Patents

Case Note: Generics BV v Smith Kline & French Laboratories Ltd.

Jane Lambert

Oct 1998
This article formerly appeared on the Lancaster Buildings  website

This was preliminary reference by the Dutch supreme court ("Hoge Raad der Nederlanden") on four questions on the interpretation of arts 30 and 36 of the Treaty of Rome.

The Facts
The questions were raised in infringement proceedings brought by Smith Kline & French Laboratories Ltd. ("SKL") against Generics BV ("Generics"). SKF applied to the Dutch patent office for a patent for a drug called "cimetidine" on the 4 Sep 1973. After publication of SKF's patent application but before its grant, Genfarma BV made three separate applications to the Dutch pharmaceutical control board for permission to market cinetidine tablets in the Netherlands. That company supplied sample tablets to the board on each application. The board approved two of those applications in Jan 1990 and the third in Dec 1992. Meanwhile, the patent office granted SKF a patent for cimetidine in June 1991. Genfarma BV transferred its licences to market cimetidine to Generics on the 21 June 1993.

The Dutch Proceedings
On the 6 Aug 1993 SKF applied to the Hague high court ("Arrondisserementschtbank") for an injunction to restrain Generics from supplying or offering to supply cimetidine until after the 5 Nov 1994. It argued that

	the supply of sample tablets to the pharmaceutical control board had infringed its patent;
	an application for leave to market the product should not have been made until after the expiry of its patent on the 4 Sep, 1993; and
	the board normally takes 14 months to approve such applications.

Generics replied that any restriction on the right to apply for leave to market pharmaceuticals in the Netherlands or to supply samples in support of such applications was tantamount to a restriction on trade between member states contrary to arts 30 and 36 of the Rome Treaty. The court granted SKF's application with a proviso that the injunction should not apply to the marketing of any tablets that the board might permit in respect of applications made after the expiry of SKF's patent. Generics appealed to the regional court of appeal ("Gerechtshof"), which upheld the order, and from there to the supreme court which made the preliminary reference.

The First Question

The first question to the European Court was whether a rule of national law that prevents the submission of sample tablets to an authority competent to issue marketing authorizations constitutes a measure having equivalent effect to a quantitative restriction within the meaning of art 30 of the Treaty of Rome. This article prohibits quantitative restrictions on imports and measures having equivalent effect subject to articles 31 to 36. Relying on such cases as Procureur du Roi v Dassonville [1974] ECR 837 and Leclerc-Siplec v TF1 Publicite and another [1995] ECR 1, the Court concluded that it was. It had consistently been held that any measure capable of hindering, directly or indirectly, actually or potentially, intra-Community trade constitutes a measure having an effect equivalent to a quantitative restriction. The rule of law on which SKF relied had the effect inter alia of preventing competitors from obtaining authorization to sell the patented product immediately after the expiry of the patent. Indirectly it prevented the importation of tablets lawfully made in another member state upon such expiry.

The Second Question
The second question was whether the rule of law was justified under art 36 of the Rome Treaty. That article provided:

"The provisions of articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of …………. industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States."

The Court held that the rule was justified. Recalling its decision in Merck v Stephar [1982] FSR 57, it explained that article 36 admits derogation from one of the fundamental principles of the common market only in so far as it is justified for the purpose of safeguarding rights constituting the specific subject-matter of the property which, in the case of patents, allows the proprietor "a monopoly of first exploitation of his product." To preclude application of the rule in the present case would allow an encroachment of that monopoly. There was no evidence that the rule was discriminatory or sought to favour domestic products over those from other member states.

The Third Question
The third question was whether the injunction constituted a measure having equivalent effect to a quantitative restriction within the meaning of art 30 that was capable of being justified under art 36. On the first part of the question, the Court was in no doubt that the injunction fell within art 30. As to the second, Generics had submitted that it would be contrary to the principle of proportionality to apply art 36 as there were other  remedies available to SKF such as damages or the cancellation of its licence. The Court was not impressed by that argument:

"The moratorium imposed by the court of the infringer of the patent right, in so far as it seeks to place the proprietor of the patent in the position in which it would, in principle, have been had its rights been respected, cannot in itself be held to be a disproportionate form of reparation."

It concluded that the injunction was "a measure having equivalent effect within the meaning of art 30 of the Treaty capable of being justified under art 36 of the Treaty."

The Fourth Question
The final question was whether a national court can restrain an infringer from marketing a patented pharmaceutical product for longer than the maximum period specified by various directives for granting permission to market such products. The Court decided that it could since any other decision would favour the infringer over the victim of the infringement. The remedy was not disproportionate as it did nothing more than place Generics in the position in which it would have been had it not infringed the patent.

 

Important