[Ip-health] Threat of Pharmaceutical-Related IP Investment

Bryan MERCURIO (Faculty of Law) b.mercurio at cuhk.edu.hk
Mon Sep 23 07:57:15 PDT 2013


Dear Brook

I honestly don't think you'll succeed in removing IPRs from the scope of investment treaties - they were literally included in the first bilateral investment treaty (Germany-Pakistan, 1959, protected patent tights) and I am not aware of any treaty which excludes them - that's over 3000 treaties (including FTAs with comprehensive investment chapters). I would put the energy towards limiting the scope of coverage/working on certain exclusions and carve-outs.

The biggest problem, as I see it, is simply poorly drafted treaties (which are never updated). Until recently, the language used in almost every treaty was extremely broad and with few exceptions and carve outs. These "first generation treaties" lasted until the NAFTA advanced the treaty-making, then of course the NAFTA model was extensively copied. Take the 1993 treaty between Australia and Hong Kong, fair and equitable treatment (FET) is drafted in the broadest terms (no mention of customary international law) and it has few exceptions. I do not think the claim by Phillip Morris will succeed, but I would be more confident if that treaty used the limiting language currently being negotiated into the TPP - by some measure. 

I am likewise confident that Canada will prevail in the Eli Lilly case. Despite the NAFTA not containing the latest limiting language clauses, it does contain some useful wording. Moreover, and here's the critical factor, essentially what Eli Lilly is asking an investment tribunal to do is to declare the Canadian interpretation of utility to be inconsistent with  Article 27.1 of the TRIPS Agreement, and then to deem a violation of TRIPS to be a violation of FET. Then, and only then, can Eli Lilly succeed on its expropriation claim. This is a big ask - and I cannot help but think that the tribunal will carefully consider the broader consequences of being asked to rule on the WTO-consistency of the Canadian interpretation. 

We have a similar situation unfolding in the plain packaging cases, but the consequences could be even worse for the international investment arbitration system - imagine if the investment tribunal finds that because the Australian measure violates TRIPS there is a violation of FET, but the WTO finds no violation of TRIPS. I do not think I am exaggerating when I say the credibility and perhaps legitimacy of international investment arbitration could be at stake.

The trend of claimants linking an alleged violation of TRIPS to a BIT will only continue. It is dangerous, on multiple levels. While language such as the limiting language in the KORUS and being negotiated into the TPP is not perfect, it does significantly raise the bar for claimants in succeeding. I am hopeful - and confident - the trend of better drafted treaties will continue. We're even seeing that in the TPP, as tobacco for the first time will be singled out for special treatment. Will the language be ideal, no, but it will be more than the other 3000+ treaties. That's a start.

But if Australia and Canada are unsuccessful, all bets are off (and even I will join you at the protest march).

Best 

Bryan


 
-----Original Message-----
From: Baker, Brook [mailto:b.baker at neu.edu]
Sent: Mon 23/09/2013 21:59
To: Bryan MERCURIO (Faculty of Law); ip-health at lists.keionline.org
Subject: Re: [Ip-health] Threat of Pharmaceutical-Related IP Investment
 
Thanks, Bryan, for your suggestion that 4(b) may be as good as we can get,
but I hope it is not.  My proposal is not so much this time that there be
no investment clause coverage of health regulations, but that there be no
investment clause coverage of IP-related claims.  However, upon
reflection, we probably do need something even stronger with respect to
public-interest-oriented regulation, including health.  Maybe you could
help us move this project forward by suggesting how we can defend against
claims that:  (1) rare circumstances are not present, (2) that regulations
are not discriminatory, or (3) that the regulations are designed and
applied to protect legitimate public welfare objectives.  The reason that
health/IP advocates are concerned is that the US and Pharma are willing to
twist any action into some they called discriminatory.  Thus, Members of
Congress and others call India's patent decisions discriminatory and
protectionist even when they are fully TRIPS compliant, and Eli Lilly
calls Canada's promise doctrine discriminatory even though it is the
result of judicial decisions made after patent challenges by third party
generics.  US and European pharmaceutical patent holders are always going
to get the bulk of the bad news on patent related matters because they own
the vast bulk of such patents!

On your second point, concerning direct expropriation, thanks for pointing
out that it was incorrect.  Although the history of direct expropriation
lies in physical seizures, it has been extended as you suggest.  Do you
think there's any merit to Eli Lilly's claim that there is direct
expropriation in the case of a patent invalidation decision?

Brook

Professor Brook K. Baker
Northeastern U. School of Law
Affiliate, Program on Human Rights and the Global Economy
400 Huntington Ave.
Boston, MA 02115 USA
Honorary Research Fellow, University of KwaZulu Natal, Durban, S. Africa
Senior Policy Analyst Health GAP (Global Access Project)
Alternate NGOs Board Member UNITAID
(w) 617-373-3217
(cell) 617-259-0760
(fax) 617-373-5056
skype: brook_baker
b.baker at neu.edu




On 9/23/13 1:44 AM, "Bryan MERCURIO (Faculty of Law)"
<b.mercurio at cuhk.edu.hk> wrote:

