International Economic Law and Policy Blog

Guest Post: Are the revisions to the EU’s ‘Bolar’ system compatible with TRIPS?

This is a guest post from Maarten Meulenbelt, Chris Boyle, Lauren Shapiro, Maryanne Kamau, and Alix Vermulst of Sidley Austin. The full article on which the post is based is available here.

In the EU, much has been written about the so-called “Pharma Review” proposals, published  by the European Commission (“Commission”) on 26 April 2023.  One of the main goals of the Pharma Review (set out in a proposed Pharmaceutical Directive and a Pharmaceutical Regulation) is to steer investment into areas of unmet medical needs by reducing and “modulating” the main intellectual property (“IP”) and regulatory rights – such as regulatory data protection (“RDP”) and orphan market exclusivity – and to speed up generic and biosimilar market access.[1]  The Pharma Review is currently going through the legislative process.[2]

One of the proposed EU measures to speed up generic and biosimilar market access deserves particular attention from an international IP law perspective: the proposal to expand the so-called “Bolar exemption”.  This wide-reaching proposal raises significant concerns under international law, as it is likely incompatible with the EU’s obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”).  

Currently, the EU’s Bolar exemption exempts from patent infringement the “necessary studies and trials” conducted by generic/biosimilar applicants and “consequential practical requirements” to obtain a marketing authorisation.  As part of the Pharma Review, the Commission’s proposal seeks to expand the scope of the Bolar exemption to include, inter alia, situations where a reference medicinal product is used to generate data for an application for pricing and reimbursement (“P&R Bolar”).  If amended as proposed by the  European Parliament on 10 April 2024, the P&R Bolar would allow, potentially years before  the relevant patent expiry date (“Day 1”), any activity reasonably related to pricing and reimbursement (“P&R”) procedures or approvals at Member State level, including negotiations with payors on prices and quantities (and potentially listing) of generic and biosimilar products. There has been no published impact assessment for these proposals. They offer no mechanism to determine the “Day 1” date, no clear safeguards, and no clarity on whether the “signalling” function of P&R steps would be preserved for the enforcement of patents.

The present article is limited to assessing the consistency of the P&R Bolar with TRIPS, as applied to patents (Supplementary Protection Certificates are not discussed).  We find strong arguments that the proposal is inconsistent with the EU’s obligations under TRIPS.

There is no doubt that the P&R Bolar encroaches upon the rights set out in Article 28.1 of TRIPS (“Rights Conferred”).  Indeed, the sole purpose of the P&R Bolar is to permit any generic or biosimilar applicant seeking a marketing authorisation (“MA”), a health technology assessment (“HTA”) or P&R to engage in activities that would otherwise be reserved to the patent holder during the patent term.  The EU would bear the burden of proof of justification of this infringement under the three cumulative conditions of Article 30 of TRIPS (“Exceptions to Rights Conferred”).

The EU is unlikely to be able to meet this burden of proof under Article 30 of TRIPS.  Given the wide scope of activities permitted, and the lack of definition of the core concept of “Day 1” market entry, the P&R Bolar can hardly be called “limited”.  The P&R Bolar interferes with “normal exploitation”, especially where it would permit offers for sale before the expiration of the patent.  The “legitimate interest” of patent holders does not appear sufficiently protected, and there is no consensus view in society that generic and biosimilar companies should be able to engage, for an undefined period of time before the expiration of the patent, in any activities including offers and negotiations of post-expiry supplies to obtain P&R.

The P&R Bolar also appears inconsistent with Article 27.1 of TRIPS (“Patentable Subject Matter”) because it unjustifiably imposes differentially disadvantageous treatment to inventions in the field of medicinal products relative to inventions in all other fields of technology.  The P&R Bolar differs from the measures examined in the Canada – Pharmaceutical Patents case in this respect: the Canadian laws at issue in that case were not, as the P&R Bolar, limited to medicinal products.

By adopting the P&R Bolar, which we find to be inconsistent with the relevant requirements in Articles 27.1, 28.1, and 30 of TRIPS, the EU would not be giving effect to all provisions of TRIPS – and is contravening certain provisions of TRIPS – in violation of Article 1.1 of TRIPS.

 

[1] The  Pharma Review should be assessed together with the Patent Package, published by the Commission on 27 April 2023, which includes proposals on Supplementary Protection Certificates, Compulsory Licensing and Standard Essential Patents.

[2] See https://goodlifesci.sidley.com/2024/03/19/eus-overhaul-of-pharma-legislation-amended-with-uneasy-ip-compromises/.

The ITC's USMCA Report: The IP Section

This is from the IP section of the ITC's USMCA report (starts on p. 213):

Modeling of Changes to Key IPR Provisions

The Commission’s quantitative assessment of the effects of key IPR changes in USMCA identifies the statistical relationships between trade in certain IPR-intensive manufacturing sectors and increased IPR protections under USMCA, and then incorporates the results into an economy-wide model as ad valorem trade cost equivalents.592 The underlying intuition for the quantitative assessment, which is supported by a substantial economic literature,593 is that improvements in IPR protections facilitate trade in IPR-intensive goods and services.594

_________________

^{594 Commissioner Kearns notes that the rationale for IPR provisions is that they encourage innovation by protecting rights holders in a way that may hurt consumers through higher short-run prices on innovative products, but provide the benefits of these products to consumers and the economy. This model, however, treats IPR protections as equivalent to a reduction in trade barriers or costs. Commissioner Kearns looks forward to methods of modeling the effect of IPR provisions in ways that better reflect their rationale and impact on the economy.}

I agree with Commissioner Kearns here, and I encourage economists to figure out better ways to model the impact of IPR protections on the economy, although I think he and I may have to wait a long time for this.

