Business news from Ukraine

The deputies propose to improve the measures for the protection of intellectual property rights adopted during martial law by preventing the possibility of baseless extension of intellectual property rights to inventions (utility models), which expired during martial law and can not be extended.
According to the draft law No. 9383 registered by deputies of different factions, the initiative will improve the affordability of medicines for the population and create conditions for the entry of generic medicines on the market of Ukraine.
The bill specifies, in particular, that intellectual property rights expiring on the day of martial law in Ukraine or during martial law, remain in force until the day following the day of termination or cancellation of martial law, but no longer than until the expiry date of intellectual property rights determined by the law of Ukraine “On Protection of Rights to Inventions and Utility Models”.
In a comment to Interfax-Ukraine one of the initiators of the bill, the head of the Parliamentary Committee on National Health, Medical Care and Health Insurance Mykhailo Radutskyi specified that the bill proposes to modify the rules of the law adopted after the full-scale invasion to extend patents during martial law and return to the regulation previously in force.
Radutskyy reminded that at the beginning of the full-scale invasion the country adopted a number of amendments to the legislation aimed at simplifying the work of business and state structures. In particular, the law “On the protection of interests of persons in the field of intellectual property during martial law, imposed in connection with the armed aggression of Russia against Ukraine,” extended the validity of all property rights of intellectual property end of martial law. Including the intellectual property rights for medicines were extended.
“In April 2022 such a decision was logical. After all, there were potential risks of losing intellectual property rights, including due to the fact that a significant number of lawyers went to serve in the AFU, the state body for registration of patents did not work regularly. But now there are no significant obstacles to extending patents on medicines. In fact, extended patents have become an obstacle for competitors to enter the market and launch production of some generic drugs in Ukraine, which makes it impossible to reduce prices for some drugs,” he said.
Radutskyy said that in mid-April, the Committee held a working meeting on this issue with representatives of the Association of Drug Manufacturers of Ukraine (ADMU), the European Business Association (EBA) and the American Chamber of Commerce in Ukraine, and bill number 9383 reflects the common position of the Committee and market participants.
At the same time, Radutsky clarified that the main committee dealing with the bill No. 9383 is the Committee on Economic Development.
“The Health of the Nation Committee, which I chair, plans to provide recommendations to my colleagues. We will initiate their early consideration in the parliament,” he said.
As reported, earlier participants of the pharmaceutical market said that the attempt to regulate intellectual property rights for the duration of the war, undertaken after the full-scale invasion of Ukraine by Russia, has led to problems in the pharmaceutical market, the inability to bring to market and launch production of new drugs. At the same time, some companies made attempts to unfairly restrict possible competition by blocking the entry of competitors’ preparations to the market.
Then the All-Ukrainian Union for the Protection of Patients’ Rights and Safety addressed the head office of the Merck Sharp and Home Corp with a demand to influence its representative office in Ukraine and to stop blocking patients’ access to the antifungal generic drugs “Caspofungin” from different manufacturers. Thus, the Ukrainian branch of the pharmaceutical company, taking advantage of the legislative changes, adopted after the full-scale invasion of Russia, actually blocked the patients’ access to a number of products by artificially extending the term of their patent, which expired on April 16, 2022. In particular, we were talking about generic drugs Caspofungin-Teva, Caspofungin Acetate manufactured by Gland Pharma Limited, Caspofungin Rompharm manufactured by K.T. Rompharm Company, and Kasmig manufactured by Pharmaten UV.

Pharmaceutical manufacturers are waiting for the settlement of problems that have arisen after the adoption of the law on the protection of intellectual property rights during martial law in connection with the armed aggression of the Russian Federation at the beginning of the war.

This was reported to Interfax-Ukraine by representatives of pharmaceutical companies producing generic drugs.

According to the director of corporate, legal relations and compliance of pharmaceutical company “Darnitsa” Serguey Bobylev, in practice, the adoption of the law, which sought to prevent the loss of intellectual property rights by their owners during martial law, due to the fact that the first months of war, many rights holders, patent attorneys, lawyers and specialists for various reasons were not able to make in time to comply with the legislation of Ukraine to maintain these rights, “created a number of problems Ukrainian pharma

“The inaccurate wording of the law allowed certain companies to argue that intellectual property rights that expired during martial law continued in force. This has created the basis for litigation, in which the owners of such patents are trying to artificially extend their validity, thus creating a monopoly of certain medicines and therefore preventing the market entry of analogues that are of the same quality and effectiveness, but cost much less,” he said.

Bobylev noted that it takes an average of three years for a generic drug to enter the market, but “with the current wording of the law, it is impossible to invest in the development and entry into the market, because it is impossible to determine the end date of such artificially extended patents.

“As far as I know, about half a dozen of relevant disputes against competitors of patent owners are in Ukrainian courts. These lawsuits have actually stopped the release of several drugs. In addition, the very fact of going to court to protect patents that have finally expired and the uncertainty created by this stops many domestic and foreign pharmaceutical manufacturers from entering the Ukrainian market,” he said.