>Dear Brook
>
> 
>
>While I agree with you that Eli Lilly's claim against Canada should
>fail, I do not entirely agree with your analysis. In part II of your
>paper, I find your analysis of the draft TPP chapter (essentially, the
>US submission from 2011 rather than agreed upon text) at times to be
>unfairly negative. Language such as that of 4(b) [also seen in the
>KORUS, but not in earlier treaties] is a huge win for public health and
>the environment, and I fear the constant press without recognizing gains
>will eventually undermine the cause as governments tune out - no matter
>what they do it will never be enough. The intent of the language is
>clear, and it is worded as strongly as it possible could be:
>
> 
>
>"Except in rare circumstances, non-discriminatory regulatory actions by
>a Party that are designed  and applied to protect the legitimate public
>welfare objectives [23 For greater certainty, the list of legitimate
>public welfare objective in this subparagraph is not exhaustive] such as
>public  health, safety, and the environment, do not  constitute indirect
>expropriations."
>
> 
>
>Really, if this is not good enough what is it that you want? What would
>satisfy you? A blanket exception whenever the word "health" is used in a
>regulation?  So, while a provision such as "foreign investors cannot
>invest in Boston" would violate NT and MFN but "foreign investors cannot
>invest in Boston, for health reasons" would be immune to challenge? Of
>course, the language is no panacea or magic bullet, and it does shift
>the argument to whether something is a "rare circumstance",
>"legitimate", and actually a "public health/environment/etc" measure,
>but it's a pretty clear statement of intent from the parties.
>
> 
>
>I should also mention your claim that direct expropriation is "limit[ed]
>...to governmental seizure of real property" is flat out incorrect. If
>the US government seized the trademarks of foreign companies and
>distributed them to US companies, there would be a direct violation of
>the relevant treaties. Full stop. While the claims we have seen relating
>to IPRs (i.e. tobacco) are indirect expropriations, there is no
>limitation.
>
> 
>
>This is a case worth publicizing, and it should be receiving as much
>attention as the Indian cases of Glivec and Novartis (hello, NGOs!), but
>careful attention must be paid not to conflate issues or fail to
>recognize how treaty language is moving in the pro-health/environment
>direction.
>
> 
>
>Kind regards
>
> 
>
>Bryan
>
> 
>
> 
>
> 
>
> 
>
>Bryan Mercurio
>
>Professor and Vice Chancellor's Outstanding Fellow of the Faculty of Law
>
>Associate Dean (Research)
>
>The Chinese University of Hong Kong
>
>Shatin, NT
>
>HONG KONG
>
>Tel: +852 3943 1139
>
>Faculty webpage: http://www.law.cuhk.edu.hk/people/mercurio-bryan.php
><http://www.law.cuhk.edu.hk/people/mercurio-bryan.php>
>
>SSRN author page: http://ssrn.com/author=346439
><http://ssrn.com/author=346439>
>
> 
>
> 
>
> 
>
> 
>
>----------------------------------------------------------------------
>
> 
>
>Message: 1
>
>Date: Fri, 20 Sep 2013 14:34:03 +0000
>
>From: "Baker, Brook" <b.baker at neu.edu>
>
>To: IP-health <ip-health at lists.keionline.org>,
>
>                "healthgap at lists.critpath.org"
><healthgap at lists.critpath.org>,
>
>                "internationaltreatmentpreparedness at yahoogroups.com"
>
>                <internationaltreatmentpreparedness at yahoogroups.com>
>
>Subject: [Ip-health] Threat of Pharmaceutical-Related IP Investment
>
>                Rights in the Trans-Pacific Partnership Agreement: An
>Eli Lilly v.
>
>                Canada Case Study
>
>Message-ID: <CE61D516.437F0%b.baker at neu.edu
><mailto:CE61D516.437F0%25b.baker at neu.edu> >
>
>Content-Type: text/plain; charset="Windows-1252"
>
> 
>
>Threat of Pharmaceutical-Related IP Investment Rights in the
>Trans-Pacific Partnership Agreement: An Eli Lilly v. Canada Case Study
>
> 
>
>Brook K. Baker
>
> 
>
> 
>
>After losing two patent cases before the appellate courts of a Western
>democracy, should a disgruntled foreign multinational pharmaceutical
>company be free take that country to private arbitration claiming that
>its expectations of monopoly profits had been thwarted by the courts?
>decisions? Should governments continue to negotiate trade agreements
>where expansive Intellectual Property-related investor rights and
>investor- state dispute settlement (ISDS) are enshrined into hard law?
>Should we be concerned about the impact of billion dollar arbitral
>judgments on the willingness of governments to regulate pharmaceutical
>companies and to corral their efforts to expand their patent and data
>protection monopolies? Ultimately, should policy makers be concerned
>about the impact of investor rights on the affordability and
>accessibility of medicines both in rich and low- and middle-income
>countries?
>
> 
>
> 
>
>The answers to these questions become more urgent given proposed IP and
>Investment Chapters in the Trans- Pacific Partnership Agreement (TPP)1
>and the recent NAFTA investor dispute notifications by Eli Lilly against
>Canada.2 The Eli Lilly case clarifies the risks of including IP rights
>in investment chapters and the boundary- pushing claims that can be
>brought on behalf of foreign pharmaceutical companies.
>
> 
>
> 
>
>4:4 Investment Treaty News 8-10 (2013), available at,
>http://www.iisd.org/pdf/2013/iisd_itn_sept_2013_en.pdf
>
> 
>
> 
>
> 
>
> 
>
>_______________________________________________
>Ip-health mailing list
>Ip-health at lists.keionline.org
>http://lists.keionline.org/mailman/listinfo/ip-health_lists.keionline.org





More information about the Ip-health mailing list