in Parke, Davis. It did not deal with a marketed units must, in accordance with the situation where only one of those conditions Community exhaustion principle, thereafter is satisfied. Further ambiguity arises from the phrase 'in particular in the case of a propri­ etor of parallel patents', as implying that this is only one situation in which the prevention 106 — Paragraph 11 of the judgment. of parallel imports is not justifiable. Strictly 107 — Paragraph 12 of the judgment. Advocate General Trabuc­ chi was equally emphatic: 'It is certainly not compatible speaking, Centrafarm v Sterling Drug with the basic principle of the Community system govern­ ing the circulation of goods for a company, which is the decided that issue only for such a case. How­ owner of a patent in force in more than one State of the ever, the Court attached great importance to Community and, through a company wholly under its control, joins in putting the said product on sale in a consent to first marketing and in that respect Member State, to block its importation by third-party purchasers into another Member State for the purpose of the decision is consistent with Deutsche ensuring a commercial monopoly there for another of its Grammophon. The converse problem of subsidiary companies'; paragraph 5 of his Opinion.

99. The strongest argument in favour of the 100. The factual circumstances of Merck v pharmaceutical companies' interpretation of Stephar correspond in all but one important Centrafarm v Sterling Drug is that, since the respect with those of Parke, Davis. Merck specific subject-matter consists of the exclu­ owned parallel patents in most Member sive right of first marketing the patented States for Moduretic, a pharmaceutical prod­ product, a rule permitting parallel imports of uct used in the treatment of hypertension. It such products marketed by the patentee in a marketed the patented product in Italy at a Member State where no patent protection time when patent protection was expressly exists and where, consequently, the patentee excluded for pharmaceutical products and was subject to potential competition at the their manufacturing processes. Stcphar pur­ first marketing stage, would empty that chased batches of the product sold in Italy exclusive right of much of its significance, by Merck and imported them into the Neth­ i. e. the patentee must at least have had the erlands where, due to the prevailing high opportunity of obtaining monopoly profits Dutch prices, it was able to undercut the in the exporting Member State before its prices charged by Merck. Merck argued that national rights in the importing Member its rights under Dutch patent law could not , 08 State can be said to have been exhausted. be exhausted by the marketing in Italy in the absence of patent protection.

down in Centrafarm v Sterling Drug. In Member State where patent protection Merck v Stephar, the Commission and existed: Stephar argued that the absence of a parallel patent was irrelevant because the crucial fac­ tor was the consent of Merck to the market­ ing in Italy. Merck, supported by the Gov­ ernments of France and the United Kingdom, while agreeing with the definition (i) the rights recognized as forming part of the specific subject-matter of a patent laid of the specific subject-matter of a down in Centrafarm v Sterling Drug, main­ patent cannot be regarded as an end tained that a patentee must have the oppor­ in themselves; but they are designed tunity to earn a monopoly profit at least to provide the patentee with 'the pos- once. sibility of obtaining a recompense for his creative effort of invention ... [which although being] one of the objectives of a patent right [...] is not ... inherent in that right... the realiza­ tion of which depends on numerous market factors such as the presence of substitute products, commercial exploitability and similar condi­ 102. I believe that it is appropriate to set out 11 tions'; 1 the reasoning employed by the Court and Advocate General Reischl in some detail.

104. The Court's judgment is equally cat­ egoric. It states that the specific purpose of a patent 'lies essentially in according the inventor an exclusive right of first placing the product on the market'. It is this right which 'enables the inventor, by allowing him C — Reconsideration of Merck v Stephar a monopoly in exploiting his product, to obtain the reward for his creative effort without, however, guaranteeing that he will obtain such a reward in all circumstances'. 113 The patentee must make the decision 'in the light of all the circumstances ... including the possibility of marketing il in a Member State where the law does not provide patent pro­ 106. Advocate General Jacobs, in his Opin­ tection'. If he decides to market in such a ion in HAG II, considered that there was no country 'he must then accept the conse­ rational basis for the doctrine of common quences of his choice as regards the free origin of trade marks propounded in Van 16 movement of the product within the Com­ Znylen v HAG. 1 The decision in Merck v mon Market, which is a fundamental prin­ Stephar represents, at least in so far as pat­ ciple forming part of the legal and economic ents arc concerned, the high point of the circumstances which must be taken into adoption of consent to marketing as the basis account by the proprietor of the patent in for the exhaustion of industrial property determining the manner in which his exclu­ rights. Once a patentee has consented to the sive right will be exercised'. 114 The Court first marketing of a consignment of its prod­ continued: '[T]o permit an inventor, or one ucts in any Member State, then, whether or claiming under him, to invoke [a patent right not patent protection exists in that State, par­ in those circumstances] would bring about a allel patent rights in respect of that consign­ partitioning of the national markets which ment arc exhausted throughout the Commu­ would be contrary to the aims of the nity. I am satisfied, however, that Merck v 15 Treaty'. 1 Stephar should no longer be applied. The Court's rationale in Merck v Stepbar was

(i) The flawed basis of the judgment

108. I am not convinced that an import 107. It is clear from Article 36 of the Treaty restriction granted in favour of a patentee that national industrial property rights are constitutes an arbitrary restriction on intra- not inherently incompatible with the free­ Community trade simply because the prod­ dom of movement of goods within the Com­ ucts concerned were marketed voluntarily in mon Market. In the absence of harmonized Community rules, they remain unaffected by Community law. Community law is, 118 — The Court has always accepted that national industrial however, legitimately concerned with the property rights arc not exhausted by exploitation outside the Community; see, initially, Case 51/75 EMI Records v activities of owners of parallel patents which CBS [1976] ECR 811, which concerned trade marks, but repeated in the context of the Act of Accession and pat­ have the effect of partitioning national mar­ ents in Generics, loc. cit., footnote 43 above. Some 1I7 kets. National industrial property laws national courts have taken the view that the importation of patented products from a third country via another Mem­ ber State will not exhaust the patentee's national patent right in the Member Stale of destination; sec, for example, the cases cited by Tritton, intellectual Property in Europe (London, 1996), who notes that the Hanseatisches Ober- Iandesgericht, Hamburg in its judgment in Re Patented 117 — In earlier case-law, for example, Parke, Davis, loc. cit., the Bandages Material [1988] 2 CMLR 359 'held that the pat Court referred to the fact that: 'The national rules relating entee has not exhausted its rights where the patentee does to the protection of industrial property have not yet been not enjoy a parallel patent in the intermediate Member unified within the Community ...'; paragraph 4 of the State'; p. 317. grounds of judgment.

another Member State without the benefit of 109. One undesirable result that would flow patent protection. " The effect of Merck v from the exercise by the plaintiffs of the Stephar is to export not merely the product 'choice' recognized by paragraph 11 of the but also the commercial consequences of the Court's judgment in Merck v Stephar would legislative choice made by the exporting be that Spanish and Portuguese patients State to the importing State because the pat would be restricted to using unauthorized entee has made a commercial choice to sell locally-produced copies of medicinal prod the product even in a less protected environ ucts patented in other Member States.

