In its decision of 5 July 2024 (Case No. 18372), the Italian Supreme Court provided better clarification on the application of article 68(1)(b) of the Italian Intellectual Property Code (IPC), the sub-article that limits the exclusive rights that a patent confers with respect to research and experimentation conducted for the purpose of obtaining a marketing authorisation (MA), for pharmaceuticals.

The ruling addresses critical issues regarding who is entitled to benefit from the Bolar exemption, particularly its application to third-party manufacturers and the conditions under which their activities may be exempt from patent infringement.

The Bolar exemption

As a preliminary matter, it is essential first to clarify the nature of the Bolar exemption. The Bolar exemption is a specific legal provision that allows pharmaceutical companies to carry on activities involving a patented invention for the purpose of regulatory approval prior to the patent expiring. The name derives from a key US case, Roche Products Inc v Bolar Pharmaceutical Co, which led to legislative changes allowing generic drug manufacturers to use patented drugs for testing to obtain regulatory approval, thereby ensuring that generic versions would be ready for market launch immediately upon patent expiration.

The Bolar exemption is intended to strike a balance between the rights of patent holders and the public interest in timely access to affordable medicines. It permits activities such as research, development and clinical testing by manufacturers of generic drugs that involve a patented product, even while the product is under patent protection. The goal is to prevent the effective extension of market exclusivity beyond the patent term due to delays in the regulatory approval process, allowing generic drugs to enter the market promptly once patent protection ends.

Italian litigation

The legal dispute originated in 2014, when Bo.In. Pharma GmbH & Co KG initiated proceedings against Teva Pharmaceutical Industries SpA and Sicor Società Italiana Corticosteroidi Srl for patent infringement. The patent in question, a European patent covering a class of compounds including tiotropium bromide (the active ingredient in Spiriva, a bronchodilator), had expired in 2010, while the associated supplementary protection certificate (SPC) expired in 2016.

Bo.In. Pharma argued that the Bolar exemption should only apply to entities that conducted internal research and development activities strictly for the purpose of obtaining their own MA. In contrast, Sicor and Teva had acted merely as producers and resellers, promoting and offering the active ingredient tiotropium bromide for sale without directly seeking regulatory approval.

First-instance decision

In Judgment No. 8273/2018, the Court of Milan ruled in favour of Bo.In. Pharma, establishing several critical points about the Bolar clause:

• The Bolar exemption does not apply to mere producers or resellers of an active ingredient protected by a patent, especially when their activities are not aimed at obtaining their own MA. The clause is meant to benefit entities that undertake research and production activities specifically to seek marketing authorisation for generic drugs.
• However, the Bolar exemption may extend to third-party manufacturers who produce the active ingredient on behalf of generic manufacturers that are unable to produce the ingredient themselves. The third-party’s activities are considered lawful if they are closely tied to the generic manufacturer’s regulatory objectives, specifically if the third party’s production aims to support the generic manufacturer’s entry into the market once the patent protection expires. In such cases, the third party’s profit is seen as remuneration for services rendered, rather than infringement.
• Importantly, the court clarified that the Bolar exemption requires the third party’s production and commercialisation activities to be conducted exclusively at the request of the generic manufacturer, and not independently, as had been the case with Sicor and Teva.

Court of Appeal decision

The Court of Appeal of Milan, in Judgment No. 1785/2021, upheld the first instance decision and further articulated the principle that manufacturers of the active ingredient must be able to demonstrate that they acted in response to a request from a generic manufacturer. Moreover, the manufacturer must have in place contractual safeguards, such as penalty clauses, to ensure that the generic manufacturer uses the active ingredient solely for purposes related to the Bolar exemption.

This ruling emphasised the need for manufacturers to adopt adequate regulatory controls in their agreements with generic manufacturers to ensure that the active ingredient is used exclusively for regulatory purposes.

