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TWN Info Service on Intellectual Property Issues (Jun17/02)
28 June 2017
Third World Network


WTO TRIPS Council debates IP and the public interest
Published in SUNS #8484 dated 19 June 2017


Geneva, 16 Jun (Kanaga Raja) -- The WTO Council for TRIPS on 13 June discussed a major proposal tabled by Brazil, China, Fiji, India and South Africa, which cited growing concern about the "imbalance between intellectual property and the public interest."

In their proposal (IP/C/W/630), the five countries for the first time called on WTO Members "to exchange views and experiences on measures within the IP system that they have adopted to promote the public interest, including but not limited to compulsory licensing, patentability criteria, IP and competition, and the Bolar exception."

For the present meeting of the TRIPS Council (13-14 June), the co-sponsors invited delegations to share their experiences on the use of compulsory licenses for accessing health and other technologies.

"There is a need to pursue a development-oriented approach towards formulating IP laws and policies rather than pursue an iconoclastic approach of IP for development," the co-sponsors emphasised.

PROPOSAL ON IP AND PUBLIC INTEREST

In their proposal, the five countries noted that the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement established minimum standards of protection that each government has to give to the intellectual property of fellow WTO Members.

WTO Members have the flexibility to design their national intellectual property (IP) systems within the minimum standards set by the TRIPS Agreement, in cognizance of a country's economic, developmental and other objectives, including public health.

The TRIPS Agreement attempts to strike an appropriate balance between the interests of rights holders and users.

The co-sponsors said an important consideration in the WTO's work has been the search for a balance between the need to protect IPRs to provide incentives for R&D on the one hand and, on the other, to address concerns about the potential impact of such protection on the health sector - in particular its effect on prices.

The TRIPS Agreement also recognizes that the principles of IP protection are based on underlying public policy objectives.

Article 8 of TRIPS Agreement entitled "Principles" states that WTO 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.

Article 8(2) further states that appropriate measures may be needed to prevent the abuse of IPRs by right holders, or to resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

The five countries pointed out that a number of safeguards or flexibilities have become an integral part of the TRIPS framework.

These flexibilities can be used to pursue public health objectives. However, to implement these flexibilities, action is needed at the domestic level by incorporating them into national IP regimes keeping in mind each country's individual needs and policy objectives.

Key TRIPS flexibilities include transition periods for LDCs (extended by the WTO until 01 January 2033), differing IP exhaustion regimes, refining the criteria for grant of a patent (patentability criteria), pre-grant and post-grant opposition procedures, as well as exceptions and limitations to patent rights once granted, including the regulatory review exception ("Bolar" exception) to facilitate market entry of generics, compulsory licences and government use.

According to the proposal, for pharmaceutical patents, these flexibilities have been clarified and enhanced by the 2001 Doha Declaration on TRIPS and Public Health.

WTO Members have the flexibility to interpret and implement TRIPS provisions in a manner supportive of their right to protect public health.

Another new flexibility was added by the Doha Declaration, which was put into practice in 2003 by the WTO with a Decision enabling countries that cannot manufacture medicines themselves, to import pharmaceuticals made under compulsory licences.

In 2005, Members agreed to make this decision permanent through a Protocol Amending the TRIPS Agreement, which entered into force on 23 January 2017 after two thirds of Members accepted it.

"The amendment provides legal certainty that generic versions of patent-protected medicines can be produced under compulsory licences specifically for export to countries with limited or no pharmaceutical production capacity," said the co-sponsors of the proposal.

"Many governments have not used the flexibilities available under the TRIPS Agreement for various reasons, such as capacity constraints or political pressure from states and corporations mentioned in the UN Secretary- General's High Level Panel Report on Access to Medicines."

Moreover, even where some developing countries used the flexibilities available to them under the TRIPS Agreement to address public interest objectives through measures which are fully consistent with the TRIPS Agreement, these attempts have been challenged legally as well as politically.