20 tured in unprotected markets. ' In other words, it would favour commercially irratio 110. In my view the reliance on the notion nal decisions to withhold products from the of free consent to marketing in Merck v markets of such States, where sales of the Stephar unacceptably glosses over the logical product would hold out some prospect of 2 fallacy that a patentee can be said to have profit. ' ' exhausted his rights by choosing to market units of the protected product in Member States where no patent protection exists. Accepting, as I do, the Court's definition of

prie ing', and Marenco and Banks who remark that '[I]t is a monopoly in exploiting his product, to indeed ironical thai provisions aimed at promoting market obtain the reward for his creative effort freedom should be interpreted in such a way as to penalise the exercise of such freedom'; loc. cil., footnote 55 above. 121 — The plaintiffs have never claimed thai ihcy arc not profit ing from marketing the relevant products on the Spanish and Portuguese markets: I do not believe, however, that this fact eliminates the large difference in principle 122 — Article 129(1) of the Treaty. between sale with and without the benefit of patent pro 123 - Sec Centrafarm v Sterling Drug, paragraph 9 of the judg lection. ment, quoted al paragraph 95 of this Opinion.

111. While I believe that the Court has cor­ rectly been concerned about the potential partitioning of national markets flowing from the exploitation by the owners of industrial property of their inherently terri­ torial (and thus protective) rights, I consider that such concern is misplaced in cases where no parallel rights exist. The diverging policies of Member States regarding the patentability of pharmaceutical products was the real 112. If the plaintiffs were to withdraw, for cause of the non-uniformity in the common example, their products from the Spanish 125 market. In such circumstances, to impose and Portuguese markets and, at least as far as a form of 'venire contra factum proprium' (as the Community is concerned, seek exclus­ suggested by Advocate General Reischl in ively to recover their research investment in 126 his Opinion in Merck v Stephar) on pat­ those products from other national markets entees attempting to exercise their national where their patents are recognized, they patent rights, on the sole basis that they have claim that they would suffer significant already sought to profit from another adverse commercial damage, particularly in national market despite being denied patent Spain and Portugal, to their goodwill and protection there, effectively imposes on pat­ reputation. I was impressed by these argu­ entees the discipline of the Common Market ments, particularly as such damage would where it does not in fact exist. Advocate flow from the withdrawal of or refusal to General Reischl stated that patentees do not supply medicinal products in respect of an always make a monopoly profit and identi­ entire market. Potential commercial damage fied various extraneous factors which can is not, of course, a reason for refusing to give seriously undermine profitability, such as the effect to free trade between Member States. 127 presence of substitute products. The However, this type of damage is clearly linked with the potential loss of incentive to investors. I would reject arguments to the effect that loss of the right to recover 124 — See paragraphs 9 and 10 of the judgment. research costs on one or two markets should 125 — At the time of the Court's judgment in Merck v Stephar, the patentability of pharmaceuticals in Europe was the be ignored unless it can be shown that this exception rather than the rule as, apart from Spain and Portugal, Austria, Denmark, Finland, Greece and Italy will probably lead to reduced research have only recognized such patentability within the last investment in future. A balanced and fair 15 years; see paragraph 79 above. 126 — Loc. cit., p. 2095. 127 — While this statement is certainly correct, the right of a pat­ entee resides in the opportunity of making the monopoly profit, which is clearly evidenced by the determination exhibited by patentees in the defence of this opportunity. 128 — Korah, op. cit., footnote 120 above.

approach should be adopted. This requires tent would unite to render such a proposal that the Spanish and Portuguese markets, unacceptable in practice. even if they cannot be made to contribute to the recovery of research expenditure, should, at least, not be used to undermine that pro­ cedure on other markets. Unfortunately, the current logical implications of Merck v Stephar not only encourage pharmaceutical companies to partition Spain and Portugal from the rest of the Community by with­ drawing from those markets, but thus also constitute a potential copyists' charter for those two markets which will last at least until research-orientated pharmaceutical 114. The reasons for not following Merck v companies arc able to bring through to the Stephar are not, in my opinion, affected by marketing stage on those markets novel and its implicit acknowledgment by the Member therefore patentable products. Stales in the Act of Accession. The Act of Accession did not entrench Merck v Stephar in Community law. On the contrary, both its long-term and its short-term effect is to negate and exclude the rule in Merck v Stephar from operating permanently. In the long term, Spain and Portugal arc required to amend their patent laws so as to be 'compat­ ible with the level of protection of industrial 2 property attained in the Community'. 1 9 This is reinforced, as wc have seen, in the 113. The commercial choice left to pharma­ specific case of patenting for chemical and ceutical companies by paragraph 11 of the pharmaceutical products by the obligation, Merck v Stephar judgment becomes even admittedly delayed until 1992, to accede to more stark when considered in the context the EPC. Thus, since 1992, all such products of pharmaceutical markets. For reasons have been patentable in those Member States. articulated in paragraphs 155 to 161 below, I Parallel patenting will become the rule rather do not recommend that the Court reconsider than the exception. Those products patented in what circumstances the free will of phar­ in other Member States prior to 1992, by maceutical companies is vitiated by an ethical reason of lack of novelty and consequent obligation to market a product. However, non-patentability in Spain and Portugal, these considerations arc not wholly devoid remain a potential source of parallel imports, of merit or relevance to reconsideration of if marketed there by the patentees, and, con­ the fundamental basis of the Merck v Stephar sequently, potential beneficiaries of Merck v judgment. It may be possible to speak of Stephar. Even here, however, the operation major pharmaceutical companies having the of the rule is countermanded for three years option of withdrawing their foreign-patented by the transitional derogation. In no respect, products from the Spanish and Portuguese therefore, is Merck v Stephar restated or markets. It should not, on the other hand, be reinforced by the Act of Accession. At most, supposed that such an extreme proposal would necessarily represent a feasible course of action. In my view compelling commercial considerations with significant ethical con­ 129 - Paragraph 1 of Protocol No 8 and of Protocol No 19.

116. I am thus satisfied, even before examin­ ing the subsequent cases cited by the plain­ tiffs in support of reconsidering the judg­ ment of the Court in Merck v Stephar, that it should no longer represent the law. In my view, Article 36 of the Treaty ought to be 115. In summary, I am satisfied that the interpreted as permitting the proprietor of a judgment in Merck v Stephar represented an patent for a medicinal preparation in one unacceptable restriction on the proper exer­ Member State who also markets units of the cise of national patent rights. It is based product in a second Member State, where exclusively on the criterion of consent to there is no patent protection, to avail of marketing. I believe that it is unacceptably rights under the law of the first Member detrimental to the legitimate interests of pat­ State to prevent imports into that first State entees and to the increasingly recognized of products which were initially marketed in Community function which patents per­ the second Member State. form. I am most struck by its logical fallacy. Patents arc creatures of national, not Com­ munity law. The doctrine of exhaustion exists in some, not all Member States. A right conferred by a national patent cannot be exercised and, consequently, cannot be exhausted by an act of marketing in a Mem­ ber State which recognizes neither that nor any other patent right in the relevant prod­ (iii) Case-law support for departing from uct. The national court observed, with justi­ Merck v Stephar fication, that the 'doctrine of exhaustion was hardly appropriate to the Merck case'. The Community doctrine of exhaustion, enunci­ ated in Centrafarm v Sterling Drug, should be reserved for those cases where there are genuine parallel patent rights. There, the logic is that the patentee has availed of his monopoly right once in the Member State of 117. I also believe that the plaintiffs are cor­ export. That is when the exhaustion occurs. rect in submitting that the case-law of the Article 30 of the Treaty then intervenes to Court subsequent to the Merck v Stephar prevent the patent right in the importing judgment supports the view that the scope of Member State from being used to partition the judgment should be reviewed. The plain­ markets to the benefit of the dual patentee. tiffs have relied especially on Pharmon v Merck v Stephar does not fit within this Hoechst, Warner Brothers v Christiansen and scheme of logic. Ideal-Standard.

