An Overview of “TRIPS-Plus” Standards
Abstract and Keywords
This chapter provides an overview of international developments since TRIPS that further impact access to medicine. In particular, some countries are now required to adopt higher standards than those required by TRIPS. These “TRIPS-Plus” standards are predominantly implemented as a result of bilateral or regional trade agreements instigated by wealthy countries since the conclusion of TRIPS. Although they are dubbed “TRIPS-Plus,” they have no formal relation to TRIPS. Rather, the term is used to indicate that these requirements go beyond the minimum obligations imposed under TRIPS. The chapter explains common themes among TRIPS-Plus requirements that impact upon the cost of drugs. This thematic approach aims to highlight how drug costs may be impacted, as well as how and why countries adopt such requirements; however, it is not intended to provide a comprehensive review of every enacted or pending TRIPS-Plus requirement.
This chapter provides an overview of international developments since TRIPS that further impact access to medicine. In particular, some countries are now required to adopt higher standards than those required by TRIPS. These “TRIPS-Plus” standards are predominantly implemented as a result of bilateral or regional trade agreements instigated by wealthy countries since the conclusion of TRIPS. Although they are dubbed “TRIPS-Plus,” they have no formal relation to TRIPS. Rather, the term is used to indicate that these requirements go beyond the minimum obligations imposed under TRIPS.
This chapter explains common themes among TRIPS-Plus requirements that impact the cost of drugs. This thematic approach aims to highlight how drug costs may be impacted, as well as how and why countries adopt such requirements; however, it is not intended to provide a comprehensive review of every enacted or pending TRIPS-Plus requirement.
By the conclusion of this chapter, a reader should be able to answer the following questions:
• If TRIPS already requires nations to provide patents, what does an agreement imposing TRIPS-Plus standards require? (p.224)
• Can a bilateral free trade agreement imposing TRIPS-Plus standards impact countries that are not signatories to the agreement?
• How do TRIPS-Plus requirements impact current access to medicine?
I. Background 224
II. TRIPS-Plus Requirements 228
A. Enhancing Patent Protection 228
B. Specific Patentability Requirements 232
C. Patent Rights and Remedies 235
D. Regulatory Protection of Drugs 241
E. Extending Protection of Drugs 246
III. Controversy Concerning TRIPS-Plus 249
IV. Conclusion 251
This chapter first explains how TRIPS-Plus requirements generally impact access to medicine. Then, the chapter discusses requirements regarding patent and regulatory laws that impact the availability of lower-priced generic drugs, followed by requirements that (p.225) directly limit the ability of countries to control the costs of patented drugs. Each section begins with a brief recap of the relevant TRIPS requirement (if any), followed by the corollary TRIPS-Plus requirement.
A. Significance of Trips-Plus
The phrase “TRIPS-Plus” refers to laws that restrict flexibility under TRIPS or provide more protection than the TRIPS requires.1 TRIPS-Plus requirements are best understood in comparison to the original TRIPS requirements. For example, whereas TRIPS is silent on whether third parties may oppose patent applications (thus permitting member states to do so), a TRIPS-Plus requirement would specifically preclude such oppositions. Alternatively, a definition of “new” that includes new uses of known compositions is also a TRIPS-Plus requirement because TRIPS lets member states decide what they want to consider “new.”
Both of these TRIPS-Plus requirements could potentially impact access to medicine. For example, if third parties are prohibited from opposing patent applications, erroneous patents are more likely to issue. Although improper drug patents can be contested later, evidentiary thresholds may be higher. In addition, the public could be improperly denied access to medicine while an erroneous patent is challenged. Similarly, if “new” were defined to include new uses of old medicines, this could expand the scope of inventions that will be priced out of reach for consumers in the short term.
Even though the number of countries that have adopted TRIPS-Plus standards is modest compared to WTO membership, each country that does so affects other nations. For example, Jordan’s TRIPS-Plus standards impact everyone seeking a patent in Jordan. TRIPS requires that members provide equal treatment to applicants from all member states such that national patent laws will provide the same treatment to all applicants. Accordingly, Jordan cannot provide better patent treatment to US citizens than citizens of a different WTO country. This means that although Jordan’s TRIPS-Plus patent requirements were adopted to comply with a free trade agreement (FTA) with the United States, those patent rules would affect nationals of other countries as well. For example, a Japanese citizen who applied for a Jordanian patent would benefit from the increased patent protection negotiated by the United States, even though Japan was not a party to the U.S.-Jordan FTA.
(p.226) B. Adoption of Trips-Plus Standards
Although any nation could theoretically decide to adopt TRIPS-plus standards because it believes increased protection is to its advantage, these standards are more typically adopted as a result of external pressure. In particular, developing countries often accept TRIPS-plus standards as a result of political or economic pressure from other nations. This pressure may exist in the form of threatened trade sanctions or withdrawal of trade preferences. The US, for example, has a number of domestic laws that permit it to potentially impose economic sanctions for intellectual property laws that are deemed inadequate—even if in full compliance of current international agreements, such as TRIPS.2 The US can withdraw trade benefits or impose duties on goods from a country that fails to provide “adequate and effective” protection for intellectual property rights—as determined unilaterally by the US. Under US law, the US Office of Trade Representatives is required to provide an annual report listing countries with inadequate intellectual property protection, which is commonly referred to as the “Special 301” Report.3 A country that is listed in this report is often then subject to increased pressure to modify its laws. Even for countries not listed, there may be pressure to enter into a specific bilateral or multilateral FTA4 that promotes increased trade while also mandating increased protection of patent and related rights.5 The United States has initiated and concluded many FTAs, and the EU has recently been negotiating them.
Any country that wants to improve its export market may be vulnerable to pressure to modify its patent rules. Developing countries are often eager to increase the marketability of their exports and thus especially vulnerable to pressure from a country with a desired export market, such as the United States or the EU. However, FTAs are not concluded exclusively with developing countries. For example, Australia entered into an FTA with the United States, and Canada is contemplating an FTA with the EU.6
(p.227) The negotiation and implementation of TRIPS-Plus standards bears a similarity to the genesis of TRIPS. In both cases, patent owners such as multinational pharmaceutical companies play an instrumental role in seeking stronger global patent rights. In addition, both involve a combination of “forum shifting” and the promise of increased trade in goods.7 As noted in Chapter 3, the United States “shifted” the forum for seeking higher intellectual property standards to a trade framework after its initial efforts to amend an existing intellectual property agreement (the Paris Convention) failed. Developing countries had no incentive to agree to higher intellectual property standards that they viewed as detrimental to their interests. However, requiring intellectual property standards as part of a broader agreement that promised greater access to wealthy markets has been a successful strategy both with the original TRIPS agreement and subsequent FTAs with TRIPS-Plus standards.
In addition to shifting forums to their advantage and using the inducement of increased trade, wealthy countries have encouraged countries to agree using unilateral political and economic pressure. For example, concurrent with the negotiation of TRIPS, the United States unilaterally pressured some countries to agree to higher patent standards as a step toward minimizing objections to these standards with the broader group of countries involved in the WTO.8 In addition, some developing countries agreed to TRIPS in part because of a belief that its conclusion would end unilateral trade pressure to increase heightened protection intellectual property rights. However, pressure to adopt heightened standards seems to have actually increased rather than decreased.
The process of establishing TRIPS-Plus standards differs in one major respect from the negotiation of the TRIPS. Notably, the WTO/TRIPS was negotiated by many developing countries. In that context, a few developing countries could often represent the interests of the broader group; for example, India played a major role. However, FTAs are negotiated with a smaller subset of countries. Sometimes when negotiations break down among a group of countries, the powerful country that initiated the FTA may elect to negotiate with individual countries. By pursuing countries individually, the country with lucrative markets has greater bargaining power and is more likely to obtain its desired results. Although there are always disparities in bargaining power, the power disparity (p.228) with FTAs is often much more distorted than in the WTO negotiation context because of the limited number of countries involved. The problem is particularly severe given that a number of scholars think that developing countries as a whole were at an unfair disadvantage in negotiating the WTO and TRIPS. In addition, because FTAs are often negotiated in secret, with the text usually made public only after agreements have been signed, there may be limited opportunities to consider implications.9
II. TRIPS-Plus Requirements
This section provides an overview of TRIPS-plus requirements. It begins with overall procedures for obtaining patents that enhance patent protection. The section then turns to requirements that have parallels in the TRIPS agreement and addresses them in roughly the same order as Chapter 3 (Introduction to TRIPS). For example, what must be patented will be discussed before patent rights and remedies. Then, non-patent issues that complement patent protection for drug companies (data exclusivity and price control limits) will be discussed.
A. Enhancing Patent Protection
This section addresses two separate issues that expand patent protection for drug companies by requiring procedures that promote patent protection. First, many FTAs require developing countries to become signatories of the Patent Cooperation Treaty (PCT), which has important implications for the number of patent applications that will likely be filed. Second, some developing countries were pressured to adopt so-called “pipeline protection” that provides patents in cases not required by TRIPS. Each of these will be discussed in more detail below.
