(2004; 49 pages)
Circumstances in which the Decision may be used
Legal status of the Decision
The Decision adopted by the WTO General Council implements interim waivers with regard to the obligations set out in paragraphs (f) and (h) of Article 31 of the TRIPS Agreement. The Council for TRIPS shall review annually the functioning of the system set out in this Decision "with a view to ensuring its effective operation and shall annually report on its operation to the General Council" (paragraph 8). This waiver shall terminate on the date on which an amendment to the TRIPS Agreement replacing its provisions takes effect for a Member.11 The TRIPS Council was mandated to initiate, by the end of 2003, work on the preparation of such an amendment with a view to its adoption within six months, "on the understanding that the amendment will be based, where appropriate, on this Decision" (paragraph 11).
11 The purpose of this linkage has been to provide legal certainty and encourage countries to implement the Decision as soon as possible. So far, only a handful of countries are reported to have taken action in order to amend national laws and allow exports under the Decision.
The Decision does not affect the use of the flexibilities allowed by the TRIPS Agreement, including the adoption of other avenues to facilitate the export and importation of cheaper pharmaceutical products, such as on the basis of Article 30 of the TRIPS Agreement.12
12 According to para. 9, “This Decision is without prejudice to the rights, obligations and flexibilities that Members have under the provisions of the TRIPS Agreement other than paragraphs (f) and (h) of Article 31, including those reaffirmed by the Declaration, and to their interpretation. It is also without prejudice to the extent to which pharmaceutical products produced under a compulsory licence can be exported under the present provisions of Article 31 (f) of the TRIPS Agreement”.
Amendment to national laws
A waiver does not imply any change of substantive treaty obligations; it only temporarily suspends their operation (Article 57 of the Vienna Convention on the Law of Treaties). A WTO waiver means that a Member shall not initiate a complaint against another Member if the latter acted under the terms of the adopted waiver. However, to the extent that a Member’s national law is not revised to implement the terms of the waiver,13 patent owners may invoke provisions in the national law to block the export of a patented drug by other companies. Whether generic drug makers will actually be able to export under the terms of the Decision, therefore, will depend on the extent to which national laws allow for it.
13 So far only two countries (Canada and Norway) have adopted legislative changes to implement the Decision. See Canada’s Bill C-9, passed by the House of Commons on 4 May 2004, which amended the Patent Act and the Food and Drugs Act, and the amendment of 14 May 2004 to the Norwegian Regulations of 20 December 1996 No. 1162 relating to the patent act.
Under the adopted system, and in a manner fully consistent with the TRIPS Agreement, countries may grant a compulsory licence14 to import a patented drug. However, some developing countries provide for the granting of compulsory licences for the manufacture of patented subject matter, and not for importation. Hence, in order to make any solution under paragraph 6 operational, those developing countries would need to amend their compulsory licence laws to provide for importation.
14 As mentioned below, the Decision also applies in cases of government use for non-commercial purposes.
The Decision does not waive the application of Article 31 (b) of the TRIPS Agreement, which requires that prior to granting a compulsory licence, licence applicants make efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and within a reasonable period of time. This requirement may be waived by national law in the case of a national emergency or other urgent circumstances or in cases of public non-commercial use. National laws may also determine that, in cases where Article 31 (b) cannot be waived and the Decision is to be applied, the period of time be shorter than in normal situations so as to expedite access to needed pharmaceutical products.15
15 The Preamble of the Decision recognizes “where eligible importing Members seek to obtain supplies under the system set out in this Decision, the importance of a rapid response to those needs consistent with the provisions of this Decision”.
Similarly, amendments to national laws will be necessary in the prospective exporting countries. Compulsory licences are granted under grounds specified in national laws. The supply of export markets is not an accepted ground in most national laws. Moreover, Article 31 (f) of the TRIPS Agreement requires that compulsory licences be issued "predominantly" for the domestic market. National laws in exporting countries must be amended to permit paragraph 6 compulsory licences exclusively to supply a foreign country.
The need to apply the Decision will arise when the patent owner does not agree to supply a patented pharmaceutical product to a country with insufficient or no manufacturing capacity in pharmaceuticals, at an affordable price or under other suitable conditions. Whatever humanitarian reasons16 underpin the country’s demand for a given pharmaceutical product, nothing in the adopted system compels the patent owner to supply it or to forego the owner’s rights under national laws.
16 See the Statement by the Chair of the General Council accompanying the Decision.
In this context, the patent owner may eventually exercise his rights to appeal a decision granting a compulsory licence in both the importing and exporting country. In some countries, such appeal may not suspend the immediate execution of the compulsory licence. In others, this may not be the case17 and the patent owner may obtain an injunction and thereby delay exports or imports under the compulsory licence until a final administrative or judicial decision is taken. National patents laws, hence, will have to be amended, as necessary, in order to allow for an effective and rapid application of the Decision to address public health needs, particularly in cases of national emergency or urgency. In undertaking such an amendment, prospective exporting and importing countries should both consider establishing a short period for fulfilling the obligation under Article 31 (b) of the TRIPS Agreement18 for a prior negotiation with the patent owner.19 Although Article 31 (b) has not been waived, as mentioned below, exporting countries may consider that compliance with Article 31 (b) should not be required when the importing country resorts to public non-commercial use or grants a compulsory licence on grounds of a national emergency or other circumstances of extreme urgency.
