Source: EURLEX
Language: en
Format: md

### **`COMMISSION OF THE EUROPEAN COMMUNITIES`**

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                            COM(94) 579 final

                            Brussels, 09.12.1994

                            94/0285 (COD)

                    Proposal for a

          EUROPEAN PARLIAMENT AND COUNCIL REGULATION (EC)

```

concerning the creation

of a supplementary protection certificate

for plant protection products

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               (presented by the Commission)

```

EXPLANATORY MEMORANDUM

INTRODUCTION

PART ONE: COMPLETING THE INTERNAL MARKET FOR PLANT PROTECTION PRODUCTS

A. Harmonizing the duration of protection for inventions in the plant protection

sector

B. Preventing distortions of competition

C. Remedying the erosion of patent protection

(a) Erosion of effective patent protection

(b) Operational differences between authorization systems

D. Need for Community action

PART TWO: THE NEEDS OF THE PLANT PROTECTION SECTOR WITH REGARD TO

COMMUNITY OBJECTIVES

A. Characteristics of the sector

1. Scale of research and development

2. Impact of environment policy

3. Intensity of competition

4. Industry profitability.

B. Improving competitiveness and promoting research

PART THREE: THE DIFFERENT INTERESTS INVOLVED

A. Access to the market for generic products

B. Effect on prices of the supplementary protection certificate

C. Multilateral application of the supplementary protection certificate

PART FOUR: DETAILS AJ^D CHARACTERISTICS OF THE PROPOSED SYSTEM

A. Operation of the supplementary protection certificate

B. Legal basis

PART FIVE : EXAMINATION OF THE PROVISIONS

**-** _**A**_ **-**

#### **EXPLANATORY MEMORANDUM**

###### **INTRODUCTION**

1. On 18 June 1992 the Council meeting on the internal market adopted
Regulation 1768/92 concerning the creation of a supplementary protection
certificate for medicinal products,^) which entered into force
on 2 January 1993. When the Council adopted the common position pursuant
to the procedure under Article 149(2) of the EEC Treaty, it also adopted,
on 19 December 1991, a statement recorded in the minutes of the meeting:

_"The Council requests the Commission to submit to it as soon as possible_
_after this Regulation enters into force a proposal concerning the creation of_
_a supplementary protection certificate for plant health products._ _"_

2. The Commission recalls that, during the discussions on Regulation 1768/92,
it argued before the Council and Parliament that it would be possible, at a
later stage, to apply the supplementary protection certificate to other
products, such as plant protection products, provided the industry concerned
demonstrated that it was faced with a situation justifying such a measure.

3. It should also be noted that, on the question of the scope of
Regulation 1768/92, the large majority of the Member States took the view at
the time that it would be more effective to restrict discussion to the

pharmaceutical sector, without prejudice to their respective positions as to
the need for subsequent action in respect of other products.

4. The plant protection industry wished the Community to intervene, on the
grounds that Community action was necessary to remedy barriers to the free
movement of its products, distortions of competition and the erosion of the
duration of effective patent protection. Following the Council's request, and
after examining the current global situation of the industry in question and
noting, in particular, the obvious erosion of the duration of patent protection
for plant protection products, the Commission takes the view that
Community action is required.

The proposed system prevents barriers to the free movement of plant
protection products in the Union and the distortions of competition that
would inevitably be caused by different national laws. This is the proposal's
first objective. The second is to improve the legal framework for firms in the
Union engaged in research and development work on new plant protection
products by providing adequate protection for innovations, thereby improving
their competitiveness on the world market.

W Regulation (EEC) No 1768/92, OJ No L 182, 2.7.1992.

**-2**

###### **PART-ONE: COMPLETING THE INTERNAL MARKET FOR** **PLANT PROTECTION PRODUCTS**

**A.** **HARMONIZING THE DURATION OF PROTECTION FOR INVENTIONS**

**IN THE PLANT PROTECTION SECTOR**

5. The primary objective of this proposal is to harmonize, at Community level,
the effective protection afforded to inventions in the plant protection field
and, consequently, to ensure the proper functioning of the internal market. At
the moment, the theoretical and, above all, the effective duration of
protection for inventions in this field varies from Member State to Member
State.

6. Where a plant protection product is protected by patent, the duration of this
protection is generally twenty years from the date on which the patent
application is filed in all the Member States, whether on the basis of national
patent law or the European Patent Convention (Munich). However, this
duration is theoretical in that marketing authorization procedures, prior to the
product's being placed on the market, shorten it considerably and
proportionally reduce the length of effective protection.

7. Action to restore adequate, effective duration of protection for these
products can be envisaged only if the conditions for supplementary protection
and its duration are harmonized between the Member States. Any disparities
here, in particular concerning the duration of protection, would lead to
restrictions on the free movement of plant protection products which could
not be justified under Community law.

8. At the moment, having regard to the operating arrangements of national
patent systems, the different patents protecting the same plant protection
product in the Member States can commence and expire on different dates
owing, in particular, to the existence of a priority period. This is the period of
twelve months during which a person who has properly filed an application
for a patent in one Member State may file another for the same invention in
another Member State without losing the benefit of the novelty of the
invention. It follows that the dates on which these different patents take effect
and expire may vary between the Member States.

9. In addition, a number of Member States have only recently become members
of the European Patent Convention (Munich) and the resulting harmonization
is not yet fully effective. Thus, patents issued in Germany before 1978 had a
term of eighteen years, former Irish patents one of only sixteen years and
patents issued tn the United Kingdom before the entry into force of the
Patents Act 1977 one of seventeen years from their date of issue. The result
is that a product which has entered the public domain in some Member States
may still be protected by an exclusive patent right in others, which disrupts
the free movement of goods.

10.- Lastly, differences in the operation of national registration systems cause an
imbalance in the duration of effective protection available to the same plant
protection product in different Member States, which interferes with the free
movement of these products and free access to the market for competing
products. As the Court noted in Case C-341/87 fEMI v Patricia), the problem
there stems from the differences between national legislation regarding the
period of protection afforded by copyright and by related rights, those
differences concerning either the duration of the protection itself or the
details thereof, such as the time when the protection period begins to run. In
this case, the imbalance — and the disruption to the internal market ~ arises
from the different dates on which the different patents covering the same
product expire throughout the Union.

Corrective action is therefore needed.

**B.** **PREVENTING DISTORTIONS OF COMPETITION**

11. Because of the differences currently existing between the details of the
operation of the patent system and of the registration system, a number of
producers of plant protection products are subject to unjustified distortions of
competition. This is particularly true of producers established in Member
States where marketing authorization is obtained much more slowly than in
the other Member States.

The erosion of the duration of effective protection is exacerbated by
differences in the efficiency of the different national registration systems.
Depending on the Member State, the time taken by the national authorities
responsible for marketing authorizations to approve an application may vary
from one to four years. Faced with the general erosion of the duration of
effective patent protection, which disrupts the proper functioning of the
internal market, firms are also faced with substantial differences in the time
taken to process their applications for marketing authorization, which
constitutes a form of distortion of competition.

12. The effort already made at Community level to harmonize the rules on
marketing authorizations for plant protection products through the adoption
of Directive 91/414/EEC, which is essential to the completion and
functioning of the internal market for this sector, must be supplemented by
the creation of a corrective mechanism for the inadequacies in the system of
protection for plant protection research, which are attributable to the very
same requirements of the prior marketing authorization.

This corrective mechanism must be harmonized at Community level, failing
which it would only maintain -- possibly worsen ~ existing distortions of
competition.

13. Putting plant protection products on a footing similar to that which would
obtain in the absence of a marketing authorization system means placing them
on the terms that obtain in other sectors of technology not subject to
marketing authorization. The plant protection sector is experiencing

distortions of competition in relation to other technological sectors because
of the very existence of the prior authorization mechanism.

14. The duration of the supplementary protection afforded by the certificate must
be sufficient to fulfil the objectives of promoting research pursued by the
proposal while maintaining balanced competition. In this respect, plant
protection research should not be discriminated against; it should be placed
on terms similar to those existing in other sectors. That is why the
Commission is proposing that the supplementary certificate should have a
maximum term of five years and that the total duration of effective protection
(residual period 'of the basic patent to which is added the supplementary
protection certificate) should be a maximum of fifteen years, starting from the
first authorization to place the product on the market in the Community. This
period is equivalent to that existing in other industrial sectors which are not
subject to prior marketing authorization.

**C.** **REMEDYING THE EROSION OF PATENT PROTECTION**

**(a)** **Erosion of the duration of effective protection**

15. The available statistics reveal that plant protection products are suffering
from increasing erosion of the duration of effective patent protection because
of the continuous increase in the time taken to obtain the necessary prior
marketing authorizations. This is not just the time taken by the national
authorities to examine applications for authorization, but rather the time
required by firms to prepare and carry out all the tests and analyses necessary
to file the application for authorization.

The duration of _effective_ patent protection of plant protection products
(period of time between the date of obtaining the marketing authorization and
the expiry of the patent protecting the product) has fallen from an average of
twelve years in 1978 to some nine years today.

These figures are taken from analyses carried out on a product-by-product
basis for each of the Member States. They reflect a situation similar to that of
medicinal products when Regulation (EEC) No 1768/92 was adopted
in 1992, and justify the adoption of a similar measure for the plant protection

sector.

**5-**

_Table 1: Duration of effective protection for plant protection products_
_(years)_

```
1978

1979

1980

1981

1982

1983

1984

1985

```

```
12,0

10,75
9,5

 9,25

10,0

11

11,75

11,25

```

```
1986

1987

1988

1989

1990

1991

1992

```

```
11,5

11,0

10,5

10,0

10,0

9,75

9,250)

```

Source: ECPA (European Crop Protection Association)

16. These overall figures are confirmed by the analysis carried out in each
Member State. In the United Kingdom, the duration of effective patent
protection for plant protection products fell from eleven years in 1980 to just
over six years in 1991. In Germany, it has also fallen, from some twelve years
in 1980 to nine years at the moment.

17. An imbalance thus arises between the interests of the patent-holder and those
of persons wishing to exploit the patented product once the patent has
expired. Because of the very nature of plant protection products, they are,
like medicinal products, easily reproduced, without the "pirate" having to
bear the costs of research and development which went into the original
product. This explains the specific value and overwhelming role of the patent
in the strategy of the plant protection industry, for which this instrument is of
vital importance since there is no alternative.

**(b)** **Operational differences between authorization systems**

18. With regard to the duration of effective protection, the differences which can
exist between Member States at the level of theoretical protection are
exacerbated by the operational differences between the systems of marketing
authorization for plant protection products. This is where the main obstacles
to the proper functioning of the internal market for plant protection products
are to be found.

19. Any plant protection product must not only be effective as an insecticide,
herbicide, fungicide, etc., but at the same time it must not have any
unacceptable effect on health or the environment.

