Opinion: Patent Evergreening – A Valid Concern in South Africa?
The term “evergreening” is used pejoratively to refer to perceived attempts to extend the duration of patent protection by various means. Attempts by patent holders to obtain multiple patents covering different aspects of the same product are characterised by some observers as evergreening. Disapprobation is expressed regarding patents for improved versions of existing products, especially in the pharmaceutical sector.
In our view the concept of evergreening is specious, especially in the South African context. It is based on an incomplete understanding of the patent system.
South Africa is currently contemplating changes to its patent system. The Department of Trade and Industry published an Intellectual Property Consultative Framework (IPCF) on 6 July 2016.1 The IPCF seeks to promote public health and to balance the interests of the public and industry development by stimulating innovation. One of the proposed changes relates to South Africa’s simple “depositary” patent system whereby patent applications are subjected only to a rudimentary check of the documentary requirements. The IPCF proposes that South Africa do away with its depository system and replace it with infrastructure for the substantive search and examination (SSE) of patent applications. There has been a groundswell of opinion since 2011 advocating for substantive patent examination. The Fix the Patent Laws Coalition was launched in 2011, comprising 15 health institutions in South Africa such as Treatment Action Campaign, Doctors Without Borders and Section 27. The coalition advocates for reform of the South African laws to address issues that block access to affordable medicines in the country. The argument is that a substantive examination will ensure that patents are only granted on real innovations, thus limiting the grant of weak patents. In 2008, a survey was conducted between South Africa and Brazil (which examines patent applications). The statistics showed that South Africa granted 2 442 pharmaceutical patents in 2008 alone while Brazil only granted 278 patents from 2003 to 2008. The argument is that these disparities show that the bulk of South Africa’s patents relate to inventions not worthy of patent protection. It is also argued that the United States and Patent Office and the European Patent Office both rejected approximately 40% of the applications granted by South Africa.2
The calls for substantive examination, and some of the other proposed changes, appear to stem from a perception that pharmaceutical patents have an obstructive impact on the roll-out of health services in South Africa.
Philip Stevens of the Geneva Network, a research organisation focusing on health, intellectual property and trade, provides the following insight into concerns relating to pharmaceutical patents:3
“Debates on how to improve healthcare in developing countries often start from the same premise: patents can potentially raise drug prices, so they should be abolished for better public health.
“In the early 2000s, this argument drove the campaign against patents on HIV drugs in SA. This month, it anchors new nongovernmental organisation (NGO) campaigns against a proposed European Union (EU)-India Free Trade Agreement and the Regional Comprehensive Economic Partnership in Asia — both of which may include heightened intellectual property provisions.
“NGO disquiet about drug patents has even led to the creation of a UN high-level panel on access to medicines…”
South Africa’s achievements in the field of healthcare, especially in relation to HIV treatment, are laudable. It is not our intention to oppose the country’s ongoing work to make generic medicines widely and inexpensively available to those in need. However, it is our contention that the government’s proposed “fixes” to the South African patent system will not advance this cause and may in fact hinder it.
The existing South African patent system promotes and encourages the development of both original and improved technologies. As long as an improvement upon a technology includes a new technical step, is non-obvious and is capable of being used in trade, industry or agriculture, such an improvement is eligible for patent protection. Any attempt to “evergreen” an invention by means of obvious and trivial improvements cannot pass muster under the scrutiny of South African patent law, and any such patents, even if granted under South Africa’s depositary system, are susceptible of revocation by the Court of the Commissioner of Patents.
Opponents of evergreening sometimes argue along the following lines4: If an originator pharmaceutical firm files a patent application in 2020 claiming an active ingredient, the resulting patent will expire in 2040. If in 2025 that same company files a second, original patent application claiming an extended release formulation of that active ingredient and the application is granted, that second patent will not expire until 2045. However, inventiveness (non-obviousness) will always be a prerequisite for the grant of the second patent (the patent to the extended release formulation). This requirement means that trivial improvements with no value are already excluded by the patent system. If there is nothing inventive about the extended release formulation then a valid patent will not be available. If, on the other hand, there is an inventive step involved then it is appropriate for that new development to be protectable. Why should third party competitors (e.g. generic manufacturers) be empowered to exploit a newly developed, inventive formulation without having made any investment towards its development? In what way does a new and inventive formulation become somehow less so by virtue of the fact that its active ingredient is already known? At such time as the first patent expires, generic drug companies will be able to sell the original release formulation of the pharmaceutical. The marketplace will ultimately decide whether the higher costs associated with the extended release formulation are worthwhile expenditures.