The co-sponsors said that "political and economic pressure placed on governments to forego the use of TRIPS flexibilities violates the integrity and legitimacy of the system of legal duties and rights created by the TRIPS Agreement, as reaffirmed by the Doha Declaration."

They also warned that a slew of regional trade agreements containing "TRIPS plus" standards of IP protection and enforcement have the potential to significantly affect the policy space available for effective and full use of the TRIPS flexibilities.

The most common "TRIPS plus" provisions in free trade agreements (FTA) that affect the pharmaceutical sector are: the definition of patentability criteria; patent term extensions; test data protection; the linkage of regulatory approval with patents and enforcement of IPRs, including border measures.

"Such provisions can delay market entry of generics and increase prices of medicines," they said. Investor-State disputes under regional or bilateral investment protection agreements are also emerging as significant threats to the use of TRIPS flexibilities in the public interest.

Ironically, they said, the abovementioned challenges to the use of TRIPS flexibilities to further the public interest objectives underlying IP protection, have been occurring in spite of the emergence of laws and jurisprudence in developed countries that seek to limit the scope of IP protection and enforcement.

For example, in the Myriad Genetics (2013) case, the US Supreme Court had ruled unanimously that naturally occurring genes cannot be patented, even if they are isolated. In 2003, the US Federal Trade Commission had proposed tightening the non-obviousness standard, in order to limit the grant of unwarranted patents.

"There is a growing concern about an imbalance between intellectual property and the public interest," the five countries underlined.

With regard to health technologies, for example, patents and related monopoly rights in test data, without sufficient use of balancing exceptions and limitations to protect the public interest, permit companies to maintain high prices and exacerbate crises of access around the world, where many patients cannot afford medicines, and force governments with finite health budgets to ration care.

Increased copyright protections create similar problems of access to knowledge goods, limiting the ability of many people around the world to access print, audio, or visual works of education or entertainment that we take for granted.

"These are only a few examples of the problem. There is a need to pursue a development-oriented approach towards formulating IP laws and policies rather than pursue an iconoclastic approach of IP for development."

More than 20 years after the adoption of the TRIPS Agreement, there is a need for discussion in the TRIPS Council on the relationship between IP and the public interest and to broaden the understanding of how the IP system can be more responsive to public interest considerations, the five countries said.

While this issue is very pertinent for developing countries, it has also been a topic of significant policy debate even in developed countries.

Calling for a sharing of experiences on the use of compulsory licences, the five countries said that compulsory licensing occurs when a government allows someone else to produce the patented product or process without the consent of the patent owner. Article 31 of TRIPS lays down a set of conditions for issuing compulsory licenses of patents.

The Doha Declaration on the TRIPS Agreement and Public Health states that, "Each Member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted".

"In spite of the clarity of this language, WTO Members around the world seeking to make use of compulsory licences as a tool to increase access to affordable medicines have faced various challenges/barriers," the co-sponsors pointed out.

The Doha Declaration on the TRIPS Agreement and Public Health confirmed what was already implicit in the TRIPS Agreement - that WTO Members have the freedom to determine the grounds upon which compulsory licenses are granted.

They are thus not limited to emergencies or other urgent situations, as is sometimes mistakenly believed. A range of grounds have been set out in national laws like (i) non-working or insufficient working, (ii) anti-competitive practices, (iii) public interest, (iv) dependant and blocking patents, (v) Government use.

In inviting Members to share their national experiences and examples of using compulsory licenses, the five countries highlighted some guiding questions:

* What grounds are available in their national laws to issue compulsory licenses?

* What are the difficulties faced by WTO Members in using compulsory licenses, including constraints, such as insufficient or no manufacturing capacities?

* How the measure of compulsory licence was used by governments to obtain price reduction from patent holders?

* What was the result of using compulsory licenses in terms of price and access to affordable products and technologies?

