The real reason why the "451-page dossier" should concern you: US seeks to put UK "deviation from the EPC" on the table in future US/UK trade negotiations

This Kat was probably not alone in being slightly bemused by the recent media reporting on the leaked “451-page dossier” describing US/UK talks on future trade arrangements. The BBC reports the dossier as showing that the US is interested in "extending patents” in the UK. How strange. Is the US government proposing some novel form of patent term extension currently unavailable to patentees in the UK? Fear not, IPKat is here to provide some clarity!

It turns out that, contrary to media reporting, the dossier does not mention anything radical with respect to patent term extension. However, there are some interesting insights to be gained from the dossier on the potential battleground for IP rights in future US/UK trade negotiations. Most notable is the US government's position on grace periods for disclosure before patent application filings, which are not permitted under the European Patent Convention (EPC).

What does the dossier actually say about IP?

The dossier is a readout of the UK-US Trade & Investment Working Group, that took place in 2017-2018. The dossier describes a series of meetings between the US and UK on “Innovative Pharmaceutical Protections”. In these meetings, representatives from the UKIPO and USPTO discussed the potential battleground for US/UK trade negotiations. As noted by the report’s authors, in trade negotiations the US typically seeks provisions for grace periods, data exclusivity and patent term extension. 

Grace period and UK exit from the EPC
What is really "on the table"?

One topic that is likely to play a significant part in any US/UK trade negotiations, is the US preference for a 12-month grace period for patent application filings after the first disclosure of an invention. If the US insists on the UK adopting such a grace period, there are concerns that the UK would be forced to leave the EPC, which does not permit grace periods. [Merpel: surely the UK would never do something so self-destructive? Then again…] 

The report itself notes that the USPTO “pushed hard” on grace periods in the meetings. The US asked if it would be "possible that the UK could diverge from the convention to, for example, adopt a grace period" (Doc 4, page 123). The UK responded that the EPC is clear that patents need substantial alignment and that they took their "standing in the EPO seriously". At stake is not only legal compatibility with EPC “but also of political signalling as the UK are a leading delegation at the EPC” (Doc 4, page 120). To put it another way, UK exit from the EPC would be a disaster. However, the US proposed a meeting with UK stakeholders that had positive views of grace periods.

The dossier therefore confirms the rumours that the US would like a 12-month grace period for patent application filings to be "on the table" in future US/UK trade negotiations.

Clarification on the UK's position on the UPC?

The US delegation was also interested to hear the UK government plans with respect to the UPC. [Merpel: wouldn’t we all?] The US expressed surprise that the UK government had ratified the UPC agreement before the UK’s exit. The US mentioned that US stakeholders were strongly in favour of the UK participating in the UPC. The UK replied that “we intend to stay part of the agreement through the implementation period…Beyond this is subject to negotiation”. This position was also described in the subsequently published FEB white paper. The dossier thus does not make us any the wiser with regards to the UK's intended negotiating position in post-Brexit negotiations with the US. Whether the UK will be able to be a member of the UPC after Brexit was discussed in a recent report from the European Parliament think-tank (IPKat: Can the UK become and stay a member of the UPC?)

Patent term extensions

The US, UK and EU currently all have provisions for extending the term of a patent relating to a medicinal product for a maximum of 5 years (the UK SPC term can also be extended a further 6 months based on a paediatric use). In the meetings, the UK commented that it would be useful for the US and UK “to look at each other’s systems and learn from them”. They also noted that the EU is currently looking at the existing SPC regime. There were also some discussions on patent term adjustment (PTA), which is available in the US but not the UK. PTA is the process by which the USPTO adjusts the term of a patent by a number of days to take account of delays in prosecution (35 U.S.C. 154(b)). The UK argued that PTA is not as relevant in the UK because accelerated examination is available for applicants. 

Despite the media uproar on the US seeking to extend patent terms in the UK, there was not in fact anything dramatic in these pleasantries. The overall conclusion from the discussion was that the US and UK systems were very similar, "e.g. one per product and maximum extension of 5 years" (Doc 4, page 125). This Kat muses that perhaps the biggest different between the US PTE and EU/UK SPC systems are that the US PTE system is less complex to navigate than the SPC regulation. 

It also seems that the main area of discussion with regards to generics access in the talks was not patent term extension but the term of data exclusivity awarded to biologics in the US and UK following marketing authorisation (MA).

