Tuesday 13 July 2021

TRIPS waiver: many academics sign open letter supporting it

 The idea that the TRIPS agreement should be waived (just a little) to remove IP protection from Covid vaccines, first raised by India and South Africa a few weeks ago, has new momentum following publication of an open letter signed by “over 100 international IP academics” supporting the intiative. The list contains some well-known names (well-known, that is, to IP practitioners and students) although a couple that are missing are perhaps even more significant (I leave you to work out who they might be). You can read the text here and my friend Mark Anderson's take on it here. He is not convinced, and neither am I.

Despite the government's commitment (superficially at any rate: it hasn't exactly stuck to the script, otherwise it would never have repealed s.52 or introduced criminal offences for designs) to the Hargreave Report's recommendation that changes in the law should always be supported by hard evidence - so-called "evidence-based policy-making" - the letter is rather short on hard facts. It footnotes a number of academic papers, and perhaps I should not expect an open letter to go into its evidence at any length but simply citing academic articles is not very convincing. Annoyingly, the links in the footnotes do not take you to the articles themselves, which would have enhanced the credibility of the exercise: I would have liked to have been able to look at them easily. As it is, I have downloaded the half-dozen that look most relevant and will read them in due course, but as this is not a peer-reviewed academic journal I don't need to be extremely rigorous in expressing my opinions.

It seems to me that, while the patent system clearly failed to ensure that we had a vaccine from an early stage (however magical the patent system is, it could hardly have produced a vaccine before the pandemic), it is not good enough to say that it must therefore be done away with - at least for the duration of the present emergency. Perhaps the proposed waiver would help, but if it does I think it will be only in a very small way. Waiving patent (and other IP) protection is all very well, but without the accompanying know-how the patent will be of little use. Protection for know-how could also be waived, but far from ensuring that the information becomes freely available, that is likely to cause the pharmas to keep its secrets even more tightly controlled.

This is a crisis in which there has been a conspicuous failure of the market system, which is built on patent protection. Vaccines have been produced not because the pharmas could enjoy monopoly profits from behind their patent fortifications, but because governments gave them a great deal of public money. There is a very important discussion to be had about how the fruits of that expenditure - the patents and other IP - should be distributed, and no doubt the pharmas will say that they need the patents for the future, and perhaps that the publc money was just a contribution. It might well lead to a fundamental reappraisal of how the patent system works, and the desirability of creating so many private monopolies especially when they are created at public expense. But that is very far removed from saying that patent protection should be waived. Perhaps it would make a contribution, and perhaps the evidence that I haven't yet read will support that, but it will be a very small contribution, quite out of proportion to the amount of noise being made about it, and it would be far more productive to direct the energy that is being expended on the waiver campaign to matters that will have a more immediate and greater impact on the problem.

Unified Patent Court agreement not contrary to German constitution

The Unified Patent Court, which will bring much-needed consistency to patent litigation in Europe (but which the UK will do without), has already faced problems in Germany once: back in March 2017 it was approved by the Bundestag but not by the right majority, so the decision was declared void. Then the UK dropped out (initially after the referendum the UK government, in an excess of "cakeism", announced that it would still participate although no-one could quite see how that would work, but then someone noticed that the Court of Justice had a role to play in the new system and it suddenly became an impossibly hot potato), which threw the entire project into doubt. But now the Bundesverfassungsgericht (federal constitutional court) has rejected two claims that the UPC Agreement violated fundamental rights under the Constitution and the way seems clear for the Bundestag to approve it again (by they correct majority this time).

As this is not a blog about German constitutional law, and one of the many things that I am not is a German constitutional lawyer, I won't try to explain the details. The court has very helpfully put out a press release in English (here). It's got at least one split infinitive in it, but apart from that the English is excellent: if you prefer, the German version is easy to find from that same link but that's all the language versions there are to choose from.

Thursday 8 July 2021

IPO launches consultation on exhaustion of IP rights post-Brexit

The UK government has launched a consultation on the future regime for the exhaustion of IP rights. The consultation is open for responses from 7 June to 31 August 2021. It is going to be a crucial decision which would significantly impact IP owners, consumers, and others involved and affected by parallel trade. 

IP rights give economic incentives for creations, products and innovations of new technology, enabling rights owners to benefit from the information and intellectual goods created. Consumers benefit from the availability of a wider range of innovative or attractive goods. But move away from this justification and you have a plain old monopoly, which means fewer goods being made, innovation being sidelined, and prices being raised.

The doctrine of exhaustion of IP rights exists to balance the different interests of consumers and rights owners when goods move between jurisdictions, preserving competition in situations where the traditional justification for IP protection is not convincing. The doctrine limits the ability of IP rights holders to use their rights to control the distribution of physical goods once they have legitimately been put on the market. Intellectual property rights can be invoked to prevent goods crossing territorial borders, an issue that has caused problems within western Europe since the earliest days of the European Economic Community. “Parallel trade” - goods moving between national markets outside the manufacturer’s official channels, are a challenge to rights-owners’ marketing strategies, but often a key factor in reducing prices.

