Pharmaceutical Intellectual Property Rights and the Single Market

A Survey of the Jurisprudence of the European Court of Justice

Thesis (M.A.), 2006

81 Pages, Grade: 13,53 (gut)




A. The importance of intellectual property rights in the pharmaceutical sector
B. Intellectual property rights as a challenge to the single market
C. Towards a Single Market in Pharmaceuticals
I. Introduction
II. The pharma industry and the pharma market in the EU
III. The pricing of pharmaceuticals
IV. Towards a single market in pharmaceuticals
V. The Frankfurt Round Tables and EU enlargement
D. Outline of the thesis

A. Intellectual property rights as a challenge to the free movement of goods
B. Existence and exercise of intellectual property rights
C. Exhaustion of rights
I. Introduction
II. Patents
1. Introduction
2. Exhaustion of patent rights trough marketing in another member state
3. Consensual marketing in other member states as a prerequisite for the exhaustion of patent rights
III. Trademarks
1. Exhaustion of trademark rights through marketing in another member state
2. Consensual marketing abroad as a requirement for the exhaustion of trademark rights
3. Repackaging and trademark rights
a) Consumer interests
b) Consumer confusion as a consideration for the ECJ
c) Limitations
d) Strategies
e) Artificial market segregation
f) Conclusions
4. Trademarks similar to but not connected with the protected trademark
IV. Copyright
D. Harmonization
I. Divergent domestic patent laws and the need for a European patent
II. Legislative developments
1. Directive 89/104
2. Regulation 40/94
3. Legal developments relating to copyright
4. Patentability of biotech products: directive 98/44
5. The directive on the enforcement of Intellectual Property Rights
E. Conclusions

A. Introduction
B. Again: existence and exercise of intellectual property rights
C. Intellectual property rights and Art. 81 EC Treaty
I. Introduction
II. Assignment
III. Licensing agreements
1. Applicability of Art. 81 EC Treaty to licensing agreements
2. Exemptions under Art. 81 (3) EC Treaty
IV. Technology transfer and other block exemptions
1. Technology transfer
2. Franchising
3. Other agreements
V. Other problems
D. Intellectual property rights and Art. 82 EC Treaty
I. Intellectual property rights as dominant positions
II. Abuse of a dominant position
1. Abuse of a dominant position through mergers and acquisitions (M&A)
2. High pricing and supply restrictions
a) Unfair pricing and Art. 82 EC Treaty
aa) Unfairly high pricing
bb) Unfairly low pricing
cc) Ties
dd) Discounts
ee) The relation between Art. 81 and Art.
EC Treaty
b) Supply decisions, the freedom to choose contracting partners and discriminatory pricing
aa) Discriminatory pricing
bb) Supply restrictions as abuse of a dominant
cc) Limitations to the IP rightholders' right to
choose contracting partners
E. Conclusions








With an aging demographic all over the European Union, the European pharmaceutical sector is set to grow in the coming decades. Already today the pharmaceutical industry is a key employer in Europe. At the same time, the pharmaceutical industry is marked by a very expensive research and development phase, which makes strong intellectual property rights crucial to ensure that research for new pharmaceuticals remains commercially interesting. But not only direct threats to intellectual property rights, such as the production of generic pharmaceuticals or the sale of counterfeit pharmaceuticals, pose a threat to those pharmaceutical companies which heavily invest in research for the development of new products: different prices for identical pharmaceuticals in different member states of the European Community make it economically interesting to buy pharmaceuticals in one member state and sell them abroad. It might even be cheaper to sell re-imported pharmaceuticals in the country of origin. This possibility opens a whole new market for re-importers which cuts directly into the profit of the producers. In this thesis we will look at different issues surrounding intellectual property rights in the European pharmaceutical sector by investigating the jurisprudence of the European Court of Justice and the Court of First Instance.

This master thesis was presented to the faculty of law of Justus-Liebig-University in Gießen (Germany) on 12 May 2006 in partial fulfillment of the requirements to obtain a Master’s Degree in International Law (“Magister Juris Internationalis” or “MJI”, for short). The degree was awarded with a grade of 13.53 points (“good”) after the final examination on 7 July 2009. The major change between the original thesis and this book is that no reference is made to the EU Constitutional Treaty. Both the original thesis and this book refer to the law as it is applicable now, prior to the entry into force of the Lisbon Treaty. Although the latter has made an important step towards becoming law due to the recent positive referendum in Ireland, it will take some time before the changes will take effect.

