European Union: ECJ Provides Guidance On Parallel Imports From New Member States

The Court of Justice of the European Union (the "ECJ") issued on 12 February 2015 a judgment interpreting the Specific Mechanism for parallel importation of pharmaceutical products from new EU Member States shortly after their accession to the EU.

The questions were referred to the ECJ by the Court of Appeal of England and Wales (the "Court of Appeal") (Case C-539/13. Merck Canada Inc., Merck Sharp & Dohme Ltd. v. Sigma Pharmaceuticals PLC). The case before this court pitted Merck Canada Inc. and Merck Sharp & Dohme Ltd. ("MSD") against Sigma Pharmaceuticals plc ("Sigma"). The dispute relates to the Specific Mechanism in Chapter 2 of Annex IV to the Act of Accession of 2003 (the "Specific Mechanism"). The Act of Accession of 2003 sets out the conditions of accession of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia.

The Specific Mechanism regulates the situation where products are protected by patents or supplementary protection certificates ("SPCs") in the EU, but this protection could not be obtained in the new Member State. In such a situation, the Specific Mechanism provides that the person intending to import or market the pharmaceutical product "in a Member State where the product enjoys patent or supplementary protection shall demonstrate to the competent authorities in the application regarding that import that one month's prior notification has been given to the holder or beneficiary of such protection". The Specific Mechanism thus balances the exclusive rights of the patent or SPC holder in the importing Member State with the principle of free movement of goods within the EU.

In the case at hand, Pharma XL Ltd., an associated company of Sigma, imported the product "Singulair" (active ingredient: montelukast) from Poland into the UK. Sigma provided prior notification of its intention to import the product from Poland to the UK, as required by the Specific Mechanism. MSD did not respond to the notice within one month but later claimed infringement of the SPC for montelukast.

The parties agreed that the product was protected by a patent and an SPC, but disagreed on the restrictions imposed by the Specific Mechanism on the enforcement of such rights.

First, the Court of Appeal asked whether the Specific Mechanism requires the patent or SPC holder to give prior notice of their intention to object to the proposed importation. In particular, the Court of Appeal sought to know whether the right holder would forfeit its rights if it had failed to respond to the importer's notice of its intention to import within the one month period provided for in the Specific Mechanism.

The ECJ held that the Specific Mechanism does not impose on the patent or SPC holder a requirement to give prior notification of its intention to exercise the option to object to parallel imports before invoking its rights under the first paragraph of the Specific Mechanism. However, if the patent or SPC holder fails to take advantage of that period in order to signal its objection, the party proposing to import may legitimately apply to the competent authorities to import the product, and, where appropriate, import and market it.

The ECJ nevertheless added that, in such a situation, the patent or SPC holder cannot be presumed to have forfeited its right to rely on the Specific Mechanism. Therefore, it remains free to oppose future importation of the pharmaceutical product protected by the patent or SPC. However, it will not be able to obtain compensation for the loss suffered as a result of the parallel imports to which it failed to object in good time. In other words, if the right holder fails to respond within one month to the importer's notice, it may still rely on its rights to object to future importation and marketing, but it cannot claim damages for importations that took place before the opposition.

Second, the referring court also requested clarification on the parties that must send and receive notification of the intention to market a product under the Specific Mechanism.

The ECJ held that the notification must be given to the holder or beneficiary of the patent or SPC, meaning any person enjoying the protection conferred by the patent or SPC. It held that giving notice to a marketing authorisation holder may not be sufficient if the marketing authorisation holder is not the holder or beneficiary of the protection conferred by the patent or SPC. The ECJ considered that the importer can easily ascertain the name of the patent or SPC holder.

Third and finally, the ECJ gave guidance regarding the party that must send the notice to the patent or SPC holder. The ECJ stated that the Specific Mechanism does not require the person intending to import to give the notification personally, insofar as the notification clearly identifies the person proposing to carry out the importation.

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