Many FTA require developing countries to recognize the PCT. This is an international agreement to which a large number of countries are signatories. The PCT provides patent (p.229) owners, such as large pharmaceutical companies, with an easy and cost-effective mechanism to globally file patent applications. While individual nations still examine whether an application meets national criteria of patentability, a PCT application streamlines the process with an initial single application; national examination occurs later.10 While this may seem a small procedural detail, it may have significant implications. Countries that are not members of the PCT are likely to have few patents filed, even if drugs are permitted to be patented. This was indeed the case in Jordan which signed an early FTA with the US that did not require adherence to the PCT; as discussed later, most companies did not immediately seek patent protection on drugs in Jordan because it was considered expensive.11
2. Pipeline Protection
Some developing countries that complied with the TRIPS requirement to provide full patent protection of drugs also adopted what is referred to as “pipeline protection” as a result of political pressure from developed countries.12 Pipeline protection essentially provides patents to inventions (in the pharmaceutical area) that were considered “in the pipeline” of development when new patent laws providing for patentability of drug compositions were adopted. Importantly, pipeline protection grants patents for compounds that would otherwise not have been patentable–either before or after the new patent laws. Before the new laws, the drugs would not be patentable because the laws did not provide protection for pharmaceutical products. However, even after national laws recognized pharmaceuticals as patentable, these drugs would not have been deemed patentable because they would have failed the novelty requirement; this is because the drugs would have been known in other countries. For example, if Brazil began granting patents on pharmaceuticals in 1997, a drug that was invented in 1993 would fail to meet the novelty requirement in 1997. However, because Brazil provides pipeline protection, the 1993 (p.230) drug could be considered in the “pipeline” of development and thus be eligible for pipeline patent protection.
As discussed in Chapter 3, developing countries that did not previously provide patent protection on drugs were required under TRIPS to provide patent-like protection if they took advantage of a five year transition period. In particular, during the transitional time, the developing country was required to accept “mailbox applications” to be later examined when patent law recognized drugs as patentable, and also to provide exclusive marketing rights (EMR) to some of these mailbox applications. However, no such requirement exists for countries that elect (albeit often under political pressure) to prematurely grant product patents. Moreover, pipeline patent protection actually provides even more protection than an EMR in that it provides full patent rights, rather than the more limited rights of an EMR (as discussed more fully in Chapter Three).
Although a number of countries have provided pipeline patent protection, the exact parameters of such protection vary.13 In Mexico, pipeline patents were granted for drugs that were already patented elsewhere so long as the drug had not yet been marketed in Mexico.14 In contrast, pipeline patents are available on a more limited basis in Brazil. In particular, pipeline patents are only available for drugs that are subject to a foreign patent application, but not yet granted a patent at the time a pipeline patent is requested; in addition, the protection is only available if the drug is not yet marketed anywhere.15 Although Brazil’s pipeline protection was narrower, it was still controversial–it was subject to a constitutional challenge for removing information that currently exists in the public domain.16 While that challenge did not succeed, more limited challenges to the term of specific pipeline patents have been effective. In 2010 alone, three blockbuster drugs were found to have shorter terms than desired by the patent owner. Pfizer’s patent on Viagra was held to terminate in June 2010 (rather than in 2011), while its patent for the cholesterol drug sold as Lipitor was held to terminate in August 2010, rather than December 2010. Most recently, a court found that Novartis’s patent on the cancer drug it sells as Gleevec will terminate in 2012 (rather than 2013).17 In each of these cases, a court (p.231) found that the twenty-year patent term should not begin with the date the pipeline patent was granted, but, rather, the earlier international filing date.18
3. The Big Picture of Pct & Pipeline Protection
As discussed above, procedures for obtaining patents promote patent protection. After all, even if domestic laws offer the type of patent protection desired, that protection is elusive if there are too many logistical hurdles to obtaining patent protection. The ability to use a PCT application removes such hurdles and thus makes even the basic patent protection under TRIPS more useful. Pipeline protection also helps enhance protection, but in a different way. In particular, pipeline protection enables companies to obtain patent protection on some drugs that would have otherwise been barred from consideration. Pipeline protection provides patent protection for a time when desired patent laws have not yet taken effect. Without pipeline protection, companies would be denied patents in countries that had only newly adopted patent laws. Before moving on to address specific requirements of patentability, the following questions should help to reinforce the issues discussed above.
Q: Does a PCT application mean that a single application will result in a global patent?
A: No. A PCT application is essentially a common application that will—if successful—result in a number of different patents granted under different national laws.
Q: Does a PCT application mean that there are uniform global patentability requirements applied to an invention?
A: No. The PCT only governs the process of obtaining a patent. The laws of each country granting a patent apply to all patents – whether filed pursuant to the PCT, or as a single application.
Q: Does a country provide pipeline patent protection for all patents?
A: No. Pipeline patent protection is usually only provided for inventions within a small window of time. Usually, the timeline for such protection terminates when new drug inventions are eligible for patentability (under newly effective patent laws).
Q: Does pipeline patent protection provide duplicative protection?
(p.232) A: No. Inventions that qualify for pipeline patent protection would not otherwise be eligible for patent protection.
Q: Does a country that grants a pipeline patent evaluate whether the invention satisfies patentability standards?
A: No. Pipeline patent protection is granted by a country that does not examine the invention; rather, protection is based on the fact that the invention is patented or subject to a patent application in another country.
B. Specific Patentability Requirements
TRIPS-plus requirements set specific patentability requirements that enable patents to be granted to a broader scope of inventions than required under TRIPS. As discussed in Chapter 3, nations must generally provide patents on all inventions (including drugs) that meet TRIPS patentability requirements, but TRIPS does not define the key terms of patentability. In particular, while TRIPS requires that patents be generally granted on inventions that are “useful,” “new,” and have an “inventive step,” TRIPS does not define these terms.19 Thus, under TRIPS, nations have discretion to define these terms and thus decide what to patent.
TRIPS-Plus patentability requirements tend to impact access to medicine by expanding what is patentable in two ways.20 First, many FTAs often limit a country’s discretion to decide what is “new” and thus patentable. In addition, many FTAs limit discretion regarding procedures to reinforce patentability requirements.
1. Patentability Requirements
a. Limited Prior Art; Modified Definition of What is “New”
Under TRIPS, member states can freely define what they consider “new.” Although it may seem this term can have only one meaning, national patent laws have historically provided different standards.21 In some countries, an invention is only new if it has never been disclosed to the public in any fashion before the patent application is filed.22 However, other countries would consider an invention new and deserving of a patent if (p.233) the inventor had disclosed the invention a limited time before the application.23 For example, a scientist who published an article describing an invention would be barred from a patent in a country that considered an invention new only if it was not previously disclosed, but the same scientist could obtain a patent in a country that considered inventions publicly disclosed to still be new. Thus, the same invention could be patented in one country but not another. Interestingly, both of these standards are consistent with TRIPS but have dramatically different results.
Some FTAs impose a specific definition of when an invention is new. In particular, a number suggest that an invention must be considered “new” if the invention was publicly disclosed by the inventor no longer than twelve months prior to the date of the patent application.24 This definition will permit more inventions to be considered patentable. Although this may be helpful to scientists who need not worry about whether the timing of a scientific publication will preclude a patent, it also has implications for access to medicine. In particular, a rule that is more permissive toward patents means that more patents are likely to result—which in turn can increase the number of patented drugs to which patients have only limited access.
b. Required Protection of New Uses
A related TRIPS-Plus requirement often seen in an FTA is that new uses of previously known compounds should be considered new and thus patentable.
To understand why a company would want to patent a new use, consider this example: the active ingredient in AZT, zidovudine, was initially studied as a potential cancer treatment. It was later discovered as useful for treating HIV, and a US patent was granted because the United States considers new uses of known compounds to be patentable.25 However, if the United States did not consider such new uses to be patentable, AZT would have originally been available at a greatly reduced cost, as the original patent on the active ingredient had expired.
New uses are often found for old compounds, including those that have previously been sold as blockbuster drugs. For example, the active ingredient in the antidepressant (p.234) sold as Prozac was later found to be useful in treating severe premenstrual symptoms. Both the active ingredient in Prozac, as well as the later-discovered use, were patented and provided market exclusivity to its patent owner.
New uses that are patented can sometimes prevent generic companies from making old drugs that have newly discovered uses. This is particularly true in nations that link regulatory approval of generics, as further explained later in this chapter.
2. Limited Reinforcement of Patentability Requirements
Before discussing how TRIPS-Plus agreements limit the ability to reinforce patentability requirements, it is necessary to review how patents are issued and sometimes revoked.
As noted earlier, a patent will only issue after a patent application is filed with a national patent office that determines a patent is appropriate. However, it is widely known that issued patents do not always meet the standards of patentability—many patents are later found invalid during litigation when the patent owner attempts to enforce the patent against others.