DISCUSSION ON IP AND PUBLIC INTEREST

According to trade officials, some fifteen delegations spoke on this issue. South Africa (which introduced the proposal on behalf of the co-sponsors), India, El Salvador, Indonesia and Colombia, amongst others, underlined that WTO members must have the complete freedom to decide the grounds upon which compulsory licences are granted.

They pointed out that political and economic pressure placed on governments to forego the use of TRIPS flexibilities violates the integrity and legitimacy of the system of legal duties and rights created by the TRIPS agreement and reaffirmed by the 2001 Doha Declaration.

Citing the report of the UN Secretary-General's High Level Panel on access to medicines, the co-sponsors of the proposal stressed that governments should adopt and implement legislation that provide for quick, fair, predictable and implementable compulsory licences for legitimate public health needs, and particularly with regards to essential medicines.

In its statement, India said the TRIPS Agreement attempts to strike an appropriate balance between the interests of rights holders and users. The TRIPS Agreement also recognizes that the principles of IP protection are based on underlying public policy objectives.

In furtherance of the objectives and principles of TRIPS enshrined in Articles 7 and 8, a number of safeguards or flexibilities have become an integral part of the TRIPS framework. These flexibilities can be used to pursue public health objectives.

India noted that during the 1980s and 1990s the antiretroviral (ARV) medicines used to treat HIV/AIDS were priced beyond the reach of most people who needed them in developing countries.

Countries like Brazil, Thailand, South Africa and others have used flexibilities under the TRIPS Agreement, including compulsory licenses to bring down the price by increasing the supply of generic ARV medicines for a fraction of the price of the patented equivalents.

Indian generic companies, especially CIPLA, played an important role by announcing in early 2001 that triple therapy could be manufactured for less than a dollar a day compared to the price of standard triple therapy of US$10,000 per patient/year.

Indian generic companies made ARV medicines accessible to all those who needed the drugs but had previously not been able to afford them.

On the issue of compulsory licensing, India said Article 31 of TRIPS Agreement provides members the complete freedom to decide the grounds for issue of the compulsory license.

The Doha Declaration on the TRIPS Agreement and Public Health has also duly confirmed what was already implicit in the TRIPS Agreement - that WTO Members have the freedom to determine the grounds upon which compulsory licenses are granted.

There have been many studies that examine the possible grounds for issue of compulsory license.

For instance, said India, the diversity in the grounds for issue of compulsory license is documented in the United States Congressional Research Service Article titled "Compulsory Licensing of Patented Inventions" by John R. Thomas dated 14 January 2014, which mentions that "depending upon particular national laws, the grounds for government award of a compulsory license may include:

-- Circumstances of national emergency or extreme urgency.

-- Where the invention serves vital public health needs.

-- A strong societal interest has arisen in access to the patented invention.

-- The patent owner has failed to practice the patented invention in the jurisdiction that granted the patent within a reasonable period of time.

-- The patent owner has abused its economic power in such a manner as to violate the antitrust laws.

-- In circumstances where multiple patents held by different owners cover a particular technology. For example, combination therapies - such as triple antiretroviral drugs - may be subject to more than one patent. In such cases, if one patent owner refuses to license, then the technology may not be marketed absent a compulsory licensing."

India provided some details of its own law with regard to compulsory licensing. It said that Sections 83 to 94 of India's Patent Act contains detailed provisions regarding compulsory licenses including those that generic companies can apply for, government use licenses, those issued in cases of national emergency, extreme urgency and public non-commercial use and compulsory licenses for exports.

India has issued only one compulsory license so far. In March 2012, Indian generic manufacturer NATCO Pharma was granted compulsory license to manufacture Bayer's drug Sorafenib Tosylate (Nexavar) used for the treatment of kidney and liver cancer.

Bayer was granted a patent and received marketing approval for Nexavar for the treatment of liver and kidney cancers in 2008. Bayer would have supplied 200 patients in 2011, which was a little more than two percent of the affected population.