'... in a common market distinguished by free movement of goods and freedom to provide services an author, acting directly or through his publisher, is free to choose the place, in Advocate General Warner had, however, any of the Member States, in which to put taken the contrary view that the effect of national law was effectively to cut down the relevant industrial property right and that, in such circumstances, 'the legislation of the 130 — Musih Vertrieb Membran, paragraphs 25 and 26 of the judgment. importing Member State may be invoked to

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120. The national court, as interpreted by this Court, asked '... in substance whether

'It is necessary to point out that where, as in this instance, the competent authorities of a 131 — Opinion, p. 180. He did not simply propose that GEMA could claim 'crudely ... the difference between the United Member State grant a third party a compul­ Kingdom statutory rate of 6.25% and a royalty calculated sory licence which allows him to carry out according to its own scales'. Classifying GEMA's royalty scales as 'irrelevant' he recommended that the extent of the manufacturing and marketing operations restriction would be 'the difference between the royalty actually paid in the United Kingdom ... and the royalty which the patentee would normally have the that could have been negotiated in the absence of Section 8 right to prevent, the patentee cannot be and on the footing that records in respect of which that royalty had been paid could be freely marketed anywhere deemed to have consented to the operation in the Community'; Opinion, p. 179. of the third party. Such a measure deprives 132 — Similar views have been expressed by various academic commentators: sec, for example, Marenco and Banks, the patent proprietor of his right to deter­ op. cit., footnote 55 above, pp. 246 to 248; Demaret, 'Industrial Property Rights, Compulsory Licences and the mine freely the conditions under which he Free movement of Goods under Community Law' (1987) markets his products. 18 II C 161, p. 176; White, case note on Pharmon v Hoechst 23 CMLR 721, pp. 722 and 723; Gotzen, 'La libre circulation des produits couverts par un droit de propriété intellectuelle dans la jurisprudence de la Cour de Justice', Revue trimestrielle de droit commercial et de droit économique 1985, p. 467, at p. 471. 133 — Loc. cit., Opinion, p. 2285, original emphasis.

'It is sufficient to state that the limits referred to above imposed by Community law on the application of the law of the importing Member State in no way depend on the con­ ditions attached by the competent authorities of the exporting Member State to the grant 124. The Court in Pharmon v Hoechst was of the compulsory licence.' 1 35 clearly influenced by the territorial nature of compulsory licences and probably also by

134 — Paragraphs 25 and 26 of the judgment. 135 — Paragraph 29 of the judgment. 136 — Sec Gormlcy. (1985) 10 E. L. Rev.. 447, p. 449

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'In some way, the economic interest of copy­ right owners of musical works in the United Kingdom and in other Member States may 125. Some of the language, at least, used in be better served if the works in question are Pharmon v Hoechst is difficult to reconcile mainly exploited by compulsory licensees in with Merck v Stephar. I am satisfied that if the United Kingdom rather than by the 'the substance of a patent right lies essen­ copyright owners themselves. In the former tially in according the inventor an exclusive situation, they are entitled to oppose imports right of first placing the product on the mar­ of musical recordings originating in the ket so as to allow him to obtain the reward 137 United Kingdom, in the latter situation, they for his creative effort', the patentee must are not. No valid reason can explain such a actually enjoy such an exclusive right if the discrepancy.' doctrine of exhaustion is to be applied.

138 — 'Industrial Property Rights, Compulsory Licences and the 137 — Pharmon v Hoechst, paragraph 26 of the judgment Free Movement of Goods under Community Law' (1987) (emphasis added). Vol. 18 IIC No. 2 161, at p. 175.

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129. Mr Christiansen relied on Musik- Vertneb Membran. He cited paragraph 25 of that judgment to emphasize the free choice exercised by the holder of an intellectual property right in placing a product on the 14 market . ' Warner Brothers , he said, had 128. The plaintiffs have perhaps placed the chosen to market the video-cassette in the greatest reliance on the judgment in Warner United Kingdom . If it had 'been marketed in Brothers v Christiansen. Danish law confers Denmark or Germany the authors' remu­ on the holder of copyright in video cassette neration would have been appreciably lower recordings the additional right to oppose the than it was in the United Kingdom' since the rental of the video-cassette even when it has 'high (British) sale-price of the cassette been sold with the copyright holder's con­ included a component to cover the intellec­ sent. The law of the United Kingdom , at the tual property rights represented by the pos­ material time , did not grant any equivalent , 42 sibility of hiring it out' . right. The voluntary sale by or on behalf of the holder of the copyright exhausted his rights in United Kingdom but not in Danish law. Mr Christiansen purchased in London ,

139 - h is interesting to noie ihal even strident academic sup porters of Merck v Stepbar were nol convinced thai lhe effects of Pbarmon v Hoechst were compatible with the 130. In its observations the Commission logic underlying Merck v Stepbar, sec, for example, the pointed out the serious potential loss of strong approva! of Merck· v Slcpbiir articulated by Bonet, Revue trimestrielle de ¡Írott européen 1982, pp. 161 to 166 and contrast that approbation with his critical comments on Pbarmon v Hoechst, Revue trimestrielle ile droit européen 1986, pp 281 lo 286 MC - Sec Dcmarcl, 'Industrial Properly Rights, Compulsory 141 — Report for the Hearing, p. 2611, paragraph 25 is quoted at Licences and the Lrcc Moderneni of Goods under Com paragraph 118 above munily Law', op cit., footnote 138 above, p. 177. 142 Ibid., p. 2611.

133. The Spanish and the United Kingdom Governments seek to reconcile the present 'Once the maker of a film has sold the cas­ cases with Merck v Stephar on very similar sette to a third party, thereby transferring lines. Whereas Merck in that case consented permanently his proprietary right over the to the placing of its patented product on the recording and permitting it to circulate Italian market in full knowledge of the freely, he may not thereafter avail himself of potential consequences for its rights in other the provisions of another [Member] State so Member States, the exhaustion of Warner as to assert his exclusive right over the work Brother's copyright in respect of the video- recorded on the cassette and thereby in prac­ 144 cassette sold in the United Kingdom did not tice prevent it from entering that State.'

145 — Ibid., paragraphs 15 and 16 of the judgment, emphasis 143 — Loc. cit., p. 2623. added. 144 — Loc. cit., Opinion, p. 2623. 146 — Paragraph 18 of the judgment, emphasis added.