Although research often is a solitary process, this process is often inspired, supported and facilitated by those around the researcher. My thanks therefore are due to Professor Dr. Thilo Marauhn, M.Phil. (Wales) and Prof. Dr. Mahulena Hofmann Csc. at Justus-Liebig-University for their interest in my work. I am also indebted to my current boss, Prof. Dr. Hans Michael Heinig at Georg-August-University in Göttingen, for giving me the time and freedom to prepare for the final exam. Finally I want to thank (in alphabetical order) lic. drs. Alexandra Ayala Delgado LL.B. (ITESM), LL.M. (Utrecht), M.F. (ITESM) (and soon to be MBA (Oxon)), Av. Eda Azik, LL.M. (Izmir), Dr. rer. nat. Michele Orlando, Judge Sarah Isabelle Reich, Dr. iur. Heiko F. Schäffer, MJI, and Beata Tarnowska, LL.M., for their inspirational interest in the work and many fruitful discussions in preparation of the oral exam this summer.

Frankfurt am Main, Fall 2009 Stefan Kirchner


A. The importance of intellectual property rights in the pharmaceutical sector

In the pharmaceutical sector, what is today not more than an idea can soon be worth millions. It is therefore crucial to secure Intellectual Property (IP) Rights and for the inventor to be able to rely on the protection afforded by the law. Without the protection of the inventor's ideas there would be no incentive for the kind of innovation[1],[2] which is crucial in this industry. Furthermore can industrial secrets in the pharmaceutical sector not be kept all the way until a product is being marketed since new pharmaceuticals will have to pass numerous clinical trials and will be scrutinized prior to entering the market. Since new drugs cannot be kept out of sight from potential competitors for too long, pharmaceutical companies will have to act in time to ensure that their rights are being protected. The timely protection of pharmaceutical intellectual property rights not only serves the company directly but also allows to create a intramural environment in which innovation is being rewarded. A pharmaceutical company which fails to reward ideas and inventions already before a profit is made with the product resulting from the ideas and inventions in question will soon find itself not only with less satisfied employees but also with less profit. Of the sums which have to be put into the entire research and development (R & D) phase, inventor benefits make up only a tiny fraction, yet one that is crucial for further innovation. Timely protection of intellectual property rights allows for timely rewards as well, fostering a culture of innovation among employees. It is therefore crucial both regarding a pharmaceutical company's competition as well as the motivation of it's own research and development employees to aim for a protection of intellectual property rights. Especially since those rights are bound to come under attack sooner rather than later: also when it comes to pharmaceuticals, products in which quality should be the only factor determining a spending decision, less affluent consumers - and, more importantly, health insurers which also want to make a profit - will of course prefer cheaper copies or generics over the original drug for which the pharmaceutical company developing it originally spent large sums into research, clinical trials etc. Consequently there is a market for cheap pharmaceuticals. Apart from counterfeiting pharmaceuticals, i.e. copying a well-known pharmaceutical or at least its packaging and the selling one's own product as the well-known product, re-importing pharmaceuticals is an issue in this context. Unlike with counterfeited pharmaceuticals, you get what you want when you buy a re-imported product. Consumers get it cheaper because it has been bought abroad. To give one example: it is not unusual to find Aspirine ®,[3] which is produced by the German company Bayer, in German pharmaceuticals, bearing, say, Greek instructions on the packaging. These are simply covered with a sticker which gives the relevant information in German and the Greek patient information leaflet is exchanged for a German-language version. Thanks to the price difference between Greece and Germany the consumer pays less and both the pharmacist and the pharmaceutical company are selling more units. Most of the financial benefit, though, will go to the parallel importer.[4] Of particular interest is the re-import of pharmaceuticals from the United Kingdom. There, due to the dominant position of the National Health Service (NHS) as the main purchaser of very large amounts of pharmaceuticals and its ability to put pressure on pharmaceutical companies to lower prices, pharmaceuticals are often cheaper than on the European mainland, making them very attractive for re-import into e.g. France or the Netherlands.