17 The experience of the Philippines is illustrative in this regard. One hundred and twenty petitions for compulsory licences were filed under the old Philippine patent law, out of which 51 compulsory licences were granted. However, the beneficiary companies were unable to market the products due to appellate proceedings that delayed the execution of the decision. The delay in the proceedings also led to the dismissal of 23 applications. Fourteen petitions were also dismissed due to a compromise agreement between the parties. Eight petitions were dismissed because the patent expired while the petitions were still pending. The only compulsory licence granted after the new Philippine Intellectual Property Code took effect on 1 January 1998 was a compulsory licence petition filed on 8 December 1991 when the old patent law was in effect. This petition was finally granted on 19 December 2001, i.e. after a period of ten years. The rest of the petitions filed under the old Philippine patent law are still pending (communication from Susan Villanueva, College of law, Philippines, 26 September 2003, on file with the author).
18 Since prior efforts to obtain a compulsory licence would have to be made, in some cases, both in the importing and exporting country, and given the need to provide a rapid response, coordination on this matter may be envisaged between the two countries.
19 Canadian Bill C-9 requires the applicant of the compulsory licence to provide a declaration showing that at least thirty days before filing the application it sought a voluntary licence from the patent owner on reasonable terms and that his effort were unsuccessful (section 21.04.3 (c)).
The waiver granted by the Decision with respect to payment of compensation in the importing country (Article 31 (h) of the TRIPS Agreement) may also need to be implemented through a legal revision, in order to prevent patent owners’ potential claims of compensation according to the national law.
Implementation of the Decision may not only require making specific changes to national laws, but also ensuring that countries do not assume TRIPS-plus obligations under bilateral or regional treaties. Bilateral agreements established by the USA with some developing and developed countries (e.g. Australia, the Central American countries, Chile, Jordan, Morocco), for instance, require the protection of data under a sui generis regime of data exclusivity for at least five years from the date of the first approval of a pharmaceutical product in the country. Some bilateral agreements, moreover, establish "linkage" requirements, so that, without the consent and acquiescence of the patent owner, national health authorities are prevented from granting marketing approval for a generic product as long as a patent over the product is in force.
The implications of these obligations are quite significant, and may delay introduction of generic products, even where compulsory licences are issued. Under the data exclusivity terms, if a compulsory licence were granted in a country to import a pharmaceutical product, a generic company would have to develop on its own all the test data as required for approval. This is a very lengthy, costly, duplicative and wasteful process given that the data have already been generated by a brand-name company, and will create an enormous obstacle to the use of the Decision. Moreover, the "linkage" between patent protection and marketing approval seems to erect an almost insurmountable barrier to the execution of a compulsory licence or government non-commercial use, since the compulsory licensee or government would be authorized to use the patented invention but not to obtain the regulatory approval to make it available. Countries willing to use the Decision (as importers or exporters) would have to devise ways, including crafting specific exceptions, to overcome these restrictions.
Finally, it is to be noted that the implementation of the Decision through appropriate amendments to national laws, as necessary, should not be regarded as a matter of mere convenience or political choice. The Decision creates international obligations that must be complied with in good faith.20 States' human right obligations are also relevant in this context for both importing and exporting countries. For instance, under the International Covenant on Economic, Social and Cultural Rights, the State parties' obligations to take steps towards the full realization of the right to health include: (a) a domestic obligation to fulfil the right to health, which requires States to adopt appropriate legislative and administrative measures towards the full realization of the right to health (General Comment No. 14, para. 33), and (b) an international obligation to take steps, individually and through international assistance and cooperation, especially economic and technical, towards the full realization of the rights recognized in the Covenant, including the right to the highest attainable standard of health (General Comment No. 14, paras 38-39).21
20 See Vienna Convention on the Law of Treaties (Article 26).
21 Thus, Paul Hunt, the Special Rapporteur of the Commission on Human Rights, issued a press release lauding the Canadian Bill as an example of the fulfillment of such obligation of international assistance and cooperation. See also E/CN.4/2004/49/Add.1, particularly the discussion of the impact of the 30 August 2003 Decision therein (para. 43).
In sum, WTO Members should review their domestic laws in order to determine what amendments are required in order to implement the Decision, and undertake the necessary legal adaptations. Such review should consider the procedures for granting compulsory licences, in order to ensure their timely granting and that their execution could not be prevented by appeals or other legal actions.
Patent rights in force
The Decision will apply when the required pharmaceutical products are patented, at least in the exporting country.