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148 — Profits on the British market were probably greater than on similar sales in Denmark. However , in response to a question from the Court, the Government of the United Kingdom produced no figures to substantiate the extent of 147 — See the economic rationale underlying paragraphs 15, 16 the 'copyright component', stated to be more than 25% of and IS of the judgment, quoted above at paragraph 132, the 'trade' price (see Warner Brothers. Report for the and, in particular, the emphasis which 1 have added to Hearing, p. 2616) in sales of video cassettes in the Untied those paragraphs. Kingdom.

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149 which must be left to the Member States. stopped manufacturing and marketing heat In my opinion, there is no convincing reason ing equipment in 1976. associated with the freedom of movement of goods why the previous Spanish and Portu guese policies of refusing to recognize the patentability of pharmaceutical products should be imposed upon other Member States, who abandoned that particular policy many years before the Act of Accession required Spain and Portugal to follow suit. 137. The relevance of the judgment for the present cases is limited by the specific trade mark aspects of the exhaustion of rights issue raised, namely whether there was a risk of confusion on the part of German consumers in the circumstances of the case and whether the proprietor of the German trade mark had any means of controlling the quality of the

In July 1984 the French subsidiary sold the French 'Ideal Standard' trade mark for heating 150 — In so far as the exhaustion of the trade mark was con cerned the Court held that '[T]he consent implicit in any assignment is not the consent required for application of the doctrine of exhaustion of rights. For that, the owner of the right in the importing State must, directly or indirectly, be able to determine the products to which the trade mark 149 — 'Geistiges Eigentum und freier Warenverkehr' (1989) may be affixed in the exporting State and to control their GRUR Int. 177, p. 179, paraphrased English translation quality. That power is lost if, by assignment, control over cited in Marcnco and Banks, loc. cit., footnote 55 above, the trade mark is surrendered to a third party having no p. 250; sec also (1989) ROM 7, p. 815 for a French version economic link with the assignor'; paragraph 43 of the of this article. judgment.

140. The position of the Court as regards 138. As I am recommending to the Court following rulings it has given in the frame­ that it should no longer apply its judgment work of proceedings under Article 177 of the in Merck v Stephar, I believe that it is incum­ bent upon me to address the Court concern­ ing the circumstances in which it should feel 152 — Per Mr Justice Kingsmill Moore delivering the judgment at liberty in departing from a previous, of the Supreme Court in Attorney Generad v Ryan's Car unambiguous interpretation of the Treaty. Hire [1965] IR 642, 654; sec generally Kelly, The Irish Constitution, Third edition by Hogan and Whyte, Butter worths, Dublin and London, 1994, pp. 532 to 539. 153 — Practice statement on judicial precedent of 26 July 1966 [1966] 1 WLR 1234, [1966] 3 Alf ER 77; for a recent appli­ cation of this statement, sec Pepper v Hart [1993] 2 WLR 151 — Sec paragraph 52 of the judgment. 1035, [1993] 1 All ER 42.

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155 — Case 26/62 Van Gend en Loos v Nederlandse Adminis- 154 — Joined Cases 28/62 to 30/62 Da Casta v Nederlandse tratie der Belastingen [1963] ECR 1; this had been decided Belastingadministratie [1963] ECR 31, section II of the seven weeks before judgment in Da Costa. Opinion. 156 — Da Costa, loc. cit., footnote 154 above, pp. 37 to 39.

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court from any obligation to refer a question to bring an action for annulment'. In the concerning the same provision to the latter judgment, the Court was led to admit 157 Court. The same expectation that the that 'the circumstances and arguments Court will seek consistency in its judgments adduced in the present case show that the underlies its ruling in C. I. L. E I. T., that no various legal remedies provided for both in obligation to refer a question of Community the Euratom Treaty and in the EEC Treaty, law will arise 'where previous decisions of however effective and diverse they may be, 160 the Court have already dealt with the point may prove to be ineffective or uncertain', of law in question, irrespective of the nature notwithstanding the fact that the very same of proceedings which led to those decisions, legal remedies had been examined in the pre- even though the questions at issue arc not vious judgment, and that the solution the 158 strictly identical'. This is further reflected Court adopted in 'Chernobyl' was in effect in Article 104(3) of the Court's Rules of Pro­ identical to that which had been proposed by cedure, which provides that '[where] a ques­ Advocate General Darmon in his Opinion in tion referred to the Court for a preliminary the earlier case. ruling is manifestly identical to a question on which the Court has already ruled, the Court may ... give its decision by reasoned order in which reference is made to its previous judg­ ment.'

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145. The judgment of the Court which is legislation to oppose the importation of perhaps most at point in the present case is similar goods bearing a designation liable to HAG II. There the Court was invited to be confused with his own trade mark . . . reconsider the doctrine of the common ori [this] analysis cannot be altered by the fact gin of trade marks which it had established that the mark protected by national legisla in HAG I, where the Court had ruled tion and the similar mark borne by the incompatible with the free movement of imported goods .

165 property rights. At the outset of its judg ment the Court expressly noted that it was 146. While the judgments outlined above are 'necessary to reconsider the interpretation too few to admit of extensive generalizations, given in [HAG I] in the light of the case-law it appears that the Court will reexamine and, which has developed with regard to the rela if need be, decline to follow earlier judg tionship between industrial and commercial ments which may have been based on an property and the general rules of the Treaty, erroneous application of a fundamental prin particularly in the sphere of the free ciple of Community law, which interpret a Treaty provision as applicable to situations which are properly outside its scope, or which result in an imbalance in the relation 164 — Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837, ship between differing principles, such as the paragraph 5 of the judgment. 165 — He also noted that the doctrine of common origin had not been taken up in later legislation, and in particular the First Council Directive (89/104/EEC) of 21 December 1988 to approximate the laws of the Member States relat ing to trade marks (OJ 1989 L 40, p. 1), though he consid 166 — HAG II, cited in footnote 82 above, paragraph 10 of the ered that such silence could be interpreted as cither appro judgment. bation or condemnation (paragraph 53 of the Opinion). 167 — Ibid., paragraphs 16 and 17 of the judgment.

149. The national court identifies as one of the strongest potential arguments in this context the existence of a legal obligation to supply the Spanish and Portuguese markets 148. The third question referred by the with the relevant products. There is general national court raises the issue of whether agreement in the observations submitted to Merck v Stephar should be followed, firstly, the Court that if a pharmaceutical company as a general proposition, but, as a subsidiary is obliged, whether pursuant to national or matter, asks whether the presence of four Community law, to supply a particular particular factors (whether individually or national market with a certain product it cumulatively) would permit the patentee in cannot be said to have consented to the first one Member State to oppose the importation sale of its product in that Member State. To of patented products which have been mar­ invoke the language employed by the Court keted in Spain and Portugal after the acces­ in Merck v Stephar, a patentee who is sion of those countries, but at a time when obliged to market cannot be said to have the products could not have been protected decided 'in the light of all the circumstances, by a patent. The relevance of these factors is under what conditions he will market his their capacity to demonstrate that products product'.

