The biotechnology Directive1 has had a difficult history. Once jilted at the altar2 there then followed a bumpy ride through its approval in the European Parliament. Although it emerged relatively unscathed on 6 July 1998 there were still dissenting voices in the European Council. It passed the vote in the Council and was published in the official journal ready for the Member States to implement, by whichever means they felt appropriate, by the deadline of 30 July 2000. This was not the end of the story.

A number of Member State's governments unhappy with the very existence of the Directive, challenged it before the European Court of Justice (ECJ) in an effort to have it annulled. As a preliminary step in this process Advocate General Jacobs has recently released his lengthy and considered opinion (on 14 June 2001) to the objections raised by these governments. The purpose of this article is to consider some of these objections and try and discuss whether the right conclusion was arrived at.

Introduction

In some ways it is curious that the Directive exists at all. Although harmonisation exists in other spheres of intellectual property, patents are still either national or the subject of a European Patent Office patent where a non-EU supra-national body grants patents in a number of convention countries, including all of the individual Member States of the European Union (EU). This is currently under review and the Community Patent, one patent valid in all the Member States of the EU is not that far away. Given the determination of the EU to create such a right it is likely to succeed, unlike its unhappy predecessor the Community Patent Convention (CPC). What the Directive does is to harmonise the way that Member States judge the validity of patents in the biotechnological field, a term undefined in the Directive.

So why does the Directive exist at all? Would it not have been more appropriate to wait until the EU had agreed a position with respect to the Community Patent? Well maybe, but the EU's main concern was its flourishing biotechnology industry which the EU is anxious to promote as part of its strategy to promote innovation in the EU. Hence the reason for the Directive, to ensure that the Member States were operating from the same start point when they considered the validity of a biotechnological invention.

The Challenge

The Dutch government had voted against the Directive during its final passage through the European Council, and a number of other governments, namely Italy and Belgium, abstained from the final vote. The Directive therefore made it through the legislative process which only required a majority vote. This was not to be the end of the Dutch government's challenge.

The Dutch government sought to annul the Directive in its entirety by challenging its legality before the ECJ. In its application for annulment it relied upon grounds that included that the Directive is: (a) incorrectly based on Article 100(a) of the EC Treaty; (b) contrary to the principle of subsidiarity; (c) incompatible with the principle of legal certainty; (d) breaches the Community's international obligations; (e) breeches fundamental rights; and (f) was improperly adopted.

Some of these grounds (in this article grounds (a), (d) and (e) will be examined) are worth looking at. This is because not only do they address questions of fundamental community competence, but because they may provide an insight into how the ECJ may interpret matters that may arise when this Directive is addressed in the courts of each Member State.

Admittedly, the whole process is only at the stage of preliminary and guiding opinion from the Advocate General. However, as the ECJ tends to follow the opinion of the Advocate General most of the time, the opinion will remain an influential document.

Background

The main challenge was not the Dutch government's only attempt to prevent the enactment of the biotechnology Directive. On 6 July 2000, some two weeks before the deadline for implementation of the Directive by the Member States of the EU, the Dutch government applied for interim relief to suspend the effect of the Directive until the ECJ had a chance to review the legality of the Directive as a whole. The President of the ECJ dismissed this application and the Dutch government was left to pursue its objections via the full hearing before the ECJ.

Substantive Arguments

Incorrectly Based on Article 100(a)

Article 100(a), which is now Article 95 of the revised Treaty on EU, sets out one of the ways in which the EU can create legislation. In this article it states the purpose of such legislation and, by reference, the manner in which legislation may be carried out (the detailed procedure is laid out in Article 251 of the revised Treaty). It is the avenue used by the EU when the EU wants to create legislation that is designed to promote the functioning of the internal market (one of the fundamental objectives set out in Article 14 of the revised Treaty). This objection formed the basis of the first, and possibly the best, attack by the Dutch government and it was supported in this part of its case by the Italian government.

The argument was presented in a number of ways. These include the fact that (a) the Article 100(a) procedure was the wrong one; (b) that in any event the correct procedure should have been an amendment of the EPC; (c) that the correct procedure was the procedure laid out under Article 308 (another method of creating legislation); (d) that the Directive in any event infringes a later part of Article 100(3); and (e) that the Directive itself creates a new intellectual property right.