Does CETA Violate WTO Obligations? How About NAFTA Chapter 11?

This is from the U.S. dairy industry:

The text of the European Union-Canada Comprehensive Economic and Trade Agreement (CETA) released at the end of last week contains provisions on geographical indications (GIs) and reallocates a portion of the World Trade Organization tariff rate quota for cheese to the EU. The U.S. dairy industry expressed concern today that these provisions would raise artificial trade barriers restricting market access for American cheeses to the Canadian market. In addition, CETA provides very limited access to many EU dairy products as a result of the agreement's prioritization of the GI goals of a few "squeaky wheels," at the expense of broader gains across the full EU dairy industry, according to U.S. dairy industry trade groups.

The provisions on geographical indications are particularly alarming because they grant automatic protection to the EU for "asiago," "feta," "fontina," "gorgonzola" and "munster" in complete disregard of Canadian intellectual property laws. Cheese manufacturers that produced those cheeses prior to October 18, 2013, will be allowed to continue to use those names, but future producers of those cheeses will have to add qualifiers, such as "kind," "type," "style" and "imitation." These new limitations on the use of generic names clearly violate Canadian intellectual property procedures and existing international trade commitments.

"The automatic protection for five cheese names that are generic in Canada, the U.S. and globally is another example of the EU's overreach on geographical indications," said Clay Hough, senior group vice president of the International Dairy Foods Association (IDFA).  "The EU's GI strategy is incompatible with the fundamental goal of a trade negotiation, which is to remove trade barriers—not add them—and allow for greater competition."

Would the U.S. government challenge Canadian actions taken to implement the CETA on these issues in a WTO complaint?  If the U.S. industry has any investment in Canada, would it bring a NAFTA Chapter 11 complaint?

Soaring Prices and Access to Vaccines: A New Mission for WTO TRIPS flexibilities?

A must-read article that appeared in the New York Times a couple of days ago nyti.ms/1t8ugtz details the soaring cost of vaccines and the potentially disastrous public health consequences (some of which are already being felt).   This seems an ideal case for compulsory licensing.  I would note that under Article 31 (b) of TRIPs the normal condition of compulsory licensing, that "the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time" may be waived in the case of "public non-commercial use".  Vaccination programs of public health authorities would clearly count as "public non-commercial use."

The NYT article is US-focused but one can imagine the global consequences are even more severe. The article does allude to some initiatives whereby pharamaceutical companies sell vaccines to least-developed-countries at low prices (the GAVI public private/partnership is one of those the article may be referring to).  But the public health implications for countries not eligible for such initiatives are huge.  Unfortunately, since they also do some real good, Initiatives such as GAVI tend to obscure one basic root of the problem, which is the incentives and rents confered by patent protection.

Concerted resort to compulsory licensing, or threat thereof, by large countries-BRICs and perhaps others as well -is likely to bring down the price of vaccines considerably (perhaps more than bargains between individual countries and big pharma, though that's just an intuition based on some game-theoretical instincts, and information asymmetries; at a minimum governments should be discouraged from entering into confidentiality undertakings with respect to the deals they receive, and it would be great to have an information exchange about such deals).  Concerted action is also likely to be more effective in countering political pressures originating with the pharma lobbies.  Of course, as is well-presented in this 2009 WHO/UNICEF study bit.ly/1ol7F6o, there are factors that affect the costs of vaccines that are not attributable to the monopoly rents big pharma earns due to patent protection.   Nevertheless the NYT article notes the extraordinary profitability of vaccines to big pharma relative to other drugs.  The Times observes with respect to just one vaccine, "Pfizer, the sole manufacturer ahd revenues of nearly $4 billion from its Prevnar vaccinelast year, about double what it made from high-profile drugs like Lipitor and Viagra, which now face generic competitors." So clearly the monopoly rents from patent protection are a significant contributor to the problem.

I offer these observations not as an expert on the issue of vaccines and communicable diseases-I'm not by any means that,obviously-but because it seems to me that the TRIPs flexibilities offer one avenue to help address the challenge, and we ought to be starting a discussion about how to bring that in.  Mainly, I'd just like to encourage everyone to read the Times piece and think about how international economic law can be part of the solution not the problem.

 

             

Why Can't We Discriminate in Relation to Patents Based on the Field of Technology?

Article 27.1 of the TRIPS Agreement says: "patents shall be available and patent rights enjoyable without discrimination as to the ... the field of technology."  The law is pretty clear, and doesn't leave much wiggle room.