168 — This issue is discussed at paragraphs 167 to 170 below. 169 — Loc. cit., paragraph 11 of the judgment.

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153. Reference has also been made by the plaintiffs to the possibility that, once a pat­ ented pharmaceutical product is initially 152. Primecrown distinguishes between a marketed on a particular national market, the voluntary decision to market products for patentee or his assignee may be obliged by the first time and a subsequent obligation to reason of the provisions of Articles 85 or 86 continue supplies. This distinction is not of the Treaty to continue supplies. The cir­ however relevant to the exhaustion of rights cumstances in which those provisions could doctrine under Community law. As Beecham be invoked to undermine consent have not, correctly argued at the oral hearing, the in my view, been developed sufficiently in

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155. The plaintiffs have also submitted that the rule in Merck v Stephar should be quali­ 154. Before turning to consider possible fied so as to recognize an exception where ethical obligations, I wish to highlight an the free will of the patentee , at least of a important practical aspect of all of these pos­ pharmaceutical product , in deciding to mar­ sible grounds of legal compulsion . They ket his product is affected by compelling imply that a national court in one ( import­ ethical obligations. Essentially the plaintiffs, ing) Member State will assess the substantive with the support of the Danish , Swedish and terms of the law of another (exporting) Italian Governments and, initially, the Member State or assess whether the effect of Commission , submit that pharmaceutical

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ethical considerations can at most constitute 'The protection of the public against the a persuasive reason for choosing to market a risks arising from defective pharmaceutical particular medicinal product but cannot, for products is a matter of legitimate concern, example, be equated with a compulsory mar­ and Article 36 of the Treaty authorizes the keting obligation imposed on a patentee by Member States to derogate from the rules an appropriate national authority having the concerning the free movement of goods on power to do so. To accept that the consent to grounds of the protection of health and life first marketing, which is central to the rule in of humans and animals. Merck v Stephar, would have to be estab­ lished in the light of such considerations would, in my view, open up the Community exhaustion principle, as applied to patents, to a significant degree of uncertainty. I would be particularly concerned that, if an ethical qualification were accepted, as indeed Prime- However, the measures necessary to achieve crown contends, the considerable financial this must be adopted in the field of health resources of such patentees would be control, and must not constitute a misuse of deployed to frustrate the activities of parallel the rules concerning industrial and commer­ traders. cial property.

, 72 party'. In my opinion the pharmacologi­ make one of its products available on a par­ cal factors advanced by the plaintiffs in these ticular market. In such circumstances, if the cases as constituting an ethical obligation to Court were to accept the relevance of ethical market merely represent a restatement of the considerations, pharmaceutical companies concerns expressed in Centrafarm v Sterling may seek to argue that they were compelled Drug. The plaintiffs' claimed ethical obliga­ ethically to market their products despite tion to distribute their products in Spain and what they might regard as commercially Portugal implies their adoption of a self- untenable controlled prices. I do not believe defined role as guardians of public health in that the presence or absence of patent pro­ those countries. tection could provide a satisfactory basis to distinguish the relevance of ethical consider­ ation in both situations.

(iii) Governmental price controls

163. It must also be stressed that the national court clearly stated that the legiti­ 172 — Loc. cit., Opinion, p. 1178. macy of the price-fixing measures adopted

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In order free movement of goods, in particular in the to clarify the views of the parties and the field of industrial and commercial prop interveners on this issue, the Court asked erty'. 173 Indeed, it has not been suggested in them to address in their oral observations the the observations submitted to the Court that question of whether a direct causal link either Member State operates its system of exists between the fact that a product cannot price controls in a manner which discrimi be protected by a patent, on the one hand, and the level of prices of pharmaceutical nates against imported medicinal products. products in a given Member State, on the As correctly submitted by a number of other, and, if so, the reasons why such non- Member States and the Commission, it is recognition of pharmaceutical patents influ clearly permissible, in the absence of harmo ences the pricing adopted by the national nized Community price-fixing arrangements authorities of the State. The plaintiffs, who for Member States, as part of their public were supported to varying degrees by health and social security policies of ensuring some of the intervening governments and the availability of adequate supplies of the Commission, argued that the non- medicinal products at a reasonable cost, to recognition of pharmaceutical patents weak seek to limit the prices of pharmaceutical ens the patentee's price negotiating position.

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is highly likely that their markets will be consented to the first marketing of patented supplied by copyists who are in a position to products in Spain and Portugal, because the accept a lower price given their lower over­ lack of patent protection in those States sig­ heads and minimal research costs. Beecham nificantly reduced their ability to influence submitted that the arguments advanced by the prices fixed on those markets. This argu­ Spain in its challenge to the validity of the ment ignores the various other factors which SPC Regulation demonstrate that the Span­ influence pharmaceutical prices on a particu­ ish Government is well aware of the link lar market. I do not think that it would be 174 between patent protection and prices. possible without, at least, the benefit of what Primecrown denied that there was necessar­ the Government of the United Kingdom ily a causal link between governmental price described at the hearing as an 'in-depth controls and patent protection. This view economic analysis' to formulate, for applica­ was supported in particular by the Commis­ tion by national courts, a set of criteria sion and the Government of the United which would permit the determination of Kingdom, who each referred to the variety whether the lack of patent protection itself of factors which influence the prices of was the principal determining factor in the 175 medicinal products. price set by a government on a particular market, without calling into question the method of price control used by that govern­ ment.

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criteria which would effectively require the possibility of injustice to even one trader national courts to engage in extensive econ­ who has relied on the existing understanding omic analyses of the relationship between of the Merck v Stephar rule is enough. The price controls and non-patentability in order normal principle that the Court's interpreta­ to determine a point at which the effect of tion of a rule of Community law applies ex the lack of patent protection would be such tunc ought not, in my view, to be applied in as to negate the voluntary nature of a the present cases. decision to market.

177 — See, for example, Case 43/75 Defrenne v Sabena [1976] ECR 455, paragraphs 72 to 74 of the judgment and Case 176 — Case 24/86 Blaizol v Université de Liège and Others C-262/88 Barber v Guardian Royal Exchange [1990] [19881 ECR 379, paragraph 28 of the judgment. ECR I-1889, paragraph 41 of the judgment.

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Community institutions might have nur­ between Spain and Portugal and the rest of 17 182 tured these uncertainties.' 8 the Community was about to open up. Uncertainty would only arise if the Court were to depart from Merck v Stephar with­ out limiting the temporal effects of its new judgment.