Bobylev noted that the biggest loser in this situation is the consumer, who is forced to use more expensive medicines without access to alternatives in the form of high-quality and cheaper generics in conditions of war and lower incomes.

“We need immediate clarification of one wording of the law in order for it to implement its real purpose, as reflected by the authors in the explanatory note to the bill, but without creating artificial grounds for the extension of patents. According to the Ukrainian National Office of Intellectual Property and Innovation, the appropriate changes have already been worked out and submitted to the parliament. We are waiting for the registration of the bill and its speedy adoption,” he said.

In turn, the director of government relations “Teva Ukraine” Marina Buchma, said that the extension of the patent during martial law is a non-standard situation: patent law provides protection for an invention for 20 years. Patents for medicines can be additionally extended for up to five years, i.e., the maximum duration of a patent cannot exceed 25 years.

“The situation seems to be exceptional and contrary to the interests of patients. After all, during martial law we need more stable access to drugs than ever before,” she said.

According to Buchma, after the law went into effect, it turned out that patents on some drugs were to expire in 2022 and that would have made it possible for generic drugs to appear on the market, these two drugs are caspofungin and etoricoxib.

“That said, it remains debatable whether extensions apply to patents that have expired the maximum term defined by patent law. Generic drugs were applied for registration in 2021 with the expectation that they could be marketed in 2022. Thus, some generic drugs are still not available to patients and the healthcare system,” she said.

Buchma noted that along with legislative mechanisms to resolve the problem that has arisen, “the pharmaceutical companies whose patents are extended by this law may take a voluntary decision to allow generic drugs to enter the market of Ukraine”.

As the agency was told by the company, at the moment Teva-Ukraine cannot bring to market the drugs caspofungin and etoricoxib due to the unjustified prolongation of patents during the martial law.

For his part, Pharmak’s legal support director Dmytro Taranchuk believes that the extension until the end of martial law of intellectual property rights has “no justification of procedural or procedural expediency, and is therefore discriminatory against market participants in Ukraine, both local and foreign.

“Adoption of the norm in the law on the extension of property rights for the period of martial law has led to an unprecedented monopoly, including in the market of medicines of Ukraine. There are cases when both basic and additional protection of rights to an invention has expired, but patent protection continues to be in force and gives the right to prohibit the use of his invention to the right holder. This is a dangerous precedent, including for the international system of protection of intellectual property rights,” he said.

Taranchuk noted that currently “monopolists retain the possibility of maintaining unreasonably high prices in the absence of competition.

“The norm of the law has a negative impact on the entire generic market of medicines in Ukraine and prevents the timely entry of generics into the market after the completion of patent protection. There are already precedents in Ukraine, when rightholders, using the norm of this law, through judicial institutions prohibit the sale of generic drugs, for example, containing molecules etoricoxib and caspofungin” – he said.

Taranchuk believes that “the authors of the bill were guided by motives to protect the interests of certain entities in the field of IP, rather than motives to protect the rights of entities in the field of IP.”

“The only effective way to solve this problem is to immediately repeal the provision of the law on the extension of property rights to protect fair competition in the markets, including medicines, and to protect the rights of consumers and patients to quality and affordable medicines in fair competition in the markets,” said the lawyer.

The attempt to regulate intellectual property rights issues during the war, undertaken after the full-scale invasion of Ukraine by Russia, has led to problems in the pharmaceutical market, the inability to introduce to the market and launch production of new drugs.

Such opinions were expressed by lawyers interviewed by Interfax-Ukraine, commenting on the consequences for the pharmaceutical market in Ukraine of the law on the protection of individuals’ interests in intellectual property during martial law, imposed in connection with the armed aggression of Russia against Ukraine, adopted in March 2022. The document extends the validity of all intellectual property rights without exception until the day following the day of termination or cancellation of martial law.

Partner and Co-Head of the Intellectual Property Practice at Arzinger Law Firm Taras Kisliy noted that the law was adopted at one of the most dramatic stages of military aggression, when many citizens were forced to leave their homes and could not fully work, “including those who work in the field of intellectual property – for example, submit documents for renewal of trademark certificates or patents for inventions”.

“In order to prevent this from leading to mass miss deadlines for filing all sorts of documents with the Patent Office, this law was basically passed. But its wording, unfortunately, was not clear enough and was perceived differently, primarily in relation to the pharmaceutical market, “- he said.

The lawyer explained that the originator pharmaceutical companies (owners of active drug patents – IF) “saw in this law that their patents, which should expire during the war, now will not actually expire and will remain in force as long as the war lasts”. As a result, after the law was passed, there was a discussion among intellectual property professionals. Some of their colleagues (including the authors of the law) believed that the patents had not been extended, while others insisted that the vague wording of the law could be interpreted as carte blanche for the originator pharmaceutical companies, which would hold a monopoly on their drugs throughout the war.

Kislyy specified that this led to dozens of lawsuits, disruption of entry into the market of cheaper generic drugs, state budget losses on more expensive drug purchases, reduced access to treatment for patients and many other negative consequences”.

