Lexploria

AS TO THE ADMISSIBILITY OF

Application No. 12633/87

by SMITH KLINE and FRENCH LABORATORIES LTD

against the Netherlands

The European Commission of Human Rights sitting in private on

4 October 1990, the following members being present:

MM. C.A. NØRGAARD, President

F. ERMACORA

G. SPERDUTI

E. BUSUTTIL

G. JÖRUNDSSON

A. WEITZEL

H.G. SCHERMERS

H. DANELIUS

Mrs. G.H. THUNE

Sir Basil HALL

Mrs. J. LIDDY

MM. L. LOUCAIDES

J.C. GEUS

A.V. ALMEIDA RIBEIRO

M.P. PELLONPÄÄ

Mr. H.C. KRÃœGER, Secretary to the Commission

Having regard to Article 25 of the Convention for the

Protection of Human Rights and Fundamental Freedoms;

Having regard to the application introduced on 12 December

1986 by SMITH KLINE and FRENCH LABORATORIES LTD against the

Netherlands and registered on 16 December 1986 under file No. 12633/87;

Having regard to:

- reports provided for in Rule 47 of the Rules of Procedure of

the Commission;

- the observations submitted by the respondent Government on

17 March 1988 and 25 August 1989 and the observations in reply

submitted by the applicant on 17 May 1988 and 10 October 1989;

- the submissions made by the parties at the hearing on

4 October 1990;

Having deliberated;

Decides as follows:

THE FACTS

The facts of the case as they have been submitted by the

parties may be summarised as follows:

The particular circumstances of the case

The applicant is a company registered in the United Kingdom

with its registered office in Welwyn Garden City, England. In the

proceedings before the Commission it is represented by Mr. A.

Pickford, a barrister employed by the applicant in London.

The applicant is the owner of Netherlands Patent No. 162073

which relates to cimetidine. This patent relates to the discovery

by the applicant of an entirely new class of drugs known as H2

antagonists which are of particular value in treating gastric and

duodenal ulcers. Cimetidine was the first such drug to be

commercialised.

The applicant's patent has three claims, respectively claiming

a process (and all analogous processes), the substance, and solid

compositions (e.g. tablets) containing the substance, all of which

relate to cimetidine.

By Dutch Patent No. 171054, a Dutch company, Centrafarm BV,

obtained a patent on a process for making a group of compounds,

including cimetidine. The applicant submits that this process uses a

known carcinogene, which is also mutagenic, as an intermediate and for

this reason cannot be used cheaply and its safe use presents serious

problems as it has to be certain that the final product does not

contain a residue of the carcinogene. As a result, this process is

not used by any commercial manufacturer of cimetidine. Patent No.

171054 has a later priority date than Patent No. 162073 (the

applicant's patent), and cannot be worked without a licence under

Patent No. 162073. The applicant was unwilling to grant such a

licence.

On 29 November 1983 Centrafarm BV petitioned for the grant of

a compulsory licence under the applicant's patent pursuant to section

34 (4) of the Patent Act (Rijksoctrooiwet) 1910, as amended by the Act

of 13 December 1978 (hereafter "the Patent Act"). This petition was

considered by a Special Division of the Patent Office (Octrooiraad)

set up by the Central Division and comprising one legally qualified

member and two other members expert in the chemical field. These

members had not been involved in the procedure relating to the issue

of either the applicant's or Centrafarm's patent.

The applicant sought in separate proceedings before the

District Court (Arrondissementsrechtbank) of the Hague to have the

Centrafarm BV Patent No. 171054 declared a nullity under section 51 of

the Patent Act. The District Court sought the technical advice of the

Patent Office, which sets up a Special Division which fulfils the

obligation under section 57 of the Patent Act to provide the court

with any necessary information and technical advice. The Special

Division consisted of the same members as those appointed to consider

Centrafarm's application for a licence.

On 11 September 1984 the Special Division of the Patent Office

allowed the petition by Centrafarm BV and granted the latter a

compulsory licence based upon its patent number 171054 in respect of

the applicant's patent subject to the condition that annulment by the

District Court would entail the lapse of the licence. The terms of

the compulsory licence gave the licensee rights over the applicant's

invention of a new chemical substance and of its use in medicinal

dosage forms as well as over the applicant's process. The Special

Division of the Patent Office in its opinion to the court expressed a

view partially supporting the validity of Centrafarm's patent. On

18 April 1986, the District Court granted part of the application for

nullity but upheld part of the patent. The applicant appealed to the

Hague Appeal Court (Gerechtshof).