Some countries provide opposition proceedings to enable third parties to assist in ensuring that patentability requirements are met. Third parties are often competitors and peers in the same field of technology who are likely to have superior knowledge of the relevant prior art, including prior art that may not be easily accessible to patent examiners. Patent examiners have ready access to patents and published patent applications. However, they are less likely to have access and knowledge concerning published articles, as well as other relevant prior art (such as commercial sales).
Countries have provided two types of opposition proceedings: oppositions to a patent application, and oppositions to a granted patent (these are usually referred to as “pre-grant” or “post-grant” oppositions). Both types serve the same goal of promoting patent validity and the public interest. To the extent they even provide any opportunity to challenge a patent, developed countries tend to allow only post-grant oppositions. The existence of a pre-grant opposition can be important because issued patents are often given a presumption of validity, making them more difficult to challenge.
a. Pre-Grant Oppositions
TRIPS does not prevent countries from permitting challenges to patent applications and patents. Rather, TRIPS requires that if such challenges exist, they must comply with the same general requirements for enforcement of all patent rights. In particular, a challenge must be fair, not unduly complicated or costly, and not involve unreasonable time limits or unwarranted delays.26
(p.235) Many FTAs preclude countries from using a pre-grant opposition to enhance the patent office’s ability to issue valid patents. In particular, FTAs commonly state that if third parties are allowed to participate, it can only be after a patent issues.27
Although eliminating pre-grant oppositions does not change the standards of patentability, it still plays an important role in discussions concerning access to medicine. In particular, if issued patents have a stronger presumption of validity than pending patent applications, it may be more difficult to challenge a patent. This does not mean the invention is any more deserving of a patent—just that the procedural presumptions may favor the status quo. However, procedures that do so may result in improper protection of drugs that should be in fact more easily accessed without a patent premium.
C. Patent Rights and Remedies
TRIPS requires that patents provide certain rights as well as remedies. With respect to patent rights, member states must generally give patent owners the right to exclude all others during the patent term, subject to exceptions to patent rights under TRIPS articles 30 and 31.
Most FTAs increase patent rights while limiting patent exceptions previously available under TRIPS. In particular, most FTAs mandate increased patent terms while restricting the use of compulsory licenses and parallel imports. All of these changes can have a marked impact on the availability of lower-cost generic drugs.
1. Patent Term Extensions
A key issue for access to cheaper medicines is the term of patents. After all, while the patent is in effect, generic drugs cannot be made and sold, as that would violate the patent right.
TRIPS requires that the term of protection cannot end before twenty years from the filing date of the patent application. Most countries provide a patent term based on the filing date of the patent application (twenty years minus the time of patent examination), such that the longer the patent examination process takes, the shorter term during which (p.236) the patent owner can actually enforce the patent. In addition, the effective patent term for a drug patent can be much shorter because the drug patent is of no commercial utility unless and until the drug is approved for sale—something that typically happens several years after patent issuance. This results in drug patents having an average effective term of eleven years in contrast to seventeen for all other patents.28 A WTO panel has previously noted that owners of drug patents are not entitled to the same patent term as owners of all other patents. However, this panel conclusion is moot for countries that are required to adopt patent extensions under FTAs.
Many FTAs require that patent terms be extended beyond the TRIPS requirement (that the term end no earlier than twenty years from the patent application filing date). The FTAs generally suggest or require the term be extended to “compensate” for two different possible types of delays, either with respect to regulatory approval or review of the patent application itself.29 Typically, countries are required to extend the patent term if there has been an “unreasonable” delay in either the review of a patent application or an application for regulatory approval.30
An important issue is assessing what constitutes an “unreasonable” delay—as well as how much compensation is required. Some FTAs contain specifics on these issues. For example, one FTA negotiated by the United States defines an unreasonable delay in the patent examination as taking more than five years for the patent to issue from the date of filing (or three years from request for examination), whichever is later.31 However, it does not state what would be an “unreasonable curtailment of the effective patent term” as a result of the marketing approval process.32
(p.237) The patent term extensions mandated in FTAs may actually result in longer patent terms in developing countries than in wealthy markets (such as the United States). In the United States, where there is a strong generic drug lobby to balance the interests of PhRMA, the patent term extension in cases of regulatory delay is subject to a complex formula with an absolute maximum effective term of fourteen years from the time of marketing approval.33 The FTA requirements, however, often require extensions and do not impose a maximum time period.34 One exception is the EU-Korea agreement, that specifies the extension of patent protection may not exceed five years.35
Although Congress made patent term extensions merely permissive rather than mandatory for Peru and Panama as one of a number of concessions to promote public health, that goal may be elusive.36 Peru and Panama are expected to make their “best efforts” to process patents and marketing applications expeditiously to avoid “unreasonable delay,” as well as agree to cooperate with the United States in achieving these objectives. Notably, although the word may is usually not obligatory, the requirement of continued cooperation might make this only a cosmetic change—especially as countries that have signed FTAs would not be immune from trade pressure for having inadequate intellectual property laws.
2. Compulsory License Limits
As discussed extensively in other chapters, although compulsory licenses are controversial, they are clearly permissible under TRIPS, which also permits member states to decide what subject matter may be subject to them. TRIPS primarily governs the procedure of how such licenses are issued, not the substance of what may be licensed.
a. Limited Subject Matter
Many FTAs restrict compulsory licenses to a narrow number of situations. Notably, these limited situations are similar to what some developed countries had previously proposed during TRIPS negotiations. In addition, these grounds have sometimes been (erroneously) suggested by the pharmaceutical industry as the only permissible grounds for compulsory licenses under TRIPS. Thus, some FTAs are making the pharmaceutical industry’s desires the new reality.
(p.238) Most FTAs limit compulsory licenses to the following grounds: national emergency, situation of extreme urgency, or public noncommercial use. All these grounds are permissible under TRIPS, but they are clearly not the only permissible grounds; rather, countries have flexibility under TRIPS to consider others. For example, India permits compulsory licenses in other situations, including when the patented invention is not made available to the public at a reasonably affordable price. If India entered into a FTA that set forth only the most typical grounds, it would need to strike this ground of compulsory licensing from its patent laws.
In addition, although some FTAs permit compulsory licenses for lack of so-called “local working,” they may explicitly define local working in a way that negates this traditional ground. As discussed in Chapter 5, many nations historically imposed compulsory licenses if the patent owner failed to “work” its invention in the patent-granting country by manufacturing it locally. Such failure to work was considered an abuse of the patent right that justified imposition of a compulsory license. As noted in Chapter 5, there is some controversy concerning whether a compulsory license can be issued on this ground. However, this is a moot issue for countries that enter into FTAs that explicitly define importation as adequate working.
Another TRIPS-Plus requirement with respect to compulsory licenses is a modification to the amount of remuneration provided to the patent owner. Whereas TRIPS only requires “adequate” compensation, an FTA may instead demand “reasonable and entire” compensation.37 This is not an issue of semantics. During negotiation of the compulsory licensing provision under TRIPS, there was a proposal that remuneration should be “adequate to compensate the right holder fully” for the license.38
Even if a compulsory license can issue under the more restrictive TRIPS-Plus requirements, the license may be of no actual value in countries that also impose TRIPS-Plus regulatory requirements that bar approval of generic drugs during the patent term, as further explained in the section on regulatory protection of drugs.
(p.239) 3. Limited Revocation
TRIPS does not dictate when a patent may be revoked. TRIPS contemplates patent revocation may occur, but only requires that there be an opportunity for judicial review39 of any decision to do so.40 Therefore, under TRIPS, nations have discretion to decide the grounds for revoking patents.
A typical TRIPS-Plus provision limits revocation primarily to patentability requirements.41 Such a restriction prevents nations from revoking a patent on traditional grounds, such as when a compulsory license issued for lack of local working still fails to make an invention publicly available. In addition, restricting revocation to patentability requirements prevents countries from developing or using new public interest reasons. For example, if India entered into an FTA that limited revocation grounds solely to patentability requirements, India would no longer be able to revoke a patent if the patented drug were not made available to consumers at a reasonable cost. This would obviously remove a potentially significant Indian lever in the patentability system to ensure consumer access to reasonably priced drugs.
4. Limited Exceptions to Patent Rights
TRIPS permits member states to provide “limited exceptions” to patent rights pursuant to a number of ambiguously phrased and undefined conditions.42 A WTO panel has previously held that a company may make a limited quantity of a patented drug as part of seeking regulatory approval to sell a generic version of the drug after the patent expires (as (p.240) a limited exception to the usual patent right to exclude others from making a patented invention). However, the WTO panel ruling left open the possibility that limited exceptions could also include a situation where a generic company makes a limited quantity of drugs toward the end of the patent term to ensure no delay in generic competition the very day the patent expires. Although the panel held that Canada’s particular law was inadequate because it failed to provide any limit on the amount of drugs made, a country that permitted only limited production might be able to come within the exception.
