The TRIPS Review: Some proposals for Developing Countries
by Carlos Correa
The Uruguay Round Agreement on Trade‑related Intellectual Property Rights (TRIPS) has brought about a "signal change" in the protection of intellectual property rights (IPRs). This Agreement, by its coverage, is the most comprehensive international instrument on IPRs.
The Agreement establishes minimum standards on almost all areas of IPRs in terms of both the availability of rights and their enforcement.
The inclusion of these latter type of provisions ‑ one of the main innovations of the Agreement with respect to pre‑existing conventions on IPRs ‑ means that whenever the Agreement enters into force, the respective Member country must have in place the legal procedures and the administrative and legal infrastructure necessary to actually enforce the conferred rights.
Any deviation from the standards set forth by the Agreement may lead to a dispute settlement procedure within the WTO, in accordance with the Dispute Settlement Understanding (DSU). If the existence of a violation is determined, (subject to some further procedural safeguards) the affected country can apply trade retaliation against the non‑complying country, in any area covered by the WTO Agreement.
As a result of its broad coverage and the nature of its provisions, the implementation of the TRIPS Agreement requires a significant body of national legislation both in terms of substantive as well as procedural rules. In many developing and least developed countries (LDCs), such an implementation calls for massive changes in pre‑existing laws.
The Agreement provides a framework for legislation and not operative provisions that may be directly imported into national laws.
In some cases there is considerable room for interpretation.
For instance, the concept of "exclusive marketing rights", as contained in Article 70.9 is undefined. Article 27.3. (b) allows an "effective sui generis regime" for plant varieties that may be designed without following any specific model. In other cases, the provisions explicitly determine options for legislation, such as Article 34 on the reversal of burden of proof.
Even in those cases where the standard of protection is clearly stated, Member countries must decide how to implement it, according to its own legal system (Article 1).
The implementation of the TRIPS standards, in sum, requires considerable elaboration at the national level.
Identifying national interests
In order to comply with the Agreement there is a need to assume a wide range of obligations in almost all areas of IPRs. In many areas the pre‑TRIPS laws of developing countries require very substantial change, particularly in order to handle new issues, such as protection under copyright law of computer programs and data bases.
There are also areas in which no previous legislation existed at all ‑‑ such as in the case of undisclosed information, integrated circuits and plant varieties.
Also, the TRIPS Agreement includes enforcement rules, and not just substantive provisions. Member countries not only face the task of drafting and obtaining parliamentary approval of new legislation, but compliance with the Agreement also calls for the revision of national laws in respect of civil, criminal and administrative procedures, as well redefining the role of police and custom authorities.
As illustrated by the UNCTAD study on TRIPS (1996), the costs of developing the institutional infrastructure to implement the TRIPS Agreement standards may be substantial.
Amending or developing new legislation on IPRs require legal expertise in a number of fields, which is often lacking in developing countries and LDCs. Drafting legislation needs an active involvement and cooperation of different State organizations, and also an interaction with the private sector and the society at large.
The adoption of new IPRs rules may affect different industrial and commercial activities in the country. Given the flexibility left by the TRIPs Agreement to deal with some issues (e.g. parallel imports, compulsory licenses) and the likely impact of different solutions, the appropriate involvement of the local private sector in the discussion of new legislation seems essential. Similarly, the strengthening of intellectual property rights may affect consumers and other groups (e.g. local communities).
Concerns have been voiced in many developing countries, for instance, with regard to the possible impact of the introduction of product patent protection in the pharmaceutical sector. Though the estimates vary significantly, several studies indicate that an increase in the prices of new medicines (as compared to a situation of open competition) will be the probable outcome of such an introduction, with a possible welfare loss for the respective country.
Likewise, a stronger protection of computer programs might reduce access to information technology systems by small and medium enterprises and educational institutions.
The TRIPS Agreement aims at balancing the interests of producers and users of technology (Article 7). Developing the appropriate mechanisms to do so is a quite difficult task, for which adequate consultation processes, reliable data and deep knowledge of each particular area are required.
The process of drafting legislation to implement the TRIPS Agreement is therefore not only a complex technical problem, but it also raises a number of public policy issues that need to be properly addressed.
Developing countries and LDCs were given transitional periods (Article 65) to implement the Agreement. Compliance will become obligatory for developing countries by 1 January 2000. Products that are not patentable at that date need to be protected as from year 2005.
