House of Commons - Draft Legislative Reform (Patents) Order 2014

Draft Legislative Reform (Patents) Order 2014 - Regulatory Reform Committee Contents

3 Assessment of the draft Order

12. Our role is to assess whether the proposal meets the statutory conditions required of an order under the Legislative and Regulatory Reform Act 2006 (the "LRRA 2006"), and to examine the proposals against a number of tests. Standing Order No. 141 sets out the criteria under which the Committee makes that assessment. In this section we assess the draft Order against those criteria.

A: APPEARS TO MAKE AN INAPPROPRIATE USE OF DELEGATED LEGISLATION

13. The draft Order does not appear to make an inappropriate use of delegated legislation and therefore does not raise any issues in respect of this test.

B: SERVES THE PURPOSE OF REMOVING OR REDUCING A BURDEN, OR THE OVERALL BURDENS, RESULTING DIRECTLY OR INDIRECTLY FOR ANY PERSON FROM ANY LEGISLATION

14. A burden is defined in section 1(3) of the LRRA 2006 as any of the following: a financial cost; an administrative inconvenience; an obstacle to efficiency, productivity or profitability; or a sanction, criminal or otherwise, which affects the carrying out of any lawful activity.

15. The Government's view is that the draft Order would remove a financial burden on companies running clinical trials. The Department states that "due to the commercial sensitivity of the information, very little quantified evidence was provided"[12] via consultation responses.

16. We asked the IPO whether there was evidence that actual or threatened patent infringement proceedings have resulted in trials being moved outside the UK. The IPO responded as follows:

Stakeholders have told us that the risk of infringement proceedings for UK-based trials is greater than for trials run in EU countries with broader infringement provisions. They have indicated that when this risk is significant, they may decide to locate a trial abroad. Thus, legal action may be avoided, due to the location of the trial.

17. Testing the strength of the evidence base for the draft Order, we asked the IPO whether the risk of infringement proceedings is theoretical rather than practical. The IPO provided a summary of the case law on the scope of the current research exemption, on which it based its argument that the risk is practical.[14]

18. The Department provided a number of examples of burdens which it argued would be reduced or removed by the draft Order in the Explanatory Document (paragraphs 3.1-3.5):

· The financial burden caused to the pharmaceutical industry by the need to carry out expensive legal assessments of the infringement position in respect of all relevant patents prior to running clinical trials in the UK;

· The financial burden which might result from an injunction being granted against a company running a trial in the UK; or the delay in getting a product to market due to legal challenges;

· The efficiency burdens placed on companies when they locate a trial abroad due to the narrow infringement exceptions in the 1977 Act (compared to most other EU countries) and the financial burden to the UK clinical trial sector and medical institutions when clinical trials are run abroad;

· The financial and efficiency burden on small and medium enterprises and academic institutions who may not have the budget to assess infringement risk and who may be more at risk of infringing third party patents.

19. We agree that the draft Order would reduce a burden, or burdens as defined in the LRRA 2006.

C: SERVES THE PURPOSE OF SECURING THAT REGULATORY FUNCTIONS ARE EXERCISED SO AS TO COMPLY WITH THE REGULATORY PRINCIPLES, AS SET OUT IN SECTION 2(3) OF THE ACT

20. The draft Order does not raise any issues in respect of this test.

D: SECURES A POLICY OBJECTIVE WHICH COULD NOT BE SATISFACTORILY SECURED BY NON-LEGISLATIVE MEANS

21. The Department notes that it considered two non-legislative options for change: industry agreements and non-statutory guidance to clarify the current legislation. Following a formal consultation, it concluded that the non-legislative options were not a viable way of achieving the policy objective.[15]

22. We agree that the proposed reforms are only possible through legislation.

E: HAS AN EFFECT WHICH IS PROPORTIONATE TO THE POLICY OBJECTIVE

23. The Explanatory Document provides information relevant to this test between paragraphs 3.12-3.13. In the light of this and the further information supplied by the Department at the request of the Committee, which is annexed to this Report, we agree that the effect is proportionate to the policy objective.