Data exclusivity

The US and UK both provide innovators with a period of data exclusivity following market approval for a drug. Data exclusivity is unrelated to patent protection but is based on FDA or EMA marketing authorisation for a drug. One difference between the UK/EU and US systems of data exclusivity is that the US provides a longer period of exclusivity to biologics than small molecules. In the US, biologics benefit from 12 years protection (8 years data protection plus four years market protection), whilst chemicals are awarded 5 years protection. The longer data exclusivity protection for biologics means that it is often data exclusivity, and not patent term, that determines when a biosimilar may enter the market. The EU and the UK, in contrast to the US, provide 8+2 years protection for all pharmaceuticals.

The dossier reports a question from the UK to the US, asking why the US had different data exclusivity periods for chemicals and biologics. The US replied that “there are patent vulnerabilities as Biosimilars are not replicas of small molecules, therefore there is more need to have a longer-term protection for Biologic products”. Furthermore, the manufacture of biologics is more complex, "biologics are therefore defined by how they are made, rather than their chemical structure". Consequently, the US argued, enforcing a patent for a biologic against biosimilars is more difficult. Do readers have a view of this? 

The UK also asked a question about pricing. Did the longer protection not mean that prices were higher for longer? The USPTO responded that “pricing plays out domestically”. Furthermore “there is a lot of conversation on drug prices…and this is causing angst”.

The outcome of the final meeting on data exclusivity appeared to be that the US would seek reassurance from the UK that the data exclusivity provisions would remain unchanged following Brexit (Doc 4summary point 5, page 120). 

Conclusion

The dossier therefore does provide some tip-bits of interesting information regarding US/UK thinking on IP protection and its relation to drug pricing. Reassuringly, despite the media reporting, there does not appear to be anything radical "on the table" with respect to patent term or data exclusivity. The US position on grace periods is the most concerning of all the issues under discussion. It would be an extraordinary act of self-harm for the UK to withdraw from the EPC, and this would have significant disadvantages not only for the UK but also for the US and third parties such as China and Japan. However, the dossier highlights throughout many areas that still need clarification. Final negotiating positions between the US and UK will also be highly dependent on the UK's negotiating position with the EU following Brexit. 
The real reason why the "451-page dossier" should concern you: US seeks to put UK "deviation from the EPC" on the table in future US/UK trade negotiations The real reason why the "451-page dossier" should concern you: US seeks to put UK "deviation from the EPC" on the table in future US/UK trade negotiations Reviewed by Rose Hughes on Friday, November 29, 2019 Rating: 5

10 comments:

  1. Let's be honest. The reason the US think the UK might be able to introduce a grace period is because they don't, and will never, understand that the EPC isn't related to the EU. Further the US is strongly in favour of the UK participating in the UPC which would, of course, be impossible if the UK isn't part of the EPC.

    The big issue is the possible extension of UK data exclusivity for biologics from 8+2 to 12. The public would undoubtedly see this as extending "patents" for pharmaceuticals.

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  2. We in the UK need to be honest about our future position in the world. We need to belong in some way to a big powerful trading block. The US would be a natural 'home' once we leave the EU. Risking that over a grace period disagreement does not seem sensible. The sooner we see that bringing ourselves into alignment with the US brings a lot of benefits, the more clearly we can develop our post-Brexit relationships and alliances. We can be the 'gateway' to Europe for the US if we compromise a little on our laws. It will be a delicate balancing act to please both the US and the EU, but surely we have little choice now?

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  3. It is not the first time that the US plead for a grace period. They have tried it in the past at WIPO level, but without success. They are thus bound to try it at every possible opportunity, like the present one. If the UK accepts this, then there will not only be a Brexit from the EU, but also a Brexit from the EPO.

    It is pretty obvious why the US want the UK to stay in the UPC. They would have a bridgehead in Europe with no linguistic problems, this being the more so since the London Section of the Central UPC division would be dealing with pharmaceuticals.

    As the US count for roughly a quarter of the European filings, and filings from the EU barely a third of the European filings, they could thus heavily influence the European market.

    That the UPC will have a positive influence on European industry is thus a fallacy only believed by those wanting to gain more money for prosecuting supra-national litigation. Do you remember who sat in the self-co-opted team drafting the RoP of the UPC?

