Available national case law supports the view that granting marketing approval to a second entrant, based on the second product's similarity to a previously approved first product, is not a proscribed "use" under Article 39.3.
The nature and extent of data exclusivity rights were examined in two important decisions by the U.S. Supreme Court (Ruckelshaus v. Monsanto Co., 467 US 986, 104 S.Ct.2862, June 26, 1984) and the Canadian Federal Court of Appeal (Bayer Inc. v. The General Attorney of Canada, the Minister of Health, Apotex Inc. and Novopharm Ltd., May 19, 1999). The second decision, in particular, examined the extent to which a national health authority can rely on the originator's data, even when an exclusivity period applies.
The Ruckelshaus v. Monsanto Co. case relates to the protection of data submitted for the registration of an agrochemical product. Though a subsequent applicant was obliged to compensate for the use of Monsanto's original data, Monsanto argued that such use undermined its reasonable "investment backed expectations" and was unconstitutional. A basic argument of the plaintiff was that the possibility given to a competitor of using the data against payment of a compensation nullified its "reasonable investment-backed expectation". However, the Supreme Court described the extensive practice of relying on data submitted by the first applicant in the United States, and rejected Monsanto's complaint (see Box 3).
Relying on data: the U.S. Supreme Court decision in Ruckelshaus v. Monsanto Co.
The Supreme Court considered that Monsanto could not have had a reasonable, investment-backed expectation that the Environmental Protection Agency (EPA) would keep the data confidential beyond the limits prescribed in the amended statute itself. Monsanto was on notice of the manner in which EPA was authorized to use and disclose any data turned over to it by an applicant for registration.
Excerpts from the Court's decision:
• "In addition, Monsanto was aware that information relating to formulae of products could be revealed by EPA to "any Federal agency consulted and [could] be revealed at a public hearing or in findings of fact" issued by EPA "when necessary to carry out" EPA's duties under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) § 10(B)22. The statute also gave Monsanto notice that much of the health, safety, and efficacy data provided by it could be disclosed according to the data-consideration and data-disclosure provisions in the statute. Monsanto chose to submit the requisite data in order to receive a registration, it can hardly argue that its reasonable investment-backed expectations are disturbed when EPA acts to use or disclose the data in a manner that was authorized by law at the time of the submission."
• "Because the market for Monsanto's pesticide products is an international one, Monsanto could decide to forego registration in the United States and sell a pesticide only in foreign markets. Presumably, it will do so in those situations where it deems the data to be protected from disclosure more valuable than the right to sell in the United States."
• "A fortiori, the Trade Secrets Act cannot be construed as any sort of assurance against internal agency use of submitted data during consideration of the application of a subsequent applicant for registration. Indeed, there is some evidence that the practice of using data submitted by one company during consideration of the application of a subsequent applicant was widespread and well known. Thus, with respect to any data that Monsanto submitted to EPA prior to the effective date of the 1972 amendments to FIFRA, we hold that Monsanto could not have had a "reasonable investment-backed expectation" that EPA would maintain those data in strictest confidence and would use them exclusively for the purpose of considering the Monsanto application in connection with which the data were submitted."
• "When Monsanto provided data to EPA during this period, it was with the understanding, embodied in the FIFRA, that EPA was free to use any of submitted data that were not trade secrets in considering the application of another, provided that EPA required the subsequent applicant to pay "reasonable compensation" to the original submitter. § 3(c)(1)(D), 86 Stat. 979. But the statute also gave Monsanto explicit assurance that EPA was prohibited in connection with the application of another, to use any data submitted by an applicant if both the applicant and EPA determined the data to constitute trade secrets."
22 See a summary of FIFRA in Annex I.
The U.S. Supreme Court in this case recognized that the authority could use the data submitted by the originator to assess second-entrant applications. According to the law applicable at the time of the complaint, Monsanto was entitled to compensation, but not to exclusive use of the data. The solution has probably not substantially changed in the United States despite the adoption of the Second Restatement of Unfair Competition Law (1997). In the absence of a specific provision granting an exclusivity period as currently provided for medicines by U.S. law, relying on data to approve subsequent applications would not be considered an illegitimate misappropriation of trade secrets.23
23 Personal communication by Prof. J. Reichman (Duke University), October 2001.
The General Court Appeal of Canada decided a second and more significant case on issues related to data exclusivity. Despite the fact that NAFTA provisions, as mentioned before, provide for a minimum term of exclusivity, the Court found legitimate the approval of a subsequent application on the basis of a prior registration. The court argued that the health authority neither requested undisclosed information a second time nor examined it; the authority just checked whether the original and subsequent products were indeed the same (see Box 4). The issue was decided under Canadian law and NAFTA Article 1711 on "Trade Secrets", which establishes the following:
"5. If a Party requires, as a condition for approving the marketing of pharmaceutical or agricultural chemical products that utilize new chemical entities, the submission of undisclosed test or other data necessary to determine whether the use of such data involves considerable effort, the Party shall protect against disclosure of the data of persons making such submission, where the origination of such data involve considerable efforts, except where the disclosure is necessary to protect the public or unless steps are taken to ensure that the data is protected against unfair commercial use.