Opponents may try to rely on Section 39 of the South African Patents Act, in terms of which a patent for an improvement can be obtained even if the improvement is obvious having regard to the main invention. This argument is unfounded because Section 39 provides that the term of an improvement patent of this type (called a “patent of addition”) cannot extend beyond the date of expiry of the patent for the main invention.
John R. Thomas5 has highlighted certain fallacies surrounding the concept of evergreening:
“Some commentators … believe the critique that many “evergreen” patents represent trivial variations of earlier technologies is misplaced. They assert that many patented improvements provide significant practical benefits. For example, a new formulation may make a known medication easier to use, leading to greater patient compliance, or cause fewer side effects.
“Observers also note that the developer of the “original” product is not always the same entity as the developer of “improvement” technologies. Sometimes competitors of the “original” patent proprietor, including generic drug companies, develop and patent the improvements. The ability of any innovator to obtain a patent is said to encourage competition among different firms, both in innovation and in the marketplace.
“Industry experts further observe that patents on improvement inventions may not block competitors from marketing competing products that were covered by patents that have expired. In this respect, it should be appreciated that the scope of protection provided by a particular patent varies in accordance with the degree of technological advance provided by the patented invention. In particular, a patent that claims a new active ingredient for use in a pharmaceutical typically provides more robust proprietary rights than improvement patents.”
There is also a fallacy in the basic underpinning of the argument that patents somehow block healthcare improvements in developing countries. In a 2016 study6, researchers investigated patents and how they affect access to medicines, by counting how many of the World Health Organisation’s (WHO’s) list of essential medicines were subject to patent protection in developing countries.
The objective of the report was to identify which of the 375 items on the 2013 Model List of Essential Medicines (MLEM) of the World Health Organization (WHO) (18th edition) were patented and where. The MLEM is a list of medicines considered by WHO experts to be the most important. It was found that where patents were filed, this appeared to be more common in countries where there was market and manufacturing opportunity, namely, middle-income nations with larger populations, higher health spending per capita and pharmaceutical manufacturing capacity.
The researchers found the following:
(1) Patents for 95% medicines on the MLEM list had expired. The implication is that patents are not relevant to the vast majority of drugs typically used by physicians in developing countries.
(2) Owners of patents for medicines either don’t register or do not enforce their patents in the poorest countries. According to report there was “a relative scarcity of patented medicines appearing on the 2013 MLEM and of those patents typically being filed in developing countries.”
In summary, if the patent system were to be abolished it would make little difference to the cost or availability of most medicines used in developing countries. Even so, these medicines are frequently unavailable in public health systems. A study by the University of Utrecht in the Netherlands found that, on average, essential medicines were available in public sector facilities in developing countries only 40% of the time.7
According to Philip Stevens:8
“While generic medicines are cheap to make, with no royalties to pay, they are still too costly for most people in developing countries. … The reasons behind the expense and scarcity of essential medicines in developing countries are complex, but failures of governance loom large. Mark-ups along the distribution chain inflate the final price of medicines and include import tariffs, sales taxes, value-added taxes and retailers’ and wholesalers’ margins.” …
Dysfunctional medicine supply chain management is another culprit. A 2015 survey by Medecins Sans Frontières (MSF) reported one in three health facilities in South Africa have shortages of crucial HIV and tuberculosis drugs. The drugs are imported in sufficient quantities, but fail to reach patients due to “local logistical and management problems, ranging from inaccurate forecasting to storage or transport issues”, said MSF.”
“These are the major influences on access to medicines. Public health would be best served if the political focus were on these issues, rather than patents.”
Evergreening cannot hold up to scrutiny as a justification for revisions of the South African patent system. The IPCF’s ambition to provide a substantive patent examination in South Africa is admirable but it will be difficult to implement, both logistically and financially. Patent examiners operate at the cutting edge of technology, meaning that post-graduate qualifications are required. This makes competent examiners expensive to hire even if they can be found in sufficient numbers. The process of examining even one patent application is a long and involved one, and often involves a protracted process of amendment, review, objection, argument, and further amendment. The South African Patent Office is currently only barely able to meet its commitments to the basic depositary system. It has had a long-standing service delivery shortfall relating to its filing service provider, with the result that patents open to public inspection cannot be accessed. Recordals of transactions in patents are behind and, as of the date of writing, some patents filed in 2014 have not yet been accepted despite acceptance being dependent only upon the need to satisfy formal requirements such as the submission of a Power of Attorney.
The attempt to introduce a substantive examination is likely to exacerbate the current situation, and indeed may backfire by causing even longer delays in the grant of patents. This is not in the interests of South Africa’s competitiveness and attractiveness to investment.