The provision of such periods was an important element in the delicate balance reached as an outcome of negotiations. They were included to allow developing countries time to elaborate and adopt the required legislation, and to design any other policies necessary to minimize the possible negative effects of new IPRs rules. This was particularly the case with regard to products which were not patentable (such as pharmaceuticals, agrochemicals and food).
Despite the automatic nature of the transitional periods, many developing countries have been under pressure by some developed countries to accelerate the pace of reforms, so as to give immediate application to the TRIPS Agreement standards. These pressures have complicated rather than facilitated the process of legislative change.
Though so far only one case relating to TRIPS has been decided under the WTO dispute settlement mechanism (USA‑India on implementation of Article 70.8), several complaints and requests for consultations have been filed during the last few months, including EU against Canada relating to the "early working" exception for patents on pharmaceuticals (also known as the "Bolar" exception"), Canada against EU relating to the extension of the patent term for agrochemical and pharmaceutical patents, USA against Argentina on the recognition of "exclusive marketing rights", and USA against Canada relating to the extension of patents issued before 1989.
A significant number of developing countries have not been able to adapt their legislation to the Agreement's minimum standards yet, and are unlikely to do so before the end of the general transitional period on 31 December 1999. Even some developing countries that have taken substantial steps to implement the Agreement, have not been able to cover all areas (particularly those in which they had no legislation previously), or have not been able still to reform enforcement‑related rules.
This may put such countries in a situation of violation on 1 January 2000, and may lead to a large number of actions under the WTO dispute settlement mechanism against them. In fact, the USTR has already announced that it will assess the situation at the end of the year in order to take action as of January 2000.
In view of this situation, a possible approach may be to negotiate an extension of the transitional period as contained in article 65.2. Alternatively, proposals could be made in order to reach a consensus for non‑action in cases of non‑compliance of the TRIPS Agreement by developing countries, for a certain agreed period.
The Marrakesh Agreement has provisions for some mandated negotiations and reviews in some areas.
In terms of the TRIPS Agreement, Article 27.3.( b) is the only provision that is subject to an early review ‑ in 1999. So far, there is no agreement in the Council for TRIPS about the meaning of "review". Developed countries hold that it is the "review of implementation" which is called for, while for developing countries a "review" should open the possibility of revising the text.
[Discussions at the July meeting of the TRIPS Council suggest that the developed countries may reluctantly agree with the contention ‑‑ advanced by India, the Philippines and a number of other developing countries ‑‑ that the 'review' called for in that article is review of the provisions of the Article, and not its implementation ‑ SUNS].
Several proposals have been made, particularly by NGOs concerned with IPR issues, for the revision of article 27.3. (b), for instance, in order to ensure that naturally occurring materials are not patentable, and to recognize some form of protection for the "traditional knowledge" of local and indigenous communities.
The aim of some developed countries, if a revision takes place, would seem to include the elimination of the exception for plants and animals, and to establish that plant varieties should be protected in accordance with the UPOV Convention, as revised in 1991.
The outcome of a possible revision of this article is unclear. For developing countries it would be important to ensure that the exception for plants and animals is maintained, as well the flexibility to develop "sui generis" regimes on plant varieties which are suited to the seed supply systems of the countries concerned.
In the revision of that provision the following elements may be considered:
a) to preserve the right of any Member country to exclude from patentability plants and animals and to develop a sui generis regime for the protection of plant varieties;
b) to clarify that naturally occurring substances, including genes, shall remain outside any IPRs protection;
c) to determine the novelty requirement in a manner that excludes the patentability of any subject matter which was made available to the public by means of a written description, by use or in any other way in any country before the date of filing, including use by local and indigenous communities, or by deposit of a material in a germ‑plasm bank or other deposit institution where said material is publicly available;
d) to establish commitments by governments not to grant, or to cancel ex officio or upon request, IPRs on biological materials obtained (i) from collections held in international germplasm banks and other deposit institutions where such materials are publicly available; (ii) without the prior consent, where applicable, of the country of origin.
e) to ensure, as appropriate, compliance with the obligation to share benefits with the country of origin of a patented biological material.
A possible revision of article 27.3. (b) may also include though it would not be strictly necessary ‑ a provision specifically allowing for an experimentation exception (including the breeding of new plant varieties).
Another issue to be dealt with by the Council for TRIPS is the treatment of "non‑violation" complaints, which were not subject to the settlement of disputes till the end of year 1999 (Article 64.2 and 64.3). A decision should be taken ‑ by consensus ‑ on whether to extend such period or to determine the disciplines to be applied. An extension of the transitional period seems advisable.