6. Each Party shall provide that for data subject to paragraph 5 that are submitted to the Party after the date of entry into force of this Agreement, no person other than the person that submitted them may, without the latter's permission, rely on such data in support of an application for the product approval during a reasonable period of time after their submission. For this purpose, a reasonable period shall normally mean not less than five years from the date on which the Party granted approval to the person that produced the data for approval to market its product, taking account of the nature of the data and the person's efforts and expenditures in producing them. Subject to this provision, there shall be no limitation on any Party to implement abbreviated approval procedures for such products on the basis of bioequivalence and bioavailability studies.
7. Where a Party relies on a marketing approval granted by another Party, the reasonable period of exclusive use of the data submitted in connection with obtaining the approval relied on shall begin with the date of the first marketing approval relied on".
Canadian Federal Court of Appeal: the Bayer case
The Federal Court of Appeal held, inter alia, the following:
"When a generic manufacturer files an Abbreviated New Drug Submission (ANDS), the safety and effectiveness of the generic product may be demonstrated by showing that the product is the pharmaceutical and bioequivalent of the innovator's product. If the generic manufacturer is able to do so solely by comparing its product with the innovator's product which is being publicly marketed, the Minister will not have to examine or rely upon confidential information filed as part of the innovator's New Drug Submission (NDS). In such case, the minimum five year market protection referred to in the regulation will not apply.
"On the other hand, if in order to be satisfied of the safety and effectiveness of the generic product, the Minister examines and relies upon information filed by the innovator in its NDS, the minimum five years market protection for the innovator will apply. This is because the safety and effectiveness of the generic product will only be established by reference to confidential information provided to the Minister by the innovator. It is only this use of that confidential information by the Minister on behalf of the generic manufacturer that gives rise to the minimum five years protection form competition for the innovator.
"The appellant says that whenever an ANDS is filed by a generic manufacturer comparing the generic product with the innovator's product, the Minister must implicitly be examining and relying upon the confidential information filed by the innovator in its NDS. We do not read subsection C.08.004.1(1) in this way. To do so would be to interpret it as invariably providing a minimum five years of market protection to an innovator when an ANDS is filed by a generic manufacturer. Rather, the regulation contemplates that the Minister may or may not examine and rely upon confidential information filed by the innovator. The appellant's argument reads out of the regulation the option given to the Minister as to whether or not to examine and rely on the confidential information filed by the innovator.
"The NAFTA provisions are intended to protect trade secrets. If the generic manufacturer exercises the option of having the Minister examine the confidential information filed by the innovator in support of its application for a Notice of Compliance, it is, in effect, relying on that information within the meaning of section 6 of Article 1711. It is apparent that if confidential data is not relied upon, the trade secrets provisions of the NAFTA are not applicable. Specifically, if a generic manufacturer is able to establish the safety and effectiveness of its product on the basis of bioequivalence or bioavailability studies without the Minister having to examine and rely upon confidential data filed by the innovator, there is no reason or justification for the minimum five years protection from competition. This interpretation of subsection 0.08.004.01(1) is consonant with section 5 and 6 of Article 1711 of the NAFTA.
"If a generic manufacturer compares its product to an innovator's product solely on the basis of public information, providing the innovator with protection from competition for a minimum of five years is tantamount to granting it the protection a patent would provide. Put another way, even if the Minister did not examine and rely on the innovator's confidential information, the innovator would be entitled to the minimum of five years protection form competition. The words of subsection C.08.004.1(1) cannot be construed to yield such a result."
The Court, in sum, concluded that, under Canadian law and NAFTA, if the health authority actually uses the data submitted by the originator on behalf of the generic manufacturer in order to assess the latter's application, the minimum five years protection from the competition for the innovator applies. But if the authority does not examine and rely on that confidential or trade secret information on behalf of the generic manufacturer, there is no use of data and the exclusivity provision is not applicable.
If despite the express provision of exclusivity, the mere reliance on a prior registration without use of the data does not allow to claim exclusivity, a fortiori the same conclusion should be reached when the exclusivity is not specifically established, as in the case of Article 39.3.
In sum, whatever the desire of some of the TRIPS negotiating parties might have been, the expression "unfair commercial use", reasonable interpreted, does not sustain a reading that Article 39.3 requires the provision of exclusivity, or of a compensation. It has left wide room for manoeuvre for Member countries to determine:
a) when such a use exists, and
b) the means of protection (see next section).
An "unfair commercial use" may be determined to exist, for instance, in situations in which a competitor obtains through fraud, breach of confidence or other "dishonest" practices, the results of testing data and uses them to submit an application for marketing approval in its own benefit. It would also apply in cases where the government provides access to undisclosed testing data in order to provide an advantage to a firm which did not produce them or share their cost.24
24 This would represent a violation of the non-disclosure obligation as well as an "unfair commercial use".