Outline For the TRIPS Agreement Section of International Trade Law I. Purpose and Principles of the WTO-briefly II. Purpose of the TRIPS Agreement III. Underlying Principles of the WTO and their Relation to the TRIPS Agreement IV. The North and the South under TRIPS IV. The Contention between Article 27 (Non-Discrimination) and Article 30 (Exceptions) V. What constitutes a violation of the TRIPS agreement? VI. What exceptions are there to the TRIPS agreement? VII. What were the issues in the cases we discussed?
I. Purpose and Principles of the WTO-briefly The purpose of the WTO is to facilitate trade between the Member nations, and provide sustainable development and prosperity. This is especially so for the developing, and least developed nations so as to reduce the standard of living gap between the nations. In the end hopefully, this will bring about greater stability. II. Purpose of the TRIPS Agreement To reduce distortions in international trade, (uniformity) and to promote intellectual development, and company goodwill, through the protection of intellectual property rights. The TRIPS agreement protects intellectual property, patents, copyrights, trademarks, trade secrets, and sui generis sytems- which are ad hoc intellectual property protection that is usually specific to an industry- like Integrated Circuit Designs). If IP rights are protected, then there will be a greater incentive to create more value behind them, which will lead to more investment in human and financial capital and in intellectual property etc... (Technological breakthroughs with patents, art with copyrights, goodwill with TMs, etc…).
III. Underlying Principles of the WTO and their Relation to the TRIPS Agreement Protection of certain IP rights like medicinal patents, and patents on technology necessary to build a modern infrastructure, hurt poor countries because: (1) they increase the cost of such information because, (in the case of patents), they give a monopoly right to the idea, (2) the poorer countries are less likely to produce IP, so rents will generally flow from South to North. These contentions between the WTO’s broader purpose, and the TRIPS agreement will probably come up in the case of patents because a country usually does not have a compelling reason to violate other rights. For example-
India has no good reason for bootlegging copyrighted DVDs. Appropriation of a company’s goodwill (trademark), deceives the public, and therefore what would be a compelling exception type reason?
It is also the purpose of the larger WTO to raise living standards in poorer countries. Where poorer countries cannot afford access to information, the TRIPS agreement and the WTO principles come into contention. Abbott, believes, according to his articles relating to AIDS medicine, that in the case of plagues, and diseases that bring about instability, the TRIPS agreements protections should be set aside to ensure global stability, and to prevent loss of life. IV. The North and the South under TRIPS There is big distinction between countries that can produce IP, and those who have to pay rents for the material. This agreement benefits the richer OECD governments. Because the TRIPS agreement protects the patent holder’s right from secondary users creating a monopoly, there is concerns about developing countries being able to afford necessary technology, especially considering they have such a great need for modern technology. You must look at the relevant field of technology, and the relevant property right in the exam. For example the protection of trade secrets in a country might help to foster foreign direct investment (FDI). Why? Because trade secrets have to rely on domestic protections from industrial espionage, because once there secret is out they can’t do much about it so extra protection in the LDCs can mean more FDI. However, protection of copyrights is important not just because their abscense will create market distortions in the foreign country, but possibly throughout the world. (Think of “Napster of Turjikstan” able to reach the world by Internet). Patents are different. Medicine is cheap to produce after you have spent the money to develop it, and it saves lives. So what if the patent holder does not want to let their secret be bought at reasonably cheap prices, or cannot meet supply demands? These extra considerations make the medicine in the TRIPS agreement a key issue. However, not all patents are the same. A patent for a new microprocessor for example is much different than medicine. While it would be nice if India could mass produce computers they ripped off of us, it would not save lives or bring about a balance to the standards of living problem. Therefore they should perhaps receive more protection than medication. And here’s the catch. While all these fields must be looked at separately to understand their true impact in the marketplace there is no discrimination between fields of technology in the TRIPS agreement. Because the third world must catch up with the developed countries in terms of standards of living the TRIPS agreement restricts their ability to appropriate technology- (which
