[Ip-health] Differential Treatment and Developing Country Transition Periods in the IP Chapter of the TPP

Baker, Brook b.baker at neu.edu
Thu Dec 5 15:51:25 PST 2013

Differential Treatment and Developing Country Transition Periods
in the IP Chapter of the TPP
Professor Brook K. Baker, Northeastern U. School of Law & Health GAP
Dec. 5, 2013

Inside U.S. Trade (Nov. 27, 2013) has reported that the U.S. floated a non-paper proposal for differential treatment and a transition period for developing country partners (Vietnam, Peru, Mexico, and Malaysia) with respect to some of its intellectual property demands in the Trans-Pacific Partnership Agreement negotiations.  According to Inside U.S. Trade, the mid-November non-paper would give developing country partners a reprieve from three specific elements of the U.S.’s TPP demands:  (1) no mandatory requirement for patent term extensions to compensate for regulatory delays in patenting or regulatory approval, (2) no additional 3-year extensions of data exclusivity beyond the initial, presumptive 5-year period, plus potentially an explicit public health exception to data exclusivity and a push clause that would start the 5 year exclusivity from the first date of approval by a TPP partner if the developing country achieves fast-track product registration within 6 months of application, and (3) no requirement of patent-registration linkage that would automatically stay the processing of generic registration applications along long as there are measures permitting patent-holders the right to defend their patents in court.

The Inside U.S. Trade article (Nov. 29, 2013) suggests that the transition period will be based on graduation to upper-income country status based on World Bank criteria that currently sets the graduation threshold at $12,616 per capital GNI per annum.  As I reported, Mexico and Malaysia are already close to that threshold, Peru is almost 50% there and Vietnam is only 12% there.

After its original article, Inside U.S. Trade reported that brand-name drug makers are “cool to the idea proposed by U.S. negotiators” and that they have taken a position in favor of a “time-bound phase-in.”  Industry was opposed because of uncertainty about when transition would occur, concern about a transition period precedent that might extend to major pharmemerging countries like India and China, and its unshakeable conviction that more IP is good even for less mature economies.  Inside U.S. Trade (Dec. 2, 2013), also reports that Senator Hatch has entered the fray, arguing that countries that don’t want the full-Monte IP proposals should be left out of the TPP Agreement.

I have already written that this offer is fool’s gold for developing countries, http://infojustice.org/archives/31540, but questions have arisen on the principles that should guide transition period should they be entered into.   This discussion should be referenced against the existing practice with respect to the May 10 New U.S. Trade policy that was incorporated into agreements with Peru, Panama, and Columbia – all developing countries.  In each of those cases, the May 10 concessions were hardwired into the agreement with no transition period for graduation included.  Thus, there is already a strong case that all TPP developing countries parties, but most especially Peru and Vietnam, who are not even close to upper-income status, should be granted IP concessions within any graduation clause requirement.

Should efforts to draw that line fail, then the question is what is an alternative defensible transition/graduation standard.  In many ways, the hard-line upper-income status test is too limiting.  For example, countries with high income inequality, where governments have to provide for the vast bulk of IP-protected medical commodity purchases, face a much harsher fiscal reality than countries with more equal income distribution.  Similarly, disease burden matters.  Finally, GNI per capita alone is a very blunt measurement.  In other contexts, human development index status has proven more useful in differentiating the development status and well-being of different countries.

In addition, the current upper-income category, as Jamie Love has demonstrated, is expanding over time to include countries earning a much lower percentage of per capita GNI than the richest countries (threshold has fallen from 50% in 1987 to 33.5% in 2012), http://www.keionline.org/node/1834.  Love proposed that differential status be given to countries where the per capita GNI was not at least 50% of the median income in the five richest countries.  That would add Chile to the list of transition/graduation countries, all of which would have a significant buffer to graduation during which they would not be burdened with the extra-burdens of May 10-plus patent and data protection.

It might well be that the best measurement for graduation – assuming increased IPRs are beneficial, which I don’t – is use of a human-development-index/Gini-index where the 50% of richest country threshold is used.

Despite discussing this approach, I want to make clear that I think any transition requirement is a second- or third-best approach.  The best approach is no TRIPS-plus IP in the TPP.  The second best approach is the standard of IP protection derived from the May 10 New Trade Policy and reflected in the Peru, Panama, and Columbia FTAs with the U.S.  The third best approach may well be what Love or I have suggested, which is a higher graduation threshold than mere upper-income status.  The industry’s suggestion of a time-limited approach is probably the worst, since Sen. Hatch’s proposal of dropping countries could be a blessing-in-disguise in helping developing countries to avoid IP handcuffs that will bind them for years to come.

More information about the Ip-health mailing list