WTO TRIPS Council debates IP and the public interest

WTO member states recently discussed the relationship between intellectual property and the public interest, including the use of compulsory licences to override patent rights on public health and other grounds.

by Kanaga Raja

GENEVA: The WTO Council for Trade-Related Aspects of Intellectual Property Rights (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, the five countries for the first time called on WTO members “to exchange views and experiences on measures within the IP [intellectual property] 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 13-14 June TRIPS Council meeting, the co-sponsors of the proposal invited delegations to share their experiences on the use of compulsory licences for accessing health and other technologies.


In their proposal, the five countries noted that the WTO’s 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 systems within these minimum standards, 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 intellectual property rights (IPRs) 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 research and development (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 the 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 socioeconomic and technological development, provided that such measures are consistent with the provisions of the Agreement.

Article 8(2) further states that appropriate measures may be needed to prevent the abuse of IPRs by right holders or the 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 least developed countries (LDCs) (extended by the WTO until 1 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 WTO’s 2001 Doha Declaration on the TRIPS Agreement 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.

The Doha Declaration added a new flexibility, 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.

Use of flexibilities challenged

The five countries noted: “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 [as] 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 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 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, the five countries 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.”

Compulsory licensing

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 the TRIPS Agreement lays down a set of conditions for issuing compulsory licences of patents.

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

“In spite of the clarity of this language,” the co-sponsors pointed out, “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 Doha Declaration confirmed what was already implicit in the TRIPS Agreement – that WTO members have the freedom to determine the grounds upon which compulsory licences 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, such as: (i) non-working or insufficient working of the patent, (ii) anti-competitive practices, (iii) public interest, (iv) dependent and blocking patents, and (v) government use.

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

l     What grounds are available in their national laws to issue compulsory licences?

l     What are the difficulties faced by WTO members in using compulsory licences, including constraints, such as insufficient or no manufacturing capacities?

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

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

The Indian experience

According to trade officials, some 15 delegations spoke on this issue at the TRIPS Council meeting. 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.

In its statement, 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 licences, 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 $1 a day compared with the price of standard triple therapy of $10,000 per patient per 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 reiterated that WTO members have the freedom to determine the grounds upon which compulsory licences are granted. There have been many studies that examine the possible grounds for issue of compulsory licences. For instance, said India, the diversity in the grounds for compulsory licensing is documented in a 2014 US Congressional Research Service article titled “Compulsory licensing of patented inventions” by John R. Thomas, which mentions that “depending upon particular national laws, the grounds for government award of a compulsory licence 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 practise 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 its Patents Act contain detailed provisions regarding compulsory licences including those that generic companies can apply for, government use licences, those issued in cases of national emergency, extreme urgency and public non-commercial use, and compulsory licences for exports.

India has issued only one compulsory licence so far. In March 2012, Indian generic manufacturer Natco Pharma was granted a compulsory licence to manufacture Bayer’s drug sorafenib tosylate (Nexavar) used for the treatment of kidney and liver cancer.

Bayer had been 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 2% of the affected population. According to India, the primary reason for the abysmally low coverage vis-a-vis the need was the exorbitant cost of nearly Rs284,000 ($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 Rs8,800 ($135) a month. The Controller General of Patents in India granted a compulsory licence 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 decision of the Controller General of Patents has been upheld by the Indian courts.

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

It said that, 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, the US threatened Bayer in 2001 with a compulsory licence on ciprofloxacin (Cipro), which the US intended to stockpile as a defence against anthrax. Bayer drastically lowered its price in response.

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

India also pointed to the Apple v. Motorola case filed in the US 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 licence 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 on Access to Medicines, which states that many governments have not used the flexibilities available under the TRIPS Agreement, including compulsory licences, for various reasons, ranging from capacity constraints to undue political and economic pressure from states and corporations, both express and implied.

The panel report also refers to resolution No. 2475 by the Colombian Ministry of Health that was a pathway for issuance of a compulsory licence to access the leukaemia drug imatinib in the public interest. Many domestic and foreign parties tried to dissuade the Colombian government from issuing a compulsory licence as provided by the TRIPS Agreement and the Doha Declaration.

India concluded by quoting the recommendations on compulsory licences in the panel report: “Governments should adopt and implement legislation that facilitates the issuance of compulsory licences. Such legislation must be designed to effectuate quick, fair, predictable and implementable compulsory licences for legitimate public health needs, and particularly with regard 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 licences left to the discretion of governments.”

Balanced IP system

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, rights holders may be subject to compulsory licences 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 holder of the dependent patent on the exploitation of the earlier patent.

Brazil said in 2007 it issued its first and only compulsory licence to date, regarding the antiretroviral 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.

Prior to the compulsory licence, the Brazilian government had engaged with the patent owner in several meetings with a view to reaching a negotiated solution. Those negotiations, however, did not lead to an agreement on terms and conditions adequate for addressing the public interest.

In conjunction with the procedures necessary for the compulsory licence, the Brazilian government initiated the preparation for the production of efavirenz. Despite strictly following the requirements contained in the national and international legal framework, the 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 $1.59 to $0.45 per tablet at nominal prices. This helped to ensure adequate provision of the 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% 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 said it believes that respect for intellectual property and efforts to promote the public interest in sectors of vital importance to socioeconomic and technological development are not mutually exclusive. It said a balanced IP system, with built-in flexibilities as well as complementary policies and incentives, is the best way to incentivize innovation in all fields of technology.

IP incentive

According to trade officials, the US 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 as 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 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 R&D and improve access to medical products for people in low- and middle-income countries.

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 World Intellectual Property Organization (WIPO) research, rather than dis-incentivizing research for the development of new and experimental drugs.

According to trade officials, the EU said that a balanced system of IPRs which takes into account legitimate interests of users and rights holders fully serves the public interest. The TRIPS Agreement 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 EU 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. (SUNS8484)                               

Third World Economics, Issue No. 641, 16-31 May 2017, pp10-13