Moreover, a deeper examination of the implications of this clause in the IPRs field may be undertaken. IPRs are generally defined in a precise manner ‑ since they imply the stipulation of a right to prohibit third parties from using, producing or commercializing a product or service.
Non‑violation opens a window for challenging on discretionary grounds IPRs national regulations and domestic policies in different areas beyond IPRs, such as price controls and regulations on royalty remittances. Hence, the application of the non‑violation clause may create a grey area and provide a basis for challenging national policies beyond the scope of IPRs.
It should be noted that according to Article 19.2 of the Dispute Settlement Understanding, the WTO adjudication process "cannot add to or diminish the rights and obligations provided in the covered agreements". And in the USA‑India dispute on Article 70.9 the Appellate Body rejected the "legitimate expectations" test derived from GATT jurisprudence on non‑violation acts, thereby confirming that "the developing countries are free to adopt their own laws and policies with respect to all intellectual property issues that were not expressly harmonized in TRIPS standards themselves"
Review of the Agreement
The agreements annexed to the Marrakesh Agreement for the establishment of the WTO have varying provisions, some for mandated reviews and further negotiations, and others generally for periodic reviews and/or review of implementation.
Besides the mandated review in 1999 of the provisions of Art. 27.3 (b), Article 71.1 of TRIPS provides for a review of the implementation of the TRIPS Agreement after year 2000, and for possible reviews "in the light of any relevant new developments which might warrant modification or amendment".
There are already several proposals, some formally submitted, to revise the TRIPS Agreement in a future Round. A preliminary question is, however, what should be the strategy of developing countries on this matter.
A first strategy may aim at a comprehensive revision, in order to effectively implement through specific provisions articles 7 and 8 of the Agreement and strike a balance between the interests of producers and users of technology. The rationale behind this strategy would be that the Agreement as it stands primarily reflects patterns of IPRs protection suitable for developed countries, but which largely disregard the "development dimension."
A component of this strategy may be to clarify various elements of flexibility which are present in the text, but which are or may be contested, such as the right to allow parallel imports (Article 6) including when originating from a compulsory licensee, the non‑patentability of uses of known products (interpretation of Articles 27.1 and 28), and the right to grant compulsory licenses on different grounds to be determined by each national law (Article 31). In addition, certain obligations may be clarified, such as obligations of developed countries under Article 66.2 with respect to LDCs and Article 67 relating to technical assistance.
This strategy may lead to the improvement of the present text from the perspective of developing countries. There is, of course, the risk that, depending on such countries' preparation and bargaining power, the revision of many provisions may lead to texts more restrictive than the existing ones. A careful political evaluation of possible scenarios is, therefore, needed.
A second strategy may, in contrast, be based on a de minimis approach, that is, opening for re‑negotiation as few provisions as possible. The rationale for this position would be that the TRIPS Agreement is not a uniform law, and that it leaves developing countries some room for manoeuvre that may be lost if the text is broadly revised. This position also assumes that the chances for developing countries to obtain favourable amendments are slim, given the high sensitivity of IPRs issues and the pressures exerted on developed countries' governments by powerful industrial lobbies.
Under this approach, only few key provisions should be subject to re‑examination, such as article 31 (g) ‑ termination of a compulsory license ‑ which seriously undermines the compulsory licensing system.
Finally, a third strategy may be based on a "policy" or "issues approach", that is on a systematic review of the Agreement in the light of a particular objective. This strategy would be most effective if the review systematically covers all WTO agreements that may affect the attainment of a certain objective, and not only the TRIPS Agreement. For instance, when dealing with technology transfer, in addition to particular provisions in the TRIPS Agreement, relevant provisions may be considered in the Agreements on the Application of Sanitary and Phytosanitary Measures (Article 9), Technical Barriers to Trade (e.g Articles 11 and 12), Subsidies and Countervailing Measures (SCM) (e.g. Article 8), and in the GATS (Articles IV and XIX).
It is possible to identify different approaches for a systematic review, as proposed:
1) Transfer of technology: Several developing countries have stressed the need to develop particular provisions in the TRIPS Agreement so as to ensure that the objective of fostering the transfer and dissemination of technology (Article 7) is effectively realized. In fact, developing countries and LDCs face growing constraints to get access to up‑to‑date technologies. Given that the issues at stake are complex, the development of a multifaceted and comprehensive approach is needed.
The enhancement of technology flows to developing countries may require the revision of several articles of the TRIPS Agreement, such as Article 27.1 (working obligations), Article 31. (b) (broader application of "refusal to deal" as an autonomous ground for compulsory licenses), Article 40 (specification of illegal restrictive business practices in voluntary licenses), and Article 66.2 (further specification of measures to be adopted to encourage the transfer of technology to LDCs).