F: STRIKES A FAIR BALANCE BETWEEN THE PUBLIC INTEREST AND THE INTERESTS OF ANY PERSON ADVERSELY AFFECTED BY IT

24. In the light of the information at paragraphs 3.14-3.20 of the Explanatory Document, we agree that this requirement has been met.

G: DOES NOT REMOVE ANY NECESSARY PROTECTION

25. The Department states that the provisions in the draft Order are in keeping with the existing exceptions to patent infringement, as they clarify that certain specific acts relating to clinical trials and Health Technology Assessment fall within the existing research exception.[16] The Department indicates that the provisions do not remove any necessary protection as a third party would still require a licence from the patent holder in order to use a patented product for commercial activities.[17]

26. The Department also notes that most EU Member States exempt clinical trials from patent infringement.[18] In the light of this and the further information supplied by the Department at the request of the Committee,[19] which is annexed to this Report, we are satisfied that the draft Order would not remove any necessary protection.

H: DOES NOT PREVENT ANY PERSON FROM CONTINUING TO EXERCISE ANY RIGHT OR FREEDOM WHICH THAT PERSON MIGHT REASONABLY EXPECT TO CONTINUE TO EXERCISE

27. The Explanatory Document includes information relevant to this test at paragraph 3.24. In particular, it states that although patentees currently have the right in UK law to prevent another party using their product in a trial, a company wishing to eliminate this risk may do so by running the trial abroad, and therefore no practical benefit flows from this right. The Department notes that eleven of twelve formal consultation responses agreed with that assessment. On the basis of this information, we are satisfied that the draft Order does not raise any issues in respect of this test.

I: IS NOT OF CONSTITUTIONAL SIGNIFICANCE

28. The Explanatory Document includes information relevant to this test at paragraph 3.25. The Department confirms that the proposals are not of constitutional significance.

J: MAKES THE LAW MORE ACCESSIBLE OR MORE EASILY UNDERSTOOD (IN THE CASE OF PROVISIONS RESTATING ENACTMENTS)

29. The draft Order does not raise any issues in respect of this test.

K: HAS BEEN THE SUBJECT OF, AND TAKES APPROPRIATE ACCOUNT OF, ADEQUATE CONSULTATION

30. The Intellectual Property office ran an informal consultation for 8 weeks between 6 June 2011 and 31 July 2011, asking stakeholders for views on whether the current legislation struck the right balance between the rights granted to a patent holder and the needs of pharmaceutical companies to carry out clinical and field trials. Following this consultation, the Government acknowledged that there was evidence of a need to amend UK patent law in this area and committed to run a formal consultation.[20]

31. The formal consultation ran for 8 weeks from 24 October 2012 to 19 December 2012. A total of twenty responses were received: 6 from the intellectual property profession (of which 4 came from professional bodies) 2 from research and development pharmaceutical industries; 3 from trade bodies representing the pharmaceutical and biotechnology industry; 2 from technology transfer organisations; one from a trade body representing the generics industry; a charitable organisation; a licensing organisation; a company employee; a Devolved Administration; a biological content manufacturing organisation and an active pharmaceutical ingredient manufacturer.[21] Nineteen of the twenty responses agreed that the 1977 Act should be changed to exempt from patent infringement activities which are carried out when preparing or running clinical or field trials using new drugs.[22] Fifteen out of sixteen responses wanted to see the exemption cover activities carried out to gain regulatory approval of new drugs.[23] Ten out of sixteen responses wanted to see the exemption extended to studies required for health technology assessments.[24]

32. In the light of this information (and the further information supplied by the Department at the request of the Committee)[25] we are satisfied that the consultation requirement has been met.

L: GIVES RISE TO AN ISSUE UNDER SUCH CRITERIA FOR CONSIDERATION OF STATUTORY INSTRUMENTS LAID DOWN IN PARAGRAPH (1) OF STANDING ORDER NO. 151 (STATUTORY INSTRUMENTS (JOINT COMMITTEE)) AS ARE RELEVANT

33. The draft Order does not raise any issues in respect of this test.

M: APPEARS TO BE INCOMPATIBLE WITH ANY OBLIGATION RESULTING FROM MEMBERSHIP OF THE EUROPEAN UNION

34. The draft Order does not raise any issues in respect of this test.