Is Croatia Ready?

Article by Anamarija Stančić Petrović, IP Specialist and PETOŠEVIĆ Croatia Director, published in The Patent Lawyer, May/June 2013

After amendments to industrial and intellectual property legislation in Croatia in 2003, 2007, 2009 and 2011, the country’s IP laws were completely harmonized with the acquis communautaire, as confirmed by closing the Chapter VII on Intellectual Property Rights of pre-accession negotiations of the Republic of Croatia with the European Union (EU). This is particularly important for the Croatian economy, as Croatia, albeit not a full EU member state, already enjoys the same benefits regarding the protection and utilization of intellectual property as any existing member state, with the exception of Community Trademark and
Industrial Design protection that will be possible after the accession.

Since Croatian independence, the system of industrial and intellectual protection in Croatia has gradually evolved. It has followed international standards, mainly applying the German model. This resulted in complete harmonization of intellectual property laws with the acquis in 2007 and 2009.

In addition to the harmonization of its industrial and intellectual property laws, in order to broaden the scope of IP protection, Croatia has amended and enforced the following laws (lex specialis):

• Trade Law;
• Corporate Law;
• Labor Law;
• Law on Medicines;
• Law on Veterinary Drugs and Veterinary-Medicinal Products;
• Law on Protection on Plant Varieties;
• Food Law; and
• Wine Law.

A national system

On 13 July 2005, the Government of the Republic of Croatia, together with the Croatian State Intellectual Property Office (CSIPO), accepted the strategic plan of
implementation of intellectual property rights and issued the document on the National System of Intellectual Property (Nacionalni sustav intelektualnog vlasništva — NSIV). This document elaborates in depth the strategic plan for implementating and enforcing intellectual property rights in Croatia. The strategic plan sets out a national intellectual property system involving relevant Government administration bodies; courts; collective societies; IP owners and their associations, corporations and their associations, consumers’ associations, registered patent and trademark representatives and other professionals in the IP filed.

The purpose of the document was to encourage economic, scientific and cultural development of Croatia, assuring a reliable system of protection and exploitation of intellectual property. In that sense, the Government worked on its strategic goals to:

• adapt IP laws to the acquis communautaire;
• reinforce the institutional framework through development of relevant institutions and government bodies;
• modernize and speed up relevant enforcement procedures;
• train judges;
• hire more qualified professionals within the relevant institutions;
• improve national intellectual property infrastructure;
• improve enforcement of intellectual property rights;
• increase intellectual property awareness; and
• integrate on a regional and global level through international cooperation.

The positive outcome of harmonization was to achieve a more efficient system of intellectual property protection as well as its more efficient enforcement. As regards principle of territoriality, joining the EU would not affect the business community in Croatia very much.

Impact of changes in patent legislation

Croatia joining the European Patent Convention system (from 1 April 2004, but practically from 1 January 2008 by becoming an official full member of the European Patent Office) was not directly linked to the harmonization with the acquis, but has brought an increase in the number of European patent extension/validation requests in Croatia by international patent holders. A significant increase was also recorded after Croatia signed the London Agreement and started implementation of Article 65 of the EPC (stipulating that only patent claims of a published granted European Patent need to be translated
into a local language). Thus, an increase in the number of European patents validated in Croatia can still be expected, but it is likely to remain relatively modest in comparison with the total number of granted patents worldwide. Increases in the number of IP rights valid in the territory of the Republic of Croatia will make provisional searches on prior rights a prerequisite for doing business in Croatia, which will increase the demand for better management of IP rights among local companies.

Furthermore, as a consequence of accession to the EU, the territory in which the principle of an exhaustion of intellectual property rights applies will be extended to the whole territory of the European Union. This principle implies that a patent holder cannot prohibit further distribution of a product that is the subject matter of intellectual property protection on the territory on which he had put the product into circulation on the market for the first time.

SPC: Major Change

As regards formal harmonization of Croatian Patent Law, the introduction of the Supplementary Protection Certificate (SPC) will definitely influence the manufacture of medicines for human or animal use and production of crops, respectively. The provisions on SPC patent protection were introduced by the Patent Law in 2004, but will enter into force on the day when Croatia becomes a full EU member state (expected on 1 July 2013).

When the relevant provision on SPC patent protection enters into force, patent holders will be able to extend the protection of their basic patent for a patented product for which the market authorization has been granted by a relevant authority. Supplementary protection is beneficial to the pharmaceutical and chemical sectors which base their business on their own research and development, thereby contributing to the technological progress, medicinal progress and progress of healthcare, as well as to the food industry.

On the other hand, extension of patent protection enables further monopolization of the market and a dominant position that enables patent owners to raise market prices of a patented product. Therefore, introduction of the SPC will mostly affect business activities of generic pharmaceutical companies, and to some extent affect the overall costs of the public health insurance system.

Currently the effective period of market exclusivity in Croatia, in other words the period of data exclusivity, is 6 years plus the time it takes to register and market the generic drug — minimum 1 year but typically 1 to 3 years.

According to Article 15 of the Croatian Medicinal Products Act (Official gazette, No. 71/07, 45/09 and 124/11), data exclusivity applies to Reference Medicinal Products which were granted marketing authorization in the Republic of Croatia or in any EU Member State not more than six years ago. However, the above Article 15 will not be effective when Croatia becomes a full EU member. Namely, Article 15 will be amended with Article 15a stipulating that:

“The marketing authorization applicant shall not be required to enclose the results of pre-clinical tests or the results of clinical trials if he can demonstrate that the drug product is essentially similar to the reference medicinal product, provided that the reference product was granted marketing authorization in the Republic of Croatia or any EU Member State more than six years ago or for more than ten years for reference medicinal product for which the marketing approval was given in EU through centralized procedure for any strength, pharmaceutical form, method of administration or packaging.” (Amending Law on Medicinal Products — OG 45/09)

Three years from the accession of Croatia to the EU, the new provisions will be added to Article 15 as Article 15a, by which time the data exclusivity period will be extended to 8 years.