178 — Sec Joined Cases C-485/93 and C-486/93 Simitzi v Kos [1995] ECR I-2655, paragraph 17 of the Opinion (quoting from paragraph 30 and referring to paragraphs 31 and 32 182 — In Case C 415/93 Union Royale Belge des Sociétés de of the Court's judgment in Case 163/90 Administration des Douanes et Droits Indirects v Legros and Others Football Association ASBL and Others v Jean-Marc Bos- [1992] ECR I-4625); see also the Opinion of 30 April 1996 man [1995] ECR I-4921, the Court was satisfied that a of Advocate General Elmer in Case C-228/94 Stanley temporal limitation of the direct effect of Article 48 to Charles Atkins v Wrekin District Council and Department transfer rules was held to be justified because 'the specific of Transport, [1996] ECR I-3633, paragraph 63; and the features of the rules laid down by the sporting associations judgment of 30 April 1996 in Case C-308/93 Bestuur van for transfers of players between clubs of different Member de Sociale Verzekeringsbank v J M Cabanis-Issarte [1996] States, together with the fact that the same or similar rules ECR I-2097, paragraph 47 of the judgment. applied to transfers both between clubs belonging to the same national association and between clubs belonging to 179 — Sec Hyland, 'Temporal limitation of the effects of judg­ different national associations within the same Member ments of the Court of Justice — A review of recent case- State, may have caused uncertainty as to whether those law' (1995) 4 I JEL 208, who argues that the alteration by rules were compatible with Community law'; para­ the Court of its previous case-law should be considered an graph 143 of the judgment. In the present cases the argu­ independent ground for limiting the temporal effect of its ments in favour of a temporal limitation arc different but, judgment. if anything, stronger because legal relationships may have been entered into on the basis of what was an unambigu­ 180 — Case 61/79 Amministrazione delle Finanze dello Stato v ous interpretation of the Treaty. Denkavit Italiana [1980] ECR 1205; paragraph 16 of the judgment, emphasis added. 183 — It is noteworthy that counsel for Beecham conceded at the 181 — The national court's comment is quoted at paragraph 21 hearing that the Court could consider delimiting the ret­ above. roactivity of the judgment.

EPC accession + end calendar (b) 31 December 95 31 December 95 year of anniversary date

— Spain: Denial of Paris Convention priority (c) 7 October 96 1 June 98 — Portugal: no national patent before this date + anni­ versary date in each case

Both countries: as at (c) + end cal­ (d) 31 December 96 31 December 98 endar year of anniversary date

(e) 3 years after particular product becomes patentable

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OPINION OF MR FENNĽLLY — JOINED CASES C-267/95 AND C-268/95

175. Paragraph3 of Protocol No 8 post­ poned Spain's obligation to change its patent laws 'solely for chemical and pharmaceutical products'. Firstly, that paragraph obliged Spain to accede to the Munich Convention, i. e., the EPC. Secondly, it envisaged that Spain would invoke the reservation in respect of 'chemical and pharmaceutical products' contained in Article 167(2)(a) of the EPC but obliged it to accede within the time allowed for that purpose. Article 167(1) of the EPC permits such a reservation if invoked by a Contracting State 'at the time 173. Spain and Portugal each undertook by of signature or when depositing its instru­ paragraph 1 of Protocol Nos 8 and 19, ment of ratification'. Spain duly made the 184 respectively, upon accession to 'adjust its reservation. Consequently, any European patent law so as to make it compatible with patent in respect of these products was 'in the principles of the free movement of goods accordance with the provisions applicable to and with the level of protection of industrial national patents ... ineffective or revo­ 85 property attained in the Community ...'. cable'. 1 That paragraph also envisaged cooperation between the new Member States and the Commission 'to cover the problems of tran­ sition of current (Spanish/Portuguese) law 184 — Official Journal of Lhe European Patent Organization 7/86, p. 200. towards new law'. 185 — EPC, Article 167(2)(a).

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177. In what was presumably considered to be the unlikely event of this extension not being granted, Paragraph 3 of the Protocol further provided that Spain might rely on Article 174 of the EPC, a provision recog­ 180. Spain was not, therefore, obliged either nizing the right of any Contracting State at by the Act of Accession or the EPC to intro­ any time to denounce the Convention. Even duce into its law provisions for the patenting in that event Spain was, 'in any event, [to] of chemical or pharmaceutical products so as accede to that Convention not later than to have any effect prior to 7 October 1992 or October 7 1992'. In the interim Spain, by its to give any recognition to an application new Patent Law 11/1986 of 20 March 1986, filed, whether in Spain or elsewhere, prior to provided that inventions of chemical and that date. In plain terms, Spain did not have to make these products patentable before

186 — This is the date fixed in accordance with Article 169 of the EPC for its entry into force. 187 — Decision of the Administrative Council of 5 December 188 — Spanish Patent Law of 20 March 1986, Transitional Provi­ 1986. Official Journal of the European Patent Organiza­ sions, paragraph 1 of the First Part, p. 176. tion 3/87, p. 91 et scq. 189 — Article 167(5) of the EPC.

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OPINION OF MR FENNELLY — JOINED CASES C 267/95 AND C-268/95

. .'. As regards equally clear that 1 January 1992 was the the fixing of the time-limit for enjoyment of date upon which Portugal was bound to this transitional privilege, on the other hand, introduce provisions for the patenting of Articles 47(2) and 209(2) are appropriately pharmaceutical products. This date was expressed in the plural and speak of the time equally foreseeable at the time of the Act of when Spain or Portugal, as the case may be, Accession. 'has made these products patentable'.

Both Merck and Beecham argued in the national court, and Beecham in its written observa tions to this Court, that the expression 'these products' found in each transitional provi sion must be interpreted as referring to the particular products whose import a patent- holder seeks to prevent. This argument can 182. An interpretation of the transitional not, in my view, survive serious scrutiny period applying it to a particular product even in the light of the text of the Article patented in a Member State other than Spain itself. Articles 47(1) and 209(1) confer, for a or Portugal prior to the obligatory date of transitional period, the rights or benefits patentability would be inconsistent with the there described on 'the holder .

It has been common ground throughout that the products in question in these cases can never obtain patent protection in Spain 190 — See, for example, paragraph 2 of Protocol No 8 concerning or Portugal even after these Member States postponement in part of provisions on shifting the burden have complied with their Treaty obligations of proof in cases of infringement of process patents to 7 October 1992 and similar provisions regarding effective to introduce patentability. This is, indeed, dates for judicial procedure known as 'distraint — description'. the starting point for the attack on the

decision in Merck v Stephar, raised in the in Spain and Portugal, by Articles 42 and third question. That exercise would be 202, from 1 January 1986. The provisions of unnecessary if Merck and Beecham enjoyed Article 30 of the EC Treaty arc thus indefinite protection by virtue of the transi­ extended to trade between Spain and Portu­ tional provisions. The Member States could gal, on the one hand, and the rest of the not have had it in contemplation that the Community, on the other. Article 30 is, of date on which Spain or Portugal might take course, qualified by Article 36 of the EC additional voluntary steps to allow the pat­ Treaty in the restrictive manner described in 192 enting of these products would become the the consistent case-law of the Court. The date from which the transitional period for introductory words to Articles 47 and 209 — these products would run. Special Spanish or 'notwithstanding Article 42 (202)' — intro­ Portuguese patents for pharmaceuticals start­ duce an additional derogation by permitting ing after 7 October 1992 or 1 January 1992 the holder of a patent in a Member State to would run counter to internationally prohibit the import of the patented product 91 accepted concepts of novelty 1 and would from Spain or Portugal for a prescribed 93 produce different expiry dates for the same period. 1 Such derogations in an Act of product patent in different countries, raising Accession will, as the Court stated in Com­ the ultimate absurd possibility of later mission v Greece, be interpreted 'so as to obstacles to parallel imports into Spain and facilitate the achievement of the objectives of Portugal upon expiry elsewhere of patents the Treaty and the application of all its 94 for the same products. A corollary would be rules'. 1 The Court continued: 'In particu­ the further inconvenience of different dates lar, with regard to the abolition of quantita­ being read into Articles 47(2) and 209(2) for tive restrictions and measures having equiva­ pharmaceutical products generally and for lent effect, the provisions of the Act of those, like the plaintiffs' products, which in Accession in this area cannot be interpreted reality will never be patentable in Spain but without reference to the provisions of the which, theoretically, might become so. Treaty relating thereto.' The purpose of Articles 47 and 209 in particular is 'to dero­ gate in a limited area from the Community rules governing the free movement of goods and not to create new rights exceeding the protection conferred on the patent by