But why is that the rule?  Why shouldn't countries discriminate in relation to patents based on the field of technology?  Aren't some patents more valuable to society than others?  Aren't patents for pharmaceuticals more valuable than patents for, say, pumpkin carving tools?  Why not give longer patent terms for life-saving drugs than for less important things?

More Support for India's Patent Policies

From economists Joseph Stiglitz and Arjun Jayadev:

The Indian Supreme Court’s refusal to uphold the patent on Gleevec, the blockbuster cancer drug developed by the Swiss pharmaceutical giant Novartis, is good news for many of those in India suffering from cancer. If other developing countries follow India’s example, it will be good news elsewhere, too: more money could be devoted to other needs, whether fighting AIDS, providing education, or making investments that enable growth and poverty reduction.

But the Indian decision also means less money for the big multinational pharmaceutical companies. Not surprisingly, this has led to an overwrought response from them and their lobbyists: the ruling, they allege, destroys the incentive to innovate, and thus will deal a serious blow to public health globally.

These claims are wildly overstated. In both economic and social-policy terms, the Indian court’s decision makes good sense. Moreover, it is only a localized effort at rebalancing a global intellectual-property (IP) regime that is tilted heavily toward pharmaceutical interests at the expense of social welfare. Indeed, there is a growing consensus among economists that the current IP regime actually stifles innovation.

"Is India undervaluing patents or is the rest of the world overvaluing them?"

Economist Arvind Subramanian comments on the Indian Supreme Court's Novartis ruling:

Critics have suggested that India is a deviant for being the only country where Novartis’ claim has been rejected. Left out is the fact that even in the United States, the Novartis application—which was really for a successor version of Glivec—was in fact first rejected by the patent office, only for a higher authority to overturn the initial ruling. The Indian verdict, like that of the US patent office, may well be more within the range of reasonable interpretations of what constitutes patentability than has been asserted by critics.

...

Other developing countries, such as Brazil, Thailand, and even China, could be emboldened by the Indian example and decide to dilute their own patent protection regimes. Even more consequential could be the impact on advanced economy patent regimes.

The US patent system has come in for intense scrutiny for its patent proliferation (including frivolous patents), its increasing tendency to hinder competition rather than promote innovation, and especially for its capture by patent owners with deep pockets. (These are explained at length in an excellent recent paper in the Journal of Economic Perspectives by Professors Boldrin and Levine of the University of Washington, St. Louis, MO). A body of opinion argues vehemently that in fact the US patent system is broken and needs radical overhaul.

At such a time, the Indian Supreme Court ruling—as a new and independent voice—could add to the momentum for a fundamental reassessment. The ruling is appealing because it asks a question that was both naïve and salient. The judges wanted to know whether the Novartis patent is a ruse to prolong an existing monopoly beyond reasonable limits, a question that has wider resonance.

Is India undervaluing patents or is the rest of the world overvaluing them? That might be one of the more intriguing questions raised by the Supreme Court ruling.

I'm not expecting a "radical overhaul" of the U.S. patent system any time soon.  But I do see a rising tide of criticism of existing IP protections.  At the least, perhaps this might prompt some debate on these issues.

TRIPS and Australia's Draft Law on Plain Packaging of Cigarettes

From yesterday's TRIPS Council meeting:

... the Dominican Republic objected to a draft Australian law requiring cigarettes to be sold in plain packaging without logos or trademarks. The brands would be identified simply in a standard typeface with large graphic health warnings.

Australia originally notified the draft and the public consultation on it under the Technical Barriers to Trade (TBT) Agreement, in documentG/TBT/N/AUS/69, which contains details of the requirements. (See alsothis Australian government web page, which includes images of samples of the proposed packaging.)

Support or sympathy for the Dominican Republic came from Honduras, Nicaragua, Ukraine, the Philippines, Zambia, Mexico, Cuba and Ecuador.

The Dominican Republic said it has “serious and grave” concerns that the proposed law would also violate the WTO’s intellectual property agreement and the linked Paris Convention. Among the legal concerns was that it would be a “special requirement” that would “unjustifiably” encumber the use of trademarks “in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings” (TRIPS Article 20).

The proposed law, the Dominican Republic argued, would hurt tobacco producers in small and vulnerable economies. It would fail to reduce smoking because the lower costs of the packaging and the competition on price — the only remaining marketing tool available — would make cigarettes cheaper and encourage higher consumption. It would also make counterfeiting easier, it said. But it added that it does recognize countries’ right to protect public health.

Australia explained why the law has been proposed — as the next available step in the campaign to deal with a major and lethal health hazard. Higher excise duties and the possibility of using anti-counterfeiting labelling would make the cigarettes more expensive and prevent smuggling, it said. Australia will do this in a way that complies with its international obligations, it added.

New Zealand, Uruguay and Norway said Australia’s draft law is justified. India did not comment on the law specifically but said studies show that plain packaging does reduce smoking. India, Brazil and Cuba stressed their view that countries have the right to implement public health policies without intellectual property being an obstacle — referring directly or indirectly to the 2001 Doha Declaration on TRIPS and Public Health.

Brazil, Chile, Ecuador and China described the issue as complex, requiring balance and a closer examination. Switzerland said it understands both sides of the debate and expects Australia to abide by its TRIPS obligations.

