Civil Procedure / Patent Law – Compulsory arbitration
Access to the law;
Access to the courts;
Effective jurisdictional protection;
Industrial property rights;
Intellectual property rights;
Market entry authorisation;
Principle of proportionality.
RULING No. 123/15
12 of February of 2015
The Court was asked to review two norms concerning industrial property rights. One of them says that if the holder of such a right wants to apply for an injunction, the only dispute-settlement option immediately available to it is the compulsory arbitration format and that direct access to a court is not possible. The Court found no unconstitutionality in this norm.
At the same time it held unconstitutional a norm that prevented the holder of an industrial property right from taking the holder of, or applicant for, a Market Introduction Authorisation (AIM) to court more than thirty days after Infarmed (the Portuguese Medicine and Health Products Authority) publishes the AIM or the application for it, as appropriate.
The Constitution does not say that disputes can only be resolved by the state justice system. It expressly permits the existence of arbitration tribunals, and allows the ordinary legislator to institutionalise non-jurisdictional conflict-resolution instruments and formats. Under the Constitution arbitration tribunals are an autonomous category of court and also exercise a jurisdictional function despite the fact that they are not state organs.
The jurisdictional protection of industrial property rights derived from patents on reference medicines is entrusted to the arbitration tribunals. The Constitutional Court took the position that inasmuch as this area does not require any special reserved jurisdictions, the particular form of protection against the (possible) effects of the market introduction of generic medicines which the legislator has opted to grant the holders of industrial property rights linked to reference medicines is not prima facie precluded by the Constitution.
However, in this particular situation the legislator also limited the ability to resort to the compulsory arbitration format to the thirty days of the initial phase of the administrative procedure involved in issuing an AIM, or at most to the period before that procedure is concluded. The Court considered the effect this limitation had on the right of access to justice to be disproportionate.
The way the legislator determined the beginning of the time limit placed especially serious burdens on the patent holder in terms of the how it first becomes aware of a situation which it may then want to challenge. The countdown began with the publication of AIM applications for generic medicines on a website, including a simple mention of the name of the reference medicine. This procedure did not adequately ensure that the holder of the industrial property rights to the latter was effectively aware of the beginning of the time limit within which it would be able to go to arbitration if it chose to do so, and there was no provision for any means of notification or information other than the application’s appearance on the website.
If arbitration proceedings – the only form of jurisdictional protection available to the industrial property right-holders in question – could only be initiated within thirty days of the publication of the application for an AIM, then the patent holders could only initiate them during the AIM procedural phase. In other words, this could only happen before the issue of an administrative act authorising an activity which could hypothetically challenge the exclusive rights afforded by the patent, and the fact is that little information was made available to the patent holder during that phase.
The Court recalled that in this particular case this form of resolving disputes (compulsory arbitration) involves claims based on industrial property rights regarding reference medicines. It said it was plausible that a thirty-day deadline – with no regard for the type of patent which could be in question and which might involve a high degree of technical and scientific complexity, particularly in terms of the substances and active principles and the manufacturing processes concerned – would not prove sufficient for the patent holder to be able to assess the real risk and the extent to which its right could be affected, and thus to be in a position to weigh up whether it should turn to the justice system in the form of the conflict-resolution process laid down in the law.
The norm completely precluded any jurisdictional protection the right-holder might want to seek later on. Even though the patent (and the exclusive right it provides) remained, its effects from the point of view of protection against generic medicines would be “paralysed” by the impossibility of exercising the right to jurisdictional protection at any time after the deadline set by the norm. This impossibility for industrial property rights linked to reference medicines to be jurisdictionally protected against generic medicines conflicted with the right of access to the courts and to an effective jurisdictional defence of the right to exclusivity provided by a patent.
The legislator chose to dissociate the administrative procedure leading to the issue of an AIM from the jurisdictional arbitration procedure designed to protect industrial property rights regarding reference medicines. This meant that the act authorising introduction into the market did not in its own right ensure the absence of possible violations of the industrial property right in question.
Notwithstanding the interests invoked by the legislator – the need for speed in order to make it possible to bring generic medicines to the market quickly, and the need to reduce health costs and thus make medicines both more accessible to citizens and cheaper for the state – the norm left other constitutionally important interests unprotected.
The norm also represented the prevalence of the right to free private economic initiative over both a right anchored in the freedom of cultural creation (which is one of the constitutional rights, freedoms and guarantees), and the right to property, in ways which the normative framework applicable to the protection of fundamental rights enshrined in the Constitution does not permit.
In this concrete review case two pharmaceutical companies (Bayer Portugal and Lusal) appealed against a decision of the Lisbon Court of Appeal. That decision was handed down in injunction proceedings, which are characterised by the fact that they are summary and provisional in nature and serve as a mere instrument in relation to the main action. Injunctions are intended to protect a right that will then be determined in the main proceedings, and they are dependent on the latter. Their sole purpose is to protect against the danger that those main proceedings may take some time to bring and conclude, and this means that if those proceedings are not in fact brought, or are terminated in some way, the injunction ceases. Given these specific characteristics, over the years the Constitutional Court has questioned whether many of the questions of constitutionality raised in relation to injunctions can in fact be appealed to the Court. However, this issue of the admissibility of appeals on the grounds of (un)constitutionality is not posed when the norms in question apply to the object of the main dispute and are relevant to the main proceedings. Nor is it relevant if the norms are only applicable to injunction proceedings themselves, given that any finding of unconstitutionality would be restricted to them and would not affect anything else.