This twofold requirement explains why research and development on new
plant protection products requires increasing amounts of time and investment
and why these products cannot be placed on the market without having been
officially scrutinized and authorized beforehand.

0) estimation

**- 6 -**

20._ On 15 July 1991 the conditions and procedures for authorizing plant
protection products were harmonized at Community level by Council
Directive 91/414/EEC concerning the placing on the market of plant
protection products/ [2] )

The system established by the Directive provides for:

(a) a positive list of active substances approved at Community level;

(b) a system of authorization, by the Member States, of products containing
one or more active substances included on the Community positive list;

(c) mutual recognition by the Member States of national authorizations
provided that agricultural, plant health and environmental (including
climatic) conditions relevant to the use of the product are comparable in
the regions concerned;

(d) a data protection mechanism — submitted with the applications for
marketing authorization ~ for the benefit of the first applicant for a period
often years from first inclusion of an active substance on the positive list.

21. Harmonization of authorizations at Community level and the requirement to
register all existing and new active substances is necessary, but not sufficient,
for the completion of the internal market, which will be of long-term benefit
to the plant protection industry in the Union and to users. The diversity of
national requirements concerning marketing authorization for plant protection
products represents always a substantial cost to industry.

**D.** **NEED FOR COMMUNITY ACTION**

22. The question of whether the proposed measures are proportionate to the
objectives pursued should also be looked at. In so far as one of the objectives
is to prevent obstacles to the proper functioning of the internal market which
would be created by disparities in the application of national laws, this
objective cannot be attained satisfactorily by action taken solely at Member
State level. To ensure the proper functioning of the internal market, the laws
of the Member States should be harmonized so that the duration of protection
for the same plant protection product is identical throughout the Union.
Harmonization must deal with not only the duration of protection generally
but also with such matters as the date on which protection expires. That is
precisely what the mechanism chosen in this proposal does.

23. The data-protection mechanism incorporated into applications for marketing
authorization introduced by Directive 91/414/EEC would not, for its part,
have the same scope and the same effects as those conferred by a patent or
similar instrument. Protection of the registration data is not absolute in that
manufacturers of generic products can, if they so wish, themselves carry out

( [2] - OJLNo230, 19.8.1991, p. 1.

**-7**

the tests needed to obtain marketing authorization without waiting for data
from the innovating firm. Only a patent or similar instrument can guarantee
fully effective protection on the market, enabling the investment made in
research and development to be recovered and adequate financial reserves to
be set aside for R&D activities.

24. As was the case in 1992 for medicinal products, this proposal seeks to create
a specific and sectoral industrial property instrument which is not such as to
have any influence on the general patent laws applicable to other
technological sectors. Since what is being created is a new industrial property
instrument distinct from patents, the optimal harmonization at Community
level of its conditions of issue and its method of calculation can be achieved

only by using the legal instrument of a Parliament and Council Regulation.

25. The method of calculating the duration of the supplementary certificate —
based on the first authorization to place the product on the market in the
Community, and for all the Member States — means that the different
certificates covering the same product will expire on the same date
throughout the Union. The date of issue of the marketing authorization in the
different Member States has no impact here since the duration of the different
certificates is calculated, for all the Member States, on the basis of the first
authorization to place the product on the market in the Union. Once the
different certificates issued by the different Member States for the same
product have expired, the product will enter the public domain at the same
time in all the Member States.

26. A heterogeneous and potentially or actually diverging situation with regard to
national laws governing the conditions for granting the supplementary
protection, its effect or duration would be such as to create distortions of
competition in the Union. Not taking the initiative at Community level and
leaving to the Member States the task of determining the rules for and
duration of an extension of patents for plant protection products would have
adverse consequences on the free movement of these products and on the
competitive conditions prevailing in this sector.

A Community solution entailing harmonization of the conditions for the
application of the system introduced and the rules governing it and
standardization of the duration of protection of plant protection products
therefore has to be found to secure the establishment and proper functioning
of the internal market and the introduction of normal competition.

27. However, with regard to patents, national laws cannot be approximated
without also preserving the harmonization between the national systems and
the European patent system. That is why the certificate applies to all plant
protection products authorized to be placed on the market and protected by
patent in their national territory, whatever path — national or European ~ has
been followed for that purpose. A uniform solution applying to all patented
products, whether the patent was issued under national law or under the
European Patent Convention (Munich), can be achieved effectively only by
action at Community level.

28.. The certificate is a national document issued by a national patent office but
whose conditions of issue and duration are harmonized at Community level.
In certain aspects it is essentially different from the basic patent. It contributes
to facilitating the proper functioning of the European patent system. The
result would be completely different if it were possible to obtain a certificate
only for plant protection products protected by a national patent. A fortiori,
when use is made of the European procedure to obtain a Community patent,
it will be all the more necessary for the certificate to apply equally to plant
protection products protected by a Community patent. The proposal has been
developed with a view to providing now for this prospect.

**9-**

###### **PART TWO: THE NEEDS OF THE PLANT PROTECTION SECTOR** **WITH REGARD TO COMMUNITY OBJECTIVES**

A detailed profile of the plant protection sector is given in the Annex.

**A.** **CHARACTERISTICS OF THE SECTOR**

**1.** **Scale of research and development**

29. The recent trend in the plant protection products industry is for a continuing
increase in expenditure on research and development (R&D), both as a
percentage of total sales and in absolute terms.

In 1991 R&D expenditure by the fifteen leading firms in the world
averaged 10.25 % of turnover. Biotechnology has become, in this respect, a
key factor in research, principally in the field of transgenic plants and the
development of pesticides. The new plant varieties will be resistant to
pesticides, disease, herbicides, frost and drought, and of improved quality.
Biotechnology research will not substantially reduce sales volume in the plant
protection sector but will produce significant changes in the types of product
available and in the competition between different products.

30. Significantly, expenditure by plant protection firms on research and
development and the development of new products rose from ECU 25 million
per product in 1975 to more than ECU 125 million in 1992, a five-fold
increase.

It should be noted that, among the different development stages of a plant
protection product (synthesis and screening-formulation, analysis of the
product and chemistry-biology-toxicology and environment), it is toxicology
and environment which have expanded most: expenditure on studies of the
toxicology and environmental impact of new products rose from
ECU 4 million per product in 1975 to ECU 50 million in 1992, an eleven-fold
increase (Source: Fonds der Chemischen Industrie, Informationsserie
No 10"Pflanzenschutz").

31. However, plant protection research, like pharmaceutical research, is a highrisk activity, involving extremely costly and hazardous investment. It is
estimated that some 15 000 chemical compounds must be synthesized and
analysed for every new product placed on the market. In addition, it is
increasingly difficult to find new plant protection products since solutions to
the less complex research objectives have already been found and
international competition imposes very high standards. While new plant
protection products were introduced at the rate of one major innovation a
year in the 1960s, this fell to one every three years in the 1980s. The number
of new products placed on the market is therefore much lower in the plant
protection sector than in pharmaceuticals, where fifty a year is a normal
figure.

**10-**

32.. In addition, whereas European firms were pioneers in the discovery of new
products in the 1970s (introduction of Bayer's fungicide triazole), two of the
major discoveries in the past decade, imidazoline and sulphonyl, both
herbicides, came from American companies (American Cyanamid and Du
Pont). Their sales of these two products for 1989 are estimated at 9 % of the
world herbicide market. A fourth major new product, however, the
insecticide pyrethrin with 6 % of the world market, was a European
innovation.

**33.**

**34.**

This shift in the centres where new products are developed can be illustrated
by looking at where the products currently registered as herbicides in France,
the most representative part of the European plant protection market in terms
of crops and climate, were researched. France currently
authorizes 115 herbicide substances. The table below shows where these

substances were discovered during previous decades.

_Table 2: Origin of herbicides launched in France_

These data are significant in that they clearly show the downward trend in
new herbicides launched by European firms. If there are no significant
changes in the protection given to research by European firms, it is likely that
American groups will continue to be the main source of scientific and
technical progress in this sector.

In many respects, the constraints on research in plant protection are similar to
those affecting pharmaceutical and chemical research. None the less, a
number of the sector's specific features make it even more vulnerable:

(a) Plant protection products are used by farmers to increase the profitability
of their farms, which reduces the producers' room for manoeuvre with
regard to the price levels of their products. The market for plant
protection products is highly price-sensitive: prices are not controlled and
are the result of market forces; farmers choose between the different
products on offer largely on cost.

(b) Plant protection research has a narrower range of objectives than
pharmaceutical research. The aim is essentially to place on the market
products which are more environment-friendly and more efficient from an
agricultural point of view.

(c) Development costs are very high because of the fact that formulations and
instructions for use of plant protection products must take account of
regional differences in agronomic conditions.

**-11**

**33%**

**45%**

**51** **%**

Japan

Time of launch

Europe
**67%**

United States

1960s **67%** **33%** **0%**

1970s **52%** **45%** **3%**

1980s **37%** **51** **%** **12%**

Source:ECPA

1960s

1970s

1980s

**52%**

**37%**

   - (d) Plant protection companies are particularly exposed to market
competition (no massive state purchases, as is the case for medicinal
products with a number of public health services).

**2.** **Impact of environment policy**

35. The scale of research is directly linked to requirements concerning the
environment. The industry must balance its role of crop protection with that
of not endangering the environment. In this respect, plant protection research
is intended not only to limit the risk of major agricultural disasters and the
massive losses (some 30 % of world harvests) caused by parasites, disease
and weeds. Today, new plant protection products must not only help in
avoiding a fall in yields and securing food supplies; they must also involve no
unacceptable risk for man and the environment.

The major challenge facing the industry is therefore to find a proper balance
between compliance with environmental policies and the production
requirements of modern agriculture. Moreover, the high level of
environmental requirements further reduces the industry's chances of
discovering commercially viable new products.

**3.** ' **ntensity of competition**

36. The industry will have to face an increasingly competitive environment as a
result of the completion of the single market, the reform of the common
agricultural policy and the GATT agreements on international trade.

The frontier-free single market will, among other things, involve a gradual
alignment of prices in the Member States. Until recently, prices in Germany
were the highest, almost double those in the United Kingdom, those in France
lying between the two. For some three years now, however, firms have been
allowing for the single market when introducing products and price
differences have fallen to no more than 25 %. This trend will accentuate even

further the importance of research as a predominant factor in the
c ompetitiveness of firms within the Union.

37. In addition, reform of agricultural policy and implementation of the GATT
agreements on international trade will reduce the amount of land farmed and
agricultural subsidies and will lead to a markedly slower rate of growth in the
market for plant protection products in developed countries, offset however
by rising demand from developing countries. Whereas the average rate of
growth of the market in the Union was some 6 % in 1988, the situation has
seriously deteriorated since, with a spectacular fall in sales on the West
European market of 18 % in 1992.