A TRIPS-Plus requirement would limit the scope of possible exceptions to patent rights, for example, by listing certain categories as the only possible exceptions to patent rights.43 Accordingly, an FTA that permitted an exception only for regulatory approval would be more limited.44 While an exception for regulatory approval is clearly permissible under TRIPS, the danger of an FTA limiting exceptions to patent rights is that they not only preclude exceptions that are generally recognized as useful, but also bar countries from crafting exceptions to situations that may be difficult to anticipate.45
5. Limitations on Parallel Imports
As discussed in Chapter 2, a nation can reduce drug costs by permitting parallel imports of a patented product (as an exception from patent liability) when the product was originally sold by the patent owner in another country. However, the ability to consider parallel imports to be noninfringing is limited by some FTAs.
Some FTAs explicitly state the patent owner has the right to bar imports of a patented product—including when the product was previously sold in another country.46 Often the agreements specify that members must bar imports at least in cases where the patent owner has placed contractual restrictions on distribution.47 This means multinational companies that sell drugs can effectively prevent unauthorized distribution via parallel imports through contractual restrictions. For example, if Glaxo sells drugs below cost in (p.241) Zimbabwe, it can do so pursuant to a contract that specifies that those drugs cannot be subsequently resold in another country. The contract would preclude an enterprising business from buying low-cost drugs in Zimbabwe and then selling them at a higher price in another market. This could be either a violation of the patent right to bar imports or a breach of contract—FTAs have utilized both possibilities. For example, one agreement specifies that the patent owner will have a cause of action for breach of a contract regarding distribution of a patented product regardless of whether the alleged breach occurred and even if the breach occurred by someone without actual knowledge that there was a contractual bar on distribution, as long as that person should have known further distribution was unauthorized.48
The focus on using contracts to limit parallel imports is one way to prevent undesired imports without addressing a nation’s view on international exhaustion of patent rights. After all, as discussed in Chapter 2, most nations do not consider a patent owner’s rights “exhausted” with respect to a good that was sold subject to a contractual restriction.
D. Regulatory Protection of Drugs
TRIPS also provides protection beyond patents. In particular, under TRIPS article 39(3), clinical data that is submitted to national authorities for the purpose of obtaining approval to sell a new drug must be protected from “unfair commercial use.” As discussed in Chapter 3, there is great controversy concerning the meaning of this phrase. However, this controversy is moot for countries that have adopted TRIPS-Plus requirements that explicitly bar generic companies from relying on clinical data of another (commonly known as data exclusivity). An additional TRIPS-Plus requirement restricts regulatory approval for generic drugs if the generic drug might arguably infringe a patent (referred to as patent linkage). Each of these will be briefly discussed; however, Chapter 9 provides a more complete discussion of the genesis of these protections, issues of concern, and how to minimize harms of such protection. The focus here is to simply highlight these issues to provide a complete picture of TRIPS-Plus requirements.
(p.242) 1. Types of Regulatory Protection
a. Data Exclusivity
Most FTAs limit a nation’s ability to approve generic drugs based on reliance on the clinical data of another—what is called data exclusivity.49 This essentially means that the first company to submit clinical data has exclusive rights over it for a certain period of time; during the term of exclusivity, no company is allowed to rely on the data in seeking approval to sell a generic drug.
Data exclusivity protects clinical data associated with a drug, regardless of whether the drug is protected by a patent. In fact, data exclusivity may provide a drug manufacturer with commercial exclusivity in the marketplace even for an unpatentable (or patent expired) drug. While data exclusivity does not technically forbid another competitor from creating its own clinical data (unlike a patent), most companies do not do so. Accordingly, through data exclusivity a company may practically obtain commercial exclusivity for a new drug even without patent protection. Data exclusivity is thus a powerful tool to provide exclusivity in the marketplace without a patent and without the necessity of satisfying any of the patentability requirements. In addition, no additional application is generally necessary, as data exclusivity is usually automatically granted with approval of a drug for marketing/sale.
b. Patent Linkage
Many FTAs impose a second requirement on regulatory laws beyond data exclusivity. In particular, they require countries to adopt what is called patent linkage. Although discussed in greater detail in Chapter 9, patent linkage in its strongest form means that a regulatory authority is precluded from approving a generic drug if that drug would infringe a patent. The application to sell the generic does not infringe but will nonetheless be denied if the manufacture or sale of the generic would infringe.50 Often, the FTAs not only preclude approval of a generic, but also require the regulatory authorities to notify the patent owner of the company that sought to sell a generic.51
(p.243) Notably, although patent linkage is premised on possible patent infringement, the regulatory authority that enforces patent linkage is not an expert on patents. To the contrary, the regulatory authority is generally knowledgeable about safety and efficacy of drugs and lacks expertise on when a patent might be infringed. Given this lack of expertise, regulatory authorities tend to defer to the perceived experts–the patent owners—to assess when a generic drug might infringe. Some assert the patent linkage requirement thus improperly turns the government into an enforcement arm of the patent owner. In addition, some critics suggest patent linkage encourages sequential filing of frivolous patents that are allegedly associated with a drug to delay the entry of generic drugs, as each new patent would have a later expiration date.
Patent linkage is definitely a TRIPS-Plus requirement. TRIPS itself provides no requirement that even suggests such linkage. As noted above, the only TRIPS obligation with respect to regulatory authorities is that they protect data from unfair competition.
2. Impact on Access to Medicine
a. Overall Impact
TRIPS-Plus requirements that mandate regulatory protection may, in combination with other factors, delay access to generics, especially for developing countries. Data exclusivity provisions generally calculate the term of data exclusivity for a given drug from the first date the drug is approved in a domestic market. The data exclusivity term—which directly impacts when generic versions may enter the market—is also impacted by a non-legal issue. In particular, many companies will first introduce a new drug in a wealthy country (such as the United States), but delay introduction in less lucrative markets.52 The decision to first sell a drug in the most profitable market is a logical business decision. However, if data exclusivity is not based on the first global approval, the delayed approval of a drug in poorer countries may delay entry of generics in such countries. For example, hypothetical company Mirck may begin marketing a new HIV drug in the United States in 2006, such that when a five year period of exclusivity expires in 2011, a generic version might be available in the United States. However, if Mirck does not seek approval to market that same drug in Brazil until 2012, a generic company could be precluded from obtaining approval to market a generic version until after the data exclusivity expires in Brazil. Under the usual five-year term of exclusivity, the generic would not be available in Brazil until 2017 - long after it was available in the United States.
The delayed availability of lower cost generics for countries that enter into FTAs with data exclusivity provisions is not hypothetical. One recent study noted that generic versions of a number of drugs will be possible in the United States before Guatemala because (p.244) of earlier expiration of patents or data exclusivity.53 It also noted that drugs protected by data exclusivity were substantially more expensive than those in the same therapeutic class; for example, the protected insulin drug sold as Lantus cost 846 percent more than the unprotected drug isophane insuline, and the protected antibiotic sold as Invanz cost 362 percent more than the unprotected meropenem.54 The study cautions that its results are limited to those drugs sold in the public sector—the only sector for which public data were readily available. Nonetheless, the public sector accounts for 70 percent of drugs sold in Guatemala and covers poor citizens who are more likely to face economic barriers to obtaining access to medicine.55
The 2007 Congressional compromise directly addressed this problem, at least for the then-pending FTA with Peru and Panama. In particular, although still requiring data exclusivity, Congress suggested that if marketing approval is granted in reliance on prior approval by the United States, and that if Peru or Panama promptly grants regulatory approval for the same drug, the exclusivity period will be concurrent with the US period.56 In other words, even if approval was sought in Peru after it was sought in the United States, the data exclusivity period would not extend beyond the date of exclusivity in the United States. This modification would thus result in lower-cost generics being available more quickly than under the terms of the former FTA.
b. Patent versus Regulatory Protection
Even if FTAs require both patent and regulatory protection, they will not necessarily all have the same immediate impact on access to medicine. In particular, as will be explained below, data exclusivity may initially play a more significant role in limiting access to medicine in developing countries that had not previously provided patent protection on drugs. Eventually, however, the interplay among data exclusivity, increased patent protection, and patent linkage will all operate together to provide a stronger barrier to short-term access to medicine than is necessary under TRIPS.
In a country that is new to providing patent protection on drugs, data exclusivity may be the only realistic method of protecting drugs immediately after the FTA is concluded. Although patent protection would technically be available, drugs that have already been patented in other jurisdictions would likely be unpatentable because they would fail to meet the requirement that they be “new.” In particular, a prior patent by another country would be considered prior art that would establish the drug was no longer new.
(p.245) Data exclusivity, however, can provide market exclusivity even for a drug that cannot be patented. There are no requirements to obtain market exclusivity other than submitting an application to sell a drug in the country, together with clinical tests establishing the drug is safe and effective. If the applicant is granted permission to sell a drug, data exclusivity is automatically granted. This means that during the term of data exclusivity, no generic equivalent will be approved based on the same data. As generic companies generally lack resources to undergo their own clinical tests, data exclusivity can provide a period of market exclusivity even where there is no patent protection.