In essence this part of their case was that the Directive was incorrectly based on Article 100(a) and the EU should have been based on another part of the Treaty, namely Article 308 of the revised Treaty. The difference between the two routes is that the latter section of the Treaty requires a unanimous vote in order to pass the legislation. With the Dutch government taking a negative role, the Directive would be unable to pass the European Council if, as the Dutch government suggested, Article 308 was the correct method for the adoption of the Directive.

The purpose of any Directive is to harmonise the laws of the Member States. It is the preferred method of legislation for the EU and only sets the minimum standard that a Member State has to achieve and the time-scale it which it is expected to achieve it. Directives are not uncommon in the area of intellectual property. There have been Directives on harmonisation of trade mark laws and design law and in that sense the biotechnology Directive represents something of an oddity. It does not create an intellectual property right. It merely harmonises the approach that the Member States take in deciding upon the validity of patents that relate to biotechnological inventions. In this respect it is more akin to the Directive that created the Supplementary Protection Certificate to extend the life of pharmaceutical patents.

This raises an interesting curiosity. Given that most biotechnology companies will want to maximise their patent protection, they are likely to apply via the EPO rather than by applications for individual patents in the Member States. The Directive only seeks to harmonise the way that Member States approach the question of validity and inventiveness. The Directive, being an EU instrument, will only apply to those patents that are valid in the Member States of the EU, leaving those Non-EU states, where the EPO examines patents and grants patents, on their own without the effect of the Directive. Whilst this curiosity appears to have been cured by the adoption of the Directive by the EPO as a piece of secondary legislation to aid examination of biotechnological patents, it does seem an interesting choice of route to bring about the harmonisation of EU law.

Before the EU can adopt such a Directive there has to be a need to harmonise the legislation of the Member States. This is a matter of common sense. The requirement for the need to harmonise is important for another reason. If the EU bodies cannot show that there is a difference between the Member States of the EU in a certain area and that difference leads to an effect on trade between Member States, then Article 100(a) is not the proper basis on which to base the Directive and the ECJ will strike the legislation down. If the Dutch government could show that there was no need for harmonisation then they had a chance to have the Directive annulled by the ECJ.

There has been precedent for this kind of attack on EU legislation. The first was the challenge by the Spanish government to the Directive on Supplementary Protection Certificates (SPCs)3, and also the German government's challenge on the Directive banning tobacco advertising4. In the first of these, the Spanish government lost its attempt to annul the Directive and, in the second, the German government was successful in annulling the Directive intended to ban all tobacco advertising. What these and other cases have established is that there must be a clear reason for a Directive and that must fit inside the remit of Article 100(a).

The essence of these two cases was that the ECJ was of the view that for a Directive to be based on Article 100(a), the EU bodies needed to show:

1. Emergence of differences between the Member States that require correction by a harmonisation Directive must be both likely and the measure must be designed to prevent them;

2. An appreciable effect on competition in the EU caused by those national differences; and

3. With respect to the potential effect on the free movement of goods, it is sufficient that obstacles to trade may well occur as a result of a lack of harmonisation.

The Advocate General relied on the ECJ's finding in Parke Davis & Co5 in rejecting this part of the case. Parke Davis was, in part, about the problems that are created in the Internal Market when some states permit patents for pharmaceutical products and some do not, and the difficulties that this can create for the free movement of goods (although this case as decided on the basis of Article 81 and 82). In his opinion, Advocate General Jacobs felt that the emergence of different levels of protection in the biotechnological field would hinder the free movement of goods and distort competition. Different levels of protection for the same product would hinder the movement of those goods and also lead to a fragmentation of the market. It does give industry a greater degree of security knowing that there is a level playing field and a guaranteed level of protection.

Some of this is true. The Advocate General points to the biotechnology industries in Japan and the US where biotechnological inventions have been permitted, as examples, of the effect that rewarding industry with patents in this area has. However, the comments of the Advocate General do tend to raise the concern that the purpose of the Directive was in fact support and encouragement of the biotechnology industry rather than harmonisation. A laudable aim was one that may well justify intervention at a Community level but, as the Dutch government pointed out, it may mean that the Directive was more properly based on another part of the Treaty.

Should the Directive have been based on Article 130?

This formed another objection by the Dutch government. They argued that the Directive should have been based on Article 163 (in conjunction with Article 153 on general industry policy and 308, another method for creating legislation) in the renumbered Treaty. This states that:

"The Community shall have the objective of strengthening the scientific and technological bases of the Community industry and encouraging it to become more competitive at international level, while promoting all research activities deemed to be necessary by virtue of the other Chapters of this Treaty."