Article 15a of the Amending Law stipulates that:

“The marketing authorization applicant shall not be required to enclose the results of pre-clinical tests or the results of clinical trials if he can demonstrate that the drug product is essentially similar to the reference medicinal product, provided that the reference product was granted marketing authorization in the Republic of Croatia or any EU Member State more than eight years ago for any strength, pharmaceutical form, method of administration or packaging. The
marketing authorization holder cannot put this medicinal product on the market ten years from the date of the first marketing approval of the reference medicinal product. This period of ten years can be extended for another year for new indication”.

Thus, for example, if the product has already been approved in the EU through the central procedure, the date of approval in the European Union is the date when the period of data exclusivity starts and the 10 years data exclusivity period applies.

If a drug was approved in the European Union (eg, in 2004) and 10 years data exclusivity period applies (meaning that it has not expired yet), all marketing authorizations granted in Croatia for generic products based on reference drug products for which the data exclusivity period in the European Union (8 or 10 years) has not elapsed, will have to be withdrawn.

A possible serious obstacle to generic pharmaceutical companies is that Croatia has no transitional period for applying the rules of data exclusivity. This means that on the date of accession the decisions for the centrally authorized products will apply immediately.¹

Because of the lack of transitional provisions, generic pharmaceutical companies may be liable for misdemeanor if their generic drugs are still available on the market on the day of Croatia’s EU accession or later, but only where the new exclusivity period of 10 years has not expired. It is reasonable to assume that most generic companies have not prepared for this yet.² They still have large quantities of medicines and medicinal products on stock that will have to be
withdrawn from the market on and after 1 July 2013. As a result, implementation of the provisions of the SPC after Croatia becomes a full EU member will bring notable changes in the pharmaceutical sector in Croatia.

Compulsory license available

Compulsory licenses are also available in Croatia. Requests for a compulsory license can be filed before the relevant court in Croatia and the relevant provisions on terms and duration of compulsory license are governed by the provisions of Article 68, Chapter VII of the Croatian Patent Law.

Harmonization of enforcement laws

Croatia has also amended its laws in accordance with the Directive 2004/48/EC on the enforcement of intellectual property rights. The relevant set of general and special laws apply in the Croatian system of enforcement of intellectual property rights in the civil proceedings.

The general laws include the Law on Civil Procedure, while injunctions and other measures for gathering and preserving the evidence (such as search orders etc) are governed by the Enforcement Law. For contractual issues that are not governed by special intellectual property laws, such as compensation for damages, the general rules of Law on Obligations apply.

Special laws that govern the protection and enforcement of intellectual property rights are:

• Law on Patents,
• Law on Trade Marks,
• Law on Industrial Designs,
• Law on Geographical Indications,
• Law on Copyright and Related Rights,
• Law on Topographies and Semiconductors, and
• Law on Protection of Plant Variety.

Patent protection and enforcement

Administrative proceedings and administrative disputes: Croatian State IP Office (CSIPO) is the competent authority for administrative proceedings regarding grant of a patent as well as invalidation and nullity proceedings.

The decisions of CSIPO can be appealed before the Appeal Board on a first instance. Administrative complaint against the decisions of the Board of Appeal can be filed with the Administrative Court on a second instance.

The decisions of the Administrative court can be appealed before the High Administrative Court of the Republic of Croatia.

Civil proceedings: The Commercial Court is competent for civil proceedings of patent infringement disputes in the Republic of Croatia. There are four Commercial courts in Croatia, namely in Zagreb, Split, Rijeka and Osijek. The civil law suit, as a legal remedy in the civil proceeding for patent infringement, can be filed by patent holder for breach of patent rights to the competent court, against natural or legal persons as the alleged infringer. The appeals against judgments of the commercial courts can be brought to the High Commercial Court.

Misdemeanor proceedings: The State Inspectorate within its authority monitors the implementation of the intellectual property laws. The inspectors instigate ex-officio inspections and based on applications submitted by natural or legal entities.

Misdemeanor proceedings are initiated before the Misdemeanor courts at the first instance. The appeals of the first instance decision of the Misdemeanor court can be filed with the High Misdemeanor Court which rules on a second instance.

Customs enforcement of patent rights: Enforcement of patent rights is available in Croatia through customs measures. The Council Regulation (EC) No 1383/2003 of 22 July 2003 has been completely implemented into the Croatian Customs Regulations for border protection of intellectual property rights.

Conclusions

In theory, considering the above facts, it can be said that Croatia is ready to join the EU in July 2013. It seems accession will not bring substantial changes into the already regulated local patent protection system. How this will reflect in practice is yet to be seen. Croatia will most probably join the Unitary Patent System. This may bring some benefits to the local SME’s, like obtaining patent protection at a relatively low cost.

When Croatia enters the EU its enterprises will be directly affected by a new economic situation. A large market of significant potential will open, but at the same time, playing there will require significant technical, marketing and financial preparation. Despite quite liberal economic policies applied so far on the Croatian market, the local economy will have to invest additional efforts in order to retain its position.

In order to encourage local enterprises, the Croatian Government and other stakeholders should better identify and provide support to various research and development projects in order to help to improve SME’s competitiveness.