The World Health Organization (WHO), an observer in the TRIPS Council provided information on its policies and on the WHO Framework Convention on Tobacco Control.

Interestingly, it appears to be mostly developing countries invoking the TRIPS Agreement against a developed country.

See this old post, including the excellent comments, for more on the issue.

The EU Tries to Co-opt Some Americans on GIs

From Reuters:

A gourmet coffee from the island of Hawaii won an European prize for top quality foods on Saturday as part of Europe's efforts to bolster the global use of prestigious place names like Champagne, Parma or Roquefort.

The European Union is in a long-running dispute with countries such as the United States over the enforcement of geographical names for some of the world's most popular foods to stem the booming trade in counterfeit goods.

"(The prize) is a symbol of solidarity towards Hawaiian producers and of a shared battle aimed at eliminating all imitations," Leo Bertozzi, director of Italy's Parmigiano-Reggiano cheese consortium which assigns the annual prize, said in a statement.

The EU is pushing to extend protection under the World Trade Organisation rules to all "geographical indicators" -- the names of foods and wines based on places such as Champagne and Parma -- but is being resisted by the U.S. and other New World producers.

...

Kona coffee grows on the slopes of Hawaiian mountains, in rich volcanic soil and is hand picked, sun dried and custom roasted. Kona coffee has a premium price of $29.87 per lb, compared with the average retail price of $3.17 per lb, according to the Food and Agriculture Organization data.

Pascal Lamy and Designations of Origin

From a recent speech:

In the 19th Century, when Ricardo developed what was to become the foundations of international trade theory, countries exported what they produced. In fact, the industrial revolution took root in countries that had coal mines and iron ore. A Portuguese entrepreneur importing a steam engine from England would know that everything from the steel of the wheels to the boiler pressure gauge came from the United Kingdom. Similarly, an English club importing Port wine for its members could be sure that it came from Portugal.

Today, Port wine is still of Portuguese origin. Thanks to progress on registered designations of origin, the English importer today is in fact more certain of this than his 19th Century counterpart. However, the concept of country of origin for manufactured goods has gradually become obsolete as the various operations, from the design of the product to the manufacture of the components, assembly and marketing have spread across the world, creating international production chains. Nowadays, more and more products are “Made in the World” rather than “Made in the UK” or “Made in France”.

So with manufacturing, we have an integrated production system, in which products are made all over the world.  That is an improvement, right?  As Lamy says, the old concept of country of origin has become "obsolete."  We are becoming more integrated, and losing touch with our old nationalist impulses.  It has not yet happened for people, but at least our products are truly "citizens of the world."

And yet with "designations of origin," the old ways remain.  Products come from one country only; production is not integrated.  I know he refers to "progress" on registered designations of origin, but was the larger point intended as a subtle dig at the idea of designations of origin and the 19th century mentality they reflect?

Probably not, but still, the contrast between the two situations is noticeable.

Some problems to come in this area:

Rep. Tom Petri has joined with other members of the Congressional Dairy Farmers Caucus in sending a letter to U.S. Trade Representative Ron Kirk expressing concerns about the European Union's increased use of "geographic indicator" protections for cheese products.

"A lot of people know the French have long insisted that only champagne which actually comes from the Champagne region of France has the right to be called 'champagne,' and they enforce that definition wherever they can," Petri explained.  "Now Europe is trying to broaden the use of so-called 'geographic indicators' in ways which threaten our dairy industry."

The European Union recently signed a free trade agreement with South Korea which includes provisions asserting geographic indicator protections for many generic cheese names, including Provolone, Parmesan, Romano, Feta, Asiago, Gorgonzola, Grana and Fontina.

If implemented fully, these restrictions could mean that, within the South Korean market, U.S. exporters would be restricted from using those generic cheese names for their cheese products. 

"Obviously, the Europeans would like to stifle U.S. competition in cheese products all over the world, and South Korea is just an opening shot," Petri said.

The letter Petri sent to Trade Representative Ron Kirk asks him to work with the Koreans to ensure that concessions granted for U.S. dairy exports in the proposed U.S.-Korea Free Trade Agreement are not undermined by the geographic indicator protections asserted by Europeans.

How will an EU-Korea FTA, a U.S.-Korea FTA, and the WTO agreements interact on this issue?

The Generic Drug Seizure Complaints

As was widely reported last week, Brazil and India have requested WTO consultations on the generic drug seizures issue.  From Ravi Kanth of the Business Standard:

India and Brazil raised a trade dispute against the European Union (EU) before the World Trade Organization on Tuesday over seizure of generic drugs by EU member countries on high seas.
 
In two separate trade dispute complaints, India and Brazil have asked the EU and one of its member countries — the Netherlands — to enter into dispute settlement consultations over Brussels’ alleged violation of global rules by illegally confiscating generic drugs exported by Indian pharmaceutical companies to Brazil and other developing countries.

“These seizures have wide-ranging implications for developing countries and they undermine the principle of universal access to medicines in poor countries and impose TRIPS+ obligations,” India’s trade envoy Ambassador Ujal Singh Bhatia told reporters.

“Despite raising our concern repeatedly over the European Union’s deeply flawed directive 1383 of 2003, Brussels has failed to bring its rules in compliance with global trade rules,” said Bhatia.

