Europe: seeking competitive research exemptions in view of the UPC Agreement - the Belgian example

Introduction

Despite its modest size, Belgium is remarkably at the top of the table in the EU for R&D and clinical trials. Out of the estimated 4,000 trials that were initiated in the EU in 2016, an impressive 507 started in Belgium. Its leadership in this field is attributed to its high-quality R&D centers and dense infrastructure, the experience of its researchers and the fast clinical trial approval procedures. It is therefore fair to comment that the pharma industry is one of the major driving forces of the Belgian economy. 

The legislative framework has sought to reinforce Belgium's leading position and stimulate innovation in the field: tax incentives for innovative companies have created a competitive fiscal regime; and legislation has recently been passed specifically aimed at decreasing the start-up times of clinical trials. Further initiatives have also been taken to promote Belgium as a Reference Inspection Land, thus, facilitating the export of medicinal products. And then there is the favorable IP regime, which, for example, provides for specific research exemptions under patent law. 

In this article, we touch upon this latter issue. This is particularly relevant in the light of certain imminent changes to the so-called experimental use and Bolar exemptions under Belgian patent law. These instruments are of extreme relevance for stakeholders in the life sciences industry. Indeed, although the new law has not yet entered into force, we believe that it is appropriate to share our commentary now. This is because it is important for the industry to be well-informed so that it can adjust to the changing legal framework, the exact scope of which might still (have to) be the subject of some debate amongst experts and stakeholders.

The new patent law and its intended purpose 

A new legislative act was published in the Belgian Official Gazette of 28 December 2017 with the title "Act amending various provisions on patents in relation to the implementation of the unitary patent and the unified patent jurisdiction" (the "Amending Act"). Of relevance here are the amendments to Book XI of the Belgian Economic Law Code (the "BELC"), formerly known as the Belgian Patent Act. 

The summary of the Amending Act, which has been prepared by the Government as a preamble to the draft, is informative. It indicates that the Amending Act's intended purpose is to implement a harmonized legal framework, and, in particular, to bring the rights of the patentee as far as possible in line with the provisions of the Agreement on a Unified Patent Court (the "UPCA").¹ The UPCA is a compromise text resulting from the enhanced cooperation request of twelve EU member states that was later endorsed by twenty-six member states. It not only introduces a new patent court but also aims at creating a single body of substantive patent law in Europe. Hence, it contains provisions on the rights of the patentee and the limitations thereof (incl. its restrictions and exemptions). 

Currently, the BELC does not contain all of the patent restrictions and exemptions that the UPCA provides for. Divergences also exist in their respective wording. That is important because at a certain point, both laws will be applicable to companies doing business in Belgium. As a result, if there are discrepancies between them, the same issue might be adjudicated upon differently depending on what legal regime is applied, i.e. before which court it is challenged. A particular use of an assay in a clinical trial, for instance, might then be found to be an infringement under the UPCA but not under the BELC (or vice versa). Moreover, because of the UPCA's specific framework, there are, in fact, several factors that influence which legal regime would apply in any given situation: 

(i) the nature of the asserted patent: Belgian, European or European with unitary effect. Only with the first type of patent would the BELC be definitely applied;

(ii) where a plaintiff files a patent claim: at a Belgian national court or the Belgian (or another competent) local division of the Unified Patent Court (the "UPC"); 

(iii) when such claim is made: during the rather lengthy (7 up to 14 years) transitional period in the early stages of the UPC, the legal regime might be different depending on whether the patentee decided to "opt out" of the UPC's jurisdiction (article 83 UPCA). 

Maintaining such a legal system would not only generate legal uncertainty for both patentees and third parties. It would also raise questions as to the compatibility of such differences in treatment with the constitutional principles of equality and non-discrimination. Hence, the governmental initiative to bring the BELC in line with the UPCA, so as to avoid these kind of discrepancies.

However, as discussed below, it is unclear whether the Amending Act actually fulfils this purpose.   