they are desperately in need of, and maybe cannot afford) it should be applied flexibly to the LDC. Outside of the Medicine, and the “save the Populace, and help world order and stability “, there are also standard of living issues associated with the TRIPS Agreement. The quickest way to the raise industrial capacity in foreign nations is to steal R&D work from the western countries and let your cheap labor force mass produce it at rock bottom prices. (See China) The TRIPS agreement restricts these appropriations through its call for protection of IP rights. So countries on the bottom of the innovative curve, or the imitators, are being hurt by the TRIPS agreement in that respect. So why would the third world or (“South”) agree to TRIPS? a.) Part of a greater agreement with the rest of the world to increase trade cooperation. b.) Agriculture and textile concessions by the OECD. How is the TRIPS agreement applied to third world countries who need IP? Flexibly. But what if they don’t have the capacity to exploit the material, so they get a developed country like Canada, or maybe India to produce the product? Each country has the right to grant compulsory licenses to produce the good and protect their citizens. They can also grant a compulsory license to import all the goods they need to protect their citizens. However, an exporting country may only send a nonsubstantial portion of their compulsory licensed products overseas. So what do small 3rd world countries with no capacity to produce medicines, do in this situation? This subject was brought up at the DOHA round which was resolved in favor of provisions that allow least-developed countries and countries that do not have production capacity to import products from a country who does have the capacity, under a compulsory license. IV. The Contention between Article 27 (Non-Discrimination) and Article 30 (Exceptions) There seems to be more tendency to make exceptions to a patentor’s rights regards to medicine. V. What constitutes a violation of the TRIPS agreement?
1.) There are no non-violation nullification or impairment claims in the TRIPS agreement. They have not yet been addressed by the members despite the fact that it should have been in place by now. TRIPS obligates members to 2.) Refrain from discriminating between different forms of patentable subject matter. This is embodied in Article 27 of the TRIPS Agreement. Article 27: covers “any invention” that are new, involve an inventive step and are capable of industrial application. 3.) Member countries must afford national treatment to patent holders of other member nations. Article 3: Each member shall accord to the nationals of other Members treatment no less favorable than that it accords to its own nationals with regard to the protection of intellectual property, subject to the exceptions already provided in the Paris Convention, the Berne Convention etc. 4.) Members must provide minimal protection of IP rights, embodied in the TRIPS agreement. 5.) Members must resort to the DSU dispute procedures to enforce their rights. Therefore, a member may violate the TRIPS agreement by: a.) Violating a IP holder’s legitimate interests, (or failing to provide minimal protections), either through lack of enforcement, or by law. b.) By de jure discrimination based on subject matter c.) By de facto discrimination based on subject matter d.) By failing to treat foreign nationals differently than the “Natives”. (National Treatment)
Article 7 sets the general standard that should be looked at when determining if a violation has occurred: “the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology…and in a manner conducive to social and economic welfare, and to a balance of rights and obligations. A.) What are a IP holder’s legitimate interests? Depends on the property type. Copyright: right to control the distribution of their expressive work. Trademark: right to control the use of a mark, and the right to exclude others from using identical or confusingly similar marks on competitive goods.
Patent- called “working” the patent - to prevent third parties not having the owner's consent from the acts of: making, using, offering for sale, selling, or importing the patented matter. Trademarks and Copyrights Because the principles for exceptions are related to mostly patents we will probably deal with that substantive area on the test. For other forms of protection, you should just know that there are basically no principles justifying their abuse, except for probably anti-trust issues. So the issue will probably relate to just a violation in these cases, look to facts that show nationals are treated better, or certain nations, or that they are not protecting the form of IP, or allowing their companies appropriate our TMs, or make bootlegs. In Trademarks there is one substantive issue he talked about, and that is the issue of Gray Markets, and parallel imports. Parallel Imports: Dramatic difference in price between countries. Nothing in TRIPs speaks to exhaustion—brand name producer gets a monopoly over sales, but doesn’t have control over sale of subsequent product. Parallel importing is where a product sold more cheaply in one country is imported into another without the patent holder’s permission. Countries’ laws differ on whether they allow parallel imports. The TRIPS Agreement simply states that governments cannot bring legal disputes to the WTO on this issue Patents In general, inventions eligible for patenting must be new, involve an inventive step (or be non-obvious) and be capable of industrial application (or be useful). Article 27 also lists inventions which governments do not have to make eligible for patent protection A country may violate the TRIPS agreement in regards to patent protection if: a.) It does not protect the patent for a minimum of twenty years. b.) It allows a competitor to make, use, offer for sale, export, or import the product without the patent holder’s consent. c.) It provides different standards for the issuance of a patent based on nationality. d.) It de facto discriminates based on nationality e.) The patent regime discriminates between different forms of patentable subject matter. a.) Minimum of 20 year protection- just what it says, must have a minimum protection of the patent for 20 years from the filing of the application. b.) During those 20 years a country must have laws that make it illegal to (make, use, offer, etc...) the patented product, and allow the patent holder to seek a legal remedy (injunction, damages…) 1. Unless: a.) The use is for experimental purposes
b.) The use is for compliance with regulations- (although no sale before twenty years, and no stockpiling- Canada Pharmaceuticals case) Any term of protection less than this, will be a violation of the patent holder’s right to exclude for twenty years. However, there are exceptions, and procedures the Member countries can use to grant compulsory licenses.
