Should pharma and biotech companies now be embracing the UPC?

Munich has been at the heart of the evolution of the UPC since the court’s opening almost 18 months ago, which is why the enchanting Kafer-Schänke restaurant in the city seemed like the perfect place for Pinsent Masons and JUVE Patent to host a dinner on 13 November 2024.  The event was attended by Pinsent Masons’ European patent litigation experts and a group of industry leaders with experience across the whole life sciences spectrum: innovator pharma, generics and biosimilars, biotech, medtech and consumer health.  It was hosted by JUVE Patent’s Mathieu Klos, who expertly guided the debate around whether, almost 18 months after the UPC opened, it is now time for pharma and biotech companies to embrace the UPC.

Overall, the attendees viewed the UPC favourably, and welcomed the lessons learnt in the first 18 months of the court.  However, the practical and financial pressures exerted by the tight timeframes, plus the uncertainty of a system whose lack of harmonised case law to date on thorny issues including inventive step and the doctrine of equivalence have – in the view of the industry leaders – meant that uptake by pharma and biotech pales into comparison to that of medtech businesses.  This will, of course, not last, and all agreed that pharma and biotech businesses will ultimately benefit from the harmonised laws brought about by the UPC.

The life sciences story so far…

The UPC’s first instance caseload of 538 on 31 October 2024, with a large majority of infringement actions continuing to be filed before German local divisions, signals an increasing level of trust placed in the system for handling patent disputes in Europe.

Engagement with the UPC has been across a wide range of sectors, but looking at this through a broad life sciences lens, the group highlighted medtech as standing out as a particular winner, with companies involved in global litigation – such as continuous glucose monitoring device manufacturers Abbott and Dexcom, and insulin pump competitors Insulet,  Menarini and Eoflow  – being active before the UPC. Medical diagnostics disputes, such as 10x Genomics v NanoString (which has generated many headlines) and Advanced Cell Diagnostics v Molecular Imaging (in which Pinsent Masons acts for Advanced Cell Diagnostics), are also ongoing.

All agreed that engagement by medtech companies is helping to develop UPC case law, and that other life sciences sub-sectors will be guided by the learnings from such cases.  However, there are some limitations: medical devices are often underpinned by fewer patents – in some cases only one – which, it was argued, makes such disputes easier for a new court to address, and perhaps infringement and validity arguments may be clearer cut than, say, in traditional pharma disputes.

This was a nice segue into the main topic of the evening: why the number of pharma and biotech UPC disputes remains extremely low.  There are a couple of innovator versus innovator disputes, notably Sanofi v Amgen in which Amgen’s evolocumab/PCSK9 antibody patent was revoked by the Munich Local Division, and the GSK v Pfizer RSV vaccine dispute which is underway before the Dusseldorf Local Division.  Preliminary injunctions have been heard in the biosimilar disputes between Novartis v Celltrion and Alexion v Amgen & Samsung Bioepis.  However, only one traditional originator versus generic medicine dispute, the cabazitaxel dispute between Sanofi v Accord & Others (in which Pinsent Masons represents Accord), is in train.

All acknowledged pharma’s apparent enthusiasm for the UPC before the court opened.  This of course begs the question as to why there is seemingly a continuing reluctance to engage in UPC litigation, with, the group noted, many life sciences innovators having opted all of their patents out of the UPC.  Is it going to be a matter of just waiting to see how the jurisprudence evolves over a period of time, or is something else underlying this hesitancy?

Aggressive timeframes – friend or foe?

The UPC’s aggressive timelines were at the forefront of everyone’s minds.  The aim of handing down first instance decisions within 12-14 months (which it has achieved so far) may provide at least some commercial certainty earlier than national litigation, which is seen as a big plus point for any business.  However, this has to be balanced with case management practicalities, and there is some skepticism as to whether the court will be able to stick with this aim in the long term as the case load and complexity of issues before it increases.

From a practical point of view, the group agreed that the short deadlines for filing a defence and counterclaim are a significant challenge for defendants.  It is particular challenge for generic and biosimilars, but also for originator vs originator disputes or indeed anyone on the receiving end of a UPC action.

The group agreed that there is no escape from the fact that there is an imbalance between originator and generics/biosimilar companies during the Transitional Period because the patentee has control – they choose whether to keep their patents in or, as many have done, opt their entire patent portfolios out of the UPC.  It will, according to one attendee, be hard enough for generic and biosimilar companies to respond to a UPC action even when they are to some extent expecting it, such as where they are engaged in pre-existing national proceedings, let alone in trying to anticipate when, if at all, a relevant patent – which may be one of thousands – may be brought within the UPC’s jurisdiction.

The lack of control over UPC proceedings afforded to defendants is, it is fair to say, a frustration, with the group discussing the need for some comfort to be provided to generics and biosimilars companies as to how to properly defend a UPC action.  Knowledge will be gained from the cabazitaxel proceedings, on which Pinsent Masons is instructed.