Bolar to be expressly referenced in the Belgian patent act but keeping a narrow scope

For a medicinal product for human or veterinary use to be lawfully placed on the market, regulatory authorities need to first approve it by granting a marketing authorization ("MA"). A substantial amount of data has to be generated for the purpose of obtaining the MA. This requires pre-clinical and clinical tests, studies and trials, primarily aimed at demonstrating that the product at issue meets the required levels of quality, safety and efficacy. Producing and analyzing these results usually takes many years. 

As compensation for those efforts, originators are awarded a specific form of exclusivity via regulatory data protection ("RDP"). This means that applicants for generic medicinal products must wait for eight years before their applications can be filed with reference to the dossier of the originator in a so-called "abridged procedure". Every applicant is required to submit data that demonstrate the bioequivalence of the generic and the reference medicinal products. A reference to the dossier of an originator saves the applicant the substantial cost of repeating the clinical trials again. Likewise, an abridged procedure applies for the approval of so-called "biosimilars". However, in such instances, the data requirements are more extensive since a biological active substance is much more complex than the chemical compound of a generic. Additional tests are required to show that the biosimilar in question fulfils the requirements of safety (pre-clinical tests) and/or efficacy (clinical tests). 

However, the reference medicinal product is often protected by patents, which may prevent potential applicants from even gathering the data necessary to benefit from an abridged procedure. The ensuing delays this may cause to the market entry of cheaper medicine was deemed undesirable by European legislators. As a result, an exemption known in the US as "Bolar" was introduced in Directive 2001/83/EC on the Community Code relating to medicinal products for human use as amended by Directive 2004/27/EC of 31 March 2004 (the "Directive").² Article 10(6) of the Directive allows applicants to conduct the studies and trials necessary for filing a MA application without the patentee's consent. 

The Bolar exemption was transposed literally into Belgian law, namely in Article 6bis, §1, part 12 of the Act of 25 March 1964 on medicinal products (the "Medicines Act"). The exemption applies to all European MA applications for generic or biosimilar products. The Amending Act does not foresee any modification of this provision. Rather, it only makes sure to include an express reference to the Medicines Act in the BELC. It is also a word-for-word implementation of Article 27 (d) UPCA:

This incorporation of Bolar into the Patent Act along with all other exemptions from and restrictions on the patentee's rights in exactly the same order as the UPCA, is an amendment that enhances consistency and legal certainty. This is in line with the objective pursued by the Belgian government. 

That being said, it is well-known that this Bolar exemption has not been implemented uniformly throughout the EU. The national law of Member States has evolved since the enactment of the 2004 Directives. Today, Bolar is far from limited to mere bio-equivalency testing. Many EU countries (including Germany and France) have broad exemptions in place, covering other types of trials, including trials for new innovative medicine. In Belgium, however, research-based pharma companies are at risk of infringing patents when performing acts with a view to obtaining marketing approval for such new drugs. There is also quite a substantial difference in the interpretation of the territorial scope of Bolar: whilst certain national laws allow for an exemption in the framework of obtaining first regulatory authorization outside of the EU, others do not. These points make it quite clear that there is no such thing as "a" Bolar exemption. Harmonization cannot be achieved per se by aligning the text of the BELC to that of the UPCA and it would have been helpful to have some further clarification by the Belgian government as to its material scope. 

Experimental use exemption: narrowed and yet broadened at the same time 

Companies doing business in Belgium are used to benefiting from a broad experimental use exemption, compared to most other EU Member States. Belgium broadened this exemption further in 2005, when implementing Directive 98/44/EC on the legal protection of biotechnological inventions. The further broadening of the exemption was inspired by the rise of joint research in academic-private projects, including university spin-offs which have proven to be very successful in Belgium over recent years. Researchers in Belgium can benefit from the experimental use exemption not only for purely scientific (university) research, but also in cases of mixed scientific/commercial research leading to a commercial application. Only purely commercial tests, the "me too trials", fall outside the scope of this exemption. 