Court of Cassation’s ruling: key legal principles

The Italian Court of Cassation confirmed the decisions of the lower courts, establishing the following key principles:

• Purpose and rationale of the Bolar clause: the Bolar exemption aims at facilitating the timely entry of generic drugs into the market, thereby preventing the unjustified extension of patent protection. The clause allows generic manufacturers to commence the necessary administrative and experimental activities required for obtaining an MA, even while the original patent or an SPC remains in force. This exemption serves to limit the exclusive rights of the patent holder by preventing any unwarranted delay in the introduction of generic drugs, particularly in the pharmaceutical sector, where the public interest has a prominent role.
• Application to third parties: the Bolar exemption may apply to third-party manufacturers of patented active ingredients when those manufacturers engage in production or research for the regulatory purposes of a generic manufacturer. However, for this broader interpretation to apply, the third-party manufacturer must demonstrate that the Bolar-related purpose is clear from the outset. This requires:
  • a prior request from the generic manufacturer; and
  • a contractual stipulation that limits the use of the active ingredient to Bolar-related purposes only. This contractual framework must clearly establish that the active ingredient is being produced or used solely for the regulatory process of obtaining an MA.
• Strict interpretation of the clause: although the Bolar clause was introduced to promote market competition by enabling generic drug entry, the court emphasised the need for a strict interpretation. This means that independent commercial activities, such as marketing or offering the active ingredient for sale, fall outside the scope of the Bolar exemption unless they are directly related to the regulatory purpose of obtaining an MA.

Reasoning of the Court of Cassation

The Court of Cassation distinguished between article 68(1)(b) IPC, which pertains to activities aimed at obtaining marketing authorisation, and article 68(1)(a), which covers experimental activities intended to surpass or improve the patented invention. The Court explained that the 2010 amendments to article 68 clarified that the legality of an activity depends on its direct connection to the process of obtaining an MA. This holds true even if the patent or SPC is still in force.

Furthermore, the Court emphasised that article 68(1)(b) must be interpreted in a way that balances two competing interests:

• the public interest in ensuring the timely entry of generic drugs into the market; and
• the patent-holder’s interest in safeguarding their exclusive rights during the patent’s term.

Expanded scope of the Bolar exemption

The Court also clarified that article 68(1)(b) does not require the entity applying for the MA to have directly manufactured the active ingredient or conducted the necessary experimental activities. Instead, the key factor is the purpose of the activities, which must be aimed at enabling the timely market entry of generic drugs.

Thus, third-party manufacturers engaged in the production, research or experimentation of a patented active ingredient can benefit from the Bolar exemption if their activities are conducted for the regulatory purposes of a generic manufacturer. In such cases, the Bolar purpose must be clear from the outset, as established through:

• a contractual relationship between the third-party manufacturer and the generic manufacturer, explicitly linking the production and commercialisation of the active ingredient to the filing of an application for an MA; and
• the third-party manufacturer acting solely in response to the generic manufacturer’s request, ensuring that the active ingredient is used exclusively for Bolar-related purposes.

Contractual safeguards and compliance

The ruling stressed the importance of having contractual safeguards to ensure that third-party manufacturers comply with the Bolar clause. Manufacturers must be able to demonstrate that they have adopted adequate measures to prevent the misuse of the active ingredient. These measures may include:

• penalty clauses, which impose financial sanctions on the generic manufacturer if the active ingredient is used for purposes other than those covered by the Bolar exemption; and
• explicit contractual limitations specifying that the active ingredient can only be used for activities related to the regulatory approval process for a generic drug.

These contractual mechanisms ensure that third-party manufacturers are protected from liability, provided they adhere to the legal boundaries of the Bolar exemption.

Conclusion

The 2024 ruling by the Italian Court of Cassation provides a nuanced interpretation of the Bolar exemption, setting forth clear parameters for its application. The decision emphasises the importance of contractual clarity and purpose-driven activities, ensuring that third-party manufacturers can rely on the Bolar exemption while respecting the exclusive rights of patent holders.

Moving forward, companies involved in producing and commercialising patented active ingredients must ensure that they operate within a clear contractual framework that explicitly ties their activities to regulatory approval processes. The contracts must establish safeguards, such as penalty clauses, to guarantee that the active ingredient is used solely for Bolar-related purposes.

This approach promotes a fair balance between competition in the pharmaceutical market and patent protection, ensuring the timely introduction of affordable generic drugs to benefit public health.