The current reform, and the completion of the single market, will increase the
intensity of competition in the sector. In particular, the number of plant
protection firms in the Union will probably fall, through acquisitions and
mergers, involving particularly firms in biotechnology research.

38. We must not ignore the fact that more than half the world market for plant
protection products concerns ones which are no longer covered by patents

**-12-**

and which, therefore, will not be able to benefit from the Regulation
concerning the supplementary protection certificate. According to available
estimates, 55 % of the world herbicide market is for products no longer
covered by patents; the figures for insecticides and fungicides are 58 %
and 59 % respectively. Accordingly, the plan for a supplementary protection
certificate will affect only some of the firms in the sector, to a degree yet to
be determined (see below). This incentive for research should also encourage
competition between plant protection firms to develop new products.

**4.** **Industry profitability**

39. The aim of the supplementary protection certificate is to protect current
profitability levels in the plant protection product industry so as to ensure
future research. Profitability in the industry, in particular in the Community, is
lower than in industry in general and the pharmaceutical industry in particular,
and is falling.

Whereas in 1990, at world level, the industry had average profits of 8.2 % of
turnover, companies based in the Union had to be satisfied with only
some 6 %, while their American competitors achieved 11.4%. Since then,
margins have shrunk even further, 1992 being a very bad year for sales in
Europe. The competitive position of the European industry is therefore
considerably weaker than that of its main competitors, American and Asian in
the main. In a sector where investment in research is so substantial and risky,
an adequate profit margin is essential to ensure the continuity of the R&D

process.

40. There are two fundamental reasons for the global reduction in the profitability
of plant protection product companies during the 1980s, namely the impact of
an increasingly competitive market and the significant increase in costs and
time spent on developing new products and getting them authorized.

The figures reveal that the plant protection industry does not generate profits
proportionate to the inherently high level of risk associated with its activities,
which alone would be able to generate adequate financial reserves to maintain
and carry on research activities. They also show the need to extend
supplementary protection to certain patented products which are already
marketed in the European Union.

41. None the less, the costs of developing plant protection products (up to
ECU 125 million for each new product placed on the market) will remain
particularly high because of the considerable volume of experimental data
required to show that the products are effective and safe. Unlike the case of
medicinal products, formulations and instructions for the use of plant
protection products must take account of regional variations in agronomic
conditions and of effects on the metabolism ~ not only of plants but also of
animals — and on the environment in general. It follows that the recovery of
the corresponding investments is absolutely vital for the research industry and
depends, to a large extent, on it being guaranteed an adequate duration of
effective protection for innovations introduced.

**13**

**B.** **IMPROVING COMPETITIVENESS AND PROMOTING RESEARCH**

42. In its communication to the Council and Parliament of 16 November 1990 on

industrial policy,^) the Commission had occasion to stress the vital
importance for the position of the Union in the world economy of having a
competitive industry, one factor in which is the capacity for innovation.
Strengthening the competitiveness of Community industry and promoting
research and technological development are now expressly included in
Article 3 of the Union Treaty.

43. Support for the research effort in a high-risk industry such as plant protection
products depends to a large extent on recovering the cost of investments in
R&D on new products, through the sale nnd exploitation of patented
products.

The erosion of the duration of effective protection under patents for plant
protection products, as described above (point 15), leads to manifestly
inadequate protection which penalizes research precisely in the field which,
because of the very nature of the process of innovation, requires the
protection of industrial property more than other industries.

44. The Commission White Paper on Growth, Competitiveness and Employment,
presented to the European Council in Brussels in December 1993, stresses
the need for action to restore the competitiveness of European firms and to
encourage growth. These measures are part of an approach to boost the
technology/growth/employment cycle. The supplementary protection
certificate for plant protection products is a sectoral initiative which is fully
consistent with this overall approach.

O Industrial Policy in an Open and Competitive Environment, COM(90) 556 final.

**14-**

###### **PART THREE: THE DIFFERENT INTERESTS INVOLVED**

**A.** **ACCESS TO THE MARKET FOR GENERIC PRODUCTS**

45. The very nature of the supplementary protection certificate will ensure that
plant protection products benefiting from the provisions of the Regulation
will continue to be protected for a longer period of time. Thus, producers of
generic plant protection products have access to certain patented products
only after several months or perhaps several years.

A number of important points should be made here.

46. First, more than half the plant protection products sold are no longer
protected by patent.

_Table 3: Plant protection product market: shares of patented_ _and_
_patented-expired products_

Current patent Patent expired
Herbicides 45% 55 %

Insecticides 42 % 58 %

Fungicides 41 % 59 %
Total 43% 57%

Source: Wood Mackenzie Consultants Ltd.

These figures, which were confirmed by a study carried out in 1990 by the
UK Ministry of Agriculture, Fisheries and Food (MAFF), show that, in the
three most important sectors of the market for plant protection products,
products not covered by patents and thus freely accessible to manufacturers
of generic products account for more than 50 % of the market.

Of course, none of the products in this category will benefit from the
provisions of the proposed Regulation, leaving manufacturers of generic
products complete freedom of action. In addition, the patented products
which account for the rest of the market will qualify for only one
supplementary protection certificate per active substance. Thus, if the same
active substance is used in different forms (powder, liquid, etc.), only one
certificate can be issued and not as many certificates as there are forms
marketed. The certificate protects the active substance which is contained in
the different forms or presentations of the product.

**47.**

Second, it should be noted that the supplementary protection certificate is not
an automatic mechanism giving five years' additional protection for all
patented products. Certificates are granted and their duration calculated on a
case-by-case basis, taking account of the duration of patent protection
actually lost by the product in question during development and the
authorization procedure for placing on the market. Thus, although the
supplementary protection certificate can be valid for a maximum of five years,

**-15-**

it will be valid for less than this if marketing authorization was granted less
than ten years after the application for a patent was filed.

The non-automatic nature of the certificate also means that it is granted by
national patent offices not to all products which might benefit from it, but on
application by the holder of the basic patent protecting the product
concerned. In certain cases (development of a revolutionary plant protection
product within the same group of products), the patent-holder could
deliberately choose not to exercise his right to apply for a supplementary
protection certificate, thus leaving the product to enter the public domain
once the basic patent expires.

The mechanism selected is such that the maximum effective protection of
fifteen years (residual duration of the basic patent plus duration of the
supplementary protection certificate) is calculated from the date of the first
authorization to be placed on the market in the Community, which means that
the full fifteen years will be achieved only in the Member State in which the
first marketing authorization is obtained. In each Member State in which a
marketing authorization is obtained subsequently, the total duration of
effective protection will be reduced by the period of time between the first
marketing authorization in the first Member State and the subsequent
authorization.

48. A third feature of the proposal is to provide a wide range of information to
interested third parties — including manufacturers of generic products —
through publication of details of the application, the decision to grant or
reject the application, and the expiry of the certificate. Manufacturers of
generic products will thus be able to monitor the development of the market
for patented plant protection products and will not suddenly be faced with a
fait accompli.

49. Lastly, it should be acknowledged that the generics industry depends to a
large extent on the success of research-based industry in that there will be no
generics industry to benefit if the research industry does not develop new
plant protection products. Today's research findings are the guarantee of the
prosperity of tomorrow's generics industry. [ r] lhe supplementary protection
certificate should contribute to the appearance of new plant protection
products which one day will be accessible to manufacturers of generic
products.

**B.** **EFFECT ON PRICES OF THE SUPPLEMENTARY CERTIFICATE**

50. A tricky problem posed by the proposal for a Regulation concerns the impact
of the supplementary protection certificate on the prices of plant protection
products and, consequently, on farmers' expenditure. Taking account of the
overall situation of the agricultural world, there are grounds for asking this
question and giving a precise answer. Various estimates suggest that the
certificate will have a minimal impact on the prices of plant protection
products.

**16-**

51.- As mentioned above (point 46), the proposed mechanism will not apply to all
plant protection products; the 57 % of the market which has already entered
the public domain will not be affected at all. Nor will the granting of a
supplementary certificate be automatic, since it is to depend on the merits of
each individual case.

52. Plant protection products placed on the market after the entry into force of
the Regulation will benefit from a supplementary protection certificate only
after ten years, i.e. on the expiry of the basic patent protecting them. During
these ten years, the supplementary protection certificate will have no impact
on their prices.

The aim of the transitional arrangements — which concern products already
on the market when the Regulation comes into force — is to strike a fair
balance between what is needed to achieve the proposal's objectives and what
can reasonably be accepted by society. This balance should not allow all plant
protection products already on the market to have a supplementary
protection certificate, but should also not exclude all these products from the
transitional arrangements.

53. Taking 1 January 1985 as the reference date for the transitional arrangements

—
this date defines the size of the group of products already placed on the
market when the Regulation comes into force and qualifying for a
supplementary protection certificate ~ means that only 37 plant protection
products could benefit from the transitional arrangements,
representing 5.28 % of the total market for such products in the European
Union.

Today, these 37 substances represent a market of the order of
ECU 285 million. As a rule, it is estimated that the introduction of generic
versions of plant protection products (legal copies of products no longer
protected by patent) leads to a price reduction of some 25 %. In addition,
the 37 substances concerned by the transitional arrangements would benefit
from a supplementary protection certificate of 2.5 years on average. That
means that the entry into force of the certificate system will put back
by 2.5 years a price reduction of the order of 25 % on a market estimated at
ECU 285 million, i.e. some ECU 180 million.

This postponement of a price reduction — it must be regarded as such rather
than as a genuine price "rise" ~ caused by the supplementary protection
certificate must be spread out over a period of ten years. This is because
products that obtain marketing authorization after the entry into force of the
Regulation will not benefit from a supplementary protection certificate until
the expiry of the basic patent protecting them, i.e. on average ten years later.

During this period, only plant protection products already on the market
when the Regulation enters into force will be affected.

If the additional expenditure generated by the supplementary protection
certificate is spread out over a period often years, that gives ECU 18 million
a year. This amount represents an increase in expenditure by farmers on plant

**-17**

protection products of the order of 0.33 % a year. According to data supplied
by Eurostat, expenditure by farmers on buying plant protection products
accounts for 6.2 % of their total outgoings. The introduction of the
supplementary protection certificate will increase this figure to 6.2204 %,
which is not a significant rise.

On the industry side, this increase in turnover — of the order of 6.25 % of the
market for products affected by the transitional arrangement ~ should
generate additional resources to encourage research. These are estimated at
ECU 4.86 million a year for each substance concerned during the period of
additional protection.

54. It is clear that, by its very nature, the supplementary protection certificate will
have an impact — albeit limited, as shown above ~ on prices: however, it
should safeguard the future of plant protection research in Europe, and hence
the development of products which will be more environment-friendly and
adapted to the needs of agricultural efficiency. There is strong demand from
farmers for such products.