    One can reckon on the ruthlessness of US negotiators to push they will through.

    Techrights: FINGERS OFF!!

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  4. The comment from "Honesty" is hard to swallow. The EU is indeed a big Bloc, with 600 million consumers and, within it, the UK is one of the "Big 3" Member States. So, a Big Fish in a Big Pool.

    As the 51st State of the USA though, with zero representation in the US Congress, it is not even a Fish, and in a pool only half as big. And what's all this nonsense about a "bridgehead" into Europe. The EU is already fully cognisant of the threat of a deregulated UK free-riding the European market. Use of force to effect a landing on the European Mainland is not an option except in times of war.

    As we are now, given our language and professional skills, we in the UK should be filing at the EPO the Lion's Share of everything sent to the EPO by both Asia and The Americas. If the UK leaves the EU it will have little or nothing of that ongoing business.

    Is there no limit to the skill with which Westminster politicians squander in a few decades the huge reserves of soft power built up by the UK over centuries?

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  5. I've read the papers (well, the IP-relevant bits), and there was one tidbit regarding the US position on the grace period that intrigued me hugely. Namely, the US negotiators appear to have noted that SOME EPO member states do have such a grace period. The British seem to have essentially retorted that those countries may be small and irrelevant enough to get away with that, but that the UK would jeopardize its position within the EPC if it did the same. Now, does anyone know which EPC countries do that (if any)?
    On another, entirely different subject, left unmentioned by the IPKat, it comes as no surprise that the US negotiators were particularly insistent in registering their displeasure with the EU's PGI system...

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  6. Revocator, could it be that the USA is eying the 10 year term petty patent/utility model GBM system in Germany, with its 6 month grace period? After all, in the USA they call Registered Design rights "Design Patent" rights so it'a easy for them to suppose that GBM's are utility patents with a grace period and the EURD is a 25 year patent with a grace period.

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  7. Revocator the article here gives a list of states with grace in Europe. https://mewburn.com/resource/grace-periods-for-disclosure-of-an-invention-before-applying-for-a-patent/

    Which bit of the EPC stops contracting states having a patent grace period for their own patents?

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    Replies
    1. An interesting question.

      Article 2(2) EPC provides that "The European patent shall, in each of the Contracting States for which it is granted, have the effect of and be subject to the same conditions as a national patent granted by that State, unless this Convention provides otherwise".

      It seems to me that most EPC Contracting States, including the UK, view "subject to the same conditions" as meaning that the substantive conditions of patentability for an EP patent must be the same as those for a national patent.

      There are clearly examples of EPC Contracting States taking different views on the level of harmonisation mandated by the EPC ... and not just in connection with the definition of the relevant prior art (ie the grace period). But does that justify the UK ignoring its obligations under the EPC in connection with such a crucial provision as novelty?

      I guess that how one answers that question will depend upon how comfortable one is with the EPC becoming a Convention that is honoured more in the breach than the observation... of course bearing in mind that the EPC provides the foundations for the UPC Agreement.

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  8. Thanks MaxDrei, but I suspect you may not appreciate the depth of the US-UK special relationship. In that bond our foreign policy objectives (for example towards China and Russia), general approaches to politics and economics are far more aligned than the UK with Germany or France. The UK vision of the future is more in harmony with the US, than with France and Germany, particularly in regards to how the power blocs of future should evolve. Assuming the UK will Brexit, then the US will need to become an even closer friend. That means choosing the US over Europe whenever the choice needs to be made, and furthering US interests in Europe if need be. That is simply how the UK must act to survive post-Brexit. I am sure the those who understand international relations in the UK have understood that already

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  9. Good point, Honesty, about foreign policy alignment, being closer between the US and the UK than between the US and Europe. We saw that, for example, in the run-up to the Iraq War. France and Germany spoke against it, Tony Blair for it. As you say, with BREXIT, the USA "will need to" become an "even closer friend" of the UK. Only snag is, countries don't have "friends", close or otherwise. Rather, they have their national interests. I'm not convinced that ours lie with a "need" to be an even closer "friend" of the USA.

    But I agree with you very strongly, that economics are very closely aligned between the USA and the UK's "natural party of government, much more closely than between mainland Europe and the USA. Whether that is a good thing for all those voting for BREXIT is an interesting question.

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