Brazil's request is here.  India's request does not seem to be up on the WTO web site yet; I'll add it when they post it.  [UPDATE: India's request is here.]  For background, SpicyIP has a number of posts on the issue here; and on this blog, Bryan has a much commented on post here. 

I'm not going to go through every aspect, but here are some key parts, from Brazil's request.

First, some details on the specific actions:

(A) A shipment of the generic drug Losartan Potassium, produced in India and destined to Brazil, was seized when in transit at Schipol Airport, in the Netherlands, in December 2008, and later returned to the country of origin. The Dutch authorities seized the shipment pursuant to the European Communities Council Regulation No 1383/2003 (EC Regulation No 1383/2003). Based on complaints of suspected infringement by alleged owners of patents (or supplementary protection certificates), over the last two years, customs authorities in the Netherlands have seized a substantial number of consignments of generic medicines from India in transit through the Netherlands, including the aforementioned shipment of Losartan Potassium destined to Brazil.

Then there's the underlying law itself:

(B) EC Regulation No 1383/2003 sets out rules for "customs actions against goods suspected of infringing intellectual property rights and the measures to be taken against goods found to have infringed such rights", including goods in transit through the territory of the European Union, and provides, among other actions, for the seizure of goods. The applicability of EC Regulation No 1383/2003 encompasses medicines in transit through the territory of the European Union that are suspected of infringing patent rights or are found to have infringed patent rights constituted according to the laws of the EC transit country, regardless of the patent status of such medicines in the countries of origin and destination.

The main legal provisions at issue are:

-- GATT Article V:1, V:2, V:3, V:4; V:5, V:7;

-- GATT Article X:3;

-- TRIPS Agreement Articles 1.1, 2, 28, 31, 41.1, 41.2, 42, 49, 50.3, 50.7, 50.8, 51, 52, 53.1, 53.2, 54, 55,
58(b), and 59, and Article 4bis of the Paris Convention of 1967.

Here's a recent journal article (not free, unfortunately) about the case:

Shashank P. Kumar, 'International Trade, Public Health, and Intellectual Property Maximalism: The Case of European Border Enforcement and Trade in Generic Pharmaceuticals' (2010) 5 Global Trade and Customs Journal pp. 155–169

Summary:

Even as the world witnesses another pandemic, industrialized nations and their industries continue their efforts to ‘rachet-up’ levels of intellectual property (IP) protection. Such a maximalist agenda drives another paradigm shift in the international IP regime today. While maximalists employ several methods to promote their agenda, this work seeks to study the case of European border enforcement law (Council Regulation (EC) No. 1383/2003 of 22 Jul. 2003, Concerning Customs Action Against Goods Suspected of Infringing Certain Intellectual Property Rights and the Measures to be Taken Against Goods Found to Have Infringed Such Rights [hereinafter ‘EC Regulation 1383’]) and its effects on international trade in generic drugs. Triggered by several incidents involving ‘seizure’ of in transit generic drugs by European customs, the issue continues to be ‘hotly debated’ on at the international level and is of immense contemporary relevance to larger issue of global justice. After a discussion on the evolution of European border enforcement law and its interpretation by European courts to determine its scope, this work seeks to study the effect of EC Regulation 1383 on international trade in generic pharmaceuticals by studying several instances of ‘seizure’ of generic pharmaceuticals in transit between developing nations and the international debate it has generated at the World Trade Organization (WTO). The discussion highlights the maximalist (and ‘TRIPS-Plus- Plus’) nature of the European law and raises important issues concerning the interpretation of Agreement on Trade-Related Aspect of IP Rights (TRIPS), public health, World Trade Organization, Ministerial Declaration of 14 Nov. 2001 (hereinafter ‘Doha Declaration’), and the possibility of a future WTO dispute. The discussion concludes with some comments on broader issues of global justice and the WTO that are raised by the European law and its enforcement affecting access to medicines in developing countries.

And here's a free one, from Fred Abbott.

ADDED:  Here's another free one:

Freedom of Transit and Trade in Generic Pharmaceuticals: An Analysis of EU Border Enforcement Law and Implications for the International Intellectual Property Regime

Shashank Kumar
National Law University, Jodhpur

European Intellectual Property Review, Forthcoming

Abstract:  

A recent dispute involving the suspension of release of a consignment of generic drug in transit from India to Brazil by Dutch Customs raises some important issues for the future of the international intellectual property regime. The dispute is only too timely as some countries resort to bilateralism and Free Trade Agreements for extending intellectual property protection beyond the minimum contained in TRIPS. It provides a classic stage for studying the conflict of interests between developing and developed countries on the issues of access to medicine and standard of protection, and thus deserves closer and independent scrutiny of facts and law. On a cursory glance EC Regulation 1383, which provides for border enforcement of rights in cases of patent infringement, seems to be in consistence with the TRIPS Agreement. A closer analysis, however, reveals that the law, in providing for a TRIPS-Plus standard of protection, may run afoul of Part III, Section IV of the TRIPS Agreement. This conclusion, however, rests on a contextual interpretation, which as this work argues, is provided by the Doha Declaration on Public Health and TRIPS and the subsequent Decision to implement paragraph 6 of the Declaration.