B. Intellectual property rights as a challenge to the single market

Although absolutely necessary for the protection of ideas and for future innovation, the protection of intellectual property rights has certain friction points with European law, in particular with regard to the single market and competition rules. The relationship between intellectual property rights and competition law in particular highlights the emphasis competition policy of the European Community (EC) places on market integration.[5] Inherent in the EC Treaty are tensions between free trade and national intellectual property law which not only encourage innovation but also have the potential to divide markets along national borders.[6] Although there is a kind of rudimentary European patent system, national intellectual property laws are far from having been replaced by comprehensive European legislation. We will therefore need to examine the existing tensions as well as possible solutions.

Such solutions are needed more urgently than ever before, given the high costs of labor in Europe as compared to other production and service locations, such as China or India and the corresponding idea to make Europe the world's foremost knowledge-based economy. With almost half a million employees in the EU-15 already as early as 1996/1997,[7] as compared to just over 200,000 in the United States,[8] the pharmaceutical sector has long been an important part of Europe's economy. Also the challenge posed by pharmaceutical IP rights to the single market is of no small economic concern.[9] 9

C. Towards a Single Market in Pharmaceuticals

I. Introduction

First steps towards the realization of a single market in pharmaceuticals were taken with directive 65/65/EEC[10] which was followed in 1975 by directives 75/318/EEC[11] and 75/319/EEC.[12] But since then, in particular during the last two decades, a large number of EC directives has been adopted with the aim of achieving a single market for pharmaceuticals.[13] A decade after the establishment of the European Agency for the Evaluation of Medicinal Products (EMEA) and the creation of a new European system for authorizing medicinal products, it can be concluded that the legislative has done a lot to protect patients while at the same time attempting to ensure that safe pharmaceuticals are available[14] to the patients who need them. Although the situation is often far from perfect, economic interests (and all too often, economic problems) of health care providers play a larger role here than inactivity on the side of European legislators. Apart from the directives mentioned, directive 92/27/EEC[15] comes to mind which required that all information needed to identify the product is given on the outside of the packaging, including i.a. the name of the product, contents, batch number, name and address of the authorization holder, the authorization number, certain warnings and the like in a clearly comprehendible and legible (and indelible) form.[16] Furthermore European Law has been requiring member states to establish national pharmacovigilance systems[17] and the mutual recognition of pharmaceuticals between member states saves costs for pharmaceutical companies and gives the consumer a wider choice of products. While a lot has been done to protect patients, we need to recognize the special challenges posed by intellectual property rights in the pharmaceutical sector for the single market, which still forms a cornerstone of European integration. Pharmaceuticals are not simply products like all others. Other products may be important, but access to them or the lack thereof does not mean life or death for the consumer. While pharmaceuticals have to be accessible also for patients or health care providers with small budgets, their development is extremely pricey and pharmaceutical companies will hardly conduct research if they cannot expect to earn a profit. Some degree of special protection is afforded to so called orphan drugs, through the European Parliament's regulation EC 141/2000. Orphan drugs are pharmaceuticals for rare diseases, the development and production of which is economically unsound due to a small number of end consumers versus high R&D costs. Apart from that, the importance of Intellectual Property rights for the pharmaceutical sector is reflected primarily in the fact that many of the early IP cases the ECJ had to deal with stem from the pharmaceutical sector, leading to groundbreaking decisions by the Court which in many areas continue to be the fundament for its jurisprudence on intellectual property issues. For this very reason, we will examine more closely in this thesis the development of the jurisprudence of the European Court of Justice which.

II. The pharma industry and the pharma market in the EU

Already in the pre-enlargement EU, despite the importance of Europe's contribution to the global pharmaceutical industry,[18] significant differences existed in the pharmaceutical markets of the member states.[19] What can be noted, though, is that the largest member states not only dominate the industry but also, even more strikingly, account for a market which is disproportionately large if compared to their population. For example Germany and France alone cover more than 50 % of the pharmaceutical market of the EU-15.[20]

III. The pricing of pharmaceuticals

The existing differences with regard to the size of the national pharmaceutical markets are furthermore reflected in different prices and pricing structures as well as different levels of "consumption"[21] (although the term "consumption" is actually being used by the Commission,[22] the terms "use" or "demand" appear to be more fortunate in order to clarify that there is a distinction to be made between pharmaceuticals on one hand and nutritional supplements which are not pharmaceuticals on the other hand).