As such, the fact that the norms before the Court in the present case referred to the ability to bring injunction proceedings meant that there was no prior question that would have prevented the constitutional appeal from being heard.
Two questions of constitutionality were raised by the appellant: one referred to a norm which says that in the case of a dispute, industrial property right-holders can only use the compulsory arbitration format and definitively cannot bring an action before a court of law, even in order to seek an injunction; and the other to a norm that prevented such right-holders from bringing legal action against the holder of, or applicant for, a Market Introduction Authorisation (AIM) more than thirty days after publication by Infarmed of the details of medicines which, at that moment in time, had not yet received at least one of the following: a market introduction authorisation, a retail sale price authorisation, or an authorisation including it on the list of medicines whose price is partly or wholly paid by the state when they are prescribed by a doctor.
The Law containing these norms was designed to combat factors that were blocking the entry of generic medicines into the Portuguese market, or at least making that introduction difficult, some of which were derived from uncertainties about possible violations of industrial property law. The Court took the stance that the right derived from a patent on a reference medicine combines the protection afforded by the right to private property with that conferred by the right of cultural creation. Intellectual property is private property and falls within the essential core of the fundamental right to property and ownership. However, the protection of copyright is not limited to the protection the state provides to property. The Constitution says that the right of cultural creation includes the right to see one’s copyright protected by law. Intellectual property is encompassed by the scope of the specific regime governing constitutional rights, freedoms and guarantees, and thus enjoys a more intense protection than that which the Constitution provides to economic, social and cultural rights.
Even though the rights at stake here do not formally take the shape of ‘copyright’, patents are exclusive rights obtained with regard to inventions, and basically speaking represent the protection of those inventions.
The constitutional norm that protects both the freedom of cultural creation, including the right to invent, and copyright simultaneously qualifies intellectual (including industrial) property rights as both fundamental personality rights and fundamental incorporeal property rights to intangible items. This is a sui generis fundamental right that encompasses elements from both personal law and property law.
The questions of constitutionality raised in the concrete case before the Court focused on ensuring respect for both the right of access to the law and the courts in order to defend rights and interests that are protected by law, and the right to an effective jurisdictional protection.
The sole purpose of the administrative procedure under which Infarmed can authorise or register the introduction into the Portuguese market of a medicine intended for human use is to evaluate that medicine’s quality, safety and efficacy, and the procedure expressly excludes the consideration of any possible industrial property rights.
The Industrial Property Code (CPI) reserves jurisdiction over the validity of patents to the courts. Only a court decision can annul a patent or declare its nullity. The Constitutional Court said that if arbitration proceedings consider the possibility that the respondent (in cases like the present one, the party seeking to bring a generic medicine to the market) may be undermining the validity of the applicable patent, they are addressing a subject which the law reserves to the jurisdiction of the state. What is more, the rights at stake here are fundamental constitutional rights that also raise questions involving important public and private interests.
Promoting research and innovation with regard to pharmaceutical products is vital to public health, and implies protecting both trust (legal certainty) and the investments made by private initiative.
The Court was of the view that, contrary to the position taken by EU Law, from the perspective of Portuguese Constitutional Law the ‘free use’ of an invention must be seen as a restriction on a fundamental right pertaining to the inventor which is only admissible to the extent that it is justified in order to safeguard interests of the community, and even then is subject to the limits of appropriateness, need and proportionality which the Constitution imposes on norms that restrict fundamental rights.
The Court stressed that the overall legal regime involved in the present case expressly provides for a court to intervene in an appeal against an arbitration tribunal’s decision on the merit of the case. However, it does not provide for any form of articulation between the arbitration process and the applicable administrative procedure. On the contrary, neither any invocation of industrial property rights, nor the respective arbitration process and decision have any influence whatsoever on the administrative procedure that leads to the grant or refusal of an AIM. In other words, the competent administrative entities can issue AIMs without considering the possible existence of relevant industrial property rights.
The Court said that it was not questioning a priori the legislator’s freedom to shape legislation regarding time limits on access to justice, on condition that those limits do not make that access impossible or excessively difficult.
The Court’s decision to find the second norm before it unconstitutional was thus based on the finding that the time limit – a mere thirty days – was insufficient given both the lack of information available to the patent holder at the moment when the law required it to decide whether to go to compulsory arbitration, and the complexity of the subject matter involved.
As part of its reasoning, the Court reviewed the comparative law question of whether requests for an injunction can be subjected to arbitration.
See Rulings nos. 230/86 (8-07-1986); 289/86 (5-02-1986; 33/88 (2-02-1988); 52/92 (5-02-1992); 757/95 (20-12-1995); 259/97 (18-03-1997); 400/97 (21-05-1997); 262/98 (5-03-1998); 254/99 (4-05-1999); 442/00 (25-10-2000); 235/01 (23-05-2001); 247/02 (4-06-2002); 491/02 (26-11-2002); 310/05 (8-06-2005); 178/07 (08-03-2007); 311/08 (30-05-2008); 577/11(29-11-2011); 350/12 (5-07-2012); 2/13 (9-01-2013); 230/13 (24-04-2013); and 781/13 (20-11-2013).