The analysis deals with the interpretation of Articles 51 and 52 of the TRIPS Agreement besides addressing the possibility of using the language of the Agreement itself as providing "ceilings" for maximum protection. The work offers some policy and symptomatic recommendations, but, and perhaps more importantly, shows how the incident serves as another litmus test for testing the efficacy of the intellectual property regime under the TRIPS and the promise of a "balance" the Doha Declaration had promised.

And a short piece from the South Centre: http://www.southcentre.org/index.php?option=com_content&task=view&id=1073&Itemid=279

Exclusive Rights, Monopoly Profits and Price Controls

Joel had a post a while back where he wondered if there is "anything in TRIPS that would restrict the ability of a state to set price controls on patented pharmaceutical products."  He doubted there was.

I was thinking about this issue recently, and while he is probably right, it seemed to me that maybe, just maybe, there was an argument on the other side.  It's probably a losing argument, but nevertheless, it seemed like there was something there.  Here goes.

The "exclusive rights" granted by intellectual property law, including patent rights, are not like most other rights, such as free speech, freedom of religion, etc.  These more traditional rights have an inherent value, both in terms of the broader policy goals and the fulfillment of individual liberty.  By contrast, "exclusivity" has no (or little) inherent value in and of itself. Article 28.1(a) of the TRIPS Agreement refers to the following exclusive rights: "making, using, offering for sale, selling, or importing."  Does it really matter if you are the only one who gets to "make" something or "use" it?  Do you feel better about yourself if no one else can do these things?  Is society better off somehow?  Is your liberty greater?  I would think the answer to all these questions is no (or at least, "not much").  Instead, the real value of exclusivity is in the monopoly you hold and the higher prices you can charge.  Since you are the only seller, you can charge whatever you want, with no fear of competitors undermining your price.  As one paper puts it:

The Main Purpose of Patent Rights

Invention is a time-consuming business. It usually requires creativity, resources and time. Once an invention has been made it may be copied by competitors. In order to enable inventors to enjoy the fruits of their labour, most states protect intellectual property through patents and other mechanisms. This allows inventors to exploit their brainchild for a limited period without unwanted competition. The patent allows its owner to block the market entry of copied products and thereby gives him or her the opportunity to recoup expenses through monopoly pricing.

So, coming back to the original question of whether there is "anything in TRIPS that would restrict the ability of a state to set price controls on patented pharmaceutical products," if exclusive rights are really all about monopoly profits, and price controls undermine these profits, couldn't it be argued that price controls violate the exclusive rights set out in Article 28?  While price controls don't affect exclusivity per se, as they don't affect whether someone else can take the actions in question (using, selling, etc.), they do undermine the purpose of exclusive rights.

On the other hand, perhaps the purpose of exclusive rights is not necessarily about allowing monopoly pricing.  In the absence of the ability to charge monopoly prices, the patent holder would still have 100 percent market share, which, while not as valuable as monopoly profits, is pretty good.

The Future of China's IP Protection

A couple months again, Bryan noted that press reports to the contrary, perhaps the U.S. did not actually do very well in the China - IPRs dispute.  An Economist article from this week suggests that change may come despite the outcome in that case:

Chinese firms are also increasingly seeking patents abroad, a sign that they plan to protect their technology when exporting it to rich countries. They won 90 patents in America in 1999 but last year they received 1,225. That is still relatively few—IBM, an American technology giant, receives around 3,000 a year—but it is increasing quickly. Because it takes three to five years to issue a patent, the number issued to Chinese firms is expected to soar soon. The quality of patents issued in China is also improving. Revisions to the patent law that take effect in October strengthen the requirement for a patent’s novelty, bringing it up to global standards. Stronger patents are easier to enforce, opening the door to more lawsuits.

All these trends are important because countries that create intellectual property eventually enforce it as well, explains Dominique Guellec of the OECD. America, it is worth remembering, was the great copyright and patent infringer when it was a developing country in the 18th century.

Copyrighting International Organization Documents

The WTO has always been great about letting us post official documents on WorldTradeLaw.net.  We ask permission and they always grant it.  However, I see WTO documents in various other places on the internet as well, and I would guess that at least some of these web sites have not asked permission before posting the documents.  But I have not heard of the WTO ever raising concerns about the practice.  By contrast, Intellectual Property Watch reports on some issues that have arisen with the WCO:

In an unusual policy for an international organisation, the World Customs Organization imposes copyright over every document its bodies produce, even agendas, which means that no document can be reproduced without the organisation’s express consent.

But now some member governments are questioning this practice, which they say was intended only for the organisation to protect the rights in publications made for sale or containing proprietary information, and is now blocking access to information about the organisation’s work.

I know that related issues have come up with domestic courts.  It is hard to imagine that the eventual outcome will be anything other than a very limited scope for copyright of international organization documents, but it may take some time to get there.

What To Do About High Drug Prices

It's a bit of a risk for me to talk about intellectual property issues, as IP is not my strong suit.  But, hey, it's just a blog, so here goes nothing.