The applicant appealed against the grant of the compulsory

licence. The Central Division set up an Appeal Division to consider

the appeal, which comprised two legally-qualified ordinary members,

two ordinary members with expertise in the chemical field, the

legally-qualified extraordinary member (the former President of the

European Patent Office and former President of the Patent Office).

None of these members had been involved in any of the earlier

procedures relating to the patents of the applicant and Centrafarm.

By a decision of 8 September 1986, the Appeal Division of the Patent

Office rejected the applicant's appeal and affirmed the decision of

the Special Division of the Patent Office in respect of the compulsory

licence application. As a result of the grant of this compulsory

licence, the applicant lost the exclusive right to its patent.

The applicant's appeal to the Hague Court of Appeal was never

decided, since to avoid the threat of the compulsory licence, the

applicant accepted Centrafarm's offer to pay 50.000 Dutch Guilders for

the surrender of Centrafarm's patent.

Relevant domestic law and practice

The grant and enforcement of patents in the Netherlands is

governed by the Patents Act 1910, as amended by the Act of 13 December

1978 (hereafter "the Patent Act"). A patent is granted for a new

product or process if the invention was not an obvious development

given the current state of the art and is capable of industrial

application.

A patent is deemed, subject to the provisions of the Patents

Act, to be personal property, assignable and otherwise transferable

in full or joint ownership (section 37).

Subject to the provisions of the Act, a patent confers on its

proprietor the sole right, inter alia, to make, use, put on the

market, hire out or deliver the patented product or, when applicable,

to apply the patented process in aid for his business or to make, use,

put on the market, resell, hire out or to deliver the product obtained

directly from the application of the patented process (section 30).

The proprietor of a patent may enforce his patent vis-à-vis any person

who, without being entitled to do so, performs any of the acts referred

to in section 30 (section 43).

By section 33, the right to perform acts prohibited to any

other person other than the proprietor of the patent may be acquired

from the proprietor by means of a licence.

By section 34(4), the proprietor of a patent shall be obliged

to grant a licence required for the working of another patent granted

in respect of an application which has the same or a later filing

date. Such licence should not extend beyond that which is necessary

for the working of the patented invention of the licensee. The

licensee is obliged to grant a reciprocal licence under his patent to

the proprietor of the dominant patent. The licence shall be granted

at the request of the party concerned by the Patent Office if the

Patent Office determines that the obligation to grant it has not been

met (section 34(5)).

Pursuant to section 34(9), the Patent Office may be requested

by the parties to fix the amount of remuneration payable. In the

absence of such request and the agreement of the parties as to the

appropriate sum, the Court may be called upon to fix the amount.

The Patent Office is empowered by the Patent Act to grant

patents (section 13). It consists of a Central Division, Examining

Divisions, Appeal Divisions and Special Divisions (section 14). Its

organisation and procedure are regulated by Order in Council (section

15).

Pursuant to the Patent Rules of 1921 (as amended by Order in

Council of 6 January 1979), the Patent Office consists of a maximum of

90 ordinary and deputy members divided into legally qualified and

technically qualified members and of at least 12 extraordinary members

appointed for five year periods. There are no rules governing the

dismissal of extraordinary members before completion of their

five year period in office, except for the internal departmental

guideline pursuant to which the Patent Office does not recommend the

appointment or reappointment of persons over 67, and the Central

Division of the Patent Office does not nominate persons of 69 or over

as extraordinary members of Divisions. Members are appointed by the

Crown. The ordinary and deputy members are appointed from among the

technical and legal staff of the Patent Office. Their appointments

remain valid until retirement. The extraordinary members are

appointed for a five year period, which may be extended for five years

at a time. They are recruited on the basis of expertise in a

particular field and, in general, are university professors in one of

the technical or applied sciences. No members may take part in

proceedings in which they have a direct or indirect interest or in

which they are in any way involved (section 3 of the Patent Rules).

On taking up their duties, members are required to take a pledge of

diligence, confidentiality and impartiality.

The Central Division of the Patent Office is responsible for

the formation of the Divisions (Examining Divisions, Special Divisions

and Appeal Divisions). The Central Division comprises five members

(and five deputy members). The President of the Patent Office is an

ex officio member of the Central Division. The other members and

deputy members are appointed by the Minister for Economic Affairs from

among the ordinary members of the Patent Office, on the basis of a

wide-ranging knowledge of the various specialist fields.

