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Protection of Data Submitted for the Registration of Pharmaceuticals: Implementing the Standards of the Trips Agreement
(2002; 77 pages) [Spanish] View the PDF document
Table of Contents
View the documentTHE SOUTH CENTRE
View the documentFOREWORD
View the documentEXECUTIVE SUMMARY
View the documentINTRODUCTION
Open this folder and view contentsII. THE RATIONALE FOR DATA PROTECTION
Open this folder and view contentsIII. CONDITIONS OF PROTECTION UNDER TRIPS
Open this folder and view contentsV. PROSCRIBED ACTS OF UNFAIR COMMERCIAL USE
View the documentIX. CONCLUSIONS
View the documentBIBLIOGRAPHY
View the documentBACK COVER


The pharmaceutical industry, the United States and the European Union disagree with the contention that Article 39.3 does not require the granting of exclusive rights. According to the industry, the only way to effectively protect test data against unfair commercial use is to provide an exclusivity period for the use of the data:

"To have a meaningful purpose this provision (Article 39.3) must be interpreted to require the protection of data against use by the competitors. Even if there is some concern about government use of such data in a commercial manner, it is minuscule in comparison to the problem of competitors' use of the data. Consequently, in light of the maxim of statutory construction that a provision will be interpreted so that no part will be inoperative or superfluous, void or insignificant, Article 39 para.(3) must be interpreted to provide protection against the use of data by competitors for some period of time" (Priapantja, 2000, p. 4).

The Office of the U.S. Trade Representative (USTR) has interpreted Article 39.3 of the TRIPS Agreement to mean that

"the data will not be used to support, clear or otherwise review other applications for marketing approval for a set amount of time unless authorised by the original submitter of the data. Any other definition of this term would be inconsistent with logic and the negotiating history of the provision".30

30 Office of the General Counsel, U.S. Trade Representative, "The protection of Undisclosed Test Data in Accordance with TRIPS Article 39.3", unattributed paper for submission in bilateral discussions with Australia (May 1995).

The United States maintained this position, for instance, in its complaint (initiated in April 1996), under Special 301 Section of U.S. Trade Act, against Australia.31 Australia did not grant exclusivity, and generic companies only had to demonstrate bio-equivalence in order to obtain marketing approval of a similar product. In addition, Australian authorities granted certificates of free sale which permitted generic companies to export to other countries where marketing approval was automatically granted on the basis of the Australian certificates.

31 This case was not brought to a panel resolution under the WTO's Dispute Settlement Understanding (DSU) rules. The U.S. instead threatened to impose unilateral trade sanctions on Australia, even though TRIPS had already entered into force in both countries. The U.S. also applied economic sanctions to Argentina in 1997, arguing Argentina maintained insufficient protection of confidential information. More recently, the U.S. has started consultations under the DSU on, inter alia, Argentina's compliance with Article 39.3.

The U.S. argued that the Australian regime violated Article 39.3. The U.S. pressure forced an amendment to the Australian law. Under the Therapeutic Goods Legislation Amendment Act 1998 (No. 34, 1998) test data in Australia now have five years of "exclusivity". During this time, another company wishing to register a generic copy of an originator's product will be required to seek the agreement of the originator company to use its data, or to develop its own data package (Priapantja, 2000, p. 6).

The exclusivity approach was also incorporated, as a result of U.S. demands, in the USA-Jordan Agreement on the Establishment of a Free Trade Area (Washington D.C., 24 October, 2000), according to which "in situations where there is reliance on evidence of approval in another country, Jordan shall at a minimum protect such information against unfair commercial use for the same period of time the other country is protecting such information against unfair commercial use" (Article 22, fin. 11)32.

32 In addition, this Agreement establishes a TRIPS-plus standard in relation to the concept of "new chemical entities": it is understood that such concept "shall also include protection for new uses for old chemical entities for a period of three years" (article 22, fn. 10). The U.S. has also criticized the amendment of the Thai "Safety Monitoring Programme" (SMP) established in 1993 as a result of USTR demands aimed at ensuring a two years minimum exclusivity period for drugs patented abroad between 1986 and September 1991. In January 2001 the SMP was amended and generics companies were allowed to conduct bioequivalence studies at any time regardless of whether or not the original products are under the SMP. If the original products are under the SMP, however, those generic products must also be under the SMP. According to the Thai authorities, the SMP had led to unaffordable high prices for new drugs. In the USTR view, this reform would mean the relinquishment of the benefits affording data protection in accordance with the U.S.-Thai 1993 Bilateral Agreement, and would create - at least until a "satisfactorily TRIPS-consistent Trade Secrets Law is enacted and implemented in Thailand - an unacceptable gap in data protection coverage (Kwa, 2001, p. 49-50).