the effect of the transitional period for prod­ In order to derive full benefit from this pri­ ucts which could not, in all probability, ever ority, he must thereafter file applications in be patented in Spain or Portugal. If such a any second country in which he wishes to result had been intended, it would have been protect his invention before the priority a simple matter to provide for it in the tran­ expires. The novelty of the invention, an sitional provisions. Protection could have essential condition of patentability, is deter­ been extended for the life of any patent mined at the date of first filing. In so apply­ granted in another Member State prior to ing, he defeats any challenge in any second 7 October 1992 in the case of Spain and 1 January 1992 in the case of Portugal. For country to the novelty of his invention based these reasons, I reject the argument of Merck on prior publication. Merck claims that Paris and Beecham that the expression 'these Convention priority has existed since the products' includes products other than those turn of the century and is recognized in all which Spain and Portugal were obliged to Member States where patenting of pharma­ make patentable by that date. Accordingly, I ceutical products is allowed. Both Merck and rule out Option (e) listed under Questions Beecham implicitly treat this priority as an (1)and(2). essential element in the patentability of a product. Beecham complains that in Spain, unlike in other Convention countries, it was not possible to claim priority in respect of any application filed in the 12 months prior to 7 October 1992. To establish this, reliance is placed on a decision of the Spanish Coun­ cil of State of 18 February 1993 which recog­ nizes priority only in respect of applications filed in other Paris Convention countries after 7 October 1992. In other words, Span­ ish law does not recognize an application in another country for priority purposes unless on the same date a valid application could 184. Next, I will review the argument, have been made in Spain for a corresponding linked to alternatives (c) and (d) under the product patent. At the same time priority first question, for priority based on the Paris 196 applications filed in other Paris Convention Convention. The point is raised only in countries in the 12 months before that date respect of Spain, although both Spain and deprive the invention of novelty for the pur­ Portugal are signatories of the Paris Conven­ pose of later applications in Spain. Merck tion. By filing a patent application in a coun­ and Beecham conclude that Spain did not, therefore, provide for full patentability of

187. There is a further preliminary problem. Merck and Bcecham proceed essentially 185. Whether or not Paris Convention pri­ from the opinion of the Spanish Council of ority is an essential feature of patentability, State, to conclude that Spain had not made this summary of the situation in Spanish law pharmaceuticals fully patentable on 7 Octo­ cannot be accepted without qualification. In ber 1992. I cannot sec that this automatically the period between 7 October 1992 and follows. Firstly, it appears from evidence 7 October 1993, such priority took effect submitted by Primecrown that the opinion gradually, e. g. priority would be accorded to of the Council of State is not binding and a prior application filed in, say, France on that there arc still conflicting views about 10 October 1992 for the purposes of a Span­ this matter in Spain which can be resolved ish application on 1 October 1993. The argu­ by the Spanish courts. It is obvious that I can ment must be assessed, therefore, in view of express no opinion about this. Secondly, and the fact that Paris Convention priority was more importantly, it is clear that Spain pro­ available progressively in Spain but only vided for the patenting of pharmaceutical became available for a full 12 months on products from 7 October 1992. Some or 7 October 1993. many applications for patents for such prod­ ucts may have encountered problems because of lack of priority for earlier applica­ tions in other countries and consequent loss of novelty. Clearly, none of the products involved in the present case are affected in that way. If any particular applicant were so affected, he could bring his claim for recog­ 186. The argument requires consideration of nition of Paris Convention priority before three international agreements, to wit the the Spanish Courts and, ultimately, seek to Act of Accession, the EPC and, now, the have the matter referred to this Court for Paris Convention. The Court has jurisdic­ interpretation. What docs not appear to me tion to interpret the first but not the other to follow is that the end of the transitional two. However, the Merck and Bcecham's period should be generally postponed for a claim that, without Paris Convention prior­ year because of the opinion of the Council ity, Spain has not made pharmaceutical of State.

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date of filing of the first application' enjoy, for the purpose of filing a Euro­ (Article 4(c)(2)). Spain could not have oper­ pean patent application in respect of the ated this provision prior to 7 October 1992 same invention, a right of priority dur­ in respect of any second country application ing a period of twelve months from the for a product patent for pharmaceutical date of filing of the first application. products; for example, if the Spanish second country application had been filed on 1 October 1992, it could not, in Spanish law, have recognized the right of priority for any first application made after 7 October 1991. In order to survive, the Merck and Beecham argument has again to be modified to say that the right of priority should be accorded (2) Every filing that is equivalent to a regu­ in the event that the Spanish second country lar national filing under the national law application had been filed both within the of the State where it was made or under period of priority but after 7 October 1992. bilateral or multilateral agreements, In reality, the argument docs not accord with including this Convention, shall be rec­ the clear implication of Article 4. That article ognised as giving rise to a right of prior­ does not envisage a transitional application ity. of the right of priority. It is expressed in terms which imply that a similar application can be filed in any second country at any date after the first and, consequently, that similar patent products are contemporane­ ously recognized in both countries.

191. Nothing in Protocol No 8 — Patents ented in Portugal before 1 June 1995. It says concerning Spain — appears to me to make that it was only on that date that the Portu­ recognition of priority applications for a guese Decree-Law No 42/92 of 31 March year before 7 October 1992 an essential fea­ 1992 provided fully for the enactment of a ture of Spain's obligations. A clear and new Industrial Property Code permitting the express indication would have been required. grant of patents for those products. For this We are concerned, after all, with transitional reason, Merck contends that the transitional provisions and it is not surprising to find period for Portugal, under Article 209 of the additional indications of gradualness, such as Act of Accession, will not terminate either the fact that priority recognition was day by until 1 June 1998 or until 31 December 1998, day becoming effective in Spain between i. e. at the end of the third calendar year fol­ 7 October 1992 and 7 October 1993. Ulti­ lowing the year in which Portugal made mately, however, I am most struck by the those products patentable. fact that Merck and Beecham are seeking to add one year to the transitional period allowed by Article 47(2). To succeed in doing that, they have to show that Spain did not make pharmaceutical products patentable on 7 October 1992, and, in plain language, they have not done so.

