Judgment of the Court of Justice (Grand Chamber) in Daiichi Sankyo, C-414/11

Svetlana Chobanova [1]

The judgment in this case gives a fresh answer to the ever so contentious question about competences of the Union and its Member States to interpret the WTO Agreements and in particular the TRIPs Agreement. It represents an important departure from the existing case law of the Court on the scope of the common commercial policy, as defined in particular in Opinion 1/94 and in Merck Genéricos, and a welcome confirmation of the impact of the Lisbon Treaty amendments in the context of Article 207 TFEU.

On the facts of the case Daiichi Sankyo was the holder of a national patent in Greece for levofloxacin hemihydrate, a chemical compound used as an active ingredient in antibiotic treatments, in particular in an original medicinal product called Tavanic. The application for the patent sought protection both for the product as such and for its process of manufacture. The protection conferred by the patent, due to expire in 2006, was extended until 2011by a supplementary protection certificate (SPC) under Regulation 1768/92 concerning the creation of a SPC for medicinal products. In 2008 and 2009 DEMO was granted authorisations to place on the Greek market a generic medicinal product, Talerin, containing the same active ingredient. It should be noted that Greece only recognised the patentability of pharmaceutical products in 1992, after the expiry of a reservation permitted by the Convention on the Grant of European Patents (EPC).

In that context, the Athens Court of First Instance, asked to order DEMO to cease all marketing of Talerin or any other medicinal product with the active ingredient levofloxacin hemihydrate, referred three questions to the Court:

–          Whether Article 27 of the TRIPs Agreement falls within the primary competence of the Member States and, if so, whether the national court may give direct effect to that provision, subject to the conditions in national law;

–          Whether the invention of a pharmaceutical product such as the active chemical compound of a medicinal product is patentable subject-matter within the meaning of Article 27 of the TRIPs Agreement and, if so, what is the scope of the protection conferred by a patent for such a product;

–          Whether a patent obtained following an application claiming the invention both of the process of manufacture of a pharmaceutical product and of the pharmaceutical product as such, but, because of the reservation, granted only for the process of manufacture, must nevertheless, by reason of the TRIPs Agreement and from the date of its entry into force, be regarded as also covering the invention of the pharmaceutical product.

Concerning the first question, the Court concludes that the entire TRIPs agreement falls within the field of the common commercial policy and thus within the exclusive competence of the Union. It first observes that the Lisbon Treaty made the commercial aspects of intellectual property fully part of the common commercial policy. It then confirms the rule that only those EU acts with a specific link to international trade are capable of falling within this field. This is the case with the TRIPs Agreement which itself forms part of the liberalisation of international trade, and its objective is to strengthen and harmonise the protection of intellectual property on a worldwide scale. A further argument proving the specificity of the link is that under the WTO rules cross-suspension of concessions is authorised between TRIPs and the other principal WTO agreements. Finally, the Court draws support from the terms used in Article 207 which almost literally correspond to the title of the TRIPs Agreement.

The Court goes on to interpret the scope of Article 27 TRIPs and notes that according to it any invention, which is new, involves an inventive step and is capable of industrial application is patentable, provided only that it belongs to a field of technology. The invention of a pharmaceutical product such as the active chemical compound of a medicinal product is therefore capable of being patented. Finally, since under the EPC the effect of the reservation continues throughout the term of the patent, Daiichi Sankyo’s patent and its SPC are of no effect as regards the invention of the pharmaceutical product even after 1992. Consequently, the Court rules that while the TRIPs Agreement obliges the WTO Member States to make it possible to obtain patents for pharmaceutical products, it does not oblige them to regard patents which were granted solely for processes of manufacture of those products as covering, after the entry into force of that agreement, the inventions of those products as such.

A central part in the Court’s reasoning concerns the interpretation of the concept ‘commercial aspects of intellectual property’. Crucially, it notes as a preliminary consideration that in view of the significant developments in primary law, the question of the distribution of competences between the EU and the Member States should be examined on the basis of the current text of the TFEU and not in view of case law interpretations of its old versions.

The Court thus departs from the outcome in its Opinion 1/94, in which it had to be determined whether the Union had exclusive competence to conclude the WTO Agreement. According to the reasoning there the connection between intellectual property rights and trade in goods was not sufficient to bring them within the scope of the now Article 207. In fact there the Court observed that they affect internal trade just as much as, if not more than, international trade. Also, it was concerned about that fact that, given the primary objective of the TRIPs to strengthen and harmonise protection of intellectual property on a world-wide scale, if the Community were to be recognised as having exclusive competence, its institutions would be able to escape the internal voting rules and rules of procedure.

Both of these concerns no longer stay on the way of the Court’s conclusion in Daiichi Sankyo but they are still very present in the Advocate General’s opinion. AG Cruz Villalón observes that the significance to international trade of a particular substantive provision in the field of intellectual property is not in itself capable of justifying the EU’s exclusive competence to determine the rules governing it. Also, he is of the opinion that an interpretation bringing the entire TRIPs Agreement within the scope of Article 207 “would simply destroy, at least potentially, the shared nature which intellectual property undoubtedly retains, thereby also depriving it of its inherent effectiveness”.

The Court however adopts an extensive and dynamic interpretation of the common commercial policy, characteristic of its case law before Opinion 1/94, and also as regards the objective of the TRIPs Agreement concludes that “to regard the rules on patentable subject-matter in Article 27 of the TRIPs Agreement as falling within the field of the common commercial policy rather than the field of the internal market correctly reflects the fact that the context of those rules is the liberalisation of international trade, not the harmonisation of the laws of the Member States of the European Union”.

Another important consequence of the judgment is the determination of the direct effect of the interpreted provision of the TRIPs. Insofar as the Court is now the sole jurisdiction responsible of the interpretation of the Agreement, its consistent case law denying direct effect of WTO norms should apply. As has been held in Dior, Anheuser-Busch and other cases, in view of the nature and structure of the provisions of the TRIPs Agreement, they are not, in principle, among the rules in the light of which the Court is to review the legality of measures of the EU institutions. They are also not such as to create rights upon which individuals may rely directly before the courts by virtue of EU law.

It seems that by consequence of the new distribution of powers those Member States which have to date granted direct effect to TRIPs provisions will no longer be able to do so. With this in mind the AG calls upon the Court to limit the consequences of its findings and, “given the uncertainty that has, with good reason, existed until now concerning the magnitude of the change brought about by the Lisbon Treaty in that field”, to apply its judgment concerning the effect of Article 27 TRIPs only from the date of publication of its decision. The judgement itself does not address this question but simply resolves the issue by interpreting the TRIPs Agreement and finding no obligation whatsoever in it that might influence the outcome in the main proceedings.

Finally, it is worth observing that the national courts remain, as before, subject to the obligation of consistent interpretation. Thus, when called upon to apply national rules for the protection of rights in a field of the TRIPs Agreement, they are required under EU law to do so, as far as possible, in the light of the wording and purpose of the relevant provisions of the TRIPs Agreement.

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[1]Teaching Assistant at the College of Europe (Bruges), svetlana.chobanova@coleurope.eu.

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