Opinion of Advocate General

Mr President,

Members of the Court,

1. The Court of Appeal, Queen's Bench Division, of the Supreme Court of England and Wales has referred a number of questions to the Court of Justice on the compatibility with Articles 30 and 36 of the EEC Treaty of a practice of the British competent authorities based on the Patents Act 1977 in connection with the conditions under which the holder of a licence under a patent endorsed licences of right may import from nonmember countries goods protected by the patent in question.

The relevant provisions of the Patents Act 1977

2. The Patents Act 1977 extended the period of validity of United Kingdom patents from 16 to 20 years. Transitional rules apply to some patents granted before the Act entered into force. As in the case of new patents, the period of validity of the patents in question is 20 years, but after 16 years they were to be endorsed licences of right automatically, that is to say even against the will of the patent proprietors.

3. The Court has on two occasions had to consider the relevant provisions of the Patents Act 1977. By judgment of 3 March 1988 in the Allen and Hanburys case the Court ruled that Articles 30 and 36 of the EEC Treaty:

The dispute in the main proceedings and the questions referred for a preliminary ruling

4. The dispute in the main proceedings is concerned with the rights in respect of the pharmaceutical product Cimetidine, which is used worldwide in the treatment of gastric and duodenal ulcers. It appears from the documents before the Court that a subsidiary of SKF manufactures the raw material for that product in Ireland. The raw material is then imported into the United Kingdom where SKF makes it up into tablet and syrup dosage forms and packages it.

5. By decisions dated 15 March and 8 April 1988 the superintending examiner, acting for the Comptroller, authorized Generics and Harris to import Cimetidine, whether in the form of raw material or of formulated product, into the United Kingdom, and at the same time fixed the rate of royalty payable to SKF. The rate of royalty is not at issue in this case and I shall therefore not discuss it further.

The questions raised under (1)

6. The national court raises two different questions under (1). First, it wishes to establish whether Articles 30 and 36 of the EEC Treaty prevent a national authority charged with settling the terms of a licence of right from being empowered to authorize or not to authorize the importation of the patented product from nonmember countries. It comes down essentially to establishing whether Articles 30 and 36 of the EEC Treaty are applicable to restrictions on trade with nonmember countries. The national court's second question assumes that Articles 30 and 36 of the EEC Treaty leave the relevant national authority with a discretion to impose terms for the licence which restrict trade with nonmember countries. More specifically, the second question seeks to establish whether the power may be exercised so that importation from nonmember countries is prohibited where the patent proprietor manufactures the product in the United Kingdom but authorized where it manufactures the product in other Member States and then imports it into the United Kingdom.

(i) The first question under (1)

7. In the judgment in EMI Records, to which SKF, Generics and the United Kingdom refer in their observations, the Court explained the territorial scope of Articles 30 and 36 of the EEC Treaty. The Court stated (in paragraph 8) that Article 30 provided that quantitative restrictions and measures having equivalent effect were prohibited between Member States. It went on to say (in paragraph 9) that according to the last sentence of Article 36 restrictions on imports justified inter alia on grounds of protection of industrial and commercial property must in no instance constitute a means of arbitrary discrimination or disguised restriction on trade between Member States. The Court inferred from this (in paragraph 10) that:

(ii) The second question under (1)

8. In its second question under (1), the national court seeks to establish whether a national authority charged with settling the terms of a licence of right may exercise its discretion so that importation from nonmember countries is prohibited where the patent proprietor manufactures the patented product domestically but authorized -where it manufactures the product in another Member State. This question is of decisive importance in the main proceedings. On the basis of sections 48(3)(a) and 50(l)(c) of the Patents Act 1977, the Comptroller, and in the event of a dispute the United Kingdom courts, usually exercise their discretion in that way. Since SKF has the raw material for the patented product Cimetidine manufactured in Ireland, the upshot of an affirmative answer would therefore be that the licensees, in accordance with the established practice, would be authorized to import Cimetidine in the form of raw material from nonmember countries.

9. In the judgment in Commission v United Kingdom (cited above, paragraphs 16 to 21), as in the judgment in Commission v Italy given on the same day (paragraphs 12 to 17), the Court delineated the framework -within which this question must be considered:

10. Under the practice adopted by the Comptroller, the protection afforded the rights of the proprietor of a patent endorsed licences of right who works the patent by importation -into the country from other Member States can be limited. Unlike in the case of a patentee who manufactures the patented product domestically, he cannot oppose the importation by the licensee of that product from nonmember countries.