Costs are also a big consideration for pharma companies.  It is likely to be far easier for the UPC’s aim of making European patent litigation more cost effective to be achieved in simple, single patent actions, compared with complex pharmaceutical disputes.  There are some concerns that the tight deadlines, likely procedural challenges and interaction with national proceedings (common in many pharma disputes) will require a large legal team, making case management difficult and making UPC litigation expensive.

Cost: benefit analysis

The discussion around costs drew out the main issue troubling pharma and biotech businesses: the commercial impact of UPC litigation and the risk of UPC-wide relief being granted against a business.

As expected, this is the main concern for generics and biosimilar businesses, but also for originator businesses, with one expert from the biotech space indicating the general sense that a key patent could fall before the UPC very quickly given the quick timelines.  This is a particular concern for smaller companies, such as those in the biotech and medtech spaces, or those with smaller patent portfolios, as losing a key patent risks shutting down the entire business.

Is this fear misplaced?  Is the UPC more likely than other courts to revoke patents?

The group considered the UPC data so far, agreeing that it is too early to identify any trends, and in fact the data may be misleading.  Most, if not all, of the early UPC actions in the life sciences space are part of wider, pre-existing multi-jurisdictional disputes:  Sanofi v Amgen, Abbott v Dexcom, GSK v Pfizer, Edwards v Meril to name but a few.  It was suggested that perhaps some of those litigants decided against bringing their strongest patents before the UPC, preferring to risk weaker patents to test the water.

Given the setting for the event – a beautiful, snowy evening in Munich – it would have been remiss for the group to have not considered the role the German UPC divisions and judges have played in the UPC’s first 18 months.  Prior to the court opening, it was generally accepted that the UPC would be heavily influenced by German procedure, and that it was likely to take a generally patentee-friendly approach to preliminary injunction applications and revocation actions.  However, the group welcomed the fact that this has not really been the case.  Despite the fact that a large majority of UPC actions have been brought before German local divisions of the UPC, and decided by judges who were formerly judges of German national courts, they seem to be adopting a more nuanced, UPC-first approach rather than a heavily-weighted German approach.  While national flavour has been observed in some decisions, the group approved of the more measured approach which has generally been seen so far.  Indeed, a number of first instance decisions have seen the patent in issue be revoked (including Sanofi v Amgen, Dexcom v Abbott, 10x Genomics v NanoString), or upheld only in amended form (e.g. Kaldewei v Bette).  Some thought that this supported the idea that litigants are only testing weaker patents before the UPC at this time.

Uncertain laws

Such views led on to a discussion around the uncertainty as to how the UPC will approach some of the knotty issues of patent law.  This impacts business’ ability to assess risk and predictability of outcomes, which, several people noted, can be an impossible sell to the business.  It is unclear how issues such as inventive step, plausibility, doctrine of equivalents and file wrapper estoppel will be dealt with by the UPC, whereas the approaches of national courts are clearer.  Ultimately, there will be a large degree of uncertainty until some of the first instance decisions, and issues such as these, come before the Court of Appeal.  Notable is the fact that there are a number of Dutch judges at the Court of Appeal who may take a different approach to the first instance courts.  Harmonisation of laws, led by future Court of Appeal decisions, will likely be game changing for many businesses and a clearer approach to important technical issues will be welcomed by pharma and biotech businesses.

Interaction with national proceedings

Bringing the evening to a close, the group went on to consider the UPC’s interaction with national courts.  Some thought that, for the time being, multiple national actions may still be preferable to the risk of central revocation for high value pharma and biotech patents.  Others thought that EPO oppositions may provide challengers with more freedom, whereas UPC judges have taken steps to limit the number of arguments before them, undoubtedly to help manage the short UPC timelines.

During the Transitional Period, for European patents that have not been opted out of the UPC, there remains a choice as to whether to bring national or UPC proceedings.  As many of the experienced national judges have moved over to the UPC, some suggested that, depending on the strength of a patent, the national route with less experienced judges or slower timelines may provide more favourable strategic options.

Outside the UPC territories, the group reflected that the UK has lost none of its shine in playing a key role in high value patent disputes, and the judges have responded with flexible case management approaches and an intention by the English Patent Courts to encourage active dialogues between the UPC and UK judges to keep them appraised of the progress of parallel proceedings.  Opportunities for UK courts to diverge from EU case law, notably in relation to SPCs (with the appeal in Merck Serono v Comptroller due to be heard in late 2024), are of interest.

Conclusion

By the end of the evening, the experts agreed that the UPC has undoubtedly changed the face of European patent litigation.  Lessons will be taken from the UPC successes seen by medtech businesses.  Confidence in the system will increase as more judgements, leading to more predictability, are issued, and less ambiguity about how proceedings will unfold from a practical perspective.  For now, many in the life sciences space are happy to allow others to test  the new forum, but all agreed that the sector will warm up to the use of the UPC in the longer term.

Pinsent Masons and JUVE Patent will be co-hosting another dinner in the Netherlands in early 2025.

If you would like to join us, or explore the opportunities or risks the UPC may bring to your business, please contact the Pinsent Masons UPC team at sarah.taylor@pinsentmasons.com.