Para. 4.1.2.iv of the IPCF concedes that: “We are conscious that the implementation of [substantive search and examination] SSE like any new administrative procedure may have teething problems. For this reason, CIPC is considering entering into outsourcing arrangements with certain patent offices that are known to be highly efficient. This would be a contingency against the accumulation of inordinate backlogs.”
That the European Patent Office rejects 40% of patent applications corresponding to those granted in South Africa is also not a cogent argument. The grant of a patent in South Africa does not preclude an interested party from applying for its revocation. In other words, a person who believes that he or she is entitled to exploit the subject matter of a patent, because he or she believes that the patent is invalid, may apply to the court for revocation of the patent. It is a relatively simple matter to check whether an equivalent European or U.S. patent was refused, or whether the scope of the claims had to be narrowed by comparison with the corresponding South African patent. Parties interested in the subject matter of such a patent may then either apply to court for revocation of the patent, or, since South African patent law adheres closely to global patent law principles, proceed on the understanding that the patent is invalid and that an infringement action on the basis of the patent would either not be in the interest of the patent holder to initiate or, if undertaken, would be likely to fail. An invalid patent cannot be infringed.
Conversely, the introduction of a substantive examination cannot and will not stop the grant of valid patents, even for subject matter such as new formulations. Patents which claim new and inventive technical developments will still be valid even if they undergo examination. Thus, there are still going to be patents for secondary or improvement inventions. A patent for a new and inventive method of manufacture of a known drug, or a revised formulation, will still have to be granted. On the other side of the coin, even under South Africa’s existing, non-examining system a patent that fails to claim a new and inventive improvement is invalid even if it is accepted onto the Register. A patent of this type is invalid with or without an examination system in place. Put simply, the introduction of an examination system in South Africa will have no effect on the number of valid patents in South Africa, except in so far as the number of applications filed may decrease because of the increased burden of costs, administrative burden and length of time taken to obtain patents.
Far from being an unfavourable feature of the South African patent system, the country’s depositary character is arguably favourable in the context of a developing country. The fact that examination is not substantive means that patents can be granted more quickly and less expensively than in most other countries. Yet quality is retained because the protection conferred by a patent remains constrained to the legal requirements. Indeed, an advantage of the existing South African patent system is that, since substantive decisions on novelty, obviousness, etc. are left to a specialist patent court rather than an examining division at a Patent Office, a more detailed and rigorous consideration of these matters can be undertaken in respect of those patents which are particularly important.
The introduction of substantive examination will inevitably increase costs significantly since higher official fees will be payable to finance the examiners’ salary bills, and significant professional fees will become payable to patent attorneys for prosecution through examination (preparing responses to official actions, amending, etc.) Substantive examination will also inevitably expand the timeline from filing to grant significantly.
One egregious consequence of this is that many potential patentees will be excluded from the system because of financial limitations. Already, the grant of patents to individual local inventors and SMME’s is a significant financial burden. An examination system will drive the protection of patents even further away from the general population and further into the arms of the large corporations, which become the only entities able to justify the costs of the system and the substantial financial risks that inevitably accompany embarking upon a patent programme. It is not sufficient to argue that financial backing can be sought by inventors. The procedural hurdles to be overcome to secure such funding are not insignificant and the award of the funds is uncertain. Futhermore, even where funding can be secured, it is often set up as part-funding with the inventor still being held responsible for a proportion of the costs. The end result is that, for the citizen of lower or even average income in South Africa a patent is out of reach or not worth the risk. This “innovation chasm” is likely to become deeper and wider with the introduction of an examining division at the Patent Office.
Copyright © 2017 Rory Moore.
- Andiswa Lawana “South African Patent Law: Developing a balance between the rights of the patients and promoting innovation within the pharmaceutical industry” 2015 Research Report University of Western Cape (Page 17).
- Philip Stevens, Business Day, 3 May 2016
- John R Thomas “Patent evergreening: Issues in Innovation and Competition” 2009 Congressional Research Service R40917, www.crs.gov (Page 10).
- John R. Thomas, idem (Page 9).
- “Patent-based Analysis of the World Health Organization’s 2013 Model List of Essential Medicines”, Beall, R.F.; Attaran, A. (University of Ottawa, Canada) published by the World Intellectual Property Organisation (12 April 2016); http://www.wipo.int/edocs/mdocs/mdocs/en/wipo_gc_ip_ge_16/wipo_gc_ip_ge_16_www_334437.pdf
- Philip Stevens, ibid.
- Philip Stevens, ibid.