Data exclusivity (rather than patent protection) is likely to be the most significant barrier to access to medicine in developing countries that are new to providing patent protection. For example, in Jordan, a developing country that historically did not provide protection on drug compounds, only five out of over one hundred newly marketed medicines were patented subsequent to a 2001 FTA.57 Multinational drug companies were nonetheless able to dominate the market; as of 2007, almost 80 percent of the new drugs had no generic competition. These drugs were protected solely by data exclusivity.
Yet, patents may subsequently be just as important as data exclusivity, and perhaps even more so with respect to the duration of market protection. Several years after patent protection on drugs is provided, patents are more likely to be granted on drugs. At this time, companies would be seeking patent protection in the developing country (such as Jordan)58 at the same time it was pursuing global protection.59 Importantly, the roughly simultaneous filing of patent applications will ensure that an invention in Jordan is not precluded for receiving a patent because of a prior application in another country.
Although both patents and data exclusivity can provide market protection, patent protection may provide longer protection—especially under TRIPS-Plus rules that require extensions of patent terms. For example, many data exclusivity laws provide a term of five years whereas the effective term of patents at generally about eleven years is nearly double that.
In addition, once patents are more commonly granted on drugs in developing countries, there may be more delay in the introduction of generic drugs if there are multiple patents filed on different aspects of a marketed drug. In other words, even though data exclusivity may have expired for the active ingredient of a drug, if other aspects of the drug are patented, that patent may still prevent entry of a generic drug. This is especially true for (p.246) countries that also require patent linkage because the generic manufacturer may be denied approval so long as there is an unexpired patent on any aspect of the original drug.
The intersection of patent and regulatory laws can be complex; thus, they are described in further detail in Chapter 9.
E. Extending Protection of Drugs
The latest aspect of TRIPS-Plus requirements increases the value of patents primarily through a two-pronged strategy of minimizing the use of price controls on patented drugs and promoting new (and typically more expensive) drugs to consumers. Both of these measures complement patent protection by increasing the value of patents without directly changing patent laws. Both of these strategies seem aimed at imposing the US marketing and sales model (that results in the highest profit margins) on other countries. Although this may have benefits for patent-owning companies, it may also increase costs and distort the path of innovation.
1. Minimizing Price Controls
An important recent trend in FTAs is to minimize a nation’s ability to impose price controls on drugs. This can enhance the ability of patent or regulatory protection to result in increased profits. For example, in the United States, where there are no national price controls, the cost of patented drugs is higher than in other countries. To pharmaceutical companies, minimizing (or even eliminating) price controls in other nations is desirable for increasing profitability. Although the profit incentive is clear, companies as well as FTAs typically frame the issue in terms of recognizing the value of innovative pharmaceuticals.
The U.S.-Australia FTA was the first to introduce provisions to impact price controls. Before the FTA, patented drugs were estimated to cost up to twice as much in the United States as in Australia,60 with Australia having one of the cheapest drug costs globally.61 The cost differential is likely attributed to Australia’s Pharmaceutical Benefit Scheme (PBS) providing reimbursement for drugs based on their relative cost-effectiveness. Drugs do not need to be listed on the PBS to be sold; however, as most consumers buy drugs through the PBS (because the PBS substantially subsidizes costs), companies tend to seek listing on the PBS even though that limits the maximum sale price. The PBS will not permit a drug to be listed for reimbursement unless it is more effective, safer, or both. In addition, even if a drug is included for listing, the reimbursement for the drug will be (p.247) capped at the price of existing comparable drugs if it does not establish improved effectiveness, safety, or both. The PBS system is thus a type of reference pricing that aims to provide greater reimbursement for drugs that are more socially valuable.
According to drug companies, a system such as the PBS that imposes a cap on prices (rather than permitting the company to sell drugs at whatever price the market will bear), fails to allow proper recoupment of the company’s research and development costs. In particular, it has been suggested that Australian citizens were improperly free riding on patients in other countries who paid higher prices for drugs. Indeed, one of the negotiating objectives by the United States was to eliminate the PBS prices—and to seek to dismantle similar reference pricing in other developed countries.62
The U.S.-Australia FTA does not require that Australia eliminate its PBS but does introduce a number of measures that may have a substantial impact on how the PBS operates. For example, the FTA requires increased transparency of the PBS reimbursement process, as well as an opportunity for patent owners to independently challenge PBS listing decisions.63 In addition, the FTA creates a new “Medicines Working Group” to address the “importance of pharmaceutical research and development to continued improvement of healthcare outcomes.”64 The creation of this group leaves open the possibility for continued pressure to modify the PBS process in a way that would better promote the interests of patent owners. In addition to these measures for influencing the PBS process, the PBS could be directly challenged pursuant to the dispute resolution procedures in the FTA. Unlike TRIPS, the US-Australia FTA permits a party to initiate a dispute when there is no violation of any explicit provision, but there is an impairment of expected benefits; this is called a “nonviolation” dispute.65 Accordingly, the US could raise a dispute based on ambiguous statements in the FTA concerning the mutual agreement to “recognize the value of innovative pharmaceuticals.”66
The subsequent U.S.-South Korea FTA goes even farther in specifying considerations in setting reimbursement.67 The agreement requires that reimbursement amounts for (p.248) drugs be based on “competitive market-derived prices,” which suggests the price would be what the pharmaceutical industry wishes to charge in the absence of any limits. South Korea enables the reimbursement amount to be alternatively determined, but the “value” of patented products is expressly noted as a factor that must be recognized in the reimbursement amount. In addition, pharmaceutical companies are allowed to have additional input into determination of the reimbursement amount. First, such companies may seek a higher reimbursement than comparative products based on evidence of safety or efficacy.68 In addition, after an initial reimbursement decision is made, a company is given a second opportunity to seek a higher reimbursement.
The limitation on national ability to control costs through limiting reimbursement amounts, as in the Australia and South Korea FTAs, appears to be a new trend. Although only a limited number of FTAs include such provisions thus far, the pharmaceutical industry seems supportive of this additional approach beyond increased patent and regulatory protection so as to maximize profitability. Although there is general recognition access to medicine is an important issue, one “practical” means to achieve balance is to insist that developed countries pay more for drugs. For example, the global profitability of drugs could be increased if countries besides the United States did not use price controls. Indeed, it has been suggested that a “middle ground” for the issue of global access to medicine would be for developed nations to commit to ensuring that government purchasing authorities pay an “adequate price to encourage research” and cover research costs for products that are of primary value to developing countries.69
2. Encouraging Use of Patented Drugs
A second strategy that has received less attention, but may also be important, is a requirement in FTAs that permits companies to disseminate information about their patented drugs to consumers. In particular, companies may provide information directly to consumers through an Internet site about the drug. Although the information must include a balance of risks and benefits, it nonetheless seems to essentially be advertising on the web and introduces the same issues that exist with direct advertising to consumers. In the United States, advertisements have played a pivotal role in inducing consumers to switch to newer-patented—and thus more expensive—drugs. In particular, as noted in Chapter 1, pharmaceutical companies sometimes will introduce a newly patented drug that is only a slight variation of an older compound just as the older compound is about to lose patent protection. If consumers are persuaded to switch to the newer-patented drug, this has a positive impact on profits.
(p.249) Increased information to consumers may seem like an innocuous requirement that can only promote better consumer decision making. However, consumers are never in an ideal position to make effective decisions on their own, as they do not have the expertise necessary to evaluate whether a new drug is actually an improvement. This stands in contrast to the experts involved in reference-pricing systems such as Australia’s PBS who can appropriately decide whether a new drug actually provides a worthwhile improvement over existing medicines—including medicines that are available at low cost because they are no longer protected by patents. The increased information companies may provide to consumers is also a novel way to influence them even in countries that do not officially permit direct-to-consumer advertising of prescription medicine.70 The web-based information could have the same effect of inducing consumers to switch to a new drug that is more expensive than a generic.
III. Controversy Concerning TRIPS-Plus
Whether TRIPS-Plus standards are appropriate for developing countries is questionable.71 Proponents of these standards often proclaim that stronger patent rights promote innovation as well as direct investment. These same claims were made in support of the original TRIPS agreement—but the actual benefits have yet to be realized.72 Similarly, countries that have adopted TRIPS-Plus agreements have not reported increased benefits, despite what proponents of such agreements have suggested. For example, although the USTR has stated that there has been a “blossoming of Jordan’s pharmaceutical industry” since increased patent rights were introduced,73 the evidence is ambiguous. There have been no (p.250) new production facilities established by major multinational firms in Jordan since the FTA.74 In fact, although there is a local pharmaceutical industry, it existed before the FTA. In addition, Jordanian firms note that R&D levels remain unchanged since the FTA. Jordan’s experience is not unexpected: prior independent studies suggested that increasing patent standards for developing countries may not promote local innovation as many poor countries do not have an adequate infrastructure to develop new medicines.75
Although the trade-off of increased prices for possible increased innovation may make sense in wealthy countries, it may be less appropriate in developing ones. Not only is there little prospect of either increased innovation or foreign direct investment, but stronger protection may have an adverse effect on access to medicine in countries that have only limited resources. In addition, higher prices as a result of patent protection may be more easily sustained in wealthy countries where most people are covered by health insurance such that they pay only a small fraction of the retail cost of drugs. In contrast, many citizens in developing countries lack insurance, and thus their out-of-pocket costs for medicine may actually be higher than citizens in wealthy countries.
