[Ip-health] Compulsory licences now available for export of patented pharmaceuticals - Lexology

Elizabeth Rajasingh elizabeth.rajasingh at keionline.org
Thu Sep 3 06:30:11 PDT 2015

Compulsory licences now available for export of patented pharmaceuticals

Jacinta Flattery-O'Brien and Kieran Williams, PhD
Australia, September 2 2015


Australia is a signatory to the World Trade Organization (WTO) Agreement on
Trade-Related Aspects of Intellectual Property Rights (the TRIPS
Agreement). The TRIPS Agreement sets out the minimum requirements for
intellectual property protection for WTO member states.

The TRIPS Agreement was amended in 2005 by the TRIPS Protocol, which had
the aim of providing developing countries with better access to medicines.
Under the TRIPS Protocol, WTO member states with insufficient manufacturing
capacity are able to import patented pharmaceutical products made under a
compulsory licence from another WTO member state.

Compulsory licences were previously available under Australian patent law
in circumstances where a patent is not being utilised, the patentee has
been approached by a third party seeking a licence, and the patentee has
refused to grant a licence “on reasonable terms and conditions”.  To date,
no compulsory licences have been granted, prompting a 2012/2013
Productivity Commission inquiry into their effectiveness.

The Intellectual Property Laws Amendment Act 2015, which came into effect
on 25 August 2015, does not implement the recommendations of the
Productivity Commission but, rather, implements the TRIPS Protocol and
introduces into the Patents Act a new form of compulsory licence.  A PPI
compulsory license enables generic Australian medicine producers to
manufacture and export patented pharmaceuticals products to developing
countries to address public health problems.  It is important to note that
a PPI compulsory license may be granted even if the patented pharmaceutical
product is being sold in Australia and, as such, represents a significant
addition to the existing compulsory license provisions.

PPI compulsory licences

A PPI compulsory licence means that the licensee does not infringe by
manufacturing and exporting a patented pharmaceutical product if it is used
to address a public health problem in an eligible country:

-in circumstances of national emergency or other circumstances of extreme
urgency; or
-by the public non-commercial use of the patented pharmaceutical product
(e.g., use by a government or a non-profit non-government organisation to
address ongoing public health problems).

An eligible country is:

-a country identified by the United Nations as a “least developed country”
– such countries include Afghanistan, Bangladesh, Cambodia, Haiti and
Nepal, as well as many African countries; or
-a WTO member state with insufficient manufacturing capacity that has
notified the TRIPS Council of its intention to make use of the PPI
compulsory licence system as an importer.

Requirements for grant of PPI compulsory licences

The Federal Court may only grant a PPI compulsory licence if it is
satisfied that:

-the proposed use of the patented pharmaceutical product is to address a
public health problem in the eligible importing country
-the PPI compulsory licence is necessary
-the application for the PPI compulsory licence has been made in good faith
(i.e., a PPI compulsory licence should not be sought in order to pursue
commercial objectives in Australia)
-the eligible importing country has notified the Commissioner of Patents or
-the TRIPS Council
-the patented pharmaceutical product is to be imported by the eligible
importing country (or by an authorised third party importer)
-the PPI compulsory licence applicant, the eligible importing country and
any third party importer will take reasonable measures to prevent the
patented pharmaceutical product being used for a purpose other than
addressing a public health problem and
-the PPI compulsory licence applicant has given the patentee an opportunity
to voluntarily authorise use of the patented pharmaceutical product (unless
there are circumstances of extreme urgency in the eligible importing

Remuneration of the patentee

The licensee must remunerate the patentee for the use of the patented
pharmaceutical product.  If the licensee and the patentee cannot agree on
the terms for the licence, either party can ask the Federal Court to
determine the remuneration.  In determining adequate remuneration, the
court will take into account the economic value to the eligible importing
country of the use of the patented pharmaceutical product.

In circumstances of extreme urgency in the eligible importing country, the
licensee does not have to wait for the remuneration to be agreed with the
patentee or determined by the Federal Court – the licensee and the patentee
can conduct their negotiations in parallel with the manufacturing and
export of the patented pharmaceutical product.

In the absence of circumstances of extreme urgency, the licensee will need
to wait for the remuneration to be agreed with the patentee or to be
determined by the Federal Court.

Concluding remarks

According to the World Health Organization, “differential” or “tiered”
pricing has reduced the cost of many drugs in developing countries.  For
example, the cost of anti-retroviral HIV/AIDS therapies has been reduced by
up to 90% in low-income countries, while the same drugs continue to be sold
at market price in developed counties.  Differential pricing and other
measures aimed at increasing the supply of affordable pharmaceuticals to
developing countries have proven useful but, in addition, the United
Nations Development Programme questioned the compatibility of the TRIPS
Agreement with human rights law due to the impact of the Agreement on
access to essential drugs in low-income countries.  The PPI compulsory
licence appears to go some way towards providing a solution to some of the
problems posed by the TRIPS Agreement.  It represents another step towards
ameliorating the significant social and humanitarian issues associated with
the undersupply of affordable pharmaceuticals to the developing world.

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>* |

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