[Ip-health] TRIPS and compulsory licences: raising the bar

Elizabeth Rajasingh elizabeth.rajasingh at keionline.org
Mon Jun 22 06:14:49 PDT 2015


TRIPS and compulsory licences: raising the bar
​http://www.lifesciencesipreview.com/contributed-article/trips-and-compulsory-licences-raising-the-bar​

​​
Sandra Kuzmich and Russell Garman
16-06-2015

The proposed Trans-Pacific Partnership seemingly contains a bid by the US
to increase standards for compulsory licences above those already in place
internationally, say Sandra Kuzmich and Russell Garman of Frommer Lawrence
& Haug.

The US is approaching the final stages of establishing a trade agreement
with 11 Pacific Rim nations. This pact, known as the Trans-Pacific
Partnership (TPP), aims not only to promote trade and improve economies in
the Asia-Pacific region, but also to address various other issues, notably,
intellectual property. Of particular interest to the pharmaceutical
industry is a proposal by the US to increase standards for compulsory
licences above the requirements that the international community already
has in place.

A compulsory licence to use a patent is a legal provision that allows a
government to license the use of a patented invention to itself or a third
party without the consent of the patent owner. The use of compulsory
licences has been agreed upon by members of the World Trade Organization
(WTO) through the 1995 TRIPS Agreement. In the negotiations leading up to
TRIPS, compulsory licensing was an area of intense discussion, as
developing countries wanted the agreement to provide easier access to
technology, while developed countries sought stronger protection for
patented technologies. The result of those discussions is article 31 of
TRIPS, which offers countries broad discretion in the use of compulsory
licensing, but under certain conditions.

The requirements governing compulsory licensing among WTO members were
revisited by the 2001 Doha Declaration on the TRIPS Agreement and Public
Health, which was adopted to address the issue of patents preventing access
to medicines for those in need. The Doha Declaration established that TRIPS
does not restrict WTO members from taking measures to protect public
health, affirming the freedom of each member to determine what constitutes
a national emergency and the grounds on which the compulsory licences are
granted.

To further expand the rights of governments to address public health needs,
in 2005 WTO members adopted an amendment to article 31 of TRIPS, known as
article 31bis. The amendment addressed the needs of countries that do not
have the capacity or resources to manufacture generic versions of patented
medicines by permitting the countries to import generic substitutes without
interference from the patent owners.

Challenges

Despite attempts by WTO members to assist countries with public health
needs through compulsory licences, there are challenges and obstacles in
the way of doing so.

First, countries are often reluctant to use compulsory licences out of fear
of retaliation, which may be founded in instances of patent owners and/or
their home countries responding aggressively to the use of compulsory
licences to their patents. For instance, in response to Thailand’s use of
compulsory licences to produce antiretroviral drugs that included pharma
company Abbott’s lopinavir/ritonavir combination, Abbott accused Thailand
of ignoring the patent system and elected not to launch any new medicines
in Thailand as a protest. Further, in April 2007 the US Trade
Representative (USTR) placed Thailand on its Special 301 Report, a watch
list of countries that allegedly fail to provide adequate protection or
enforcement of IP rights.

As another example, non-governmental organisations such as Doctors Without
Borders suspect that increased measures to seize pharma products at the
borders of countries in Europe were in retaliation to developing countries
with compulsory licences that use Europe to transit drugs from India.

Second, the use of compulsory licensing is restricted or limited by
commitments in bilateral agreements. The USTR often pursues trade
agreements that require greater protection of IP rights than that afforded
under TRIPS, referred to as ‘TRIPS-plus’ provisions.

The US has entered into 20 free trade agreements and many of these require,
for example, specific restrictions or conditions on compulsory licences
(eg, only as a remedy to anti-competitive practices, for public
non-commercial use, for cases of national urgency, etc).

Third, the process of obtaining a compulsory licence under TRIPS is
inefficient. For example, the single instance of a compulsory licence under
article 31bis involved Canada authorising a compulsory licence to drug
company Apotex to manufacture generic AIDS medicines for exportation to
Rwanda. Canada (the exporter) and Rwanda (the importer) found the procedure
to be complicated and cumbersome.

Apotex also had little incentive to participate in the process due to
difficult negotiations with the patent owners and concerns that the term of
the compulsory licence was too short to recover the costs of manufacturing
the AIDS medicines.

The TPP and waiving TRIPS

The USTR has indicated that in the TPP the US is seeking to establish more
flexible pharma IP rights protections for developing countries than exist
in developed countries. However, it is questionable whether the provisions
that the US is proposing will actually assist developing countries to meet
their public health needs.

"THE US MUST BALANCE ITS ECONOMIC RESPONSIBILITY TO PROTECT THE IP OF ITS
DOMESTIC INDUSTRIES AND ITS MORAL RESPONSIBILITY TO AID THOSE NATIONS IN A
HEALTH CRISIS."