Appeal lies from the decision of an Examining Division to

an Appeal Division. Members involved in the examination of an

application or in any of the proceedings of an Examining Division,

which decides on whether a patent should be granted, are not allowed

to take part in proceedings before the Appeal Division (section 24).

Section 24 A lays down the formal requirements for the appeals

procedure: the parties must be given a hearing, a written reasoned

decision must be produced, and the members of the Appeal Division must

not have been previously involved in the case.

Pursuant to section 6 subsection 1 of the Patent Rules and

section 8 of the Patent Rules, the Central Division sets up an Appeal

Division drawn from the ordinary or extraordinary members of the

Patent Office. The Appeal Division normally has three members,

though the number may be extended to five if this is justified by the

nature of the issue.

In cases where the Patent Office is called upon to examine an

application for a compulsory, the Central Division sets up a Special

Division with members drawn from the ordinary, extraordinary or deputy

members of the Patent Office, pursuant to section 6 subsection 2 of

the Patent Rules. They are nominated on the basis of their expertise

in the relevant field. Section 9 subsection 2 of the Patent Rules

states that the Special Division shall always comprise two technically

qualified members and one legally qualified member, or, if the case

mainly involves a point of law, two legally qualified members and one

technically qualified member. The application is sent to the person

under whose patent the licence is being requested. This person is

obliged to observe a deadline in producing a written reply to the

application.

The Division does not arrive at a decision until the parties

have been heard, or at any rate summoned in the proper manner. The

parties' pleadings are followed by a discussion of the issues with

members of the Division, who then retire to confer in chambers. The

decision, which is given in writing, sets out reasons. These

procedural requirements are laid down in section 34 subsections 6 and

7 of the Patents Act.

Patent legislation does not provide for the proceedings before

the Patent Office to be open to the public. At no time has the public

been admitted. The argument advanced in defence of this established

practice is that arguments based upon confidential company matters and

expertise which must not be made public are often used to convince the

Division of a particular point of view. It is for the same reason

that the reports of the sessions held by the Divisions of the Patent

Office are not placed among the documents which are open to inspection.

A patent shall be annulled if it should not have been granted

under the provisions of the Patent Act or if it is in contravention of

any other patent granted to a person entitled thereto under the Act

(section 51). The District Court of the Hague has exclusive

jurisdiction with regard to all actions for annulment or invalidation

of a patent as well as actions in respect of the fixing of

remuneration (section 54).

Pursuant to section 57, the Patent Office shall be required to

provide the court with all the information and technical advice the

court may require to reach a decision. A Special Division is formed

for this purpose. It is provided that this advice shall have the same

effect as advice given by experts as referred to in sections 222-236

of the Netherlands Code of Civil Procedure.

Appeal lies from the District Court to the Hague Court of

Appeal.

COMPLAINTS

1. The applicant alleges a breach of Article 6 of the Convention.

It submits that its right to Patent No. 162073 is a civil right and

that the decisions by the Special Division and Appeal Division on the

dispute between the applicant and Centrafarm constituted a

determination of the applicant's rights. However the applicant

complains that the Patent Office does not constitute an independent

tribunal within the meaning of Article 6 para. 1 of the Convention and

its decision to uphold the compulsory licence is not subject to review

by any court or other judicial body.

2. The applicant also complains that the grant of the compulsory

licence interfered with the applicant's peaceful enjoyment of its

patent and deprived it of the exclusive right to the use of the

patented invention contrary to Article 1 of Protocol No. 1. The

applicant complains that the licence was not in the public interest

and that the relevant law does not require the public interest to be

taken into account. The applicant further submits that even if the

licence could have properly been granted, it should have been

restricted to the scope required by the process and not extended to

medical use or to the manufacture and sale of the substance and

compositions containing the substance.

3. The applicant also invokes Article 13 of the Convention, in

that the decision of the Patent Office is not subject to review or

appeal by any judicial body or court. The applicant submits that

provisions for royalties from the compulsory licencee are inadequate

compensation for deprivation of the sole right to exploit their

product and the substantial investment and research put into the

development of the product.

PROCEEDINGS BEFORE THE COMMISSION

The application was introduced on 12 December 1986 and

registered on 16 December 1986. On 12 December 1987, the Commission

decided to invite the respondent Government to submit observations on

the admissibility and merits of the application. The Government

submitted their observations on 17 March 1988 and the applicant

submitted its observations in reply on 17 May 1988.