Further, the exemption covers not only experiments that serve to verify the workability and utility of a patented invention or to improve it (i.e. research on the patented subject-matter itself), as in most other jurisdictions. It also protects the use of a patented invention to research other technologies, using the patented technology for instance as a tool or instrument (i.e. research with the patented subject-matter). Although case law on the issue is scarce, the broad wording of this exemption has given researchers the comfort of a safety net in Belgium covering a wide range of sectors and industries. It has also attracted businesses specializing in providing services to companies with respect to their experimental activities. 

This regime will change when the UPCA enters into effect. 

Under the new law (article XI. 34, §1 (b) BELC) the wording of the exemption was amended to mirror more closely that of the UPCA. This new wording reads as follows:

The textual changes are clear, the consequences thereof a bit less so. There will be discussions about the exact scope of an exemption for experiments relating to the patented subject-matter. In our view, the new exemption should be read as being narrower than the current regime. Despite the (slight) difference in wording between the new BELC and the UPCA, in both instances it clearly is the experiment itself that should relate to the patented invention. Hence, patented tools or means that are instrumental to an experiment on another product or process seem no longer exempted. Because, in such cases, the experiments are done with the object of the patented invention, not relating to it; the patented tools or means are not the actual purpose of the experiment. This is narrower than the current exemption. Also, when interpreting the text of the new law, it should be borne in mind that the amendment is meant to bring Belgian law in line with those of the other Member States participating in the UPCA, whereby thecurrent research exemption in Belgium is in certain aspects much broader indeed. This amendment to the BELC is thus likely to contribute to legal certainty. 

Patents covering a screening or testing apparatuses or methods (so-called 'research tool' patents) may currently be hard to enforce in Belgium because of the broad wording of the experimental use exemption. Holders of such patents might find renewed hope in this new provision.

Deus ex machina (paragraph 1/1): experimental use exemption broadened even further

Another key feature of the Amending Act is the addition of a new paragraph 1/1 to article XI. 34 BELC. This new paragraph reads as follows:

In the preparatory works, this provision is presented as being a clarification of the research exemption in article XI.34.1(b) BELC, which we discussed earlier. It is further said that this provision is meant to make sure that research on any medicinal product (including new, innovative drugs) are exempted from infringement finding. As such, it is clear that this new paragraph goes much further than a mere "clarification": it is a broadening of the exemption that adds further limitations to the rights of patent holders. This is said to pursue an objective of public interest, namely public health. The preparatory works also state that "other countries, such as the U.K., have already introduced such a provision in their legislation and, if Belgium were to lag behind in that respect, it would be disadvantaged compared to its neighboring countries" (translated)³. There is a clear economic interest involved, namely to maintain Belgium's ability to compete as a market for clinical trials. 

That being said, the precise scope of this exemption is unclear. The wording that is used is broad and quite vague. Belgian law will in the future also exempt clinical trials supporting new innovative drugs, which is a good thing. But terms like "all possible activities", "for the purpose of", "evaluation", "medicinal products" are not further defined. This is a notable difference compared to the UK legislation, which the Belgian legislator quoted as a reference (cf. supra). In the UK, the drafters did see a need to define the notion of "assessment of medicinal products", as "any testing, course of testing or other activity undertaken with a view to providing data for obtaining marketing authorisation"⁴. The Belgian legislator decided not to do so, and hence conveys a puzzling message: first it explicitly refers to UK law in the preparatory works, but then it expressly deviates from it by excluding its limitative definitions. Consequently, one can only conclude that the Belgian exemption has the ambition or, at least, the potential of maintaining a much broader exemption. 