**C.** **MULTILATERAL APPLICATION OF THE SUPPLEMENTARY CERTIFICATE**

55. This proposal for a Regulation, like Regulation (EEC)
No 1768/92 concerning medicinal products, may benefit not only firms from
within the Union but also firms from outside. In fact, having regard to the
geographical distribution of the plant protection research industry, only
Swiss, American and Japanese firms are concerned.

56. The obligations which the European Union accepted under the GATT
Uruguay Round prevent any other outcome. Article 3 of the TRIPs text
(trade-related aspects of intellectual property rights) lays down the "national
treatment" principle, which requires the GATT Contracting Parties to grant
to natural or legal persons from the other Contracting Parties the same
treatment as they give to their nationals.

57. A further consideration is that plant protection firms from the Union benefit
from restoration of patents in Japan and Korea, and the advantages inherent
in the American system, where the duration of the patent is, in fact, longer
than the theoretical 17 years because of the method of calculation. In the
United States the duration of patents is 17 years from the date on which the
patent is granted and not from the date on which the application is filed,
which means that any delay in the procedure for awarding the patent — very
frequent because of the judicial proceedings in that country — delays the start
of protection and means that effective protection ends later.

58. Lastly, according to estimates, if the reference date for the transitional
arrangements is 1 January 1985, of the thirty-odd products concerned, less
than ten are of American origin, while the rest are European. It is thus clear
that the proposed measure will not be of greater benefit to firms from outside
Europe. In the context of an open market, in normal circumstances it will
apply both to European firms and those from outside the Union.

**-ii**

###### **PART FOUR: DETAILS AND CHARACTERISTICS OF THE** **PROPOSED SYSTEM**

**A.** **OPERATION OF THE SUPPLEMENTARY CERTIFICATE**

59. The supplementary protection certificate is a sui generis industrial property
instrument which takes effect on the expiry of the basic patent protecting an
invention in the plant protection field. The rules governing its granting and its
duration are harmonized at Community level, although the certificates are
issued by the national patent offices. The same plant protection substance
patented and authorized to be placed on the market in a number of Member
States is the subject of the same number of applications for certificates, filed
with corresponding national patent offices. At national level, the competent
patent office is that of the State which granted the basic patent or on whose
behalf it was granted and in which a marketing authorization was obtained.

60. The supplementary protection certificate applies to all patents existing at
national level, whether granted under national law, the European Patent
Convention (Munich) or, subsequently, the Community Patent Convention
(Luxembourg). Only legislative action at Community level, in the form of a
Regulation, can achieve the degree of harmonization needed at this triple
level.

61. As was decided for medicinal products in 1992, this proposal for a
Regulation harmonizes the conditions for granting supplementary protection
certificates and their duration; it does not create a single application or a body
specifically responsible for issuing supplementary protection certificates at
Community level.

62. With a view to maintaining as broad as possible a degree of harmony in the
field of industrial property, the Commission takes the view that a proposal
concerning the creation of a supplementary protection certificate for plant
protection products should not, in principle, differ from Council
Regulation 1768/92 concerning medicinal products.

This means that the basic rules, the procedure and the overall mechanism for
the supplementary protection certificate, in particular its duration, should be
identical. Moreover, this approach was preferred by the national experts
attending the meeting of the Group of experts on industrial property held, at
the Commission's initiative, on 1 October 1992. The few changes in relation
to Regulation 1768/92 are highlighted in the section on examination of the
provisions (see Part Five).

63. Because of the very high research costs in the plant protection sector, it is
usual practice to protect any invention in all the Member States (in fact,
protection is generally wider since patent applications cover the entire
industrialized world). With regard to the European Union, that means that the
same plant protection substance protected in all the Member States will have
its protection extended by a maximum of five years and that this protection

**-19**

will expire on exactly the same day throughout the Union. The detailed
procedures provided for in this proposal are a powerful force for
harmonization of the conditions of protection granted to inventions in the
plant protection sector and, through competition, a means of ensuring the
establishment and proper functioning of the internal market.

64. Putting plant protection products on a footing similar to that which would
obtain in the absence of authorization means placing them on the terms that
obtain in other sectors of technology not subject to authorization. The
Commission puts the average period from when the patent application for a
given product is filed to when it is placed on the market at five years. The
duration of protection under the certificate thus calculated (the period "lost"
less five years) takes effect on the day after the basic patent lapses.

If the duration of protection under the certificate (the period "lost" less five
years) is added to the period of effective protection under the basic patent,
i.e. from the date marketing authorization is obtained to the end of the
patent's term, a total period of effective protection for the product concerned
is obtained of a maximum of fifteen years, starting from the first authorization
to be placed on the market in the Community.

B. LEGA, BASIS

65. The introduction of a different period of protection for plant protection
products in each of the Member States of the Union would create obstacles
to their free movement within the internal market and distort conditions of

competition.

The introduction of a standard, adequate period of protection for the results
of plant protection research will help avoid problems in the internal market,
encourage innovation and technical progress at Union level, and promote
intra-Community trade in plant protection products. In addition, because of
the method of calculation, the certificate is a powerful force for
harmonization and will facilitate the free movement of plant protection
products in so far as one and the same patented product protected by
certificates in a number of, or all, the Member States will enter the public
domain on the same day throughout the Union.

However, this proposal does not create, at Community level, any new body
responsible for issuing certificates; they will be issued by national patent
offices.

The Commission proposes that Article 100a of the EC Treaty be taken as the
legal basis for this proposal.

In drafting the proposal, the Commission has taken due account of the
provisions of Article 7c of the Treaty and has found that there is no need to
provide for special or exceptional provisions for the time being.

Similarly, the Commission has considered the question of the high level of
protection required in the field of health, safety, environmental protection and

**-20-**

consumer protection under Article 100a(3) of the Treaty. In order to
introduce a high level of protection, meeting both the requirements of the
internal market and the need to create a legal environment conducive to the
unhampered development of research activities in the plant protection sector,
the duration of effective protection for plant protection products should be
harmonized at fifteen years from the date of the first authorization to be
placed on the market in the Union.

**21** **-**

###### **PART FIVE: EXAMINATION OF THE PROVISIONS**

Article 1

66. "Plant protection products" are defined in Article 2 of Directive 91/414/EEC
concerning the placing of plant protection products on the market. The terms
"substances", "active substances" and "preparations", also taken from
Directive 91/414/EEC, help to identify better what is covered by the
definition of plant protection product.

However, since the objectives of the patent system are different from those of
the system of marketing authorization, it is important to stress that, for the
purposes of the certificate, the term "product" is not understood to mean an
agro-chemical product or a plant protection product in the wider sense, as
presented for purchase by the final consumer, but in the narrower sense of
active substance or combination of active substances contained in a plant
protection product.

The purpose of the expression "basic patent" is to specify what types of
invention may serve as a basis for a certificate: the proposal does not provide
for any exclusions. All plant protection research, provided that it leads to a
new invention that can be patented, whether it concerns a new product, a new
preparation, a new process for obtaining a new or known product, a new
application of a new or known product, or a new combination of substances
containing a new or known product, must be encouraged, without any
discrimination, and must be eligible for a supplementary protection certificate
provided that all of the conditions governing implementation of the
Regulation are fulfilled.

It is for the holder of the patents for the product, the process for obtaining
the product, the application of the product or the combination containing the
product, to choose which of these patents is to be regarded as the "basic
patent" for the purpose of obtaining a supplementary protection certificate.

Article 2

67. This Article determines the scope of the proposal. It refers to any product
that is the subject of both a system of protection by patent and a system of
administrative authorization prior to its being placed on the market.

It is specified that the authorization concerned is that provided for in
Directive 91/414/EEC or in equivalent national law, thereby making it clear
that the proposal applies only to plant protection products which have been
authorized to be placed on the market pursuant to current Community or
national law.

With rega^ to the twelve Member States, Directive 91/414/EEC came into
force in J 993. However, applications for ma..;eting authorization filed
before that date in these Member States, on the basis of the relevant

**22**

provisions of the different national laws, will be governed, even once
authorization has been granted, by those same national laws and not by
Directive 91/414/EEC. The reason for this is that the period between the
application for marketing authorization and the date of issue can run to
several years. This explains why the proposal lays down that products
covered by national law — those in respect of which the application for
authorization to be placed on the market was filed before the entry into force
of Directive 91/414/EEC — will also be able to benefit from a supplementary
protection certificate under the conditions laid down by the Regulation.

With regard to the countries which are soon to become members of the
European Union, the proposal allows for enlargement by laying down that
any product which has been the subject of an application for marketing
authorization filed before the entry into force of Directive 91/414/EEC **for**
**the Member State in question** will be able to benefit, under the conditions
laid down by the Regulation, from the supplementary protection certificate.
If, in the future, a new Member States joins the European Union,
Directive 91/414/EEC will enter into force in that Member State at a later

date than that laid down for the current Member States. It is possible that the
authorization to be placed on the market obtained in this new Member State
will be the first marketing authorization to be obtained in the enlarged
Community; this authorization must also enable a supplementary protection
certificate to be obtained. The proposal allows for this type of situation.

Since the proposal does not state under what kind of law patent protection is
given, it follows that the proposal applies to all plant protection products with
a patent in any Member State, whether this be a national patent, a European
patent or, in due course, a Community patent.

Only patented products are covered, whatever the legal source of the patent.
The aim here, with a view to the single market, and in accordance with the
solution adopted in Regulation (EEC) No 1768/92 concerning medicinal
products, is to prevent the illogical situation whereby, in one and the same
Member State, a new plant protection product may or may not benefit from a
supplementary protection certificate depending on whether the corresponding
patent was obtained nationally or at European level.

The requirement for harmonization on two levels, in addition to the urgency
in this specific instance in view of the constantly increasing periods required
to obtain authorizations to place plant protection products on the market,
calls for the adoption of a legal solution that maintains such harmonization
and enables it to be implemented simply and swiftly. That is why the proposal
for a Regulation provides for a system identical to that in force
since 2 January 1993 for medicinal products, i.e. a supplementary protection
certificate, the conditions and the rules for obtaining which are laid down in a
uniform manner for all of the Member States of the European Union.

**2 3 -**

Article 3

68. This Article lays down the substantive conditions to be met by a product in
order to obtain a certificate.

As the certificate is a national document, compliance with these conditions
must be examined with respect to the Member State in which the application
for a certificate is submitted and to the date of application.

First, it must be ascertained that the product is protected by a current patent.
It is this patent that serves as the basis for the certificate for the purposes of
the Regulation.

It may be that the same product is protected by more than one patent, e.g.
one for the product and another for the process for obtaining the product. In
this case, it is for the holder of the patents concerned to choose one of them
as the basic patent. This choice is particularly important in that the subject
and the content of the protection granted by the certificate are limited,
respectively, by the subject and content of the basic patent.