This approach may be supplemented, as mentioned before, by an analysis of the amendments or new provisions that may be needed in other WTO agreements, such as the GATS and SCM. For instance, consideration could be given to the exemption under the SCM Agreement of subsidies related to the export of technology and associated equipment to developing countries.
2) Environment: Within the WTO Committee on Trade and Environment, India has already indicated the need to amend the TRIPS Agreement in order to facilitate the access to and use of environmentally sound technologies. The proposal requires the amendment of Article 31 (compulsory licenses) and Article 33 (duration of patents), and suggests that patent holders should be subjected to an obligation of transferring environmentally sound technologies on fair terms and most favourable conditions. It also proposes a financial compensatory mechanism.
3) Biodiversity: The reconciliation of the TRIPS Agreement with the Convention of Biological Diversity (CBD) may be one of the main objectives of possible negotiations. This may include the amendment of Article 27.1 (requirement of universal novelty as a condition for patentability) and Article 29 (obligation to prove that prior informed consent has been obtained with regard to claimed biological materials). A new provision on "traditional knowledge" may also be considered, though the complexity of this issue would justify the establishment of a working group to study and clarify possible options.
4) Health: The implementation of public health policies may be restrained by the implementation of IPRs protection, if the latter is not designed in a manner that effectively takes into account the objectives of such policies. The TRIPS Agreement leaves some room for this.
Under an approach focused on public health, however, some articles may require revision, for instance, Article 27.1 in order to exclude the patentability of "essential medicines" listed by WHO; Article 30 so as to incorporate an explicit recognition of an "early working" exception for the approval of generic products before the expiration of a patent; and, Article 31 in order to clarify the right to grant and the scope of compulsory licenses for public health reasons.
5) Competition: The expansion and strengthening of IPRs in developed countries has taken place pari passu with an effective application of competition law. Illustrative of this linkage is the large number of compulsory licenses granted in the United States in order to remedy anti‑competitive practices.
In developing countries, in contrast, IPRs protection is being enhanced consistent with the TRIPS Agreement, but competition law is non‑existent or weak in many countries.
The revision of the Agreement could be made with a view to strengthening the competition‑related provisions thereof (such as Article 40) and to incorporate new disciplines, for instance relating to measures to prevent and remedy abuses of IPRs. Specific work could be undertaken on vertical restraints, such as tying arrangements and restrictive practices in licensing agreements, as well as on horizontal restraints, such as pooling and cross‑licensing and industry standardization.
Some proposals have been made to revise the TRIPS Agreement in order to expand the special protection of geographical indications under Article 23 (now limited to wines and spirits) so as to cover other products of export interest, such as basmati rice. Such an increased protection, if admitted and not subject to special and differential treatment, could benefit all Members; therefore, its net impact in developing countries would depend on the number and economic importance of such countries' indications vis‑a‑vis those of other Members.
Other possible amendments that developing countries may consider include: clarifying Articles 70.8 and 70.9 in the sense that the 'exclusive marketing rights' should be conferred only in respect of new chemical entities and that only patents granted in another WTO Member with an examination system may be considered as a basis for granting those rights; incorporating the first to file principle for patent applications; developing rules for the protection of the works of folklore, as recommended by UNESCO Model Law of 1989, and to allow any Member country to recognize and protect traditional knowledge.
Both the United States and the European Union have suggested that a possible amendment to the TRIPS Agreement should incorporate the two conventions approved under the auspices of WIPO in 1996, that is, the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty. The WIPO Copyright Treaty reconfirms the pertinent provisions of the TRIPS Agreement on copyright. It also contains provisions particularly relevant to the use of works in a digital environment, like the 'right of distribution' (Article 6) and the 'right of communication to the public', including when members of the public may access these works from a place and at a time individually chosen by them' (Article 8).
Dr.Carlos Correa, lawyer and economist, is Director of the Masters Programme on Science and Technology and Postgraduate Course on Intellectual Property at University of Buenos Aires. He is also Director of Revista del Derecho Industrial y de la Competencia, a journal specialising in intellectual property and competition law. He was Under‑Secretary of State in the government of Argentina, 1984‑1989, and a negotiator in the Uruguay Round TRIPS negotiations and the Washington Treaty on integrated circuits. The above paper is abstracted from his book, "Intellectual Property Rights, the WTO and Developing Countries: The TRIPS Agreement and Policy Options", published by the Third World Network, Penang.