In an article about John McCain's views on health care policy, the Economist had this to say:

Like his Democratic rivals, Mr McCain supports the import of drugs from Canada, which industry lobbies denounce as a violation of intellectual-property rights. Like them, he wants Medicare, the big government health scheme for the elderly, to negotiate bulk discounts with the industry—something Republicans have strongly opposed in the past.

So, if I understand things correctly, the situation is the following.  Through our patent laws, we give pharmaceutical companies 20 year patent monopolies on drugs they develop.  Then when these companies charge very high prices, people get upset and the government threatens to take action (such as allowing re-imports or negotiating bulk discounts) to lower the prices.

Here's my problem with this:  The reason they are charging the high prices is that the government gave them a monopoly!   Thus, the effort to lower drug prices means we're fighting the effects of one government measure (the patent) with another government measure (re-imports or bulk discounts).  It seems to me that if we are really concerned about companies charging such high prices, perhaps a better approach would be to change the IP laws in some way.

One counter-argument is that blocking the Canadian imports is the government action, and allowing them is the natural state of things.  That's true in a sense, but if the Canadian prices are low due to government action, then we're back to the same problem:  High prices due to government-granted monopoly are being counteracted by additional government action.

A Compulsory Licensing Complaint?

Whenever I hear about compulsory licensing done pursuant to the TRIPS Agreement and related instruments, I wonder whether IP companies will lobby for a formal complaint against the practice.  It is permitted in principle, of course, but there is always the possibility that the applicable rules have not been followed.  IP companies can't be happy about compulsory licensing, which makes a complaint a real possibility.  On the other hand, a complaint could be a PR disaster.

I'm not sure I'm reading this right, but this article suggests that an EU complaint may be under way:

The EU, pushed particularly by Germany and France, recently said it would file a complaint against Thailand for breaking the international agreement on compulsory licensing.

Now, the article says "complaint," but does that mean a complaint under the DSU?  Or is it something more informal?  I'm not sure, and I can't find any other articles confirming this.

The other likely complainant is the U.S., of course, but it seems the U.S. has no complaint is in the works:

The Office of the US Trade Representative (USTR) has moved to quell rumours that it was on the verge of filing a complaint with the World Trade Organisation about Thailand's compulsory licensing of pharmaceuticals under the Surayud Chulanont government.

''Speculation about a WTO case is frankly surprising,'' the USTR said in a statement. ''Any such consideration would only happen after a thorough review of the consistency of such measures with WTO rules and extensive discussion with the Thai government, neither of which has happened.''

Reports of a WTO case emerged after the Biotechnology Industry Organisation (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA) petitioned the US government, as part of the annual Section 301 intellectual property rights review, to designate Thailand a Priority Foreign Country.

The two groups had complained about Thailand for invoking compulsory licences. BIO alleged that the compulsory licences went well beyond the letter and spirit of the WTO's Doha Declaration provisions relating to health emergencies. PhRMA claimed Thailand did not meet all thresholds set under international agreements to issue compulsory licences.

UPDATE:  This article suggests there is no EU complaint coming after all:

However, Essential Action says that reports suggesting that the European Union is planning to file a case against Thailand at the World Trade Organisation are untrue. The group says that when asked a plea to the WTO was in the pipeline, an EU official stated that no challenge was or will be made and acknowledges that Thailand's actions are WTO-compliant.

India Considers a Compulsory Licenses for Nepal: Is there an Ulterior Motive?

Although ignored by most media outlets (but not IP Watch), the India Patent Controller is considering an application from Indian generic pharmaceutical company Natco to produce two drugs for export to Nepal under compulsory licence. If approved and implemented, this would be the second compulsory licence issued for export under the TRIPS ‘waiver’ granted in 2003 (Canada issued one last year for the export of an AIDS drug to Rwanda).

The important (and interesting) aspect of the application is not the use of TRIPS to issue a compulsory licence for export, but more so the ease (or difficulty) with which the Indian Patent Controller will issue compulsory licences to Indian manufacturers.

Section 84(1) of the Indian Patent Act prevents compulsory licences from being issued for the domestic market for the first three years of a patent. Given that three years has now passed since India has had to provide protection for pharmaceutical patents, the generic industry is keenly interested in exploiting the provision for the domestic market. Generally speaking, India’s patent act allows a wide range of avenues for compulsory license, including if a drug is not available in adequate quantities, not reasonably priced, or (in a possible violation of TRIPS) not manufactured in India.

If approved, the Patent Controller may have to deal with a lot more applications in the months and years to come. Watch this space!

WTO Law in Domestic Law: The Novartis Case

The status of WTO law in domestic law varies a bit from country to country, and is sometimes not very clear.  The recent Indian court decision in the Novartis case was interesting, as the court basically said that any consideration of consistency of Indian law with the TRIPS Agreement should be done in WTO dispute settlement, not in Indian courts. Here's a link to the decision: http://judis.nic.in/chennai/qrydisp.asp?tfnm=11121  The key portion seems to be this part:

the Constitutional validity of section 3(d) alone is in challenge, both on the ground  that it violates  not only Article 14 of the Constitution of India but also on the ground that it is not in compliance  to "TRIPS".

...