date, therefore, for the patentability of failure expressly to exclude later reliance pharmaceutical products in Portugal was upon the provision. To exclude such a read­ 1 January 1992 which becomes the date of ing, some limiting words such as 'and not commencement of the transitional period thereafter' might have been inserted. The specified in Article 209 of the Act of Acces­ expression 'until the end of the third year ...' sion, thereby eliminating Options (c) and (d) lays proper emphasis on the termination of from Question (2). the period. The only real textual support for the calendar-year approach is the use of the word 'after' rather than 'from'; but 'from' could not be substituted without other changes. It would be necessary to add: 'the date when', 'the time when', or some other phrase defining temporally the Spanish or Portuguese action of rendering pharmaceuti­ cal products patentable. In my view, looking at what is meant here, the most natural read­ ing is that the transitional period was for 195. The final choice between Options (a) three years after 7 October 1992 or 1 January and (b) turns on the meaning to be attributed 1992, ending thus on the anniversary date, to 'the end of the third year after Spain [Por­ 7 October 1995 or 1 January 1995. The tugal] has made these products patentable' calendar-year approach would have required (emphasis added), i. e. after 7 October 1992 some explicit wording, such as 'the end of or 1 January 1992 respectively, since those the third year after the year in which ...' are the dates, on my analysis, when Spain (emphasis added). There is a final important and Portugal made these products patent­ point. I treat the dates of patentability able. The national judge thought the choice looked at from the date of the Act of Acces­ of the anniversary date to be almost beyond sion, as predictable future dates. The argument. Nevertheless, four of the five calendar-year approach would produce a Member State Governments who have made transitional period of about three years and observations on this question disagreed and three months for Spain, but four years (less supported Merck and Beecham in opting for one day) for Portugal. No basis has been 31 December 1995. suggested for such a large discrepancy.

many provisions found in the Act of Acces­ seek to prolong the transitional period by a sion providing for the termination of transi­ full year. tional measures or periods at the end of a calendar year. Merck have gone so far as to produce a lengthy schedule to demonstrate that, as they state, 'all transitional measures contained in Spain's Act of Accession expire at the end of a calendar year.' It is true that there are very few exceptions to this asser­ tion, which certainly applies, for example, to 198. Merck bases a very similar argument the phased abolition of customs duties on upon the terms of Article 379 of the Act of 201 imports (Article 31), the introduction of the Accession. The principal provision of that common customs tariff (Article 37) and the Article permits a Member State to apply for elimination of quantitative restrictions authorization to take protective measures in (Article 43). I do not think, however, that order to rectify difficulties arising before any such general rule of interpretation as is 31 December 1992 'which are serious and implied by this submission emerges. On the liable to persist in any sector of the economy whole adjustments in the agricultural sector or which could bring about serious deterio­ are made by reference to 'marketing years' ration in the economic situation of a given 200 area'. It is further provided that 'this provi­ or in one case the 'wine growing year'. Protocol Nos 8 and 19 contain the detailed sion shall apply until 31 December 1995 for provisions on Spanish and Portuguese pat­ products or sectors in respect of which this ents and provide for a series of derogations Act allows transitional derogations of from the overriding obligation. The period equivalent duration'. Merck claims that this of the derogation runs to 7 October 1992 or demonstrates that the Act of Accession does 1 January 1992 and thus not necessarily to not contemplate transitional derogations the end of any calendar year. This argument expiring after 31 December 1992 but before does not, therefore, lead to any particular 31 December 1995. In my view, this argu­ conclusion as to the meaning of 'end of the ment carries only very slight weight. There is third year' in Article 47(2) or 209(2). Portu­ no internal evidence of any cross-reference guese accession to the EPC, on the other between the provisions. It does not persuade hand, was to take place on 1 January 1992, me to a view different from that already which docs coincide with the start of a cal­ expressed. endar year. It is obvious that the three years should run to 1 January 1995. To add a fur­ ther year, as Merck and Beecham claim, merely because the date is the first day of the year rather than the last day of the preceding year leads to an absurdity. They effectively

202 204 relating to Community patents and administrative authority. Article 4(2) says approved by 'Coreper' on 24 March 1992 for that 'where a time limit is expressed in submission at the Lisbon conference of 1992 months or in years the dies ad quem shall be on the European Patent. It refers to the the day of the last month or of the last year fourth preamble to this agreement which whose date corresponds to that of the dies a states that the Luxembourg Agreement quo or, when there is no corresponding date, should apply as regards Spain 'as from 1 the last day of the last month'. While this January 1996, the date on which the free Convention was signed by seven States movement of goods will apply fully between which are now members of the European Spain and the other EC Member States'. This Community, it has not been signed by the 205 is also of only the very slightest weight, if it United Kingdom, Spain or Portugal. Sec­ has any. Firstly, the draft Protocol in ques­ ondly, Primecrown refers to the well- tion post-dated the Act of Accession and established rule in English law that a period cannot be an aid to its interpretation. Sec­ of a month or a year following a date expires 206 ondly, as is admitted by Merck, the draft on the anniversary of that date. Thirdly, it Protocol was not, in the event, adopted. refers to a provision of the Spanish Civil Code to the effect that 'if terms arc fixed in months or years, then they shall be com­ 207 puted from date to date'. At most, these provisions arc helpful indications, all point­ ing in the same direction, of some accepted national rules and one international rule sup­ porting the interpretation I propose. The decisive consideration must be, however, that, in the event of any doubt or difficulty 200. Left with the choice between two dates, in interpreting the text, the Court should 7 October 1995 and 31 December 1995 for bear in mind that it is being asked to inter­ Spain and 1 January 1995 and 31 December pret a provision permitting a significant 1995 for Portugal, for the end of the transi­ derogation from the principle of freedom of tional period, I believe that the text itself movement of goods which, apart from being offers the clearest answer to the question a general principle of Community law, is posed. In my view, for reasons given in para­ specifically applied to Spain by Article 42 graph above, I believe it favours a straight­ and to Portugal by Article 202 of the same forward three-year period running to the Act. For these reasons, I recommend that the anniversary date, 7 October 1995 or 1 Janu­ expiry of the transitional periods referred to ary 1995. Primecrown furnishes three further by the national court in its first and second sources of legal authority in favour of this questions should be interpreted, respectively, view. Firstly, it draws attention to the Euro­ as 7 October 1995 and 1 January 1995. pean Convention on the Calculation of Time-Limits (the Basle Convention) of 203 1972. That Convention applies to the cal­ culation of time-limits in civil, commercial and administrative matters including time- limits laid down by law or by a judicial or an

(2) The period referred to in Article 209(2) of the Act concerning the conditions of accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties should be deemed to have come to an end on 1 January 1995.

(3) The rules contained in the EC Treaty concerning the free movement of goods, including the provisions of Article 36, should be interpreted as not preventing the proprietor of a patent for a pharmaceutical product who sells that product in one Member State where patent protection exists, and who also markets it in another Member State at a time when that proprietor is unable to obtain such protection for that product, from availing himself of the right conferred by the law of the first Member State to prevent the marketing in that State of units of the said product imported from the other Member State. This inter­ pretation should have effect only from the date of the Court's judgment in the present cases.

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