Compulsory Licensing: Compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner. It is one of the flexibilities on patent protection included in the WTO’s agreement on intellectual property, but it should not be done unless in compliance with the following regime, which also serve to be exceptions to the general rule of patent protection: Article 8.1: Health Exception: Public health exception as long as consistent with obligations. “Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement. (This italicized has been interpreted to mean the obligations of non-discrimination of foreign nationals, obviously these compulsory licenses will probably be used mostly for pharmaceuticals therefore it is a weak argument to say that (For ex.) “Canada de facto discriminates against pharmaceuticals because it issues more compulsory licenses for medicine”.) Article 31: Procedures for Compulsory Licensing 31(b) Can issue a compulsory license but first have to enter into negotiations with patent holder; but not required in time of national emergency. “In situations of national emergency, or other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable. 31(h) The right holder shall be paid adequate (reasonable) remuneration in the crircumstances of each case, taking into account the economic value of the authorization. There’s more. Compulsory licensing must meet certain additional requirements: it cannot be given exclusively to licensees (e.g. the patent-holder can continue to produce), and it should be subject to legal review in the country. For “national emergencies”, “other circumstances of extreme urgency” or “public non-commercial use” (or “government use”) or anti-competitive practices, there is no need to try first for a voluntary licence. It’s the only instance when the TRIPS Agreement specifically links emergencies to compulsory licensing: the purpose is to say that the first step of negotiating a voluntary licence can be bypassed in order to save time. But the patent owner still has to be paid. Reasonable Compensation is determined by the Member
countries judicial system. Special Issues for Compulsory Licensing: The LDC and the problem of issuing a compulsory license to import generic pharmaceuticals they can’t make, and the rule that you can’t export a substantial amount of a product under a compulsory license. (So where could they get the product from if the generic producing country would violate the WTO by sending it the product to them?) To address this problem: The DOHA Ministerial came down with a common sense ruling that allows the importation of pharmaceuticals under a compulsory licensing program. Their actual outline of the issues is good and concise, so I duplicate it for you here: DOHA Ministerial: Declaration on the TRIPS Agreement and Public Health Adopted on 14 November 2001 ¶ 4. We agree that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect publc health and, in particular, to promote access to medicines for all. ¶5. Accordingly, and in light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include: (a) Each member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted. (b) Each member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV?AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency. ¶6. We recognize that WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002.
All WTO member countries are eligible to import under this decision, but 23 developed countries are listed in the decision as announcing that they will not use the system to import, including the United States. Why? No idea. Abbott says it was stupid, and I agree, who do we have negotiating over there? Why give that up? So long as a medicine is not patented in a least-developed country, the LDC government does not need to issue a compulsory licence to import. But the supplying country would have to issue a compulsory licence to export a generic copy of a medicine that is patented in that country. To use the system, potential exporting countries probably have to change their laws too. This is where their laws complied with the original TRIPS provision by
requiring production under compulsory licensing to be predominantly for the domestic market. So far Norway, Canada and India have informed WTO members (through the TRIPS Council) that their new laws and regulations are in place. The EU, Switzerland and Republic of Korea have said they are close to completing the legislation. Along with the issues presented in the compulsory license a patent maintenance regime are the issues of a Member who violates the TRIPS agreement by: c.) providing different standards for the issuance, or terms of a patent based on nationality. d.) de facto discrimination based on nationality e.) The patent regime discriminates between different forms of patentable subject matter. There are no excuses for arbitrary discrimination in any of these fields because they undermine the purpose of the WTO, and the TRIPS agreement. The only exception is if the measure discriminates because of a special defense or national security issue, (which trump everything in the TRIPS agreement). See Article 73 of the “Relevant TRIPS portions”. Other than that there is not much more you need to know concerning the standards of violation, and the exceptions that can be used. VII. So How did these issues play out in the Canada Pharmaceuticals case?