Underlying causes for these differences are, among others, "divergent medical cultures and prescribing patters [as well as] price discrimination by pharmaceutical companies to reflect the differences in the ability to pay".[23]

Another key factor is the fact that (maximum) prices for pharmaceuticals are often fixed by the member states in an attempt to control the costs of the national health care system.[24] Such price fixing conflicts with the single market, which continues to form the core of the overall project of European integration and will put pressure on products which are already in the market, forcing producers to offer at lower prices.[25] A result of this are parallel imports of pharmaceuticals: the parallel importer acquires pharmaceuticals in a low cost member states, re-labels them in the language of the destination state, and sells them there for the higher local prices.[26] As has been said before, in the example involving Aspirine re-imported from Greece to Germany, most of the financial benefit will go to the parallel importer rather than to the health care system as a whole or to the individual patient.[27] In so far, parallel importing creates inefficiencies.[28] At the same time, though, the fact that parallel imports actually happen, indicates that there is something wrong in the single market. In a perfectly integrated single market, parallel imports would simply not happen because it would not make sense economically to buy a product and have it transported to another member state where it could be have been bought for the same price. Coming back to our Aspirine example, after Bayer produced the drug in Germany and had it shipped to Greece, it should, if at all, be more expensive in Greece than in Germany due to the fact that it is more expensive to bring a product from a factory, say in Leverkusen or Dormagen, to a pharmacy in Athens than it is to bring the same product to a pharmacy in Berlin, leaving no margin of profit for a potential re-importer. It is price differences which stimulate parallel imports[29] and parallel imports indicate the existence of substantial price differences. Thereby parallel imports can become a driving force for market integration.[30] Price fixing therefore has a distorting effect on the single market, without necessarily being irreconcilable with the free movement of goods.[31] The European Court of Justice has decided in Roussel Laboratoria B.V. et al. v. The Netherlands[32] that price-fixing may be contrary to the principle of the free movement of goods in case the prices are fixed at a level which makes the sale of imported goods more difficult than the sale of domestic products. In the Merck v. Primecrown[33] the Court had held that the effects of price-fixing in one member state must not be "compensated" by "countermeasures", if you will, by other member states but rather by measures taken by the Community authorities.[34]

IV. Towards a single market in pharmaceuticals

The actual development towards a single market in pharmaceuticals

has led over several station to the present legal situation, including a

long-running evolution in the area of securing the safety of the medical products which enter the European market which have led to the Rules governing medical products in the European Union.[35] At the same time the protection of intellectual property rights has been developed to a level which ensures that pharmaceutical intellectual property rights are no where in the world better protected than they are in the EU:[36] "To compensate for the fact that it takes a long time to research and develop a new product, the pharmaceutical sector has been granted (through supplementary protection certificates) the right to extend its market exclusivity beyond the normal 20-year patent period, up to 15 years of effective protection from the date of first authorization in the Community [...]."[37]

V. The Frankfurt Round Tables and EU enlargement

Yet, there remain many open questions in this field and to this end the Frankfurt Round Table meetings were held in the late 1990s. These meetings were held already with a view to EU enlargement in 2004 and the resulting growing pharmaceutical market as well as generics industry in the new member states and the fact that in fact that citizens in the new member states have significantly less money to spend, both in general as well as on pharmaceuticals.[38]

D. Outline of the thesis

At a time in which biotech and pharma IP issues are of greater microand macro-economic importance than ever before and the gap between patients having access to state-of-the-art pharmaceuticals and patients who lack this access due to financial needs is widening, intellectual property rights are still at odds with fundamental tenets of European integration, in particular the freedoms of the single market and European competition law. Over the last decades, the Commission and the European Court of Justice (ECJ) have attempted to soften the frictions between IP rights and the demands of the single market.

In this thesis we will examine the limitations placed upon patents, trademarks and copyrights in the pharmaceutical sector by the single market. The core of our investigation will be a look at the way the European Court of Justice has over time approached the tensions inherent in the relation between an open single market on one hand and the fundamentally protective nature of Intellectual Property Law on the other.


[1] Cf. Stephen Weatherill / Paul Beaumont, EU Law, 3rd ed., Penguin Books, London, 1999, at p. 967.

[2] In this context it has to be noted that another important obstacle to innovation is posed by large pharmaceutical companies which fail to sufficiently reward inventors for ideas and create internal bureaucratical hurdles for the quick implementation of research ideas. In the current discussion on the ethical limits of biotechnological research the effect of such corporate cultures stifling innovation is largely overlooked despite the fact that it, rather than restrictive laws poses the largest threat to European Biotechnological development.

