[Ip-health] Bitter pill for India-EU trade ties

Leena Menghaney leena.menghaney at geneva.msf.org
Fri Aug 27 01:32:31 PDT 2010

Bitter pill for India-EU trade ties 
India's ongoing negotiations with the European Union have seen differences
over intellectual property rights

Biswajit Dhar, livemint.com, 2 August 2010

The ongoing negotiations between India and the European Union (EU) on a
broad-based bilateral trade and investment agreement (BTIA) have seen
differences emerge in a number of critical areas, including those on
intellectual property rights. What is perhaps more disconcerting is that
these two negotiating partners find themselves on opposite sides of the
table in a number of forums.

The most recent flashpoint is a dispute initiated by India against the EU at
the World Trade Organization (WTO). EU customs authorities had seized
authorized generic pharmaceutical products-in transit to Latin America and
Africa- when they were transiting through ports and airports in the
Netherlands. More than 20 cases of seizures took place in 2008 and 2009.
While taking action, EU authorities had enforced a 2003 European Commission
directive, which allows seizure of goods that are suspected of infringing
the rights of intellectual property holders in the EU even when the goods
are merely in transit, i.e., they have not entered the customs territory of
any EU member state. Though the EU has clarified that the seized shipments
were released, the inordinate delays caused in transit not only affected the
commercial interests of the exporting Indian firms but also denied patients
in the importing countries access to crucial life-saving medicines.

There are at least two substantive grounds on which the EU directive is in
explicit violation of WTO rules and procedures. First, WTO law provides that
intellectual property owners have the right to prevent third parties from
making, using, offering for sale, selling or importing the protected
products or processes. In other words, the rights can be enforced only when
there is an explicit conflict with the commercial interests of the owners of
intellectual property rights. However, in the case involving seizures of
pharmaceutical products, the commercial interests of the EU intellectual
property owners were in no way affected, since the products were merely in
transit through the Dutch ports.
Second, there is a mutual agreement among WTO members to grant freedom of
transit through their territories, through the routes most convenient for
international transit, for traffic in transit to or from the territory of
other members. This provision was agreed to when the General Agreement on
Tariffs and Trade, or Gatt, the predecessor organization of WTO, became
effective in January 1948. Importantly, during the six decades of Gatt's
existence, the multilateral trading system has seen no dispute on the issue
of freedom of transit. That means this is the first time that the
multilateral trading system would be considering a case where the freedom of
transit has been denied by a member.

It is not only in international markets where the EU is challenging generic
pharmaceutical producers. In the domestic market, these firms are facing the
heat as the EU pushes for changes to Indian laws that govern marketing of
pharmaceutical products. The EU is, in effect, seeking to introduce in India
laws governing marketing of pharmaceutical products that are similar to its
own. In the EU, any firm seeking marketing approval for a new pharmaceutical
product, for which it has submitted data on clinical trials, can get
exclusive marketing rights on the product for 10 years. This implies that
any other producer can market a similar product only after the 10-year
exclusivity period has lapsed. Introducing these provisions in India can
dent the market prospects of generic producers, most of which are looking to
introduce cheaper versions of patented products once their patent terms have

Yet another challenge for the Indian generic pharmaceutical industry arises
from the proposed Anti-Counterfeiting Trade Agreement (Acta), a plurilateral
agreement, which is the result of a joint initiative taken by the US, the EU
and Japan. Acta negotiations have a twofold objective: to redefine
counterfeit products and to strengthen the enforcement of intellectual
property rights. In fact, the proposals that Acta is considering could
result in ratcheting up standards of intellectual property protection, well
beyond those provided by the WTO agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS).

The definition of counterfeit products that has been proposed by
participants such as the EU, if accepted, would expand the scope of coverage
of such products. If the global standards on intellectual property
rights-namely, those provided by TRIPS-were considered, the term
"counterfeit" can only be applied in respect of trademark violations.

The legislative and enforcement issues that are being raised in Acta's
context encompass a number of areas, which include border measures and
intellectual property protection and enforcement. The proposals that have
been tabled in the Acta negotiations thus far, which are considerably more
stringent than TRIPS provisions, include civil judicial proceedings to
compensate for damages arising out of infringements.

Given the strong position that it has taken against "TRIPS-plus" standards
in WTO, India could find itself constrained in the ongoing BTIA negotiations
with the EU.

Biswajit Dhar is director general at Research and Information System for
Developing Countries, New Delhi. 

Leena Menghaney
Campaign Co-ordinator 
Medecins Sans Frontieres
Campaign for Access to Essential Medicines (India)
C 236 Defence Colony, New Delhi, India
Tel: +91 11 46573731, +91 11 46573730

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