The Commission considered the application further on 10 July

1989 and decided to invite the parties to submit further observations

on the admissibility and merits of the complaints made under Article 6

of the Convention. The Government submitted their further

observations on 25 August 1989 and the applicant submitted its

observations on 10 October 1989.

The Commission resumed its examination of the admissibility of

the application on 5 March 1990 and decided to invite the parties to

make further submissions on the admissibility and merits of the

application orally at a hearing.

At the hearing, which was held on 4 October 1990, the parties

were represented as follows:

For the Government

Mr. K. de Vey Mestdagh, Agent, Ministry of Foreign

Affairs

Mr. I.W. van der Eyk, Ministry of Economic Affairs

Mrs. M.W.J. Bechger, Ministry of Justice

For the applicant

Mr. A. Pickford, barrister

Mr. D.H. de Witte, lawyer.

THE LAW

The applicant alleges a breach of Article 6 para. 1 (Art. 6-1)

of the Convention in relation to the grant by the Patent Office of a

compulsory licence in respect of one of its patents. The applicant

also complains that the grant of the compulsory licence interfered

with its peaceful enjoyment of its patent contrary to Article 1 of

Protocol No. 1 (P1-1) and that it had no remedy for its complaints

contrary to Article 13 (Art. 13) of the Convention.

Article 26 (Art. 26) of the Convention

The respondent Government contend that the applicant has not

exhausted domestic remedies in respect of its complaints since it has

not pursued its appeal before the Hague Appeal Court in its action

challenging the validity of Centrafarm's patent. The applicant

submits that these proceedings did not allow it to challenge the grant

of the licence itself.

The Commission recalls that Article 26 (Art. 26) of the

Convention only requires the exhaustion of such remedies which relate

to the breaches of the Convention alleged and at the same time can

provide effective and sufficient redress. An applicant does not need

to exercise remedies which, although theoretically of a nature to

constitute a remedy, do not in reality offer any chance of redressing

the alleged breach (cf. No. 9248/81, Dec. 10.10.83, D.R. 34 p. 78).

It is furthermore established that the burden of proving the

existence of the available and sufficient domestic remedies lies upon

the State invoking the rule (cf. Eur. Court H.R., Deweer judgment of

27 February 1980, Series A No. 35 p. 15, para. 26, No. 9013/80, Dec.

11.12.82, D.R. 30 p. 96, p. 102).

The Commission notes that the invalidating of Centrafarm's

patent in the court proceedings would also have the effect of

extinguishing the compulsory licence. The grant of a compulsory

licence however under the Patent Act involved an assessment of whether

the licence was necessary for the operation of Centrafarm's patent.

The applicant also complains that even if the licence was properly

granted, the terms of the licence exceed what is necessary. These

matters cannot be brought before the courts in the proceedings

challenging the validity of Centrafarm's patent. The Government have

not satisfied the Commission that any other effective remedies exist

before the courts.

In these circumstances, the Commission finds that the

application cannot be declared inadmissible for non-exhaustion of

domestic remedies.

Article 6 (Art. 6) of the Convention

The applicant complains of being deprived of the exclusive

right to exploit its patented drug as a result of the grant of a

compulsory licence to Centrafarm. The applicant complains that the

Patent Office in effect determined its civil rights in respect of its

patent but did not constitute an independent or impartial tribunal

within the meaning of Article 6 para. 1 (Art. 6-1) of the Convention,

which provides, inter alia:

"In the determination of his civil rights and

obligations or of any criminal charge against him,

everyone is entitled to a fair and public hearing

within a reasonable time by an independent and

impartial tribunal established by law."

The Government submit that the right to a licence is

automatically conferred by the Patent Act itself and the procedure by

which the Patent Office grants a licence does not determine any civil

rights within the meaning of Article 6 para. 1 (Art. 6-1) of the

Convention. They also submit that in any case the Patent Office is an

independent and impartial tribunal within the meaning of that

provision.

The Commission has made a preliminary examination of the

parties' observations on the merits of these complaints. It considers

that they raise questions of fact and law which are of such complexity

that their determination should depend upon an examination of the

merits. It follows that this part of the application cannot be

declared manifestly ill-founded within the meaning of Article 27 para.

2 (Art. 27-2) of the Convention, but must be declared admissible, no

other ground for declaring it inadmissible having been established.

Article 1 of Protocol No. 1 (P1-1) to the Convention

The applicant also complains that the grant of a compulsory

licence to Centrafarm has interfered with its rights under Article 1

of Protocol No. 1 (P1-1) to the Convention, which provides:

"Every natural or legal person is entitled to the peaceful

enjoyment of his possessions. No one shall be deprived of

his possessions except in the public interest and subject

to the conditions provided for by law and by the general

principles of international law.

