The European Commission has published a set of legislative proposals to ensure and support uptake of research results to the market, but they face scepticism.
To make the most of research results, a comprehensive and fine-tuned solid system is needed. The European Commission (EC) aims to create such a framework by adapting existing legislation. In this context, the reform plans of the EU pharmaceutical legislation were presented on 26 April. Only one day later on 27 April, the EC published three proposals to improve the regulation of the European patent system. Furthermore, the plans for a Panel Survey were launched on 24 April. The survey should assess the demand for standardisation in knowledge valorisation, and support its role therein.
Intangible assets, like brands, designs, patents or data, are growing in importance in our knowledge economy. Especially for research-based companies, intellectual property (IP) rights in the form of patents are crucial for value creation. IP is therefore a key driver for economic growth and an important pillar of the economy in general, with almost half of European GDP, and over 90% of EU exports, being generated by IP-intensive industries. To support the leverage of new technologies for the Green and Digital Transition, and increase the competitiveness and sovereignty of the EU, the EC proposed a package of three regulations based on a stakeholder consultation process which should complement the Unitary Patent System (UPS).
The UPS includes two main parts, the European patent with unitary effect (unitary patent) and the Unified Patent Court (UPC), both entering into force on 1 June 2023. The UPC should provide a one-stop-shop solution for patent protection and enforcement in the EU, it is based on a regulation from 2012. The unitary patent is a legal title providing uniform IP protection across all participating Member States; upon the launch, this will include 17 countries, Germany, France, Belgium, Bulgaria, Denmark, Estonia, Finland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Austria, Portugal, Sweden and Slovenia. This system should reduce administrative burdens and costs because the single patent application is sufficient to get coverage in all 17 countries. Average current costs of €36’000 are expected to fall to €5’000. Furthermore, the protected inventions will only gain in value, because that protection covers a vastly larger market.
The new proposals should complement the UPS by introducing Standard Essential Patents (SEPs), Compulsory Licensing and Supplementary Protection Certificates (SPCs). SEPs are patents protecting technology declared as essential for the implementation of a technical standard adopted by a standard-developing organisation, such as 5G, Wi-Fi, or Bluetooth. The SEPs should make the interaction between the patent holder and the implementer using the patent more transparent and predictable, and should reduce lengthy disputes and litigation. The holder of a SEP is forced to license the technology on fair, reasonable and non-discriminatory (FRAND) terms to ensure European innovation and market access for high-tech at reasonable prices for end users. With the proposal, a set of measures are planned to be introduced; a SEP register, database and essentiality checks, expert opinions on aggregate royalty, FRAND determination via conciliation, SME support schemes and the establishment of a Competence Centre at the European Union Intellectual Property Office (EUIPO). The regulation will apply by default only to standards published after entry into force, but the EC can determine exceptions including or excluding certain technologies.
To support the uptake of Research and Innovation results through standardisation in general, the EC signed a contract on the development and implementation of a European Standardisation Panel Survey. It should identify industries’ demand for standards as a result of R&I and therefore complement the Guiding Principles for Knowledge Valorisation implementing Codes of Practice. The results are planned to be published in the last quarter of 2023.
The proposal on Compulsory Licensing should organise the current patchwork of 27 different regimes, by allowing all EU governments to authorise the use of a patented invention without the consent of the holder of the patent in crises. In general, voluntary licensing agreements are preferred, but to provide access to crisis-relevant products or technology Compulsory Licensing can be used as a last resort. This proposal complements other crisis instruments like the Single Market Emergency Instrument, the HERA regulations or the Chips Act.
The third EC proposal affecting the IP regulation in Europe deals with unitary Supplementary Protection Certificates (SPCs). These will serve to extend the term of patents for human or veterinary pharmaceutical products and plant protection by up to five years. This should encourage innovation, and promote growth and job creation in the respective sectors. The SPCs should complement the unitary patent and reduce fragmentation. A single application and examination process will lead to SPCs in all Member States designated in the application. The unitary SPC is going to be implemented by EUIPO in cooperation with national IP offices.
These regulatory proposals are accompanied by the activities of the SME Fund 2023 which supports innovation, by handing out voucher services for European Patents. With the support of the SME Fund, SMEs can save up to €1’500 on their patent registration and €225 on the registration of new plant varieties.
Almost at the same time, the EC published their proposals for the reform of the pharmaceutical legislation as part of the European Health Union. The Pharma legislation was last overhauled about 20 years ago, and now a regulation and a directive should replace the existing pharmaceutical legislation, including special legislation on medicines for children and rare diseases. These regulatory acts are complemented by a communication on the pharmaceutical reform and Antimicrobial Resistance (AMR) and a Council Recommendation on AMR, which encourages prudent use of antimicrobials, awareness raising, education and training of professionals and concrete targets regarding the reduction of the use of antimicrobials. Furthermore, it tries to boost the development and implementation of national AMR plans, while fostering research, innovation, monitoring, and surveillance.
The idea of the reform is to make the legislation more agile, flexible and adapted to the needs of citizens and businesses. It should ensure the availability, accessibility and affordability of state-of-the-art medicines for European citizens. At the same time, it will buttress the innovation capacity and competitiveness of the EU pharmaceutical industry. Key objectives of the legislation are the creation of a single market for medicines, improving the framework for research, development, and production, while reducing administrative burdens. At the same time, the reform should introduce higher environmental standards and sustainability goals, as well as relevant aspects of the digital transformation to the pharmaceutical system.
The regulation proposals of both packages, IP rights, and pharmaceuticals, will now go to the European Parliament and the Council to be discussed. After the respective institutions adopt their opinions, trilogues will start.
Meanwhile, the regulations already face harsh criticism from affected stakeholder organisations. According to the European Federation of Pharmaceutical Industries and Associations (EFPIA), pharma companies will be penalised by the new regulation. If a drug is not launched in all 27 Member States within 2 years after approval by the European Medicines Agency (EMA), the company will lose market exclusivity two years earlier. And this is particularly problematic because many delays in the launching process happen after the approval. Additionally, it is sometimes not feasible or useful to launch all drugs in all 27 EU countries. Especially SMEs and Biotech companies working on pharmaceuticals for rare diseases are affected by this because for many of the treated illnesses patients or centres where therapies could be applied are missing in several countries, as argued by EuropaBio, the European Association for Bioindustries. This will put patients further away from cutting-edge healthcare and increases the risk for investment, which could hamper innovation and research and even lead to the relocation of companies. But also the foreseen regulations regarding the IP system are criticised. IP Europe, a coalition of R&D intensive organisations condemn in a ScienceBusiness article that the management of patents is planned to be turned over to an agency with no previous experience in the field of patents or standards. The proposal creates an unpredictable and unbalanced system, with the risk of delays in licence negotiations and royalty payments.