Compulsory Licensing under TRIPS: The Negotiations

An understanding of the TRIPS compulsory licensing regimerequires an examination of the circumstances that led to its emergence. The TRIPS Agreement became part of the agenda for the GATT Uruguay Round for trade discussion partly through the significant influence of two important American lobbying groups: the Intellectual Property Committee(consisting of chief executive officers from selected economically influential American-based multinational corporations) and the International Intellectual Property Alliance.25 At the launch of the Uruguay Round at Punta del Este in September 1986, the US and Japan submitted proposals

21

Ibid

22_{B Mercurio & M Tyagi, ‘Treaty Interpretation in WTO Dispute Settlement: The Outstanding Question of the}

Legality of Local Working Requirements’ (2010) 19 Minnesota Journal of International Law 275, 281.

23

Before 1925, the only remedy for non-working pursuant to the Paris Convention was forfeiture by virtue of Article 5 Paris Convention, 1883, Article 5 Paris Convention (Brussels Revision, 1900), Article 5 Paris Convention (Washington Revision, 1911).

24

Article 31 (h) of the TRIPS Agreement provides that the patentee shall be adequately remunerated whenever a compulsory license is granted.

25_{S K Sell, ‘Post-TRIPS Developments: The Tension between Commercial and Social Agendas in the Context}

of Intellectual Property’ (2002) 14 Florida Journal of International Law 193, 194; P Drahos with J Braithwaite,

21 covering all IPRs to the Round’s preparatory committee whilst parallel proposals from Brazil and Argentina opposed the inclusion of IP in the new Round.26 At the end of the September 1986 Punta del Este negotiations, the ‘trade-related aspects of intellectual property rights, including trade in counterfeit goods’ was part of the Ministerial Declaration on the Uruguay Round of 20 September 1986.27

During the 1989 TRIPS Negotiating Group’s deliberations, compulsory licensing was already at centre stage with Brazil and Korea making a strong case for its inclusion.28 The US, in tandem with the European Community, sought to limit the use of compulsory licensing by member states and to impose the payment of remuneration to the patent holder in each case where a licence was granted29. The US initially sought to expressly limit the use of compulsory licensing to cases of antitrust violation and national emergency. Thus, Article 27 of the Draft Agreement on Trade Related Aspects of Intellectual Property, Communication from the US stated:30

Contracting Parties may limit the patent owner’s exclusive rights solely through compulsory licenses and only to remedy an adjudicated violation of competition laws or to address, only during its existence a declared national emergency.

The above provision was undoubtedly most restrictive and opposed by developing countries,which viewed the proposals presented by the developed countries as being over- protective of IPRs with little regard for the interest of consumers.31As observed by Gold and Lam:

In particular, developed and developing countries argued over whether it was

26

See D Gervais, The TRIPS Agreement: Drafting History and Analysis (Sweet and Maxwell, Thomson Reuters 3ed. 2008) 11.

27

GATT Ministerial Declaration on the Uruguay Round, GATT/WTO Doc MIN (86)/W/19 (Ministerial Declaration of 20 September 1986) available at

http://www.jus.uio.no/lm/wto.gatt.ministerial.declaration.uruguay.round.1986/doc.html.

28

Gervais, above n 26, 16.

29

See E T Penrose ‘The Economics of the International Patent System’, in F. Abbot et al, The International Intellectual Property System: Commentary and Materials (Kluwer Law International, The Hague, Part 1, 1999) 635.

30

Draft Agreement on Trade Related Aspects of Intellectual Property, Communication from the US, GATT Doc. No. MTN.GNG/NG11/W/70, (11 May 1990).

31

See A M Pacon, ‘What Will TRIPS Do for Developing Countries?’ In F Beier, & G Schricker (eds.) From GATT to TRIPS – The Agreement on Trade Related Aspects of Intellectual Property Rights, IIC Studies: Studies in Industrial Property and Copyright Law, (VCH Verlagsgesellschaft mbH, Munich, 1996).

22

necessary to engage in negotiations with the patent holder prior to issuing compulsory licenses granted in the public interest. It was this argument that set the stage for the current article 31 of TRIPS….32

Compulsory licensing was thus viewed by most developing countries as an indispensable weapon to prevent the abuse of patent rights whilst enhancing competition in domestic markets.33 During the TRIPS negotiations, India,in particular, argued that members should be free to specify the grounds for granting compulsory licences and automatic grant of such licences should be available to developing countries in sectors of critical importance to them.34 To counter this, a ‘prior negotiation’ requirement was included in TRIPS requiring those seeking compulsory licences to have made reasonable efforts to negotiate voluntary licences.35

At the end of 1991, India still refused to accept the TRIPS ‘package’ because it was concerned about the restrictions on compulsory licensing especially where the patent was not ‘worked’ in the country conferring the right.36This was heavily influenced by thefact that India had a very strong generic pharmaceutical manufacturing industry which would be significantly affected by the TRIPS minimum standards for IP protection. It has been observed that the extent of the working obligations imposed on a patentee was one of the most controversial issues in negotiating the Agreement. This is evident in the language of compromise contained in Article 27.1 of TRIPS,37which provides that patents shall be available and the rights enjoyable without discrimination as to whether the products are imported or manufactured locally. Whilst this provision seems to expressly oust the ability of Members to refuse to grant patents or to issue compulsory licences for failure to work locally, the position,as shown below, is less straightforward than it might appear.