Price differentials, naturally, lie at the heart of parallel trading. Traders - arbitrageurs, they might prefer to be called - will buy goods where they are cheap and move them to markets where they command a higher price. At one level, this is nothing that has not been going on for centuries: Traders will buy produce where it is grown and move it to where people want to buy it. But in the consumer society it’s far more complicated. Purchasing power differs enormously, even within the European Economic Area, and a rational manufacturer will pitch their prices according to what local consumers can afford - which might represent a fantastic bargain to someone in a richer EU country.

Following Brexit, the UK is no longer bound by the requirements of EU’s rules, which in essence say that once goods have been placed on the market within the European Economic Area any IP rights attached to them will not be infringed if those goods are imported into another Member State (although the rules do provide for cases where there are legitimate reasons for stopping parallel imports, for example where they have been repackaged). The goods have to be free to circulate within the EEA. Notwithstanding all the talk of taking back control, the UK (at least in part because the Northern Ireland Protocol limits its room for manoeuvre) continues to apply the same rules after Brexit, so we are open to trade in cheap pharmaceuticals from The Netherlands; but the EU simply treats the UK as a third country, not within the Single Market, so parallel imports entering EU Member States from here are likely to infringe.

The consultation identifies four possible regimes: 

● The current unilateral EEA regime 

● National exhaustion 

● International exhaustion 

● A mixed regime 

The current unilateral EEA regime 

Once goods are put legitimately on the market in the EEA, rights are considered to be exhausted in the UK. IP rights cannot be used to prevent goods being imported from the EEA into the UK. On the other hand, the EEA is closed to parallel imports from the UK, but that is a matter for EU law so naturally the consultation does not touch on this aspect.

National Exhaustion 

Under this regime, rights are only considered exhausted in the UK once goods are legitimately put on the market in the UK, so IP rights can be used to prevent goods put on the market anywhere in the world from flowing into the UK. But this option has been ruled out by the government because of the inconsistency with the Northern Ireland Protocol, which means no checks are needed on the goods crossing the border with the Republic of Ireland. 

This option was only included in the consultation to gather what evidence is available on economic impact.

International exhaustion 

This regime would automatically allow the import of goods from any country. exports, on the other hand, would be automatically allowed only to those other countries with an international regime. This means that the rights are considered exhausted in the UK when goods are legitimately put on the market anywhere in the world. IP rights then cannot be used to prevent goods from entering the UK from any other country. This would have significant implications for IP owners in that it would limit their ability to prevent goods from being parallel imported into the UK. 

We have been here before, though it was over 20 years ago. Following the Silhouette case, the Commission had a report drawn up entitled "The economic consequences of the choice of regime of exhaustion in the area of trademarks" (NERA/SJ Berwin, February 1999), which found that the issues were complex and the benefit to consumers of changing to international exhaustion likely to be small (in some sectors under 2 per cent). It then consulted widely, including with Member States: in the UK, the result of this was the Eighth Report of the Select Committee on Trade and Industry (9 July 1999). The Commission dropped the idea of changing, though the Select Committee favoured international exhaustion at least for some goods. Which leads us to...

A mixed regime 

This would mean that specific goods and sectors could be subject to one regime and all other goods, sectors and IP rights subject to a different regime. Switzerland has a regime in which most goods can be parallel imported but an exception for medicines which is governed under their national regime. It is going to be a rather complex system if implemented and may be difficult for consumers and businesses to understand, but that doesn’t seem to have given the government pause for thought since the referendum. 

Note that the consultation does not cover some major topics such as: 

Exhaustion of rights in purely digital goods. 

Geographical indications or plant variety rights 

Counterfeit goods 

Parallel exports


Since the “National Exhaustion regime” has been ruled out, the UK government is left with limited possibilities . It will be interesting to see which regime will win the votes for this Post-Brexit battle as this will be of great commercial concern. Will the Government  head towards a “Mixed regime” and implement a complex system for consumers and businesses or getting cheap exports through “International regime” become the vote-winner? Only time will tell.

Friday 2 July 2021

Post-implementation review of s.72 CDPA

 The government recently announced a post-implementation review of the changes made to s.72 five years ago.

S.72 creates what the government (though the IPO) tells us is "an exception to copyright infringement" though I insist (especially to students) that it is a permitted act. If the legislation uses that terminology, why should we call it something different? It has the effect of an exception to copyright infringement, but calling it by that name is sloppy.

Anyway, that section (should you need a reminder) permits free showing of a broadcast, and certain copyright elements that go with it (because a broadcast has to be of something: in modern terminology, which I also find objectionable because it devalues the work of creative individuals, "content"), and applies only in places where the public has free access, which may include retailers, hospitality, community spaces, gyms, voluntary centres, hospitals, charities, and some workplaces.