While the negotiations surrounding the TPP are closed to the public and
details of the agreement have been kept secret (which is itself a source of
controversy and debate), drafts of the TPP have been leaked. Most recent is
a May 16, 2014 version of the TPP released by WikiLeaks. In this version,
article Q.Q.E.4 requires that compulsory licences (1) are “limited”; (2)
“do not unreasonably conflict with a normal exploitation of the patent”;
and (3) “do not unreasonably prejudice the legitimate interests of the
patent owner, taking account of the legitimate interests of third parties”.

This proposal imposes restrictions on compulsory licences to which WTO
members are not currently held, since article 31 of TRIPS does not limit
the grounds or underlying reasons under which a compulsory licence may be
used. In contrast, the second TPP condition (that the compulsory licence
“do[es] not unreasonably conflict with a normal exploitation of the
patent”) may be interpreted as a bar against any compulsory licence
designed to expand access to a drug.

In a leaked previous version of the TPP, dated August 30, 2013, there was
an additional provision that stated “[n]othing in this chapter shall limit
a party’s rights and obligations under article 31 of the TRIPS Agreement or
any amendment thereto.” Such a provision would have permitted countries to
use compulsory licences as long as they met the conditions of article 31,
regardless of whether the conditions in article Q.Q.E.4 are met, but this
provision was removed in the subsequent May 16, 2014 version of the TPP.

Australia, perhaps in recognition of the fact that the reference to article
31 of TRIPS was omitted in the May 16, 2014 version of the TPP, recently
proposed to add a footnote to the TPP stating “[f]or greater certainty,
nothing in this chapter shall prevent a party from taking measures pursuant
to article 31 of the TRIPS Agreement, including any waivers or amendments
thereto”.

However, this footnote does not have the same impact as the TRIPS article
31 provision in the August 30, 2013 version of the TPP, because the
footnote can be interpreted to mean that countries seeking compulsory
licences can use the procedures set out in article 31 but would still have
to comply with the conditions in TPP article Q.Q.E.4.

Proponents of the May 16, 2014 version of the TPP could also point to
article Q.Q.A.7(b) as a potential means to address a healthcare crisis via
a compulsory licence. This article states that the TPP “does not and should
not prevent the effective utilisation of the TRIPS/health solution”.

The TRIPS/health solution is a waiver of TRIPS obligations for a developing
nation facing a public healthcare crisis and having insufficient drug
manufacturing capabilities. But using this type of compulsory licence is
burdensome and requires that various safeguards are met, including
information specifying the quantities of drug needed, evidence of an
inability to manufacture the drug, numerous notices from an exporting
country, and a guarantee that the drug will be used for public health
services. Implementation of a compulsory licence under article Q.Q.A.7(b),
therefore, is not a viable option for countries in urgent need of
healthcare.

Therefore, while it is proclaimed that the TPP sets more flexible pharma IP
rights protections for developing countries, the information leaked to the
public about the provisions governing compulsory licences indicates
otherwise.

The US must balance its economic responsibility to protect the IP of its
domestic industries and its moral responsibility to aid those nations in a
health crisis. Perhaps that balance may be achieved with requirements for
using compulsory licensing that are less restrictive than those presently
proposed in the TPP, such as a condition that more strongly encourages
nations in need of a compulsory licence to work with the patent owner in
exchange for relaxing the requirement that the compulsory licence must “not
unreasonably conflict with a normal exploitation of the patent”.

Such a compromise may even prove to be financially beneficial to developing
nations, as analyses such as the one conducted by Amir Attaran at the
University of Ottawa in Canada have shown that the prices of drugs obtained
through international procurement are ultimately lower than the prices of
drugs obtained through compulsory licensing.

The TPP is viewed as a template for future trade agreements between the US
and other nations. Consequently, it is essential that the US strikes the
right balance in relation to the provisions governing compulsory licensing.

Sandra Kuzmich heads the life sciences group at Frommer Lawrence & Haug.
Her practice focuses on strategic IP counselling and product life cycle
management in the areas of pharmaceuticals and biotechnology. She can be
contacted at: skuzmich at flhlaw.com

Russell Garman is an associate at Frommer Lawrence & Haug. He focuses his
practice on developing and managing global patent portfolios and on
protecting life sciences technologies throughout their life cycle. He can
be contacted at: rgarman at flhlaw.com

----
Elizabeth Rajasingh
Perls Research and Policy Fellow, Knowledge Ecology International
1621 Connecticut Ave. NW, Suite 500
Washington, DC 20009
*elizabeth.rajasingh at keionline.org <elizabeth.rajasingh at keionline.org>* |
 1-202-332-2670



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