Canada Generic Pharmaceutical Case- Chaired by Robert Hudec The EU complained that Canada: 1.) Violated the legitimate interests of the patent holder by allowing generic producers to: a.)to produce pharmaceuticals and get ready for the regulatory review process during the term of the twenty years. AND b.)manufacture and stockpile large amounts of the patented drug prior to the expiration of the twenty year term, so at the time of expiration they could hit the market running 2.) Canada Responded by saying: a.) These were limited exceptions to a patent holders right b.) Did not conflict with the normal working of a patent c.) The measures did not prejudice the legitimate interests of the owner, taking into account the legitimate interests of third parties. And were therefore allowed to make these exceptions under Article 30 of the TRIPS.
Because the EU was able to establish a de jure prima facie case that Canadian law made an exception to the rights Article 28 conferred on a patent holder, (the right to 20 year protection), the burden shifted to Canada to show that the measures it took were within the scope of the exceptions in Article 30; (the requirements of which were (a-c) in the Canadian defense on the previous page. The Panel determined that Canada’s laws had to meet all 3 of the tests imposed by Article 30. 1.) The Panel first looked to see if the two measures were limited. Rule: In this case the Panel accepted the EU’s definition of the term “limited exception”: the panel said had it had too be read narrowly because both limited an exception are narrowing words. The panel determined that the test here was whether the measure at represents only a small diminution of rights. Holding: That the regulatory review exception was limited, practiced in other countries, and was consistent with the experimental use exception. That the stockpiling exception was not limited because it allowed generics to take a substantial commercial step in the production of the pharmaceuticals. 2.) The panel then looked to see if the regulatory review exception violated the holders normal exploitation, or working of the patent. The EU said that because the original patent holder has to go through the regulatory process, (and lose time in the market), that the generic holders should have to wait to pass regulations as well. Canada argued that the right conferred by a patent is the right to exclude others from the market for 20 years, and that the regulatory requirement is incidental. Therefore, because the use for the regulatory applications was limited in quantity, and was not going to be sold to the consuming public it did not violate the patent holders right to exclude generic producers from the market. The Panel Agreed with Canada. Rule: The normal exploitation of a patent under Article 30 does not include experimental, or regulatory use, but only commercial use. Commercial Use includes stockpiling, so it is a term that is broader than just sales to consumers. On the test look for behavior that seems commercial.
3.) Finally the panel had to determine if the measure prejudiced the interests of the patent holder, taking into account legitimate third party interests. The Panel somewhat dodged the issue of what this requirement meant. See 7.82 p. 169 It sort of held that third party interests can include the public that would like to buy generic pharmaceuticals. It also said that the legitimate interests of the patent holder are different than their legal interests, because this an exception part of TRIPS, and such an interpretation would be redundant, in light of Article 28. (Which confers rights on patentees) The EU then argued that Canada should offer a patent extension to compensate the holder for their regulatory time, and that such a measure would reserve the patent holder’s right to exclude competitors for 20 years. Canada said no need, just have to afford minimum protections. Panel again agreed. The Violation of Article 27 Issue The EU also complained that the Canadian violated the non-discrimination between subject matter principle, because it treated pharmaceuticals differently than other products: The proof was Parliamentary Hearings, and a lower court ruling. Canada insisted the lower court would be overruled, and that the exception applied for all regulated products, even though in practice it was primarily done with pharmaceuticals. Argued that it was the nature of the industry, the Panel accepted this argument, and Canada’s assurances that the law applied to all regulated products.