The Copyright (Free Public Showing or Playing) (Amendment) Regulations 2016 amended s.72 by removing “film” from the list of exceptions. That's a small change, but a dramatic one, akin to adding the word "not" to a sentence. 

The change was a response to a series of judgments of what the IPO calls the Court of Justice of the European Union, or CJEU, which is not entirely incorrect but unforgiveably sloppy: the CJEU is the judicial institution of the EU, comprising two tribunals (the Civil Service Tribunal having been merged into the General Court in 2016). The Court of Justice is one of those tribunals, which is daft and highly confusing but it should be capable of being understood by a moderately intelligent person, and certainly by a lawyer. Anyway, if you want to revisit it, the original consultation is here along with a further consultation (when the government changed its mind a bit) and the government response.

The bit that the government changed its mind about involved what I think is probably the most interesting aspect of the whole exercise, the distinction (which EU law makes) between the cinematographic element of a film and the fixation aspects. It's not a distinction that our copyright law has ever made, as the Court of Appeal found in Football Association Premier League Ltd v QC Leisure & Ors [2012] EWCA Civ 1708 (20 December 2012), so basically the government agreed with a number of reespondents that the best thing to do would be to take out the word "films" altogether.

At the heart of the matter lies the showing of broadcasts of football matches in public houses, and clearly this was something that FAPL wanted to be controllable by the copyright owner. At first glance this seems a heavy-handed approach, because there will surely be collateral damage: all manner of broadcast films will be removed from the scope of the permitted act. But the get-out-of-jail free card here seems to be that this content is already covered, to a large extent if not completely, by collective licensing arrangements.

There is a lot more to this consultation than I have had time to mention here, but it is a specialised area and I don't propose to comment in great detail. I have nothing to say to the government in response to their questions: I cannot give them any evidence to help the consultation, so I'll just draw readers' attention to it, provide links to assist with further research, and move on to something else.

Secretary of State v Servier: Supremes decline to broaden scope of unlawful means tort

When a patent is held to be invalid for want of novelty or inventiveness, a party which has suffered loss by being denied access to cheaper products cannot get damages on the basis that their loss was caused by unlawful means. In Secretary of State for Health v Servier Laboratories Ltd, where the loss arose because there were no generic equivalents of the invalidly-patented drug, the Supreme Court held that the "dealing requirement" laid down in OBG Ltd v Allan [2008] 1 AC 1, which states that the unlawful means should have affected the third party’s freedom to deal with the claimant, is a necessary element of the tort. So it's not exactly a patent case, but it deals with interesting questions about what an applicant or patentee can and can't do to protect their invention when novelty or inventiveness is in doubt.

The issue of the validity of the UK designation of the patent in suit was held to be invalid as long ago as July 2007 by the late Pumfrey J held ([2007] EWHC 1538 (Pat)). It lacked novelty, or alternatively was obvious over another existing patent. The Court of Appeal upheld that decision in May 2008 ([2008] EWCA Civ 445), the leading judgment being given by Jacob LJ, and in 2009 the EPO Technical Board of Appeal revoked the patent.

Causing loss by unlawful means is an economic tort, consisting of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful and which is intended to cause loss to the claimant. In this case, the claimant was of course the Secretary of State (not the recently departed one - it would have been Jeremy Hunt at the relevant time) and the third parties whose freedom was interfered with were the European Patent Office and the courts of England and Wales. As neither of the third parties had dealt with the Secretary of State, the claim could only succeed if the court said that the dealing requirement did not form part of the ratio of OBG or departed from that case (which, incidentally, was one of three cases dealt with together by the House of Lords, one of the others being better-known to IP lawyers: Douglas v Hello!).

To cut a fairly long story (30 pages) short, the Supremes could see no reason to do either of these things. In reviewing Lord Hoffmann's reasons in OBG for imposing the requirement, they listed seven good reasons for it, which should be enough for anyone. The claim was struck out by the judge at first instance, the Court of Appeal upheld him, and now the Supremes have too.

Whether the patentee deceived the EPO or the courts is another matter: for the purposes of the strike-out, it was assumed that they had, but the important matter is that there was no sufficient connection between the alleged deception and the loss that the Secretary of State claimed to have suffered. Under the 1966 Practice Statement which remains effective in the Supreme Court (see Practice Direction 3, para 3.1.3), there was no reason for the Supreme Court to depart from OBG, no injustice that called for the invocation of that Statement.

But this is an intellectual property law blog, so we should leave the tort law to others - if the Secretary of State cannot claim on the basis of unlawful means, what can he (or, though not then and not now, she) do about what would (if proven) be reprehensible conduct? Jacob LJ dealt with this back in 2008, saying that there might be a sanction under competition law but noting that the application of that body of law to unmeritorious patents was not something that had been explored. There is, it seems, a claim that Servier's conduct amounts to an abuse of a dominant position, and we (and the Secretary of State) must now wait to see how that goes. It certainly looks more promising, and more closely related to patent law than the tort under consideration in today's judgment.


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