The product must have obtained a valid marketing authorization in
accordance with Article 4 of Directive 91/414/EEC. That Directive adopts a
two-stage system of authorization: first, the authorization is restricted to
plant protection products containing certain active substances on a
Community list of authorized active substances; next, the final product is
subject, as a final product, and before it is actually marketed, to a separate
authorization to be placed on the market. Only plant protection products
which have successfully completed these two stages qualify for a
supplementary protection certificate.

In addition, because of the special features of the registration system for plant
protection products (long delay between the filing of the application and the
issue of the certificate by the competent authorities in the Member States),
there is a need to ensure that a product authorized on the basis of an
equivalent provision of national law can also benefit from the proposal.

It is frequently the case that one and the same product is successively granted
several authorizations to be placed on the market, in particular every time a
modification is made affecting dose, composition or use, and every time a
new use for the product is developed. In such a case, only the first
authorization to place the product on the market in the Member State in
which the application is lodged is taken into account for the purposes of the
Regulation, in particular for calculating the period of six months available to
the holder of the basic patent to submit an application for a certificate.
Furthermore, if the first authorization given is also the first authorization to
place the product on the market in the Union, it serves as the sole reference
for all of the Member States for calculating the duration of each of the
certificates they grant for the same product (see Article 13).

Lastly, the product must not have already been the subject of a certificate in
the Member State concerned. The certificate is designed to encourage

**-24**

research into new plant protection products so that the duration of protection
it affords, together with the duration of effective protection by patent, is

sufficient to enable the investments made in the research to be recovered.

However, it would not be acceptable, in view of the balance required between
the interests concerned, for this total duration of protection for one and the
same plant protection product to be exceeded. This might be the case if one
and the same product were able to be the subject of several successive

certificates.

This calls for a strict definition of the product as laid down in Article 2. If a
certificate has already been granted for the active substance itself, a new
certificate may not be granted for that active substance, whatever changes
may have been made regarding other features of the plant protection product
(use of a different salt, different excipients, different presentation, etc.).

In conclusion, it should be noted that, although one and the same substance
may be the subject of several patents and several authorizations to be placed
on the market in one and the same Member State, the supplementary
protection certificate will be granted for that substance only on the basis of a
single patent and a single authorization to be placed on the market, namely
the first granted in the State concerned (the first authorization in the Union
being taken only to calculate a uniform duration of different certificates for
one and the same product).

Article 4

69. The supplementary protection certificate is a sui generis protection instrument
inasmuch as it is linked to both an authorization to place the product on the
market (the first granted in the State concerned) and to a previous patent (the
basic patent). This is already evident from the conditions for obtaining the
certificate, which require both that the basic patent is a current one and that
the authorization is valid, failing which the certificate is void.

The delimitation of the subject protected by the certificate also illustrates this
duality since the protection afforded by the certificate is limited in two ways.

It is often the case in the plant protection field that a patent protects a series
of products based on the same formula. However, only some of these
products will subsequently be developed and only one might be placed on the
market. In such a case, the certificate will protect only the product covered
by the authorization and not all of the products protected by the patent.

At the same time, the product authorized will itself be limited by the patent's
subject-matter. Lf the basic patent protects a compound x, where the
authorized product consists _of_ a combination of compound x and another
active principle, only compound x will be protected by the certificate.

Furthermore, the certificate will protect only the product covered by the
authorization, namely the product within the strict meaning of Article 2.

**- 2 5 -**

Lastly, the fact that the certificate is based on both the basic patent and the
authorization can also be seen in the link between the protection afforded and
the use of the product. A new product patent normally gives the product
absolute protection so that any use of the patented product, even for nonpatented applications, constitutes an infringement, i.e. the patent protects all
possible uses that the product may have.

The certificate does not given such protection. On the one hand, the link with
the authorization system implies protection of the product covered by the first
authorization, while limiting it to the uses of the product successively
authorized prior to the expiry of the protection certificate.

Plant health firms frequently develop new uses of the same product, which
are the subject of new marketing authorizations. The marketing authorization
is actually granted several years after the patent is filed, during which time the
plant protection product undergoes multiple tests for one or more very
specific uses. In view of this, it would seem to be logical to protect it, by
means of the certificate, for the successive uses which have been the subject
of authorizations.

Furthermore, only uses in the plant protection field as defined in
Directive 91/414/EEC come under the protection of the certificate
(authorized use of the product as an additive in animal feedingstuffs, for
example, would not be protected under the certificate).

On the other hand, the protection granted by the certificate is limited by that
of the basic patent. In the case of a product patent, the limitation under the
patent will not apply since this type of patent protects all possible uses of the
product. However, in the case of an application patent, the certificate will
protect only the use or uses claimed in the patent, provided that they were
authorized prior to the expiry of the certificate.

Article 5

70. The effects of the certificate on the subject to which it refers as described in
Article 4 are the same as those of the basic patent. The patent system has
hitherto been the best way yet found of encouraging research. It is therefore
not surprising, in view of the objective of this Regulation, that the certificate
grants the same rights, subject to the same limitations.

In the case of a basic patent covering a product, the rights conferred by the
certificate will be the same as those conferred by the basic patent, but limited
to any use of the product authorized prior to the expiry of the certificate.

In the case of a basic patent covering a use of the product, the rights
conferred by the certificate will be the same as those conferred by the basic
patent, but limited to the use covered by the patent and authorized prior to
the expiry of the certificate.

T
n the case :_, a basic patent covering a process for obtaining the product, the
rights conferred by the certificate will be the same as those conferred by the

**26**

basic patent, but limited to the process for obtaining the authorized product.
The rights conferred by the certificate will be extended to the product if the
law applicable to the basic patent lays down that the protection of a process
for obtaining a new product extends to the product directly obtained by that

process.

Lastly, the certificate is subject to the same restrictions as the basic patent.
Restrictions on private acts for non-commercial purposes, restrictions on acts
for experimental purposes relating to the subject of the certificate and
restrictions on obligatory licences relating to the subject of the certificate are
some of the possible restrictions on the rights conferred by the certificate if
these are also included in the basic patent.

Article 6

71. The right to apply for a supplementary protection certificate belongs to the
holder of the basic patent; it is for him, or his successor in title, to choose
whether or not to exercise this right.

Article 7

72. This Article concerns the time during which the application for the certificate
must be submitted.

A period of six months is provided from the date on which the first
authorization to place the product on the market in the State concerned was
obtained. This solution takes account of the various interests involved; those
of the patent holder who, after having applied for the certificate, may, if he so
wishes, forgo the certificate if his product proves to be unsuccessful on the
market, and those of third parties who have every interest in knowing as early
as possible whether or not the product concerned will be protected by a
certificate once the patent has expired.

Furthermore, there is no danger of applications for a certificate being
routinely and systematically filed each time authorization to place a product
on the market is given, since the conditions laid down in Article 3 for
obtaining the certificate are strict and allow only one certificate per substance.

It may be that authorization is obtained before the basic patent is granted, in
particular in the field of biotechnology products, where patent applications
may be left pending for quite a long time. In such cases, the period of six
months begins on the date on which the patent is granted and not on the date
on which the first marketing authorization is obtained.

Article 8

73. This Article concerns the content of the application for a certificate.

**27**

Few documents are, required. Apart from the request itself, a copy of the first
authorization to place the product on the market in the State concerned is
required as this enables the product to be identified. If this authorization is
not also the first authorization to place the product on the market in the
Union, a copy of the latter also has to be attached since the duration of the
certificate will be calculated, yi all Member States in which an application for
a certificate is lodged, by reference to this criterion alone. Information
enabling the basic patent to be identified must also be provided.

The authority responsible for granting the certificate will have to verify that
the authorization(s) and the patent refer to one and the same product.

Lastly, the application must contain a summary of the product's features as
defined at points A(l) or B(l) of Annex II to Directive 91/414/EEC or by
equivalent national legislation. These are the features which enable it to be
characterized as a plant protection product and, consequently, which help to
provide a better description of the product. It is also a requirement that is
easy to meet once all the tests on the product have been completed.

Article 9

74. The application for a certificate must be submitted to the patents offices of
the Member States. The office responsible for each application for a
certificate is that in the State which granted the basic patent or on whose
behalf it was granted and in which the first authorization to place the product
on the market for that State was obtained. For one and the same plant
protection product patented and authorized to be placed on the market in
several Member States, as many applications for certificates must be
submitted to the corresponding patents offices.

The application for a certificate must be published by the patents office. This
important formality ensures that third parties are informed as soon as
possible.

Article 10

75. This Article refers to the conditions governing the grant of the certificate or
the rejection of the application.

The procedure is simple; its application should not give rise to any particular
difficulties. All patent offices must, in particular, be able to verify the
conditions referred to in Article 3 under which the certificate was obtained.

Contacts may, if necessary, be provided for between the patents office and
the authority responsible for authorizing the product to be placed on the
market.

**28**

Article 11

76. With a view to providing the best possible information to interested third
parties, the proposal for a Regulation provides for publication of the decision
to accept or reject applications for supplementary protection certificates. This
publication must be accompanied by a series of details intended to provide
information which is as complete as possible to third parties.

Article 12

77. This Article states that the Member States may provide that renewal of the
certificate is subject to the payment of a fee. It is for the Member States to
establish the amount if they decide to introduce such fees, failure to pay
causing the certificate to lapse.

Article 13

78. The duration of protection granted by the certificate is established on the
basis of several factors.

First, the duration of protection must be sufficient to meet the proposal's
objectives of promoting research. In this respect, there is a need to avoid
discriminating against plant protection research and to subject it to conditions
similar to those which would obtain if plant protection products were not
subject to authorization to be placed on the market.

The duration of the certificates covering the same product in a number of
Member States must be calculated on the basis of specific reference dates, the
effect of which, in particular, is that all the supplementary protection
certificates protecting one and the same product in the different Member
States expire on the same date throughout the Union. The proposal for a
Regulation will therefore exercise a powerful harmonizing effect on the total
duration of protection for plant protection products throughout the Union.
This harmonization also means that one and the same plant protection
product, covered by supplementary certificates, will enter the public domain
on the same day in all the Member States, whereas this is not the case under
the current patent system.

However, it is also essential to take account of the objectives of Community
policy as a whole and, in particular, to prevent the duration of protection of
plant protection products from becoming a barrier to them.

Lastly, the system must be kept simple, while allowing for a certain degree of
balance between all the interests involved.

The Commission therefore proposes that the duration of the certificate be
calculated on the basis of the protection period "lost" under the patent, i.e.
the period between the date on which the patent application is filed and the
date on which the first authorization to place the product on the market in the
Community is obtained.

**29-**

As the authorization dates for one and the same plant protection product
differ from one Member State to another, the later authorization is given, the
shorter the period of effective protection will be. The Community's policy on
authorizations should nevertheless gradually reduce the gaps between
Member States and therefore improve the levelling of the durations of
effective protection afforded to plant protection products.