The ECJ has made it clear that where there are a choice of routes open to the EU to create legislation, the method chosen by the EU legislative bodies must be based on objective matters that are susceptible judicial review. Where there is more than one aim in a Directive it is the principle objective that is the correct one for determining the correct legal basis for review.

The Directive contains a total of 56 recitals that outline the legislative thinking in creating the Directive and a mere 18 actual articles of legal text. Of these, the first 3 refer to the importance of the biotechnology industry to the EU and the importance of patents for encouraging innovation and research. There are 3 recitals (recitals 5 to 7) that speak about the need to eliminate the national differences between the laws of the Member States that could act as barriers to trade between Member States and therefore impede trade between Member States. There are also two further recitals that speak of the need for harmonisation. Clearly, if there a numbers game the harmonisation aspect would be more important, but equally the EU had chosen to put the recitals stressing the industrial aspect first. The Dutch government's argument was that the harmonisation aspect was an ancillary part of the Directive and the real purpose was the promotion of the EU's biotechnology Directive.

The Advocate General rejected the argument based on a more fundamental point. He relied on evidence produced by the European Parliament that appeared to show that Member States were adopting different standards when it came to the granting of national patents. However, the evidence does seem thin and in any event the guiding hand of the EPO has a had a harmonising influence on the grant of this kind of patent. However, on this basis it was clear to the Advocate General that the Directive was intended as an instrument of harmonisation and therefore its primary aim fell within the ambit of Article 100(a).

Whether, as a matter of practice, this is correct is another matter. As has been said earlier in this article most biotechnology companies will in any event be applying via the EPO and they have a fairly clear line and an established case law on this kind of patent. The truth is that the Directive does have duel aims, and which of these was the principle aim is difficult to tell by reading the Directive itself. If the evidence was that there were national differences that did indeed lead to a disruption of the internal market, then the Advocate General's opinion must be, on balance, the right one.

Does the Directive Infringe International Obligations?

Under Article 300(7) of the revised Treaty, the EU has the power to international treaties and they become binding upon the EU and the Member States of the EU. For instance, the EU is a party to the TRIPS (Trade Related Aspects of Intellectual Property Agreement). The Dutch government invoked the TRIPS agreement, the Agreement on Technical Barriers to Trade (another part of the GATT Treaty), the European Patent Convention and the Convention on Biological Diversity as examples of Treaties were it felt the EU, and its Member States were in conflict with their international obligations.

TRIPS

TRIPS sets minimum standards for various forms of intellectual property, including patents, and it is specifically mentioned in Articles 12 and 36 of the Directive. It also permits various opt outs in a number of areas that are controversial. Article 27(3)(b) of the TRIPS agreement permits exclusions for:

"Plants and animals other than micro-organisms, and essentially biological processes for the production of plants and animals other than non-biological and micro-biological processes........."

The Dutch government's concern was that the Directive had only excluded part of this and therefore left no option for the Member States but to accept the Directive in the form that it had passed. In particular, although patents are not permitted for plants and animals per se the Directive does permit patents that involve plants and animals. This was the nub of the Dutch government's problem with the Directive. It was the concern, however right this objection is in reality, that it had that patents that may be granted for animals and plants, the so called "patent on life" objection.

The Advocate General dismissed this as a challenge. Rightly, he said that the EU as a signatory to the TRIPS agreement had chosen, as it is permitted under the TRIPS agreement, to exclude only parts of the list of possible exclusions under Article 27(3) of the TRIPS agreement. The fact that the Dutch government did not get to choose what it did and did not want was a consequence of the harmonising nature of the Directive, or to put it another way, the fact that it was a member of the EU.

The EPC

In a related argument the Dutch government also cited an apparent difference between the EPC and the Directive. Under Article 53(a) of the EPC the "publication or exploitation" of patents that appear to contrary to ordre public or morality are to be declared unpatantable. However, under Article 6(1) of the Directive the "commercial exploitation" of a patent that contravenes the ordre public or morality is unpatantableraising a possible distinction between the two, as a patent may be permitted under the Directive, but not the EPC.

In truth, and as the Advocate General pointed out, the difference between the two is marginal. More importantly, from a legal point of view, the EU is not a member of the EPC and therefore cannot be bound by the convention and so, the Directive cannot therefore infringe the EPC. Also, any risk that there would be a conflict between the Directive and the EPC should be cured by the fact that the EPO has now adopted the Directive as a means of interpretation.