[3] Only for sake of readability, names of pharmaceuticals mentioned in this thesis will be given in italics, without additions such as ® etc.

[4] Commission, Commission Communication on the Single Market in Pharmaceuticals, COM (98)588 final, 25 November 1998, at p. 4.

[5] Imelda Maher, Competition Law and Intellectual Property Rights: Evolving Formalism, in: Paul Craig / Gráinne de Burca, Evolution, pp. 597 et seq., at p. 597.

[6] Maher, op. cit., at p. 598.

[7] Pharmaceuticals in the EU, at p. 31.

[8] Ibid.

[9] Cf. Günter Heiduk, Ökonomische Aspekte, in: Heiduk, / Emmerich, pp. 9 et seq., at pp. 53 et seq. and pp. 137 et seq.

[10] EEC Directive 65/65/EEC, OJ 1965, 22, pp. 369 et seq.

[11] EEC Directive 75/318/EEC, OJ 1975 L 147, pp. 1 et seq.

[12] EEC Directive 75/319/EEC, OJ 1975 L 147, pp. 13 et seq.

[13] Pharmaceuticals in the EU, at p. 1.

[14] On patents as a barrier to access to pharmaceuticals cf. Andrew Beckerman-Rodau, Patent Law - Balancing Profit Maximization and Public Access to Technology, Columbia Science and Technology Law Review, Vol. 4, No. 1 (2002), available online from, at p. 4 and pp. 32 et seq.

[15] EEC Directive 92/27/EEC, OJ 1992 L 113, pp. 8 et seq.

[16] Pharmaceuticals in the EU, at p. 15.

[17] EEC Directive 75/319/EEC, OJ 1975 L 147, pp. 13 et seq.

[18] Cf. Commission, Commission Communication on the Single Market in Pharmaceuticals,

COM (98)588 final, 25 November 1998, at p. 2.

[19] Ibid., at p. 3.

[20] Ibid., at p. 4.

[21] Ibid.

[22] Ibid.

[23] Ibid.

[24] Cf. ibid.

[25] Ibid.

[26] For a more detailed economic analysis of parallel imports of pharmaceuticals in the EU cf. Mattias Ganslandt / Keith E. Maskus, Parallel imports of Pharmaceutical Products in the European Union, World Bank Policy Research Working Paper 2630, available online at

[27] Cf. Commission, Commission Communication on the Single Market in Pharmaceuticals, COM (98) 588 final, 25 November 1998, at p. 4.

[28] Ibid.

[29] Ibid., at p. 5.

[30] Ibid., at p. 4.

[31] Cf. ibid.

[32] ECJ, Roussel Laboratoria B.V. et al. v. The Netherlands, Case C-181/82, [1983] ECR 3849, no. 2.

[33] ECJ, Merck & Co. Inc., Merck Sharpe & Dohme Ltd and Merck Sharpe & Dohme International Services BV v. Primecrown Ltd, Ketan Himatlal Metha, Bharat Himatlal Metha and Necessity Supplies Ltd and Beecham Group plc v. Europharm of Worthing Ltd, Cases C-267/95 and C-268/95 [1996] ECR I 6285.

[34] Commission, Commission Communication on the Single Market in Pharmaceuticals, COM (98)588 final, 25 November 1998, at p. 5.

[35] Available online at

[36] Commission, Commission Communication on the Single Market in Pharmaceuticals, COM (98)588 final, 25 November 1998, at p. 6.

[37] Ibid., at p. 6.

[38] Ibid., at pp. 6 et seq. On more exact figures see the annexes to the same document, there at pp. 21 et seq.

Excerpt out of 81 pages


Pharmaceutical Intellectual Property Rights and the Single Market
A Survey of the Jurisprudence of the European Court of Justice
Justus-Liebig-University Giessen
Magister Juris Internationalis
13,53 (gut)
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
669 KB
Pharmaceutical, Intellectual, Property, Rights, Single, Market, Survey, Jurisprudence, European, Court, Justice
Quote paper
Rechtsanwalt Stefan Kirchner (Author), 2006, Pharmaceutical Intellectual Property Rights and the Single Market, Munich, GRIN Verlag,


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