Putting plant protection products on a footing similar to that which would
obtain in the absence of an authorization system means placing them on the
terms that obtain in other sectors of technology not subject to authorization.
The Commission puts the average period in Europe from the date on which
the patent application for a given product is filed to the date on which it is
marketed at five years. The duration of protection under the certificate thus
calculated (the period "lost" less five years) takes effect on the day after the
basic patent lapses.

It should be stressed that, if the effective period remaining under the basic
patent, i.e. from obtaining the marketing authorization to the expiry of the
patent, is added to the duration of protection under the certificate — the
period lost less five years ~ a total period of effective protection for the plant
protection product concerned of fifteen years is obtained, below which, in the
Commission's view, the objectives of this proposal for a Regulation will not
be attained.

Lastly, it should be pointed out that the proposal also provides for a deadline
after which the plant protection product enters the public domain. The
duration of the certificate may not exceed five years from the date on which it
takes effect.

The simplicity of the system means that it is not possible to take account of
certain factors, such as the diligence that the innovating firm has shown
throughout the tests required to obtain authorization. The proposal
compensates for this shortcoming by restricting the certificate in cases in
which authorization was obtained very late. For example, if the authorization
was obtained eighteen years after the application for the corresponding patent
was filed, the duration of the certificate is not thirteen years (eighteen minus
five) but five years, after which there is no further protection.

It should be noted that fixing the maximum duration of the certificate at five
years begins to have a restrictive effect if the marketing authorization for the
plant protection product concerned is obtained more than ten years after the
date on which the application for the patent was filed, which is, however, the
norm in this sector. Thus, an authorization obtained twelve years after the
corresponding patent application was filed does not produce a certificate of
seven (twelve minus five) years' duration, but a certificate of maximum five
years' duration.

**30**

Article 14

79. This Article provides for four cases of extinction of the certificate: expiry of
the certificate itself; surrender of the certificate by its holder; non-payment of
the annual fees, and the fact that the product no longer has authorization to
be placed on the market obtained in accordance with Community law.

Article 15

80. The proposal lays down three grounds for invalidity of the certificate.

(1) The certificate is void if the conditions for obtaining the certificate as laid
down in Article 3 have not been complied with. This will in particular
concern cases where the authorization to place the product on the market
was not valid or was not the first in the Member State concerned, where
the basic patent was no longer in force when the certificate was applied
for and, lastly, where one and the same product was the subject of several
certificates in the same Member State, in which case only the certificate
granted in respect of the first authorization to place the product on the
market in the State concerned will be valid.

(2) The certificate is void if the basic patent is not valid when its lawful term
expires. Where renewal of a patent until its term expires is indicative of
the value of the product it protects, this ground for invalidity will play an
important selective role. Furthermore, the exclusive protection granted by
the certificate over a given period is not lawful unless the product
concerned meets not only the specific conditions for obtaining the
certificate laid down by Article 3, but also the criteria of patentability for
the basic patent. It is therefore necessary to specify that the certificate is
void if the basic patent or at least that part of the basic patent that
corresponds to the product covered by the certificate has been revoked. It
is therefore necessary to specify expressly that an application for
revocation of the basic patent, with a view to the revocation of the
certificate, may be submitted even after the lawful term of the basic patent
has expired.

(3). The certificate is void if the subject that it protects is not covered by the
basic patent. The aim is to prevent a given product not protected by a
patent from enjoying the exclusive protection of a certificate without
having to fulfil the conditions and obligations specific to the patent
system. This ground for invalidity is therefore based on the same principle
as the previous ground. It should also be stressed that, if the subject of
the certificate is only partially covered by the basic patent, the declaration
of invalidity of the certificate may take the form of a corresponding
limitation of the certificate, this being in accordance with the principle of
proportionality. Lastly, the Article specifies that any person may request a
declaration of invalidity of the certificate from the authority which
granted it, i.e. the corresponding patents office. The decision of the office
will be subject to appeal, as provided for in Article 17.

**31**

Article 16

81. Pursuing its objective of making information widely available to interested
third parties, the proposal lays down that notice be given of the lapse or
invalidity of the certificate.

Article 17

82. This Article provides that any decisions of the patents office to which the
application for a certificate was made are open to the same appeals as
provided for in national law against similar decisions in respect of patents.
This is an essential legal guarantee, claims under which.are subject to the
national patents law of the State in which the certificate was granted.

Article 18

83. Where the proposal for a Regulation lays down procedural provisions, these
will apply. If it does not, the applicable provisions are those laid down by the
national law applicable to the corresponding basic patent, unless that law has
laid down special procedural provisions.

In addition, the proposal states that it is not possible to oppose a certificate
which has been issued.

Article 19

84. In accordance with the general principles of law, the proposal for a
Regulation will apply to any product protected by a valid patent and which
has not yet obtained the authorization to be placed on the market when the
Regulation comes into force.

The aim of this Article is to lay down transitional arrangements concerning
products already authorized when the Regulation comes into force, a
particularly important and sensitive part of the proposal. The Commission
takes the view that certain criteria have to be satisfied in order to arrive at a

balanced solution.

It is essential to strike a balance between all of the interests concerned if the

desire is to find a solution acceptable to everyone: the aim is neither to cover
all products already being marketed nor to exclude them totally.

The proposed solution must avoid any distortion to the system for granting
authorization to place a product on the market that might make certain firms
delay submitting an application for such authorization.

Lastly, the solution must be free of uncertainty in order to enable all firms to
plan ahead.

**-32-**

That is why the Commission proposes that the Regulation apply to all
products authorized since 1 January 1985 and protected by a valid patent on
the date on which it enters into force.

The choice of 1 January 1985 as a single reference date for obtaining the first
marketing authorization should enable European industry to close the gap
between itself and its foreign competitors. Furthermore, if the date of entry
into force of the Regulation can be envisaged as the beginning of 1996, a
product for which a patent application was filed in 1976 will not be able to
benefit from a certificate unless the corresponding authorization was given
more than nine years after the application was filed (after 1985).

However, Directive 91/414/EEC concerning the placing of plant protection
products on the market entered into force only in mid-1993; this means that
few products which could qualify for the transitional arrangements of this
proposal for a Regulation have an authorization to be placed on the market
granted on the basis of Directive 91/414/EEC. Before this Directive entered
into force, the procedures for authorization to be placed on the market for
plant protection products were a matter for national laws. It is therefore
necessary to specify in the transitional arrangements that plant protection
products authorized after 1 January 1985 on the basis of either
Directive 91/414/EEC (a limited number of products) or an equivalent
provision of national law (the majority of products) are eligible for a
supplementary protection certificate, provided that the other conditions for
obtaining a certificate are met. Of course, in order to qualify for the
transitional arrangements, these products must still be validly protected by a
current patent on the date on which the Regulation comes into force.

As regards the transitional arrangements, the proposal for a Regulation lays
down that the application for a certificate must be filed during the six months
following the entry into force of the Regulation.

**33-**

**ANNEX**

**PROFILE OF THE PLANT PROTECTION SECTOR**

The agro-chemicals industry comprises two principal sectors, fertilizers and chemical
products protecting crops, also known as plant protection products, which include
herbicides, insecticides, fungicides and plant growth regulators.

Firms in the plant protection sector can be split into two broad groups: those which
base their activities on substantial research, with a view to placing new plant
protection products on the market, and those which do not carry out research but
depend on the first group for making lawful copies of products no longer protected
by patent: these latter firms are commonly called manufacturers of generics.

**A.** **The market for plant protection products**

The world market for plant protection products is estimated at
ECU 22 000 million (1992 figure). The United States accounts for
some 27 % of this market, the twelve Member States of the European Union
for 26 %, the Far East for 25 %, and the rest of the world for 22 %.

_Table 1: Plant protection products: market size by region_ _(1992)_

Insecticides

1311

878

2160

Fongicides

456

1510

1475

406

Other

286

1022

197

52

122

(ECU million)
USA
Western Europe

Far East

Latin America

Eastern Europe
Rest of World

Total

Herbicides

3649

2275

1606

976

293

765

**9564**

606

297

931

**6183**

Total

5702

5685

5438

2040

Eastern Europe 293 297 142 122 854
Rest of World 765 931 133 39 1868

Total **9564** **6183** **4122** 1718 21587

Source: County NatWest WoodMac.

142

133

**4122**

39

1718

In terms of the value of plant protection products, it is estimated that the
European Union, with some 36 % of world production, remains the largest
producer, the United States lying second with almost 28 %. They are
followed by Japan (14 %) and the rest of Western Europe (10 %).

The current position of the European industry is based on experience over the
last forty years in developing products initially aimed at the markets of
Europe, Africa, Australasia and Latin America.

France, Germany, Italy and the United Kingdom are the largest producers of
plant protection products in the Union; with Spain, these countries are the
largest consumers since between them they use more than 80 % of the
herbicides and fungicides, and more than 75 % of the insecticides consumed
in Europe.

In 1992 France, along with the United States and Japan, accounted for 55 %
of the world market for herbicides and, on its own, for 8 % of world sales.
Today, herbicides form the largest production and market in the Union, with

**34-**

the exception of Italy, where sales of fungicides have been greater than those
of herbicides since 1990, and Spain, where sales of insecticide exceed those
of herbicides.

**B.** **Trade balance**

The trade balance is very favourable to the Union since its exports run at
twice the level of its imports although, since 1985, imports have been
increasing more strongly than exports (see Table 2). The market for plant
protection products in the European Union generates a positive trade balance
of some ECU 850 million (1991).

Whereas in 1986 the Soviet Union was the Union's largest export market
(19%), in 1991 its successor States accounted for only 11 % of sales. The
countries of central Europe and EFTA have taken over, even if it is the rest
of the world which accounts for the highest percentage of Community
exports (46 %). With regard to imports, the major competitors of Community
firms are in the EFTA countries, with more than 50 % of total Community
imports, followed by the United States (33 %).

_Table 2: Plant protection products: external trade_

```
198B

1342.9

 461.2

 881.7

```

```
1989

1404.2

 571.0

 833.2

```

```
1984

1527.1

 374.2

1152.9

```

```
1986

1599.9

 378.5

1221.5

```

```
1987

1380.0

 392.0

 988.1

```

```
1991

1478.7

 633.2

 845.5

```

```
(ECU million)

Exports extra-EC
Imports extra-EC

Trade balance

Ratio of exp/imp

Intra-EC trade

```

```
1982

1074.7

257.1

817.6

```

```
1983

1242.6

 301.3

 941.3

```

```
1990

1423.0

 593.6

'829.5

  2.4

2162.0

```

```
          4.1 4.12 4.08 4.07 4.23 3.52 2.91 2.46 2.4 2.34

   trade 97 9.6 1091.9 1413.0 1518.3 1521.9 1476.9 1628.4 1932.5 2162.0 2111.0

```

Source: Panorama of European Industry and Eurostat 1991

```
  4.08

1413.0

```

```
1985

1732.9

 426.3

1306.6

  4.07

1518.3

```

```
  4.23

1521.9

```

```
  3.52

1476.9

```

```
  2.91

1628.4

```

```
  2.46

1932.5

```

```
 4.1

97 9.6

```

```
  4.12

1091.9

```

However, these figures reveal a decline in the relative position of the
European plant protection industry at international level. Whereas the ratio of
exports/imports was 4.18 in 1982 — which indicates that exports of plant
protection products from the Union were more than four times higher than
imports ~ this fell to 2.34 in 1991. During this period, the amount of plant
protection products bought outside the Union rose from ECU 257 million to
ECU 633 million, an increase of 146%, while exports rose from
ECU 1 074 million to ECU 1 478 million, an increase of 37 %.

