The ordinary meaning of "unfair" is "not equitable or honest or impartial or according to rules"16. In the case of Article 39.3, this concept must be understood in the light of Article 10bis of the Paris Convention.
16The Concise Oxford Dictionary, Seventh Edition, Oxford University Press, Oxford, 1989.
The concept of "unfair" is relative to the values of a particular society at a given point in time. It varies among Members, and this variation is in fact one of the premises on which the discipline of unfair competition is grounded. There is no absolute, universal rule to determine when certain practices should be deemed "unfair":
"Morality, which is the source of the law of unfair competition, is a simple notion in theory only. In fact it reflects customs and habits anchored in the spirit of a particular community. There is no clearly objective standard of feeling, instincts, or attitudes toward a certain conduct. Therefore, specific prescriptions involving uniform evaluation of certain acts are extremely difficult.
The pressures existing in the various countries for the suppression of acts of unfair competition differ greatly. Generally, the development of law of unfair competition depends on active and intense competition in the marketplace by competing enterprises. It is the pressure of conflicting interests which leads to the establishment of clear rules of law. This pressure is not uniform in all countries and indeed it is evolving continuously" (Ladas, 1975, p. 1685-1686).
Ladas concludes his treatise's discussion of the issue by indicating that:
We look for a standard by which we may judge the act complained of. This is an objective standard: the honest practices in the course of trade in the particular community and at the particular time" (Ladas, 1975, p. 1689).
Given this diversity, it is likely that different countries will judge certain situations differently, depending on their values and competitive advantages. Some countries may consider it an "unfair practice" for a "follower" company to commercially benefit from the data produced by the originator, via a marketing approval system based on "similarity"; or hold that such commercial benefit gives rise to claims of "unjust enrichment" leading to a compensation for the use of the data. In others, it may be regarded as the legitimate exploitation of an externality created during legitimate competition in the market. As noted by Kamperman Sanders,
"Where exploitation of another's achievements becomes inequitable, unfair competition law acts provides a remedy. This means that the mere fact that another's achievement is being exploited does not call for any impediment on the basis of unfair competition provisions. On the contrary, appropriating and building on others' achievements is the cornerstone of cultural and economic development. The axiom of freedom to copy epitomizes the principles of the free market system".
Certainly, specific regulations could be adopted at the international level in order to harmonize the treatment of these cases. The United States made such a proposal in the TRIPS negotiations,17 but it was not incorporated into the final text of the TRIPS Agreement. The U.S. proposal would have obliged countries to prevent any use of test data, without the consent of the right holder or on payment of "the reasonable value of the use", if that use led to the "commercial or competitive benefit of the government or of any person". This provision would have obliged countries to prevent any practice that would create such benefit. The final proposal, by contrast, used the term "unfair commercial practices". The rejection of the US proposal indicates that the negotiating parties deliberately opted under Article 39.3 to mandate regulation of certain types of practices (those that are commercially unfair) and not to prevent any practice based on its possible effects on benefits allocation.
17 See below the history of the negotiation of article 39.3.
In other words, Article 39.3 only applies when a competitor obtains a benefit or advantage from the use of the originator's testing data as the result of unfair commercial practices. It is the qualification of the practice that counts, not the mere existence of an advantage or benefit. Such qualification is left to Members' discretion; it is part of the room for manoeuvre that they retained when signing the Agreement.
There are many instances in which the production of goods, notably intangibles, in a competitive environment generate externalities that benefit competitors. In describing the nature of competition, Ladas has noted that:
"it is an undeniable fact of modern business life that successful manufacturers or traders have to cope with the danger of having the goodwill of their business, their connection with the purchasing public, interfered with by competitors... In a competitive economy is it to be expected that each manufacturer or trader necessarily seeks to maintain and improve his market position by obtaining the benefit of a public demand, even though this demand be created by other manufacturers or traders...
"...where does lawful competition end and unlawful competition begin? The fact that a competitor may derive a profit from his act of competition or cause monetary loss to another is not, in itself, unlawful. The dictum "no one should reap where he has not sown" requires delicate application. Progress would be paralyzed and monopoly would become general if we should attempt to prevent persons from using the work or experience of others. We must encourage people in the same trade or industry to compete for the custom of the public on the most favorable terms. The issue is whether the means employed in such competition are fair and lawful. An act may lack tact or taste but not be dishonest" (Ladas, 1975, pp. 1676, 1677 and 1689).
Many countries do not treat commercialization of a "similar" product approved by reference to a previous registration, or by reliance on data submitted by the originator company, as an unfair commercial practice, but some do. Under Article 39.3, each approach is valid. Article 39.3 mandates protection against "unfair commercial practices", but permits Member countries to determine which practices will be deemed commercially unfair. As mentioned, differences among countries are likely to exist, consistent with Article 10bis of the Paris Convention.