Nevertheless, this wording makes the exemption also prone to discussion. For instance, "evaluation of medicinal products" is a concept not defined in the law (not even in the Belgian Medicines Act). Strictly speaking, it could also cover commercial product evaluation, unrelated to any regulatory requirement. This notion could also be interpreted as referring to the evaluation of the dossier by the competent authorities, instead of the researcher invoking the exemption, which would be odd. Also unclear is what is meant by "all possible activities" for the purpose of such an evaluation. Would a third party's supply of an API to perform a clinical trial be covered by the exemption? One might recall that such a question was referred to the CJEU in the context of the Bolar exemption in 2014 (Astellas Pharma Inc., C-661/13) but then withdrawn before the Court could render a judgment, leaving the issue unresolved. Another question is whether the use of tooling inventions (instruments, research and testing methods and the like), that was excluded from the broad scope of article XI.34.1(b) BELC (cf. supra), would be exempted all over again in this way? This would mean a blow for holders of such patents. Although such activities were covered in any way by Bolar in the case of generics (and biosimilars), the effect of that exemption was relatively limited. Such inventions play a much bigger role in innovative research (for new medicine) which, under the current law, is not exempted. If now the entire pharma industry is covered by this exemption, that would seriously reduce the value of such patents. Another example of uncertainty with respect to the scope of the exemption relates to the question whether trials in support of first marketing authorization applications filed outside the EU, i.e. those that currently fall outside the scope of Bolar in Belgium, would be covered by paragraph 1/1; There would seem to be good arguments in support of such a claim. 

Finally, let's turn back briefly to the text of the general research exemption in article XI.34.1(b) BELC (cf. as discussed supra). An amendment thereof we had not touched upon is the abolition of the requirement for a "scientific purpose" and the introduction of the notion of "experiments". These amendments will cause also purely commercial (non-scientific) testing to be exempted. Because, absent such an amendment, there would be a contradiction with paragraph 1/1, which aims to exempt any and all tests for the evaluation of medicinal products, including pure commercial tests without any scientific purpose. However, the full ambit of article XI.34.1(b) BELC itself reaches far beyond  the pharma sector. Indeed, article XI.34.1(b) BELC - as opposed to article XI.34.1/1 BELC - is not limited to any evaluation of medicinal products. So, aligning these two provisions has the (unexpected) consequence of broadening the experimental use exemption to all types of products and processes, subsequently covering also purely commercial experiments across all industries. Although case law will determine how the new notion of "experiment" will be defined, this might mean that industry will feel less inclined to team up with universities or set up spin-offs to benefit from the exemption. "Me too" trials in the broad sense will now also fall outside the scope of patent protection. 

Further comments and conclusions 

At first sight, the new law would merely recalibrate the experimental use exemption in Belgium. In certain aspects, the exemption will be narrowed: in principle, it excludes the use of patented tools and instruments, to bring the exemption in line with the UPCA. In other aspects, the exemption will be broadened: acts that fall outside the scope of the Belgian Bolar will be caught by the extension of the experimental use exemption in Article IX.34, paragraph 1/1 BELC (innovative medicine and, possibly, first MA's outside the EU).

However, the new law goes further than that. Broadening the research exemption to cover Bolar type situations via an entirely new paragraph 1/1 has a rather big collateral impact on patent holders in Belgium: first of all, it implies introducing a much broader research exemption for all industries, by abolishing the requirement of a scientific purpose. Secondly, it has the potential of excluding pharma trials (including the tools and instruments used in that framework) from the scope of patent protection altogether. We are not sure that these secondary effects were actually intended. 