This does lead to the question as to why amendment of the EPC was not the chosen route of bringing about the changes needed, to the extent that they were needed. This was another ground that was tried by the Dutch government but rejected as it would not ensure harmonisation and also as it required an inter-governmental conference which the Advocate General felt was too slow and cumbersome.

Convention on Biological Diversity

Recitals 55 and 56 of the Directive refer to the Convention on Biological Diversity. The purpose of the Convention is to ensure the sustainable use and conservation of the Earth's biological diversity. It is also intended to ensure the fair sharing and the equitable sharing to genetic material. The Dutch government, together with the Norwegian government, sought to annul the Directive on the basis that they were unclear as to how their obligations under the Directive were in conflict with those under the Convention. In particular they were unclear as to how they were meant to comply with the duty to ensure equitable sharing in the case of a patent that claimed or was dependent upon genetic resources that were exclusively present in developing country.

In order to dismiss this objection the Advocate General drew a distinction between patent law on the one hand, and the objectives of the Convention on Biological Diversity in the other. The objective of patent law can be said to be to reward the inventor for his or her creative effort. It is not to ensure that countries genetic resources are monitored. To the extent that developing countries may be the subject of exploitation, this was a matter for the individual countries concerned to monitor via other means. The Advocate General cited the examples of the Philippines government requires bio-prospectors consent from the government and the local people before a resource is removed for exploitation, and the Costa Rican government has signed an exclusive exploitation deal with a pharmaceutical company so that it will share in any commercialisation of any of its resources. Once again this is probably right as, tempting tough it is, it cannot be the aim of patent law to account for the Conventions much broader goals.

Does the Directive Breach the Fundamental Rights of the EU?

This ground presents an interesting challenge to the legality of the Directive. The EU is bound under Article F(2) to act in accordance with the Convention on the Protection of Human Rights (a separate and non-EU Convention). The Directive specifically mentions Fundamental Rights and Recital 26 of the Directive requires that where material is removed from a human subject:

"Whereas if an invention is based on biological material of human origin or if it uses such material, where a patent application is filed, the person from whose body the material is taken must have an opportunity for free and informed consent thereto, in accordance with national law..."

The Dutch government's submission was dependent on this provision and in part of their argument they argued that (i) as the Recitals of a Directive have no legal force, and there is no Article of the Directive that deals with the giving or taking of informed consent, the Directive must fall foul of an individuals right for informed consent and therefore violate their fundamental rights; and (ii) that a patient may obtain treatments that involve methods obtained by biotechnological means and the Directive contains no provisions that deal with informing the patient.

The Advocate General agreed the rights that were relied upon by the Dutch government were fundamental rights and that a breach of these rights could lead to an annulment of the Directive. However, the Advocate General took a narrower line. The Recital was inserted by the Parliament who also suggested a legally binding Article (Article 8(a)) that would have required informed consent as a condition of obtaining a patent. In fact this Article was never included.

The Advocate General took the narrower view of the purpose behind the Directive and decided that the issue of consent was not one for patent law (hence the reason it was left out of the Directive) but for other national laws that could deal with the overall issue of consent. Again, probably a correct if not somewhat narrow view of the Directive. It does leave the question as to why the issue of consent (or for that matter the Convention on Biological Diversity) was raised in the Recitals of the Directive if there was to be no legal force behind these provisions in the legally binding parts of the Directive.

Conclusion

The EU felt as though there was sufficient reason to pass this Directive. Whether it will actually make any difference beyond a symbolic gesture to both the powerful green lobby and in fact also the biotechnology industry remains to be seen. To its credit, the Dutch challenge has raised a number of interesting and important issues that have not been explored judicially until now. The ECJ decision is awaited with interest.

1 Directive 98/44/EC; 6 July 1998 OJ 1998 L 231, p.13
2 The Council's first attempt at the Directive with a much broader definition of biotechnology and also no guiding ethical principles which was the principle reason for its downfall see COM(95)661 of 17 October 1988; OJ 1989 C10, p3.
3 Spain -v- The Council of the European Community: Case C-350/92 [1995] ECR I-1985
4 Germany -v- The Parliament of the European Community; Case C 376/92 [2000] ECR I-8419
5 Parke Davis -v- Probel, Reese, Betema-Interpharm and Centrafarm [1968] ECR 55, p71

First published in Patent World in September 2001.