According to India, the primary reason for the abysmally low coverage vis-a-vis the need was the exorbitant treatment cost of nearly Rs. 2,84,000 (US$4,370) for a month's treatment which priced the medicine out of reach of almost all people in India.

Patent rights cannot be allowed to impede protection of public health, India underlined.

NATCO proposed to sell the generic form of Nexavar for Rs 8,800 (US$135) a month.

The Controller of Patents in India granted a compulsory license under section 84 because the TRIPS Agreement allows members to adopt measures to protect public health and Bayer did not meet its duty under the Indian Patents Act as the patented invention was not available to the public at a reasonable price, and it was not worked in the territory of India.

The Indian Courts have upheld the decision of Controller General of Patents to grant Compulsory License to NATCO Pharma to manufacture the generic version of Nexavar in India.

India also provided some details on the use of compulsory licenses in a few other WTO Members.

It said according to an article entitled "Compulsory licensing of patented pharmaceutical inventions: evaluating the options" by Jerome H. Reichman published in the Journal of Law, Medicine and Ethics in 2009, 37 (2): 247-263, the United States threatened Bayer with a compulsory license on ciprofloxacin (Cipro) in 2001, which the US intended to stockpile as a defense against anthrax. Bayer drastically lowered its price in response.

The Italian Competition Law authorities issued compulsory licenses against Merck, on certain antibiotics, for abuse of a dominant position in 2005; against Glaxo, for refusal to license a patented migraine headache drug in 2006; and against Merck again for a refusal to license a treatment for baldness in 2008.

India further said in Apple vs. Motorola case filed in the United States District Court for the Northern District of Illinois (Eastern Division), Judge Richard Posner, in June 2012, while dismissing with prejudice the patent infringement suits, cited the decision in eBay Inc. v. MercExchange, L. L. C and specifically noted that a "compulsory license with ongoing royalty is likely to be a superior remedy in a case like this because of the frequent disproportion between harm to the patentee from infringement and harm to the infringer and to the public from an injunction".

India also cited the September 2016 report of the UN Secretary-General's High-Level Panel (HLP) that states that many governments have not used the flexibilities available under the TRIPS Agreement, including compulsory licenses for various reasons, ranging from capacity constraints to undue political and economic pressure from states and corporations, both express and implied.

The HLP report also refers to resolution No. 2475 by the Ministry of Health of Colombia that was a pathway for issuance of compulsory license to access Imantib, in the public interest, for treatment of leukemia.

The report also states that many domestic and foreign parties have tried to dissuade the Colombian government from issuing a compulsory license as provided by the TRIPS Agreement and the Doha declaration.

India underscored that political and economic pressure placed on governments to forego the use of TRIPS flexibilities violates the integrity and legitimacy of the system of legal duties and rights created by the TRIPS agreement and as reaffirmed by the Doha Declaration.

It concluded by quoting the recommendations on compulsory licenses in the HLP report: "Governments should adopt and implement legislation that facilitates the issuance of compulsory licenses. Such legislation must be designed to effectuate quick, fair, predictable and implementable compulsory licenses for legitimate public health needs, and particularly with regards to essential medicines. The use of compulsory licensing must be based on the provisions found in the Doha Declaration and the grounds for the issuance of compulsory licenses left to the discretion of governments".

In its statement, Brazil said that IP addresses the public interest by providing incentives for innovation. At the same time, governments have the responsibility of safeguarding the public against a potential negative impact, notably on competition.

"A balanced IP system, therefore, provides powerful incentives for innovation with the least effects on the competitive landscape; in economic terms, it will stimulate the pro-competitive dynamic effects of intellectual property while limiting and controlling its potential anti-competitive static effects."

Under Brazilian law, right holders may be subject to compulsory licenses if they exercise patent rights in an abusive manner, or if they engage in abuse of economic power.