The lawyer also stressed that in terms of extending the monopoly on pharmaceuticals, the adopted law directly contradicts the European commitments of Ukraine, in particular the provisions of the EU-Ukraine Association Agreement. At the same time, only international generic pharmaceutical companies that received an open-date monopoly benefited from the law.

“International generic pharmaceutical companies, which release cheaper analogues of drugs on the market after the end of patent protection, suffer greatly in this situation. Now they are deprived of the possibility to plan to enter the market with new drugs at all. All they have to do is to sue and hope that the court will make a legal decision in this situation of direct conflict with the provisions of the EU-Ukraine Association Agreement. However, trials are ongoing and the Supreme Court has not yet put a final point in this category of cases,” he said.

At the same time, Kislyy noted that the situation with domestic pharmaceutical manufacturers is even worse.

“The current interpretation of the law actually closes them to foreign markets due to the peculiarities of registration procedures, necessary for the sale of medicines,” – said the lawyer.

In turn, a lawyer of the law firm “Legal Alliance” Alexander Tsurkan said that the risks of losing intellectual property rights at the beginning of the war were indeed high and in some cases the law justifiably allowed to retain these rights to trademarks and patents, which expired during the martial law.

“An example can be given where a company owned trademarks and patents on drugs that expired after February 24, 2022. The company was relocated, the employees were outside of Ukraine and at the beginning of the war no one was physically able to file for renewal of IP rights. Thanks to this law all IP rights of the company were preserved, competitors were not able to take advantage of the expiration of trademark certificates and register identical trademarks. The loss of intellectual property rights for business is sometimes equal to the loss of business itself”, he said.

At the same time Tsurkan agrees that this law has a number of drawbacks. In particular, he called the extension of patents beyond their maximum possible term of legal protection one of its problems.

“The term of a patent in Ukraine is 20 years, and at the end of that term, legal protection is usually cancelled, and everyone can use the present invention. However, because of the law, patents that should have lost legal protection since the beginning of martial law continue to operate, and as a consequence some of the patents are already in effect for 21 years instead of the maximum term of 20 years,” he said.

In particular, the case of the drug “Caspofungin-Teva”, whose patent expired during martial law, is currently pending before the Cassation Economic Court. Plaintiff was the patent holder for the active ingredient “caspofungin,” and the patent expired on April 16, 2022, and after that date other pharmaceutical companies could use the substance in medicinal products without infringement.

The defendant, in turn, knowing of the termination of legal protection, applied for registration of a drug using the compound “caspofungin” and intended to begin selling such a drug after the termination of the plaintiff’s patent.

The trial and appellate courts found that the law extends the term of the patent, the defendant is prohibited from using the compound “caspofungin” and from selling the drug “Caspofungin-Teva” protected by such patent.

“Thus, the problematic aspect of the law is to provide the patent owner with an additional term of legal protection beyond the maximum possible, so other players in the market cannot produce an identical product,” Tsurkan explained.

At the same time, the lawyer noted that “Ukrpatent” has repeatedly pointed out in its letters that the continuation of patents, under the law, applies only to patents that could have been extended (and not to those that have been terminated – IF), but the courts did not agree with this position.

As an example, the lawyer cited a court case on the drug Exib, for which the patent was expiring during the war and another pharmaceutical company began using the chemical formula of the invention in its drugs. The court did not agree with the position of “Ukrpatent” and prohibited the use of the patent’s formulation, valid beyond the maximum possible period, in the drug “Exib.

“Thus, the courts now formally apply the law without deep analysis for compliance with international law and the arguments of “Ukrpatent”, which adds additional term of protection to patent owners, turning such patents into evergreen,” – said Tsurkan.

According to him, pharmaceutical companies very carefully monitor the validity of their competitors’ patents and in the last months of the patents they start preparatory actions to bring new drugs to the market.

“Because of this law, after the end of 20 years of patent protection, the companies that expected to bring the product to market cannot do so, because the IP rights of the patent owner formally continue to operate even in cases where they should no longer. In this situation, on the one hand, there is a positive effect for pharmaceutical companies, which are owners of patents, because they have received an additional period of legal protection, but on the other hand pharmaceutical companies, having made pre-sale preparation and waiting for the end of the patent, cannot sell their medicinal product,” he said.

“The law was passed at a difficult time and was intended to protect and equitably preserve intellectual property rights in every possible way. However, the creation of legislative opportunities to provide additional term of legal protection contrary to the provisions of international conventions is a negative effect for many players in the market, “- said the lawyer.

For her part, partner of the law firm Asters Yulia Semenii also believes that the need for this law was due to the war, and its purpose was to prevent the applicants and right holders from losing their rights due to noncompliance with the terms. However, the situation with patents in the pharmaceutical market was a side effect of this document.

To resolve the problem, according to Semenya, could be the position of the Supreme Court in this category of cases, where it will be determined that the law does not extend the patents for medicines or to amend it.

“All bona fide pharmaceutical players always strive for transparent and clear rules of the game. Now the said law has created chaos, the elimination of which is waiting for the whole pharmaceutical market”, – stressed the lawyer.