**Leading firms**

Most of the main producers of plant protection products — estimated to be
forty worldwide ~ are located in the United States (9), Japan (11), or in
Western Europe (14). Almost all are part of multinational chemical firms and
the plant protection sector represents only a small fraction of the total group
sales.

Monsanto (USA) is regarded as the leading producer of herbicides (14 % of
the world market), followed by Ciba (Switzerland) with 12 %, RhônePoulenc (France) and BASF (Germany) with 6 % each. In the field of
insecticides, Bayer (Germany) and Rhône-Poulenc (France) are the leaders,
followed by FMC (USA) and Hoechst (Germany). The main producers of
fungicides are Bayer (18 % of the world market), Ciba, Rhône-Poulenc, Du
Pont (USA) and BASF (see Table 3).

**35-**

_Table 3: Plant protection industry: leading firms_

Firm Sales, of plant protection Plant protection products

products as
(ECU million) % of total sales
Ciba (CH) 2416 18J>
Du Pont (USA) j 1669 _52_
Bayer (D) 1595 7,3
Rhône-Poulenc (F) 1572 12.5
Zeneca (ex-ICI) (GB) 1465 28Ji
Monsanto (USA) 1405 21^2
Dow Elanco (USA) 1349 100.0
Hoechst (D) 1138 4 J
BASF (D) 975 _42_
American Cyanamid (USA) 854 Ij^O

Source: County NatWest WoodMac — 1992 figures

In terms of the breakdown of turnover of plant protection products by
product group, it is estimated that herbicides account for 45 % of the total,
insecticides 29 %, fungicides 19 %, plant growth regulators and other
products 7 %.

**36-**

**Proposal for a**
**EUROPEAN PARLIAMENT AND COUNCIL REGULATION** **(EQ**

concerning the creation
of a supplementary protection certificate for plant protection products

###### `THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN` `UNION,`

Having regard to the Treaty establishing the European Community, and in particular
Article 100a thereof,

Having regard to the proposal from the Commission/ [1] )

Having regard to the opinion of the Economic and Social Committee/ [2] )

(1) Whereas plant protection research contributes to the continuing improvement in crop
production;

(2) Whereas plant protection products, especially those that are the result of long, costly
research, will not continue to be developed in the Community and in Europe unless
they are covered by favourable rules that provide for sufficient protection to
encourage such research;

(3) Whereas at the moment the period that elapses between the filing of an application
for a patent for a new plant protection product and authorization to place the
product on the market makes the period of effective protection under the patent
insufficient to cover the investment put into the research and to generate the
resources needed to maintain a high level of research;

(4) Whereas this situation leads to a lack of protection which penalizes plant protection
research and the competitiveness of the sector;

(5) Whereas, in its Resolution of 1 February 1993< [3] ) on a Community programme of
policy and action in relation to the environment and sustainable development, the
Council adopted the general approach and strategy of the programme presented by
the Commission, which stressed the interdependence of economic growth and
environmental quality; whereas improving protection of the environment means
maintaining the competitiveness of industry; whereas, accordingly, the issue of a
supplementary protection certificate can be regarded as a positive measure in favour
of environmental protection;

W OJNoC

( [2] ) OJNoC

< [3] ) OJNoC 138, 17.5.1993, p. 1.

**-37**

(6) Whereas a uniform solution at Community level should be provided for, thereby
preventing the heterogeneous development of national laws leading to further
disparities which would be likely to create obstacles to the free movement of plant
protection products within ihe Community and thus directly affect the establishment
and the functioning of the internal market; whereas this is in accordance with the
principle of subsidiarity as defined by Article 3b of the Treaty on European Union;

(7) WTiereas, therefore, the creation of a supplementary protection certificate granted,
under the same conditions, by each of the Member States at the request of the holder
of a national or European patent relating to a plant protection product for which
marketing authorization has been granted is necessary; whereas a Regulation is
therefore the most appropriate legal instrument;

(8) WTiereas the duration of the protection granted by the certificate should be such as to
provide adequate, effective protection; whereas, for this purpose, the holder of both
a patent and a certificate should be able to enjoy an overall maximum of fifteen years
of exclusivity from the time the plant protection product in question first obtains
authorization to be placed on the market in the Community;

(9) Whereas all the interests at stake in a sector as complex and sensitive as plant
protection must nevertheless be taken into account; whereas, for this purpose, the
certificate cannot be granted for a period exceeding five years; whereas the
protection granted should furthermore be strictly confined to the product which
obtained authorization to be placed on the market as a plant protection product;

(10) Wliereas a fair balance should also be struck with regard to the determination of the
transitional arrangements; whereas such arrangements should enable the Community
plant protection industry to catch up to some extent with its main competitors, while
making sure that the arrangements do not compromise the achievement of other
legitimate objectives concerning the agricultural and environment policies pursued
both at national and Community level;

(11) Whereas only action at Community level can be effective in attaining the objective,
which consists in ensuring adequate protection for innovation in the field of plant
protection, while guaranteeing the proper functioning of the internal market for plant
protection products;

**HAVE ADOPTED THIS REGULATION:**

**38**

Article 1

Definitions

For the purposes of this Regulation, the following definitions shall apply:

1. 'plant protection products': active substances and preparations containing one or
more active substances, put up in the form in which they are supplied to the user,
intended to:

1.1. protect plants or plant products against all harmful organisms or prevent the
action of such organisms, in so far as such substances or preparations are not
otherwise defined below;

1.2. influence the life processes of plants, other than as a nutrient (e.g. plant
growth regulators);

1.3. preserve plant products, in so far as such substances or products are not
subject to special Council or Commission provisions on preservatives;

1.4. destroy undesired plants; or

1.5. destroy parts of plants, check or prevent undesired growth of plants;

2. 'substances': chemical elements and their compounds, as they occur naturally or by
manufacture, including any impurity inevitably resulting from the manufacturing

process;

3. 'active substances': substances or micro-organisms including viruses, having general
or specific action:

3.1. against harmful organisms; or

3.2. on plants, parts of plants or plant products;

4. 'preparations': mixtures or solutions composed of two or more substances, of which
at least one is an active substance, intended for use as plant protection products;

5. 'plants': live plants and live parts of plants, including fresh fruit and seeds;

6. 'plant products': products in the unprocessed state or having undergone only simple
preparation such as milling, drying or pressing, derived from plants, but excluding
plants themselves as defined at point 5;

7. 'harmful organisms': pests of plants or plant products belonging to the animal or plant
kingdom, and also viruses, bacteria and mycoplasmas and other pathogens;

**39-**

8. 'product': the active substance is defined at point 3 or combination of active
substances of a plant protection product;

9. 'basic patent': a patent which protects a product as defined at point 8 as such, a
preparation as defined at point 4, a process to obtain a product or an application of a
product, and which is designated by its holder for the purpose of the procedure for
grant of a certificate;

10. 'certificate': the supplementary protection certificate.

Article 2

Scope

Any product protected by a patent in the territory of a Member State and subject, prior to
being placed on the market as a plant protection product, to an administrative
authorization procedure as laid down in Article 4 of Council Directive 91/414/EEC^ [4] ), or
pursuant to an equivalent provision of national law if it is a plant protection product in
respect of which the application for authorization was lodged before the entry into force
of Directive 91/414/EEC for the Member State concerned, may, under the terms and
conditions provided for in this Regulation, be the subject of a certificate.

Article 3

Conditions for obtaining a certificate

A certificate shall be granted if, in the Member State in which the application referred to in
Article 7 is submitted, at the date of that application:

(a) the product is protected by a basic patent in force;

(b) a valid authorization to place the product on the market as a plant protection product
has been granted in accordance with Article 4 of Directive 91/414/EEC or an
equivalent provision of national law;

(c) the product has not already been the subject of a certificate;

(d) the authorization referred to in (b) is the first authorization to place the product on
the market as a plant protection product.

Article 4

Subject-matter of protection

Within the limits of the protection conferred by the basic patent, the protection conferred
by a certificate shall extend only to the product covered by the authorizations to place the

W OJNoL230, 19.8.1991, p. 1.

**40**

corresponding plant protection product on the market and for any use of the product as a
plant protection product that has been authorized before the expiry of the certificate.

Article 5

Effects of the certificate

Subject to the provisions of Article 4, the certificate shall confer the same rights as
conferred by the basic patent and shall be subject to the same limitations and the same
obligations.

Article 6

Entitlement to the certificate

The certificate shall be granted to the holder of the basic patent or his successor in title.

Article 7

Application for a certificate

I. The application for a certificate shall be lodged within six months of the date on
which the authorization referred to in Article 3(b) to place the product on the market
as a plant protection product was granted.

_I._ Notwithstanding paragraph 1, where the authorization to place the product on the
market is granted before the basic patent is granted, the application for a certificate
shall be lodged within six months of the date on which the patent is granted.

Article 8

Content of the application for a certificate

1. The application for a certificate shall contain:

(a) a request for the grant of a certificate, stating in particular:

(i) the name and address of the applicant;

(ii) if he has appointed a representative, the name and address of the
representative;

(iii) the number of the basic patent and the title of the invention;

(iv) the number and date of the first authorization to place the product on the
market, as referred to in Article 3(b) and, if this authorization is not the
first authorization to place the product on the market in the Community,
the number and date of that authorization;

**41**

(b) a copy of the authorization to place the product on the market, as referred to in
Article 3(b), in which the product is identified, containing in particular the
number and date of the authorization and the summary of the product
characteristics listed in Part A.I or B.I of Annex II to Directive 91/414/EEC or in

equivalent national laws of the Member State in which the application was
lodged;

(c) if the authorization referred to in (b) is not the first authorization to place the
product on the market as a plant protection product in the Community,
information regarding the identity of the product thus authorized and the legal
provision under which the authorization procedure took place, together with a
copy of the notice publishing the authorization in the Official Journal or any other
document including the information required.

2. Member States may provide that a fee is payable upon application for a certificate.

Article 9
Lodging of an application for a certificate

1. The application for a certificate shall be lodged with the competent industrial
property office of the Member State which granted the basic patent or on whose
behalf it was granted and in which the authorization referred to in Article 3(b) to
place the product on the market was obtained, unless the Member State designates
another authority for the purpose.