In the case of dependent patents, for instance, anti-competitive behaviour can be established if the holder of the main patent fails to reach agreement with the patent-holder of the dependent patent on the exploitation of the earlier patent.

Brazil said in 2007 it issued its first and only compulsory license to date, regarding the anti-retroviral Efavirenz for public non-commercial use. The underlying intention was to guarantee that HIV patients received appropriate treatment from the Brazilian Public Health System, as Efavirenz was used by 40% of all HIV patients in Brazil at the time.

Previously to the compulsory license, the Brazilian Government engaged with the patent owner in several meetings with the view of reaching a negotiated solution. Those negotiations, however, did not lead to an agreement in terms and conditions adequate for addressing the public interest.

In conjunction with the procedures necessary for the compulsory license, the Brazilian Government initiated the preparation for the production of Efavirenz.

In spite of strictly following the requirements contained in the national and international legal framework, the Brazilian Government faced legal disputes in national courts, which were initiated by the owner of the patent. These disputes, however, were not successful.

As a result of such efforts by the Brazilian Government, and taking full advantage of legally permissible limitations and exceptions, it was possible to substantially reduce the price of Efavirenz from US$1.59 to US$0.45 per tablet at nominal prices.

This helped to ensure the adequate provision of medicine to HIV patients who need to take it on a daily basis to keep the disease under control.

According to Brazil, thanks to successful public policies combined with the steady availability of innovative drugs, it is able to provide treatment to the vast majority of patients diagnosed with HIV/AIDS.

Nowadays, among those receiving treatment, 90% of them have no detectable viral load, a sign of success of the treatment. This is a result only possible with the active participation of Government, pharmaceutical companies and patients' associations, in line with the higher level goals of the IP system.

Brazil believes that respect for intellectual property and efforts to promote the public interest in sectors of vital importance to their socioeconomic and technological development are not mutually exclusive.

It said a balanced intellectual property system, with built-in flexibilities as well as complementary policies and incentives, is the best way to incentivize innovation in all fields of technology.

According to trade officials, the United States warned against the potential negative effects of the co-sponsors' view of public interest, in the sense that it could discourage members from striving towards upholding robust domestic IP regimes, and therefore deny the public the benefit of critical future innovations and creative endeavours.

According to the US, IP and patents should not be viewed as intrinsic barriers to access. To properly address barriers to access, it is necessary to look at relevant factors outside the IP system, such pricing and procurement policies, taxes, mark-ups in tariffs, and other national policies that in the US view result in higher cost for consumers and health systems.

The US claimed that compulsory licensing diminishes the exclusivity of the patent grant and undermines the incentive for innovation and investment that is a critical component of technological progress.

Switzerland maintained that the current system of IP protection fully integrates a balance between private and public interests, while constantly nurturing the pipeline of new generic products.

Reliable and solid rules on IPRs provide for the necessary legal certainty to encourage the investment in new and better drugs for unmet medical needs, it said.

Instead of advocating for the use of compulsory licences, Switzerland said it supports the promotion of initiatives and approaches which incentivize research and development, and improve access to medical products for people in low and middle income countries.

This is one example of how the IP system serves the public interest, it added.

According to Switzerland, the way forward is building on voluntary and inclusive efforts such as the Medicines Patent Pool, the Global Fund's e-procurement platform or WIPO research, rather than dis-incentivizing research for the development of new and experimental drugs.

According to trade officials, the European Union said that a balanced system of IPRs which takes into account legitimate interests of users and rights holders fully serves the public interest.

TRIPS provides a reasonable balance and its rules and flexibilities allow countries to have a pragmatic and flexible approach that can help them to maximize the potential of their own intellectual assets and their integration into international trade while achieving broader societal welfare, it said.

The European Union maintained that this debate confirms that the current system is well suited and has reached a carefully crafted balance. Even countries asking for more flexibilities have decided not to use them, it said. +

 


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