What eventually emerged at the end of the negotiations was Article 31 of the TRIPS Agreement, which represented a compromise between the conflicting interests of the

32_{E R Gold & D K Lam, ‘Balancing Trade in Patents, Public Non Commercial Use and Compulsory Licensing’,}

(2003) 6(1) Journal of World Intellectual Property 5, 16.

33

See Pacon, above n 31.

34

See GATT Secretariat , Synoptic Tables Setting out Existing International Standards and Proposed Standards and Principles, MTN.GNG/NG11/W/32/Rev.2, 99-103 (Feb. 1990).

35

See Article 31(b) TRIPS Agreement.

36

Gervais, above n 26.

37

C M Correa, Trade Related Aspects of Intellectual Property Rights: A Commentary on the TRIPS Agreement

23 developed and developing countries. Developing countries accepted TRIPS, no doubt hoping it would give them better access to international trade through the WTO38 and probably thinking it would allow greater flexibility in the national interest, given the TRIPS recognition of social policy goals and certain exceptions to patents rights.39 It is generally believed that TRIPS does attempt to strike a balance between the interest of society in spurring innovation through economic incentives as well as the desires of users for liberal access, and that compulsory licensing is one of the ways for achieving this balance.40It is believed that compulsory licensing under TRIPS can be a means of striking a balance between the interest of the right holders and the social objectives of protecting access provided the necessary structures for its effective utilisation exist.

The TRIPS compulsory licensing regime providesclear parameters for the grant of compulsory licences which are arguably not only strong enough to check any potential or real abuse of the patent system but also sufficient to address a public health emergency. The problem,it appears, is with the strict interpretation of the TRIPS Agreement generally favoured by pharmaceutical companies. Mace has argued that, given the drafting history of the TRIPS compulsory licensing regime, a more plausible interpretation of Article 31 is that it was meant to discourage the intentional infringement of pharmaceutical patents and prevent the use of compulsory licensing in a way unreasonably favourable to domestic interests.41

In sum, Article 31 of TRIPS provides the framework for compulsory licensing under the Agreement, although via the phrase ‘use without authorization’. Under Article 31, compulsory licences can be used to advance social policy goals by making essential goods available at affordable rates where the manufacturer is unwilling or unable to do so at a rate within the purchasing power of the populace of a country. This was reinforced by the Doha Declaration of 2001, the Implementation Decision of 2003 and the Protocol amending

38

R L Gana, ‘The Myth of Development, the Progress of Rights: Human Rights to Intellectual Property and Development’, (1996) 18 Law & Policy 315, 334; D P Harris, ‘Carrying a Good Joke Too Far: TRIPS and Treaties of Adhesion’ (2006) 27 University of Pennsylvania Journal of International Economic Law 681, 724- 38; A Reich, ‘The WTO as a Law Harmonising Institution’(2004) 25 University of Pennsylvania Journal of International Economic Law321, 362.

39_{D Borges Barbosa et al, ‘Slouching Towards Development in International Intellectual Property’, (2007)}

Michigan State Law Review 71, 110.

40_{G Scott, ‘A Protocol for Evaluating Changing Global Attitudes toward Innovation and Intellectual Property}

Regimes’ (2011) 32 University of Pennsylvania Journal of Intellectual Property Law 1165, 1250.

41_{A C Mace, ‘TRIPS, EBAY, and Denials of Injunctive Relief: Is Article 31 Compliance Everything?’ (2009) 10}

24 TRIPS.42In particular, the Implementation Decision provided for legal changes to make it easier for countries without manufacturing capacity to import cheaper generics made under compulsory licensing.43

It has however been posited by a commentator that ‘the actual implementation of compulsory licensing for the public good has been disappointing and its true potential is largely unrealised’.44This statement is hardly contestable having regards to the fact that virtually all countries that have made use of compulsory licences to address their public health problems have found a way into the US Special 301 trade sanction list and countries without pharmaceutical manufacturing capacity may find it extremely difficult to meet the requirements for using the system to import products manufactured for them by other countries.

1.2.

The Scope of Compulsory Licensing under TRIPS Article