US beats a (tactical) retreat over Brazil’s patent law

by Chakravarthi Raghavan

Geneva, 25 June 2001 - The United States has dropped its complaint at the World Trade Organization against Brazil over its patent law, and is notifying the Dispute Settlement Body (DSB) to this effect, in what is being presented as a “mutually satisfactory solution,” that leaves Brazil to pursue its successful health policy to combat AIDS, and enables the Bush administration to salvage itself from a public relations disaster for backing its pharmaceutical lobby against a developing country and the poor, on the emotive issue of the HIV/AIDS pandemic, with political and economic overtones.

The US action is the second serious setback to the transnational pharmaceutical lobby. The pharmaceutical corporations earlier this year had to withdraw, under public pressure, a high profile case in South Africa challenging that country’s laws authorizing compulsory licence, in the South African domestic courts.

In starting its dispute, the US had presented it as challenging the ‘local working’ requirement of the Brazilian law, and the pharmaceutical lobby had campaigned that the Brazilian law had little to do with fighting AIDS.

But neither cut much ice with the public groups, and the US has cut its losses in dropping the case.

As presented, the US is withdrawing the challenge to the provisions of the Brazilian Patent law, enabling the granting of compulsory licences to enable ‘local working’ of a patent. In turn, Brazil has agreed that, prior to issuing such a licence (which under the WTO TRIPS agreement and its own patent law, is a case-by-case decision), in relation to a patent held by US companies, Brazil will hold ‘prior talks’ with the United States, within their existing US-Brazil Consultative Mechanism.

The joint Brazil-US communication (to the WTO panel) about the agreement over the dispute regarding the compatibility of Brazil’s Industrial Property Law with the TRIPS Agreement, says:

“Without prejudice of the US and Brazil’s different interpretations of the consistency of Article 68 with the TRIPS Agreement, the US Government will withdraw the WTO panel against Brazil concerning the issue, and the Brazilian Government will agree, in the event it deems necessary to apply Article 68 to grant compulsory license on patents held by US companies, to hold prior talks on the matter with the U.S. These talks would be held within the scope of the US-Brazil Consultative Mechanism, in a special session scheduled to discuss the subject.”

“Brazil and the US consider that this agreement is an important step towards greater cooperation between the two countries regarding our shared goals of fighting AIDS and protecting intellectual property rights.”

The Brazilian Government in a press communique from Brasilia has said: “Brazil maintains its conviction that Art. 68 is fully consistent with the TRIPS Agreement and an important instrument available to the Government, in particular, in its efforts to increase access of the population to medicines and to combat diseases such as AIDS.”

The USTR, Robert Zoellick, for his part in a press release in Washington has said that he stands “four-square behind strong enforcement of the WTO rules on intellectual property. However, fighting this dispute before a WTO dispute panel has not been the most constructive way to address our differences, especially since Brazil has never actually used the provision at issue.”

The press release repeated the Bush administration’s commitment to a flexible approach, sensitive to the health crisis and also to protect IPRs.

It is evident that both sides have agreed to allow each other to put a spin of their own in presenting the compromise to their domestic audiences and constituencies.

The US is trying to present the agreement as one involving ‘consultation’, and Brazil is insisting that it is only an agreement for ‘talks’ and in the context of an existing joint “Consultative Mechanism.”

The US is presenting it as a compromise that protects intellectual property rights without compromising efforts to combat HIV/AIDS and, to quote the USTR, Robert B. Zoellick, is standing “four square behind strong enforcement of WTO rules on intellectual property.” The US position is that TRIPS does not allow industrial policy, and requirements of local working of a patent fall in that category, and thus illegal.

Brazil, whose health minister has been pursuing the highly successful strategy of providing ‘free’ medicine - the cocktail of retrovirals to keep at bay HIV/AIDS in patients, in a press communique from Brasilia, maintained its “conviction” that Art. 68 is fully consistent with the TRIPS agreement and an important instrument available to the government, particularly in combatting “diseases such as AIDS”.

The transnational pharmaceutical lobby has been attempting to portray Brazil’s position as something to do with Brazil’s domestic politics and Mr. Serra’s ‘candidacy’ to succeed President Cordoso.

It is clear, though, that the US has bowed to public pressures and the global campaign against the cost of medicines, and has yielded in not challenging the Brazilian law as such involving such high public emotions, but is keeping its options open to mount a challenge at some future point either against any actual Brazilian measure, or to pick on some other country taking similar steps in a matter not involving AIDS.

Developing-country diplomats have welcomed the US action in dropping the case against Brazil, but are under no illusions, and underscore the need to remove doubts by an interpretation or understanding by the Ministerial Conference or the General Council of the WTO.

Leading civil society organizations who have been campaigning on the issue of TRIPS and public health and affordable drugs, are equally clear that they have to keep up the pressure.

Mr. James Love, of the US Consumer Project on Technology, and a leading campaigner on the TRIPS issue, in welcoming the US move to withdraw its complaint, has noted that while the original US complaint related to the requirement of the Brazilian law about ‘local working’, the joint statement appeared to cover the entire Article in the Brazilian law, and this should be cleared up by both parties.

More generally, said Mr. Love, the US government should not insist on supervising another nation’s day-to-day administration of its patent laws.

The US itself, he notes, is out of compliance with the TRIPS in several areas.  For e.g. state governments cannot be sued for patent or copyright infringement under the US doctrine of state sovereign immunity. “Under what terms would US government accept foreign supervision of this US constitutional provision?”

It was positive to move away from a confrontation over the Brazil compulsory licensing act, and to avoid further confusion, if possible, regarding what is actually permitted under the WTO agreement.

“But the agreement to give the US government the right to be consulted on each compulsory licensing request,” Mr. Love said, “is not helpful and it is reminiscent of the (former vice-president Al) Gore proposal to South Africa, that would have had the US government supervise each parallel import license. At some point, we have to respect national sovereignty, and in the case of Brazil, let Brazil continue its difficult and costly efforts to treat poor AIDS patients.”

Elen ‘t Hoen of Medcins sans Frontier (MSF) welcomed the US action, and said other nations could follow the example of the successful Brazilian policy, that has shown to slash prices of AIDS drugs by about 80%. MSF said that there was now a growing consensus that governments should be able to take measures to obtain access to low-cost drugs in the poor countries.

Oxfam also welcomed the US decision and said this would help other countries who wished to stand up to the US and the drug companies. There was now no going back that TRIPS had to be interpreted in a “pro-public health” way. Cheap access to drugs could only be assured through a review of TRIPS.

Cecilia Oh of the Third World Network, which with Oxfam and MSF has launched an NGO signature campaign, said the international campaign led by the NGOs had contributed to the US decision. The NGOs would pursue and persist in their campaign in the run-up to Doha to ensure that the TRIPS rules are changed or interpreted so that developing countries could implement their health policies.

And looking beyond, it was time to review the TRIPS rules to reach understandings or changes that would be supportive of the Third World’s development and its ability to exercise its options - balancing within each country the need to promote and protect innovation and the need to safeguard public interest. – SUNS4923

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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