For the reasons we set out above, these amendments in fact imply a "re-extension" of the scope of the research exemption, whilst, on the other hand, the new article XI.34, § 1 (b) BELC narrows it to bring it in line with the UPCA. Then, inevitably, one should ask the question whether these amendments are not creating precisely that situation which the Amending Act aimed at solving: they run afoul of the legislator's stated objective to achieve consistency (a mirror image even) with the UPCA. The UPCA does not even contain any equivalent provision. So, we are afraid, the Amending Act will not avoid legal uncertainty: pharma companies doing business and conducting trials in Belgium will - still - risk being subjected to a different legal regime, depending on the circumstances of every case and, more importantly, the chosen strategy of the plaintiff. That is exactly the point: creating new and broad exemptions that might apply only before one particular venue (local Belgian courts) only gives a false impression of legal safety. Exemptions to patent infringement are for the benefit of an alleged infringer, who in the majority of court cases is the defendant and does not choose the venue for litigation. Researchers challenged before a Belgian court would be able to rely on the new Article XI.34, paragraph 1/1 BELC. But that defense will not be available if they were to be challenged before a division of the UPC.

Defendants may then in certain circumstances try to seek relief under Bolar, which might indeed be interpreted broadly before a division of the UPC. But that can only be confirmed by actual UPC case law. Again it is yet unclear what the exact scope thereof will be, especially in the first couple of years, considering inter alia: (i) the current differences in the national implementation of Bolar and; (ii) the fact that a Belgian local division, for instance, will be composed of a bench of one Belgian judge (who by experience might be used to applying a narrow Bolar exemption) and two other judges, delegated ad hoc from the central pool of judges, whose nationality or ideas and experience regarding the scope of the Bolar exemption may not be known at all.

It may be that companies involved in drug research will want to obtain protection from the specific broad experimental use exemption under Belgian national law and that they will consider doing so by pro-actively seeking declarations of non-infringement, so as to make sure they can set out their best experimental use defense before a Belgian national court rather than the UPC. That is possible during the transitional period of the UPC. However, such legal action requires companies to set out the reasons for non-infringement in great detail. Yet, at the same time, companies are most often very reluctant to disclose such information unless they are compelled to do so. A pharma company's conduct of such clinical tests and trials is often a matter of utmost commercial sensitivity. Moreover, the narrow scope and the precarious nature of a declaratory action based on an experimental use defense (acknowledging infringement but for the grant of this exemption) might put such a plaintiff in a fragile procedural position. And such claims are of course subject to a requirement of a current and personal standing to sue, which different national courts might apply differently. 

In sum, the changes brought by the Amending Act thus create legal uncertainty for researchers in the field. We feel this is unnecessary and could have been avoided if, for instance, the legislator had chosen to broaden the scope of the Belgian Bolar exemption (extending it to new innovative drugs). Instead, the legislator (partially) gives the example of the UK in support for an extension of the research exemption beyond the scope that is foreseen in the UPCA. This reference raises questions in its own right, as the UK is in the process of leaving the EU, has not ratified the UPCA and/or has indeed introduced a law that deviates from the UPCA, i.e. the legal framework the Belgian legislator intended to align with in the first place. 

C. Entry into force of the Amending Act 

As noted in our introduction, the amendments introduced herein do not apply yet. They will indeed only enter into effect once the UPCA itself becomes effective. In the current state of play, this requires that both the UK and Germany still ratify the UPCA, which, to date, is not the case. 

Until then, and unless other amendments would be enacted, current Belgian patent legislation remains intact, along with its broad experimental use exemption and narrow interpretation of Bolar. As a result, the introduction of any safe harbour for innovative research relating to regulatory compliance, which - as the Belgian legislator acknowledged - currently falls outside the scope of both the experimental use and Bolar exemptions in Belgium law, is thus dependent on the entry into effect of the UPCA. But then the question remains how "safe" it will really be.

This article first appeared in PHARMANetwork.

^{1 Chamber of Representatives, Doc 54-2755/001, pp. 6-22.}

^{2 An exemption was also introduced for medicinal products for veterinary use by Directive 2001/82/EC on the Community code relating to veterinary medicinal products, as amended by Directive 2004/28/EC. We will focus here on the human use.}

^{3 Chamber of Representatives, Doc 54-2755/001, p. 16.}

^{4 Section 60(6E) of the UK Patents Act 1977, as amended.}