Although some countries may feel pressure to adopt TRIPS-Plus standards, the possible impact on access to medicine is not wholly unrecognized—at least by the country forced to adopt the agreement. Sometimes a nation will enter into an agreement demanding TRIPS-Plus standards despite opposition from consumer groups or local industry. Occasionally public opinion will be strong enough to thwart a proposed agreement; however, this is the exception rather than the norm.76 More typical are side letters to FTAs that purport to assert the agreement has no impact on the ability of a country to take “necessary measures to protect public health by promoting access to medicine for all.”77 Although these may sound reassuring, they likely have little to no legal weight. Moreover, the side letters do not permit countries to ignore the actual requirements of the agreement that may in fact make it difficult to promote access to medicine by mandating that more medicines be patented.
TRIPS-Plus requirements also deserve close attention as there has generally been a constant “ratcheting up” of standards, with the potential to substantially and significantly (p.251) impact public health.78 In other words, each subsequent agreement containing TRIPS-Plus standards generally imposes higher standards than the last one. Increasing standards of protection generally also increases barriers to current access to medicine. Many developing countries have limited resources as well as serious public health challenges. Accordingly, to the extent a developing country adopts a TRIPS-Plus standard that requires more protection for patents, more drugs are likely to be patented—and priced out of reach. This ratcheting up phenomenon has been a trend, but it need not continue. For example, in 2007, the US Congress bowed to public pressure and announced it would modify a then-pending FTA with Peru and Panama to promote public health.79
Although developing countries retained some flexibility to tailor patent laws to their social priorities (as discussed in Chapter 4), TRIPS-Plus requirements may be rapidly eroding that protection. This is particularly true not only because FTAs that impose TRIPS-Plus requirements have multiplied, but because there has been a general trend toward increasing the required protection. Even if subsequent FTAs do not further increase protection, the current ones already impose much higher standards than TRIPS requires.
Subsequent chapters further explore some of the TRIPS-Plus requirements introduced here. For example, Chapter 9 provides a more in-depth discussion of TRIPS-plus regulatory requirements and also discusses concrete measures that countries can try to take to minimize the health impact of such requirements. Chapter 10 discusses a TRIPS-Plus requirement in EU law that threatens international trade in low-cost generic drugs and has ramifications beyond the EU, as there is a pending international agreement under negotiation that would have a similar impact for member countries.
(1) Sometimes the term TRIPS-Plus is used to refer to standards adopted by a country in advance of when it needs to comply with TRIPS. For example, least developed countries that are members of the WTO do not have to provide patent protection for drugs until at least 2015 (as discussed in Chapter 3). However, LDCs that already provide such patent protection are considered to have adopted TRIPS-Plus rules.
(2) E.g., 19 U.S.C. § 2242(d)(4)(2000) (noting that a country can be deemed to have inadequate protection of intellectual property rights “notwithstanding the fact that the foreign country may be in compliance” with TRIPS).
(3) 19 U.S.C. § 2242(a)(2000).
(4) Although TRIPS-Plus standards often exist in free trade agreements, they are not the only type of agreement that may incorporate such standards. An alternate vehicle for TRIPS-Plus standards are bilateral investment agreements.
(5) TRIPS-Plus rules may also be created through multilateral agreements focusing solely on intellectual property rights. Thus far, however, no such agreements have been concluded involving patents. Negotiations on a Substantive Patent Law Treaty (SPLT) under the auspices of the World Intellectual Property Organization (WIPO) that would establish uniform patent standards for both developed and developing countries (that are members of WIPO) have been stalled for several years. The proposed Anti-Counterfeiting Trade Agreement (ACTA) addresses enforcement of patent and other intellectual property.
(6) U.S.-Austl. Free Trade Agreement, art. 17.9(1)–(2), U.S.-Austl., May 18, 2004, T.I.A.S. No. 6422, [hereinafter U.S.-Austl. FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/australian-fta/final-text; EUROPEAN COMMISSION, INTERNATIONAL AFFAIRS: FREE TRADE AGREEMENTS, http://ec.europa.eu/enterprise/policies/international/facilitating-trade/free-trade/index_en.htm (Apr. 31, 2010) (listing FTAs under negotiation).
(7) Forum shifting is a recognized strategy used by countries and organizations to seek the optimal reception for their goals. See, e.g., JOHN BRAITHWAITE & PETER DRAHOS, GLOBAL BUSINESS REGULATION ch. 24, (2000); Laurence Helfer, Regime Shifting: The TRIPs Agreement and New Dynamics of International Intellectual Property Lawmaking, 29 YALE J. INT’L. L. 1 (2004)
(8) See, e.g., PETER DRAHOS WITH JOHN BRAITHWAITE, INFORMATION FEUDALISM: WHO OWNS THE KNOWLEDGE ECONOMY? 99–107 (2002). Although some countries immediately changed their laws in response to trade pressure, others faced sanctions. For example, tariff penalties were imposed on Brazilian imports in 1987 when the United States comprised twenty-five percent of Brazil’s export market. By 1990, Brazil’s laws were in compliance with the United States desires.
(9) For example, although the EU and India are reportedly expected to conclude a free trade agreement by Spring 2011, as of late 2010 the negotiations were being criticized for lack of transparency. See, e.g., Monika Ermert, Lack of Transparency in EU-India FTA Talks Spurs Requests for Halt, IP WATCH MICROBLOG (Sept. 3, 2006, 6:59 PM) http://www.ip-watch.org/weblog/2010/09/03/lack-of-transparency-in-eu-india-fta-talks-spurs-requests-for-halt/?utm_source=daily&utm_medium=email&utm_campaign=alerts; Does EU-India FTA Serve Mutual Interests? Policymakers, NGOs Disagree, INTELL. PROP. WATCH (Nov. 12, 2010), available at http://www.ip-watch.org/weblog/2010/12/10/policymakers-ngos-disagree-does-eu-india-fta-serve-mutual-interests/. Although negotiations were launched in 2007, the first leaked text in 2009 noted that the EU would provide a “revised text” for the controversial provision on data exclusivity. Draft EU-India Free Trade Agreement art. 10 (Feb. 24, 2009), http://file.wikileaks.org/file/eu-india-fta-feb-2009.pdf.
(10) If an application is filed pursuant to the PCT, it provides the applicant with several benefits. First, the applicant can initiate a request for a patent in all countries that are members of the PCT; however, the high costs of many parallel national applications are deferred for a period of months and sometimes years. The lag time also enables an applicant to delay a decision concerning which countries are desirable for patent protection. Second, the applicant is entitled to a preliminary examination of its patent application through the PCT, which, if negative, may enable the applicant to elect not to pursue some or all national applications.
(11) Oxfam International, All Costs, No Benefits: How TRIPS Plus IP Rules in the US Jordan FTA Affect Access to Medicine 7-8 (Oxfam Briefing Paper No.102, 2007), available at http://www.oxfam.org.uk/resources/issues/health/downloads/bp102_trips.pdf. In addition, as noted by Professor Drahos, Vietnam has seen a rapid increase in the number of patent applications since it became of a member of the PCT in 1993 whereas Thailand received less than fifty applications in 2007. PETER DRAHOS, THE GLOBAL GOVERNANCE OF KNOWLEDGE; PATENT OFFICES AND THEIR CLIENTS 269-79 (2010).
(12) E.g., CHRISTOPHER SCOTT HARRISON, THE POLITICS OF THE INTERNATIONAL PRICING OF PRESCRIPTION DRUGS 103-10 (2004) (describing US pressure on Argentina and Brazil to adopt pipeline protection).
(13) Countries that provided pipeline protection include Brazil, Thailand, Argentina and Uruguay.
(14) Technically, the Mexican law is not a traditional TRIPS-Plus protection since the pipeline protection was required pursuant to the North American Free Trade Act. NAFTA 1709(4). However, NAFTA was negotiated concurrently with TRIPS and the pipeline protection is similar.
(16) E.g., Claudia Jurberg, Challenge Raised to Constitutionality of Brazilian Pipeline Patents, INTELL. PROP. WATCH (Jan. 22, 2008), http://www.ip-watch.org/weblog/2008/01/22/challenge-raised-to-constitutionality-of-brazilian-pipeline-patents/. This challenge existed despite the fact that the Brazilian law bars pipeline protection if a third party has made “serious and effective preparations” to make the drug.