The EU argues, similarly, that Article 39.3 established an exclusivity obligation. All that is left to Member countries, according to the EU, is the determination of the duration thereof.33

"the only way to guarantee that no "unfair commercial use" within the meaning of Article 39.3 shall be made is to provide that regulatory authorities should not rely on these data for a reasonable period of time, the determination of what is a reasonable period of time being left to the discretion of the Members.

In theory, Article 39.3 appears to give Members the discretion to provide for different means of data protection, although it is very difficult to imagine other ways than non-reliance over a certain period of time, except for a (temporary) refusal to grant any second market approval to similar products (even if the second applicant submits its own data), as is the case in at least one WTO Member and maybe for an obligation to pay as a compensation for reliance on proprietary data without having to obtain consent from the first applicant. The question remains whether such payment would indeed be sufficient to guarantee that any "unfair commercial use" of test data takes place. For instance, it would be essential that such payment reflects the investments made by the original applicant - which may not always be easy to establish.

In theory, any country maintaining an effective system to implement obligations under 39.3 even if different from non-reliance over time, would not be in breach of its TRIPS obligations, but we are not aware of many alternatives and it is clear that what the TRIPS-negotiations had in mind was data exclusivity over a certain period of time. On the other hand, as it does not set any time limit, Article 39.3 would not prevent a country from providing for data exclusivity for an unlimited period of time" (EU, 2001, p. 4-5).

33 See also Lobato García-Miján, 2000.

The EU position suffers from several shortcomings, however. First, had the negotiating parties agreed to embrace the concept of exclusivity, they simply could have done so explicitly. The TRIPS Agreement's obligations in relation to copyrights, trademarks, industrial designs, patents and integrated circuits (via incorporation of the Washington Treaty), all explicitly provide for exclusivity.

The EU admits that there was substantial disagreement during negotiations:

"It must be admitted that the following of Article 39.3 does not, from a prima facie reading, appear to impose data exclusivity during a certain period of time. This lack of clarity is the obvious result of a difficult negotiation process where divergences of views arose between developing and industrialized countries as to the necessity of EC/U.S. like type of data protection as well as among industrialized countries on the length of the data exclusivity period", (EU, 2001, p. 3).

The disagreement among the parties was, however, more substantial than that argued by the EU, and there was no international established practice on which to rely. The negotiating history of Article 39.3 reveals that the parties considered at length, but did not adopt, text which clearly required exclusivity for test data.

Second, if the negotiating parties only left the Members the freedom to determine the duration of the exclusivity period, on what basis could a panel or the Appellate Body establish an "adequate" duration? The basic rule of Article 3.2 of the WTO's Dispute Settlement Understanding prohibits dispute settlement bodies from adding to or subtracting from WTO agreement rights.34 The EU itself admits that there was disagreement among the developed countries even about the duration of such period:

"Would this be 5 years (as in the case inter alia in US), 4 years or 3 years? This remains an open question".

34 Article 3.2: "Recommendations and rulings by the Dispute Settlement Body cannot add to or diminish the rights and obligations provided in the covered agreements".

As noted by Watal,

"It can be argued that if the intention had been to have such exclusive marketing rights, this term, which is used in Article 70.9 of TRIPS, would have been used here too. Further, given the differences in the TRIPS and NAFTA texts of this provision, it is clear that the scope and purpose in TRIPS is intended to be more limited as otherwise the text would have been as specific. No additional obligations, which are not present in the text, can be imported through interpretation. Therefore, a reasonable interpretation would be that the obligation on the authorities would be to keep the test data secret and to prohibit others from accessing this test data for unfair commercial use, such as sale to rival firms" (Watal, 2001, p. 204).

In sum, Article 39.3 clearly requires some form of protection for test data. Its main purpose is not to prevent the commercial use of such data by governments, but the use by competitors. The wording, context and purpose of the article does not support an interpretation that the required protection can be implemented only on the basis of an exclusivity protection. This interpretation is confirmed by the history of the negotiation of the TRIPS Agreement, as reviewed below.35

35 The suggested interpretation has also been held by the Africa Group, Barbados, Bolivia, Brazil, Dominican Republic, Ecuador, Honduras, India, Indonesia, Jamaica, Pakistan, Paraguay, Philippines, Peru, Sri Lanka, Thailand and Venezuela in a recent submission to the Council of TRIPS on "TRIPS and Public Health": "Protection of Test Data: Article 39.3 of the TRIPS Agreement leaves considerable room for Member countries to implement the obligation to protect test data against unfair competition practices. The Agreement provides that "undisclosed information" is regulated under the discipline of unfair competition, as contained in article 10 bis of the Paris Convention. With this provision, the Agreement clearly avoids the treatment of undisclosed information as a "property" and does not require granting "exclusive" rights to the owner of the data" (para. 39) (IP/C/W/296, 19 June, 2001).

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