(a) Assuming that the amended section is in clear breach of Article 27 of "TRIPS" and thereby  suffers the wise of irrationality and arbitrariness violating Article 14 of the Constitution of India, could the courts in India have jurisdiction to test the validity of the amended section in the back drop of such alleged violation of "TRIPS"? 
     OR
Even if the amended section cannot be struck down by this court for the reasons stated  above, cannot this court grant a declaratory relief  that the  amended  section  is  not  in  compliance  of Article 27 of "TRIPS"?.

    
   (b)  If it is held that courts in India have jurisdiction  to  go into the  above  referred  to issue, then, is the amended section compatible  or non-compatible to Article 27 of "TRIPS"?

...

  8.  Even otherwise, we are of the considered view that in  whichever manner one may name it namely,  International Covenant, International Treaty, International Agreement  and so  on and so forth, yet, such documents are essentially  in the  nature of a contract.  In Head Money cases namely,  the judgment of the Supreme Court of the United States reported in 112 U.S. 580, it is held as follows:

"A  treaty  is primarily a compact  between independent Nations, and depends for   the enforcement  of its provisions on the  honor  and  the interest of the governments which are parties to it."

Therefore there cannot be any difficulty at all in examining such treaties on principles applied in examining  contracts.  Under  these circumstances, when a dispute is brought before a   court  arising  out of an International  Treaty,  courts would  not  be  committing any error in deciding   the  said dispute  on principles applicable to  contracts.   In  other words,  the  court  has  to  analyse   the  terms  of   such International  Treaty; the enforceability of  the  same;  by whom and against whom; and if there is violation, is there a mechanism for solving that dispute under the treaty  itself? Based  on  such  construction of  the  International  Treaty namely,  "TRIPS",  it  is  argued very  strenuously  by  the learned  counsels appearing for the contesting parties  that there is a settlement mechanism under the Treaty itself  and therefore   even   assuming  without  conceding   that   the petitioner  has the right to enforce the terms of  the  said Treaty,  yet, he must go only before the Dispute  Settlement Body  provided  under the "TRIPS" itself.    Article  64  of "TRIPS" is pressed into service to sustain this point.    It is  contended  by Mr.Anand Grover learned counsel  that  the settlement mechanism provided under Article 64 of "TRIPS" is governed  by the procedure as understood by the World  Trade Organisation.   Mr.Anand  Grover  learned  counsel  took  us through the said Dispute Settlement Understanding.   Article 1  of  the  Dispute Settlement Understanding,  defines   the areas covered under that Rule.  Article 1 declares that  the agreements  listed in Appendix 1 to the said Rule  would  be covered  by the procedure.  "TRIPS" is mentioned as  one  of the  agreements in Appendix 1 (B) - Annexure 1C.    We  have been   taken  through  the  above  referred  to  Rules   and Procedures governing the settlement of disputes and we  find that it contains comprehensive provisions for resolving  the disputes  arising  out  of  any  agreements  enumerated   in Appendix  1  to  that Rules.  Under the  Rules  there  is  a Dispute Settlement Body.  The manner of it's constitution is also  provided  therein.  Various  steps  to  sort  out  the problem  arising  out of an agreement are provided  therein. Article  17  of  the  Rules referred to  above  provides  an appellate  review  against the order passed  by  the  panel. Therefore  we have no difficulty at all that Article  64  of "TRIPS"  read  with World Trade Organisation's understanding on Rules and Procedures governing the settlement of disputes provides a comprehensive settlement mechanism of any dispute arising  under  the  agreement.   Article  3  of  the  Rules declares  that the dispute settlement system  of  the  World Trade Organisation is to provide security and predictability to   the   multilateral  trading  system.    When   such   a comprehensive  dispute settlement mechanism is  provided  as indicated  above and when it cannot be disputed that  it  is binding on the member States, we see no reason at all as  to why  the  petitioner, which itself is a part of that  member State,  should not be directed to have the dispute  resolved under  the  dispute settlement mechanism referred to  above.  Several nations in the world are parties to "TRIPS" as  well as  the  "WTO"  agreement.   The agreements  are  discussed, finalised  and  entered  into at the  higher  level  of  the nations  participating  in such meeting.   Therefore  it  is binding  on  them.  When such participating nations,  having regard  to  the  terms  of  the agreement  and  the  complex problems that may arise out of the agreement between  nation to nation, decide that every participating nation shall have a  Common Dispute Settlement Mechanism, we see no reason  at all as to why we must disregard it.  As we began saying that any International Agreement possesses the basic nature of an ordinary  contract  and when courts respect  the  choice  of jurisdiction fixed under such ordinary contract, we  see  no compelling  reasons to deviate from such  judicial  approach when  we  consider  the  choice  of  forum  arrived  at   in International Treaties.  Since we have held that this  court has  no  jurisdiction to decide the validity of the  amended section, being in violation of Article 27 of "TRIPS", we are not  going  into  the  question whether  any  individual  is conferred  with an enforceable right under "TRIPS"  or  not. For  the  same reason, we also hold that we are not deciding issue  No.(b)  namely,   whether  the   amended  section  is compatible  to Article 27 of "TRIPS" or not.

(emphasis added)