(17) See, e.g., Claudia Jurberg, Brazilian Generic Drug Registration Sets Standard for ‘Pipeline’ Patents, INTELL. PROP. WATCH (May 13, 2010), http://www.ip-watch.org/weblog/2010/05/13/brazilian-generic-drug-registration-sets-standard-for-pipeline-patents/; Ed Taylor, Novartis Loses Court Battle over Lifespan of Brazilian Patent on Gleevec, BNA PAT. TRADEMARK & COPYRIGHT L. DAILY, Oct. 29, 2010.
(18) In some cases, there was a dispute about what constitutes the earlier international filing date. For example, in one case, the first international application was abandoned and the patent owner wanted to use the later filing date as the relevant date for calculating the term from which the twenty years should run.
(19) The application must also adequately explain the invention such that others with a similar scientific background could make and use it. TRIPS art. 29(1).
(20) There are some requirements that do not directly impact access to medicine, such as those that plants and animals be patentable rather than excluded from patentability. TRIPS art. 27(3).
(21) Whether or not the invention in a patent application is new is generally compared with prior art—a term that usually references publicly available information before the patent application. However, there are presently differing standards on when an invention is new in different countries.
(22) This is considered an “absolute novelty” regime. This system encourages inventors to promptly file their inventions.
(23) This is considered a “relative novelty” regime that is more accommodating of the realities of traditional practice in which scientists primarily share knowledge through publications rather than patents. Under this system, the scientists would not lose all patent rights because they preferred to first publish rather than patent the invention.
(24) U.S.–Pan. Trade Promotion Agreement, U.S.-Pan, art. 15.9(7), June 28, 2007 [hereinafter U.S.-Panama TPA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/panama-tpa/final-text; U.S.-Korea Free Trade Agreement, U.S.-Korea, art. 18.8(7), June 30, 2007 [hereinafter U.S.-Korea FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta/final-text; United States-Morocco Free Trade Agreement, U.S.-Morocco, art 15.9(8), June 15, 2004 [hereinafter US-Morocco FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/morocco-fta/final-text.
(25) U.S. Patent No. 4,724,232 (Feb. 9, 1988). In addition, the use of AZT to increase the T-lymphocyte count of HIV patients was subject to a separate patent. U.S. Patent No. 4,818,750 (April 4, 1989).
(26) TRIPS art. 62(4); TRIPS art. 41.
(27) E.g., U.S.-Morocco FTA, art. 15.9.(5) (“Where a Party provides proceedings that permit a third party to oppose the grant of a patent, a Party shall not make such proceedings available before the grant of the patent”); see also U.S.-Korea FTA, art. 18.8(4); U.S.–Singapore Free Trade Agreement, U.S.-Sing., art. 16.7.4, May 6, 2003 [hereinafter U.S.-Singapore FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/singapore-fta/final-text; U.S.-Bahrain Free Trade Agreement, U.S.-Bahr., art. 14.8.4, Jan. 11, 2006 [hereinafter U.S.-Bahrain FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/bahrain-fta/final-text; U.S.-Oman Free Trade Agreement, U.S.-Oman, art. 15.8.4, Jan. 19, 2006 [hereinafter U.S.-Oman FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/oman-fta/final-text.
(28) WTO Panel Report, Canada—Patent Protection of Pharmaceutical Products, WT/DS114/R (Mar. 17, 2000).
(29) E.g., U.S.-Jordan Free Trade Agreement, U.S.-Jordan, art. 4(23), Oct. 24, 2000, 41 I.L.M. 63 [hereinafter U.S.-Jordan FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/jordan-fta/final-text (extension for regulatory delay only); U.S.-Singapore FTA, art. 16.7(7), 18.8(4)(a) (extension for patent or regulatory delay); U.S.-Chile Free Trade Agreement, art. U.S.-Chile, arts. 17.9(6), 17.10(20(a)), June 6, 2003, [hereinafter U.S.-Chile FTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/chile-fta/final-text (extension for patent or regulatory delay); U.S.-Austl. FTA, arts. 17.9(8), 17.10(4) (extension for patent or regulatory delay); U.S.-Morocco FTA, art. 15.9(7); 15.10(3) (extension for patent or regulatory delay); Free Trade Agreement, Eur.-Korea, art. 10.35(2), Oct. 15, 2009 [hereinafter EU-Korea FTA], available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=443&serie=273&langId=en (extension for regulatory delay).
(30) In addition, for countries that approve drugs based on prior approval in another country, patent term extensions must be provided if there was a delay in the prior country’s approval process. E.g., U.S.-Bahrain FTA, art. 15.6(b)(ii).
(31) Central America-Dominican Republic-United States Free Trade Agreement, art. 15.9, Aug. 5, 2004 [hereinafter CAFTA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/cafta-dr-dominican-republic-central-america-fta/final-text.
(32) Id. art. 15.10
(33) 35 U.S.C. § 156(c)(3).
(34) Moreover, they are unlikely to do so where there is no substantial domestic generic drug industry to lobby for such changes.
(35) EU-Korea FTA, art. 10.35(2).
(36) Whereas prior FTAs stated that countries “shall” provide a patent term extension, Peru and Panama’s FTAs were to be modified to state that they “may” provide such an extension for drug patents.
(37) U.S.-Singapore FTA, art. 16.7(6)(b)(ii); see also U.S.-Austl. FTA, art. 17.9(7) (requiring patent owner be provided “reasonable compensation”). Although this is a TRIPS-Plus standard that favors the interests of patent owners, it is not yet a uniform standard in FTAs. Several FTAs negotiated after the “reasonable and entire” compensation standard was included contained no specific mention of compulsory licenses, which suggests the TRIPS standard of “adequate” compensation would apply. See generally U.S.-Chile FTA; CAFTA; U.S.-Morocco FTA; U.S.-Panama TPA; Trade Promotion Agreement, U.S.-Peru, Apr. 12, 2006 [hereinaft er U.S.-Peru TPA], available at http://www.ustr.gov/trade-agreements/free-trade-agreements/peru-tpa/final-text; U.S.-Colom. Trade Promotion Agreement, Nov. 22, 2006, available at http://www.ustr.gov/trade-agreements/free-trade-agreements/colombia-fta/final-text; U.S.-Korea FTA.
(38) See Chairman’s Report, Status of Work in the Negotiating Group ¶ 5A.3.9, MTN.GNG/NG11/W/76 (Jul. 23, 1990) (noting this as one of several suggestions for the compensation standard).
(39) There is some dispute concerning whether this should be interpreted literally to mean review by a court, or whether any review by a higher authority, such as a higher administrative authority, is permissible. See CARLOS M. CORREA, TRADE RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS: A COMMENTARY ON THE TRIPS AGREEMENT 342 (2006). In either case, however, it is clear the TRIPS requirement is a modest one of imposing only a need for review rather than setting any substantive standards.
(40) TRIPS art. 32 (“An opportunity for judicial review of any decision to revoke or forfeit a patent shall be available.”). There is also one additional requirement that exists for patents revoked when a compulsory license for failure to work is deemed inadequate. In such cases, the revocation cannot occur until at least two years after the compulsory license is issued. Paris Convention for the Protection of Industrial Property art. 5(a)(3), Mar. 20, 1883, revised July 14, 1967, 21 U.S.T. 1583, 828 U.N.T.S. 305 [hereinafter Paris Convention].
(41) Many FTAs limit grounds for revocation to patentability requirements and possibly fraud of some type—without the option to revoke a patent where a compulsory license has been inadequate. See, e.g., U.S.-Korea, art. 18.8(4) (“Each party shall provide that a patent may be revoked only on grounds that would have justified a refusal to grant the patent. A Party may also provide that fraud, misrepresentation, or inequitable conduct may be the basis for revoking a patent or holding a patent unenforceable.”). Similar language appears in a number of other FTAs. E.g., U.S.-Morocco FTA, art. 15.9(5); U.S.-Austl., art. 17.9(5); U.S.-Singapore FTA, art. 16.7(6)(b)(ii); U.S.-Chile FTA, art. 17.9(5); U.S.-Peru TPA, art. 16.9(4).
(42) TRIPS art. 30 (“Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.”).
(43) Thus far, restricting permissible exceptions to patent rights beyond the compulsory realm is the exception, rather than the norm, but is included for discussion here as FTAs are ever-evolving.
(44) U.S.-Jordan FTA, art. 19.
(45) An FTA that restricts exceptions from patent rights to regulatory approval would bar a common exception for “experimental use” that enables scientists to use patented inventions in the process of creating new innovations. In the absence of such an exception, there is the danger that scientists will be delayed in pursuing research or elect not to pursue certain avenues of research.
(46) U.S.-Morocco FTA, art. 15.9. This FTA permits parties to limit the restriction to cases where the patent owner by contract has placed restrictions on importation.
(47) E.g., U.S.-Austl. FTA, art. 17.9(4) (“Each party shall provide that the exclusive right of the patent owner to prevent importation of a patented product… without the consent of the patent owner shall not be limited by the sale or distribution of that product outside its territory, at least where the patentee has placed restrictions on importation by contract or other means.”); U.S.-Morocco FTA, art. 15.9. This FTA permits parties to limit the restriction to cases where the patent owner has placed restrictions on importation by contract.