2. Notification of the application for a certificate shall be published by the authority
referred to in paragraph 1. The notification shall contain at least the following
information:

(a) the name and address of the applicant;

(b) the number of the basic patent;

(c) the title of the invention;

(d) the number and date of the authorization to place the product on the market,
referred to in Article 3(b), and the product identified in that authorization;

(e) where relevant, the number and date of the first authorization to place the
product on the market in the Community.

Article 10

Grant of the certificate or rejection of the application

1. Where the application for a certificate and the product to which it relates meet the
conditions laid down in this Regulation, the authority referred to in Article 9(1) shall
grant the certificate.

**-42**

2. The authority referred to in Article 9(1) shall, subject to paragraph 3, reject the
application for a certificate if the application or the product to which it relates does
not meet the conditions laid down in this Regulation.

3. Where the application for a certificate does not meet the conditions laid down in
Article 8, the authority referred to in Article 9(1) shall ask the applicant to rectify the
irregularity, or to settle the fee, within a stated time.

4. If the irregularity is not rectified or the fee is not settled under paragraph 3 within the
stated time, the authority shall reject the application.

5. Member States may provide that the authority referred to in Article 9(1) is to grant
certificates without verifying that the conditions laid down in Article 3(c) and (d) are

met.

Article 11

Publication

1. Notification of the fact that a certificate has been granted shall be published by the
authority referred to in Article 9(1). The notification shall contain at least the
following information:

(a) the name and address of the holder of the certificate;

(b) the number of the basic patent;

(c) the title of the invention;

(d) the number and date of the authorization to place the product on the market
referred to in Article 3(b) and the product identified in that authorization;

(e) where relevant, the number and date of the first authorization to place the
product on the market in the Community;

(f) the duration of the certificate.

2. Notification of the fact that the application for a certificate has been rejected shall be
published by the authority referred to in Article 9(1). The notification shall contain at
least the information listed in Article 9(2).

Article 12

Annual fees

Member States may require that the certificate be subject to the payment of annual fees.

**-43**

Article 13

Duration of the certificate

1. The certificate shall take effect at the end of the lawful term of the basic patent for a
period equal to the period which elapsed between the date on which the application
for a basic patent was lodged and the date of the first authorization to place the
product on the market in the Community, reduced by a period of five years.

2. Notwithstanding paragraph 1, the duration of the certificate may not exceed five
years from the date on which it takes effect.

Article 14

Expiry of the certificate

The certificate shall lapse:

(a) at the end of the period provided for in Article 13;

(b) if the certificate-holder surrenders it;

(c) if the annual fee laid down in accordance with Article 12 is not paid in time;

(d) if and as long as the product covered by the certificate may no longer be placed on
the market following the withdrawal of the appropriate authorization or
authorizations to place it on the market in accordance with Article 4 of
Directive 91/414/EEC or equivalent provisions of national law. The authority
referred to in Article 9(1) may decide on the lapse of the certificate either on its own
initiative or at the request of a third party.

Article 15

Invalidity of the certificate

1. The certificate shall be invalid if:

(a) it was granted contrary to the provisions of Article 3;

(b) the basic patent has lapsed before its lawful term expires;

(c) the basic patent is revoked or limited so that the product for which the certificate
was granted would no longer be protected by the claims of the basic patent or,
after the basic patent has expired, grounds for revocation exist which would have
justified such revocation or limitation.

2. Any person may submit an application or bring an action for a declaration of
invalidity of the certificate before the body responsible under national law for the
revocation of the corresponding basic patent.

**-44-**

Article 16

Notification of lapse or invalidity

If the certificate lapses in accordance with Article 14(b), (c) or (d), or is invalid in
accordance with Article 15, notification thereof shall be published by the authority
referred to in Article 9(1).

Article 17

Appeals

The decisions of the authority referred to in Article 9(1) or of the body referred to in
Article 15(2) taken under this Regulation shall be open to the same appeals as those
provided for in national law against similar decisions taken in respect of national patents.

Article 18

Procedure

In the absence of procedural provisions in this Regulation, the procedural provisions
applicable under national law to the corresponding basic patent shall apply to the
certificate, unless that law lays down special procedural provisions for certificates.

Notwithstanding paragraph 1, the procedure for opposition to the granting of a
certificate shall be excluded.

**TRANSITIONAL PROVISIONS**

Article 19

Any product which, on the date on which this Regulation enters into force, is
protected by a valid basic patent and for which the first authorization to place it on
the market as a plant protection product in the Community was obtained
after 1 January 1985 under Article 4 of Directive 91/414/EEC or an equivalent
national provision may be granted a certificate.

An application for a certificate as referred to in paragraph 1 shall be submitted within
six months of the date on which this Regulation enters into force.

**45**

**FINAL PROVISION**

Article 20

Entry into force

This Regulation shall enter into force three months after its publication in the Official
Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member
States.

Done at,

For the Parliament For the Council

The President The President

**46**

##### FINANCIAL STATEMENT

**TITLE**

Proposal for a Parliament and Council Regulation concerning the creation of a
supplementary protection certificate for plant protection products.

**DESCRIPTION OF THE MEASURE**

The objective is to promote research in a high-risk sector by creating a new industrial
property instrument, the supplementary protection certificate. The measure also
harmonizes the conditions for granting the supplementary protection certificate and
calculating its duration at Community level.

The measure has no financial impact on the Community budget.

**47-**

##### **IMPACT OF THE PROPOSAL ON FIRMS** **(in particular SMEs)**

**1.** **WHY IS COMMUNITY LEGISLATION NECESSARY?**

In order to harmonize at Community level the arrangements for granting and
calculating the duration of the supplementary protection certificate, in pursuit of the
following objectives:

(a) improving the functioning of the internal market for plant protection products by
ensuring their freedom of movement;

(b) preventing the distortions of competition currently facing plant protection firms;

(c) ensuring that plant protection research can benefit from better protection through
a single measure with direct and uniform effect throughout the Community;

(d) improving the competitiveness of the plant protection industry by supporting
European research.

**2.** **WHICH SECTORS WILL BE AFFECTED?**

(a) Firms manufacturing plant protection products, essentially those which base their
activities on research, will benefit from the measure, provided that the products
concerned are protected by a valid basic patent when the Regulation comes into
force.

(b) Most of these firms belong to international groups operating in several sectors of
the chemical industry (basic chemistry, plant protection products, colorants,
plastics, etc.) and human or animal health. Plant protection generally accounts for
a relatively small percentage of their total activities, but it is characterized by a
very high level of risk. However, the proposed measure is such as to apply to all
plant protection firms irrespective of size.

The rights to supplementary protection must be respected by third parties, such
as manufacturers of generic plant protection products. However, the proposal
contains limitations, in particular concerning the maximum duration of the
supplementary protection certificate, intended to prevent any undue effect on the
activities of manufacturers of generics in the sector.

**48**

(c) There are no grounds for supposing that certain geographical areas will profit
more than others from the measure.

**3.** **WHAT MUST FIRMS DO TO COMPLY WITH THE MEASURE?**

The supplementary protection certificate will be granted to plant protection firms
which apply for it, provided that all the necessary conditions are met.

All applications for a supplementary certificate must be submitted to national patent
offices: the application may be subject to the payment of a fee to be set by the
competent authorities of the Member States.

**4.** **WHAT ARE THE LIKELY ECONOMIC EFFECTS OF THE MEASURE?**

**(a)** **On employment.**

The creation of the supplementary protection certificate will provide
innovating firms in the plant protection sector with an incentive to maintain,
even increase, their investment in research. It will help to establish an
appropriate legal framework for protecting innovation in the sector; it will
thus have a positive effect on employment, in particular in research.

**(b)** **On investment and the creation of new firms.**

Harmonization at Community level of the conditions for granting the
certificate and the method of calculating its duration should provide the firms
concerned with more certainty about recovering their costs, thus encouraging
them to invest. Since patents are the best instrument for encouraging
research, it is certain that the supplementary protection certificate — a sui
generis instrument providing similar protection to a patent ~ will be regarded
as an incentive to research in the plant protection industry.

**(c)** **On the competitiveness of firms.**

By placing the plant protection industry in a competitive situation comparable
to that prevailing in the other important regions of the world, the
supplementary protection certificate should be an incentive for maintaining
investments in Union territory. The European plant protection industry,
which makes a substantial contribution to the European Union's positive
balance of payments, will thus have the opportunity of better establishing its
competitive position on domestic and international markets.

**49**

**5.** **DOES THE PROPOSAL CONTAIN MEASURES TAKING ACCOUNT OF**

**THE SPECIAL CIRCUMSTANCES OF SMES?**

The measures contained in the proposal are not specifically aimed at small and
medium-sized businesses, although they can also take advantage of it in so far as they
meet the conditions required for a supplementary protection certificate to be granted.

**6.** **CONSULTATION**

A meeting of national experts was held on 1 and 2 October 1992 at the Commission's
initiative. The experts examined the need for supplementary protection for patents
for plant protection products in the light of a Commission working document. The
main subjects discussed were determination of the scope of a Community measure
and the transitional arrangements. This proposal takes account of the initial approach
emerging from that meeting.

In addition, Commission departments have contacted the various organizations
representing the interests concerned by the proposal.

The organization representing the research-based plant protection industry, the
**ECPA/** **[1]** **)** supplied the Commission with data which established with certainty that
the industry was suffering from substantial erosion of the duration of effective patent
protection, which has a negative impact on the sector's research activities. The ECPA
estimates that the supplementary protection certificate will help to ensure that
innovating industries will be able to recover over a long enough period the
increasingly large investments needed to develop new products.

Commission departments also received a contribution from GAME/ [2] ) an informal
grouping of several (currently four) producers of generic products, which takes the
view that the proposed measure will delay free access to protected products and,
consequently, is opposed to any extension of patent protection or of supplementary
protection. GAME is eager to see generic products appearing on the market as
quickly as possible after the expiry of a patent in order to promote competition, in
particular price competition.

0) European Crop Protection Association.

( [2] ) Generic Agrochemical Manufacturers of Europe.

**50**

Lastly, COPA-COGECA( [3] ) submitted its position, voicing its concerns about the
effects of the supplementary protection certificate on the prices of plant protection
products and, as a result, on expenditure by farmers on buying these products.
Commission departments have made estimates to assess, where possible, the effects
of the proposed measure on farmers' outgoings.

( [3] ) Committee of Agricultural Organizations in the European Community; General Committee for
Agricultural Cooperation in the EC.

**51** **-**

**ISSN 0254-1475**

### COM (94) 579 final

# **DOCUMENTS**

### E N 03 08 Catalogue number : CB-CO-94-601-EN-C ISBN 92-77-83316-5

**Office for Official Publications of the European** **Communities**

**L-2985** **Luxembourg**

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