11. That infringement of the principle of the free movement of goods cannot be justified under Article 36 of the EEC Treaty on grounds of protection of industrial and commercial property or on any other proper ground. The specific subject-matter of the patent is indeed not protected by a discriminatory practice adopted in exercising a discretion under which imports from nonmember countries are prohibited where the patented product is manufactured domestically but permitted where the patented product is manufactured in another Member State. As is clear from the judgments of both the Patents Court and the Court of Appeal in the main proceedings, such discrimination is not designed to protect industrial and commercial property but to foster domestic production. Such a consideration, the Court held in Commission v United Kingdom (paragraph 30),

The questions under (2)

12. The difference between questions 2(a) and 2(b) is not plain to me. Furthermore, I cannot quite see what those questions add to the questions raised under (1). They are possibly prompted by the argument raised by SKF in the main proceedings to the effect that sections 48(3)(a) and 50(l)(c) of the Patents Act 1977 are incompatible with Community law in so far as they authorize the grant of a compulsory licence where domestic demand for the patented product is met by importation from other Member States but do not authorize such a grant where the product is manufactured domestically.

Question (3)

13. The origins of question (3) lie in the application made by Generics and Harris to the Comptroller for authorization to import Cimetidine from (inter alia) Spain and Portugal. To date it has not been possible to obtain a patent in Spain or Portugal for a pharmaceutical product.

14. Article 47 (in the case of Spain) and Article 209 (in the case of Portugal) of the Act of Accession derogate from Article 42 (Spain) and Article 202 (Portugal) of that Act, which provide that quantitative restrictions on imports and exports and any measures of equivalent effect are to be abolished on 1 January 1986 between the Community and the two new Member States. The derogation reads as follows:

15. Generics and Harris, the United Kingdom and Spain, together with the Commission, agree with Nicholls LJ in the Court of Appeal that Articles 47 and 209 of the Act of Accession do not permit the competent national authority to prohibit importation from Spain and Portugal in the present situation. They point out that what is involved here is a patent endorsed licences of right. They go on to argue that in the judgment in Allen and Hanburys (paragraph 13) the Court of Justice stated that it was clear from the national court's analysis of the Patents Act 1977 that the proprietor of such a patent in contrast to the proprietor of an ordinary patent ... cannot oppose the grant of such a licence to a third party who applies for a licence in order to manufacture and market the product in question in that Member State but he retains the right merely to obtain a fair return. They infer from this, in common with Nicholls LJ, that the rights of a proprietor of a patent endorsed licences of right extend no further than receiving a fair return for the use of the patent and that, in view of the limited extent of his right, the patentee cannot rely on Articles 47 and 209 of the Act of Accession, which are intended for a different situation.

16. According to their wording, Articles 47 and 209 of the Act of Accession protect only the rights granted by the patent in question, which are plainly the rights to which the patentee can lay claim under the legislation of the State in which the patent was granted. Consequently, those articles authorize the patentee to prevent the importation of a pharmaceutical product from Spain or Portugal in so far as the right to do so constitutes part of the relevant patent protection. If this is applied to the present case and on the assumption that under the relevant national law the proprietor of a patent endorsed licences of right is entitled merely to claim a fair return, as Generics and Harris maintain on the basis of the judgment in Allen and Hanburys, such a patentee can rely on Articles 47 and 209 of the Act of Accession only in order to ensure that it obtains a fair return from the licensee wishing to import the patented pharmaceutical product from Spain or Portugal.

17. I propose that the Court should answer the national court's questions as follows:

1 Original language: Dutch.

2 Allen and Hanburys Ltd v Generics (UK) Ltd and Cist Brocades NV and Others and the Comptroller General of Patents [1986] RPC 203, esp. 248 and 249.

3 Case 434/85 Allen and Hanburys v Generics [1988] ECR 1245.

4 Case C-30/90 [1992] ECR I-829

5 Case 51/75 Emi Records v CBS United Kingdom [1976] ECR 811.

6 Sec also the judgments in Case 225/78 Bouhelier [1979] ECR 3151, paragraph 6, and in Case 270/80 Polydor [1982] ECR 329, paragraph 18.

7 Case C-235/89 Commission v Italy [1992] ECR I-777.

8 Judgment in Case 8/74 DassonvilU [1974] ECR 837.

9 The Spanish Government sutes in its observations to the Court that pharmaceutical products will be patentable in Spain as of 7 October 1992.

10 Judgment in Case 187/80 Merck v Stepbar and Exler [1981] ECR 2063.