(48) U.S.-Singapore FTA, art. 16.7(2) (“Each party shall provide a cause of action to prevent or redress the procurement of a patented pharmaceutical product, without the authorization of the patent owner, by a party who knows or has reason to know that such product is or has been distributed in breach of a contract between the right holder and a licensee, regardless of whether such breach occurs in or outside its territory.”)
(49) E.g., U.S.-Singapore FTA, art. 16.8; U.S.-Austl. FTA, art. 17.10; U.S.-Morocco FTA, art. 15.10; U.S.-Korea FTA, art. 18.9; see also Karin Timmermans, Monopolizing Clinical Trial Data: Implications and Trends, 4 PLOS MED. 206, 208 (2007) (summary table comparing data exclusivity provisions in FTAs); Dolores Cullen, Data Protection: The New IP Frontier—An Overview of Existing Laws and Regulation, 5 J. GENERIC MED. 9 (2007).
(50) See, e.g. U.S.-Singapore FTA, art. 16.8(4)(c); U.S.-Chile FTA, art. 17.10(2)(b); CAFTA, art. 15.10(3); U.S.-Austl. FTA, art. 17.10(5); U.S.-Morocco FTA, art. 15.10(4). Pursuant to the 2007 Congressional agreement, the Panama and Peru FTAs do not demand that the drug regulatory agency withhold approval of a generic during the patent term, but still require procedures to permit expeditious resolution of patent infringement or validity disputes. In addition, the patent owner must still be promptly notified if an application is filed to market a generic version of the patented drug.
(51) E.g., U.S.-Chile FTA, art. 17.10(2)(c); CAFTA, art. 15.10(3); U.S.-Austl. FTA, art. 17.10(5); U.S.-Morocco FTA, art. 15.10(4).
(52) There may be no financial incentive to do so if the market is not expected to be profitable. Moreover, from the corporate perspective, there are clear dangers to promptly seeking approval because that could provide the basis for compulsory licenses of drugs as well as parallel imports.
(53) Ellen R. Shaffer & Joseph E. Brenner, A Trade Agreement’s Impact on Access to Generic Drugs, 28 HEALTH AFFAIRS 957, 961, 964–65 (Aug. 25, 2009), http://content.healthaffairs.org/cgi/content/abstract/28/5/w957.
(54) Id. at 962.
(55) Id. at 965.
(56) The partner country is required to grant approval within six months of the application.
(57) See Oxfam International, All Costs, No Benefits: How TRIPS Plus IP Rules in the US Jordan FTA Affect Access to Medicine 7-8 (Oxfam Briefing Paper No.102, 2007), available at http://www.oxfam.org.uk/resources/issues/health/downloads/bp102_trips.pdf.
(59) There is actually an international agreement that helps applicants avoid barring themselves from patentability. In particular, pursuant to the Paris Convention, applicants are given one year from the first globally filed application to file other similar applications while retaining the same filing date. Paris Convention, art. 4.
(60) E.g., AUSTL. PRODUCTIVITY COMM’N, No. 0107004, INTERNATIONAL PHARMACEUTICAL PRICE DIFFERENCES 79 fig. 3.1 (2001).
(61) K. Lokuge & Richard Denniss, Trading in Our Health System? The Impact of the Australia-US Free Trade Agreement on the Pharmaceutical Benefits Scheme 16 (The Austl. Inst., Discussion Paper No. 55, 2003), available at https://www.tai.org.au/file.php?file=discussion_papers/DP55.pdf.
(62) See INT’L TRADE ADMIN., U.S. DEP’T OF COMMERCE, PHARMACEUTICAL PRICE CONTROLS IN OECD COUNTRIES: IMPLICATIONS FOR U.S. CONSUMERS, PRICING, RESEARCH AND DEVELOPMENT, AND INNOVATION 52 (2004), available at www.ita.doc.gov/drugpricingstudy. However, a trend towards emulating the general lack of price controls may have undesirable consequences beyond higher drug costs. In particular, without price controls, there may be an incentive to promote inefficient research into similar versions of profitable products rather than innovative and socially valuable new products.
(63) U.S.-Austl. FTA, Annex 2-C, 2(f).
(64) Id., Annex 2-C, 3.
(65) US-Austl. FTA, art. 21.2(c).
(66) E.g., Buddima Lokuge & Thomas Faunce, Trade Disputes and the Pharmaceutical Benefits Scheme: Constructive Ambiguities, Non-Violation Nullification Disputes and the Australia US Free Trade Agreement 18 (Centre for Governance of Knowledge & Dev., Working Paper, 2004), available at http://cgkd.anu.edu.au/menus/PDFs/TradedisputesandthePharmaceuticalBenefitsScheme.pdf.
(67) The agreement also goes beyond the FTA with Australia in extending the same conditions to medical devices.
(68) U.S.-Korea FTA, art. 5.2.
(69) Letter from Pfizer CEO and Professor John Barton to Honorable Max Baucus (Aug. 13, 2008), available at http://media.pfizer.com/files/news/kindler_baucus_letter_081308.pdf.
(70) U.S.-Austl. FTA, Annex 2-C(5) (dissemination of information).
(71) In fact, some have even suggested that poor countries should be exempted from intellectual property requirements altogether—although this is obviously not realistic in the wake of TRIPS. E.g., Alan V. Deardorff, Should Patent Protection be Extended to All Developing Countries?, 13 WORLD ECON. 497 (1990). An alternative, but similarly unrealistic proposal would be to have patent-owning companies choose to protect their inventions in either industrialized or developing countries, but not both. Jean Olson Lanjouw, Beyond TRIPS: A New Global Patent Regime, Center for Global Development, CGD Brief, Aug. 2002, available at http://www.cgdev.org/content/publications/detail/2860/.
(72) Many have noted the argument between stronger rights and increased foreign direct investment (FDI) is weak. E.g., F.M. Scherer & S. Weisburst, Economic Effects of Strengthening Pharmaceutical Patent Protection in Italy, 26 INT’L REV. INDUS. PROP & COPY. L. 1009 (1995); E. Mansfield, Intellectual Property Protection, Direct Investment, and Technology Transfer, Int’l Finance Corporation, Discussion Paper, No. 27 (1995); see also A.S. Kirim, Reconsidering Patents and Economic Development: A Case Study of the Turkish Pharmaceutical Industry, 13 WORLD DEV. 219 (1985); Frederick M. Abbott, The International Intellectual Property Rider Enters the 21st Century, 29 VAND. J. OF TRANS. L. 471, 474 (1996) (noting countries with the weakest levels of intellectual property rights (IPR) protection—the People’s Republic of China, Taiwan, Brazil, Argentina, Thailand, etc.—over the past decade have routinely been recipients of the largest net FDI inflows).
(73) E.g., Marilyn Chase & Sarah Lueck, In New Trade Pacts, U.S. Seeks to Limit Reach of Generic Drugs, WALL ST. J., July, 6, 2004, at A1.
(74) Hamed El-Said & Mohammed El-Said, TRIPS-Plus Implications for Access to Medicines in Developing Countries: Lessons from Jordan-United States Free Trade Agreement, 10 J. W. INTELL. PROP. 438, 453–55 (2007).
(75) E.g., UK COMMISSION ON INTELLECTUAL PROPERTY RIGHTS, INTEGRATING INTELLECTUAL PROPERTY RIGHTS AND DEVELOPMENT POLICY, ch. 2 (2002).
(76) For example, Thailand has thus far resisted efforts to enter into an FTA, although it continues to be subject to political pressure and has been consistently listed on the US Priority Watch list.
(77) See, e.g., Letters between Minister Taïb Fassi Fihri, Del. for Foreign Aff. and Cooperation, Kingdom of Morocco, and Robert B. Zoellick, Trade Rep., United States (June 15, 2004), available at http://www.ustr.gov/trade-agreements/free-trade-agreements/morocco-fta/final-text (courtesy translation of the understanding of chapter 15 of the U.S.-Morocco FTA, supra note 14).
(78) E.g., Peter Drahos, Bits & Bips—Bilateralism in Intellectual Property, 4 J. WORLD INTELL. PROP. 791 (2001); Susan K. Sell, The Global IP Upward Ratchet, Anti-Counterfeiting and Piracy Enforcement Efforts: The State of Play (IQsensato, Occasional Papers No. 1, 2008), http://www.iqsensato.org/wp-content/uploads/Sell_IP_Enforcement_State_of_Play-OPs_1_June_2008.pdf.
(79) E.g., Peru & Panama FTA Changes 8 (May 10, 2007), available at http://waysandmeans.house.gov/Media/pdf/110/05%2014%2007/05%2014%2007.pdf. However, developing countries that negotiated FTAs prior to 2007 have thus far not been successful in securing modified agreements. (p.252)