The preceding provisions shall not, however, in any way

impair the right of a State to enforce such laws as it

deems necessary to control the use of property in

accordance with the general interest or to secure the

payment of taxes or other contributions or penalties."

The Commission notes that under Dutch law the holder of a

patent is referred to as the proprietor of a patent and that patents

are deemed, subject to the provisions of the Patents Act, to be personal

property which is transferable and assignable. The Commission finds

that a patent accordingly falls within the scope of the term

"possessions" in Article 1 of Protocol No. 1 (P1-1).

The Commission has therefore examined whether there has been

any interference with the applicant's rights under Article 1 of

Protocol No. 1 (P1-1).

The Government submit that patents are granted subject to the

provisions of the Patent Act which expressly limits the scope of the

patent owners' rights by providing for the grant of compulsory

licences to dependent patent-holders. The grant of such a licence can

therefore not constitute an interference within the meaning of the

above provision. The Commission however recalls that a patent

initially confers on its owner the sole right of exploitation. The

subsequent grant of rights to others under that patent is not an

inevitable or automatic consequence. The Commission finds therefore

that the decisions of the Patent Office, conferring on Centrafarm a

right of compulsory licence in respect of the applicant's patent,

constituted a control of the use of property. The Commission must

therefore consider whether this control is lawful, in accordance with

the general interest and pursues a legitimate aim in a proportionate

manner (Eur. Court H.R., Tre Traktörer AB judgment of 7 July 1989,

Series A no. 159, pp. 22-24, paras. 56-63).

The Commission recalls that the exclusive rights of a patentee

are limited in many of the Contracting States and that provision for

other persons to make use of a particular patented product or process

is commonly made for the purpose of preventing the long term hampering

of technological progress and economic activity. The Commission notes

that Centrafarm was granted a compulsory licence under the applicant's

patent since, otherwise, it could not work under another patent which

it held. Pursuant to the Patent Act, the dependent patent would only

have been granted if it was considered to introduce a new product or

process that was not an obvious development given the current state of

the art and was capable of industrial application. The Commission is

satisfied that the grant of the compulsory licence was lawful and

pursued a legitimate aim of encouraging technological and economic

development.

As regards proportionality, the Commission notes that the

provision only comes into effect where such licence is necessary for

the working of a patent of the same or later date and the licence

should be limited to what is required for the working of the patent.

Further, the owner of the dominant patent is entitled to royalties in

respect of each compulsory licence granted under the legislation and

receives reciprocal rights under the dependent patent. While the

Commission recalls that the Patent Office is not required to

investigate in each particular case whether the grant of the

compulsory licence is necessary in the general interest, the

Commission finds that the framework imposed by the legislation is

intended to prevent abuse of monopoly situations and encourage

development and that this method of pursuing that aim falls within the

margin of appreciation accorded to the Contracting State. The

Commission accordingly finds that the control of use in the

circumstances of this case did not fail to strike a fair balance

between the interests of the applicant company and the general

interest and is in accordance with the requirements of Article 1 of

Protocol No. 1 (P1-1) to the Convention.

It follows that this part of the application is manifestly

ill-founded within the meaning of Article 27 para. 2 (Art. 27-2) of the

Convention.

Article 13 (Art. 13) of the Convention

The applicant complains of not having an effective remedy in

respect of its complaints contrary to Article 13 (Art. 13) of the

Convention, which provides:

"Everyone whose rights and freedoms as set forth in

this Convention are violated shall have an effective

remedy before a national authority notwithstanding that

the violation has been committed by persons acting in

an official capacity."

The complaint under Article 13 (Art. 13) of the Convention is

closely linked to the complaint under Article 6 (Art. 6) of the

Convention. It should therefore also be declared admissible.

For these reasons, the Commission

by a majority, DECLARES THE APPLICATION ADMISSIBLE,

with regard to the applicant's complaints under Article 6

para. 1 and Article 13 (Art. 6-1, 13) of the Convention,

without prejudging the merits;

unanimously,

DECLARES THE REMAINDER OF THE APPLICATION INADMISSIBLE.

Secretary to the Commission President of the Commission

(H.C. KRÜGER) (C.A. NØRGAARD)

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SMITH KLINE and FRENCH LABORATORIES LTD v. THE NETHERLANDS

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