Patents may be obtained not only in relation to active ingredients, but also in respect of formulations, pharmaceutical salts, isomers, polymorphs, combinations, manufacturing processes, etc. In some countries the new use of a known product may also be patented (as a "second indication"). There are cases in which an active ingredient is off-patent, but the pharmaceutical product that contains it, its method or manufacture or use, is patented, even many years after the expiration of the original patent. In other cases, a patent on the active ingredient may coexist (though not necessarily for exactly the same period) with many other patents on the product.
Whenever this is the case, the application of the Decision may require the granting of compulsory licences on a set of patents, not just on a single patent. If the coverage of the licence is not comprehensive, patent holders may complain that export or import of the product is not permitted.
Given the territoriality of the patent system and that the same patents are not necessarily applied for and obtained in all countries, and that the scope of the approved claims (with regard to the same invention) may also vary from country to country, the set of patents to be subject to compulsory licences may not be exactly the same in the exporting and importing countries. In addition, it will be necessary to determine whether the relevant patents are in force. They not only elapse due to the expiry of the term of protection, but also due to the lack of timely payment of maintenance fees.22
22 Most countries in the world provide for the automatic expiry of patents when the patent owner fails to pay the specified maintenance fees. Some laws allow for the rehabilitation of expired patents, but this is facultative (see Article 5 bis of the Paris Convention).
Importing and exporting countries alike may overcome these problems by specifying that the compulsory licences apply to all patents on the product, its processes of manufacture and uses.
In what circumstances does the Decision apply?
The Decision may be applied when:
a) the required pharmaceutical product is subject to one or more patents validly in force in the exporting country;
b) the relevant patents are not subject in the exporting country to a compulsory licence to remedy anti-competitive practices that allows the licensee to export (Article 31 (k) of the TRIPS Agreement, in which case Article 31 (f) does not apply, and there is no need to employ the Decision waiver). Similarly, if a compulsory licence has been issued under which the licensee is predominantly supplying the domestic market, the licensee may supply an importing country with the non-predominant share of its production, and therefore without resort to the Decision waiver.
The Decision would be applicable whether or not the relevant products and processes are patented in the importing country.
If the required pharmaceutical product, or the process for its manufacture, is not patented in the importing country or the patent has expired or been revoked, there is no need to grant a compulsory licence in the importing country. But the Decision applies in order to allow the granting of such a licence in the exporting country.
A particular case may arise in LDCs, which can delay the recognition of pharmaceutical patents until 2016. LDCs that make use of this extension may consider granted pharmaceutical patents non-enforceable until that date. If, despite this possibility, patents on needed pharmaceutical products are enforced, they can grant compulsory licences to use the system set forth by the Decision.
If the product or process for its manufacture is patented in the importing country, then the importing country must issue a compulsory licence pursuant to the special conditions set forth in the Decision.
The Decision will not apply if the relevant product is off-patent in the exporting country, since a waiver of Article 31 (f) is not required. In this case, and if the product were patented in the importing country, a compulsory licence should only be granted in the importing country, under the ordinary terms allowed by the national law. There would be no need to comply with the special conditions established by the Decision.
According to paragraph 1 (a) of the Decision, a "pharmaceutical product" is defined as "any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address the public health problems as recognized in paragraph 1 of the Declaration". Several elements in this paragraph are important.
First, the Decision may apply either when a patent covers a product or a manufacturing process.
Second, it applies to products "of the pharmaceutical sector" in general, without any limitation as to the types of products (e.g. synthesized chemical products or biologicals), their characterization as essential medicines, or the kind of diseases they are intended to treat. The Decision clarifies that this concept includes "active ingredients necessary for its manufacture". The Decision may be applied in relation to a patent covering a pharmaceutical formulation or the process for its manufacture. The Decision also clarifies that "diagnostic kits needed for its use would be included". This wording may be interpreted as including reagents, diagnosis and monitoring kits. Microbicides can also be considered as covered products.
Vaccines are not specifically mentioned in the Decision. It may be argued that, had the drafters the intention to exclude them, an exception would have been expressly established. According to its ordinary meaning, "pharmaceutical" means "of or engaged in pharmacy; of the use or sale of medicinal drugs".23 Vaccines may be delivered at a pharmacy, are produced by pharmaceutical firms, and are crucial to address public health problems in developing countries. In view of the very purpose of the Declaration, the term "product … of the pharmaceutical sector" should, hence, be read as including vaccines.24
23The Concise Oxford Dictionary, p. 768.
24 See, e.g. Vandoren P and Van Eeckhaute JC, The WTO Decision on Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, The Journal of World Intellectual Property, Vol. 6, No. 6, November 2003, p. 784.
Third, the definition of pharmaceutical product refers to Paragraph 1 of the Declaration, which recognizes "the gravity of the public health problems afflicting many developing and least developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics" (emphasis added). As the negotiation of the Decision made clear, it applies to pharmaceutical products for any disease. The three mentioned epidemics are only special cases - that certainly deserve particular attention - but the system established by the Decision is not limited to products related to them. Similarly, the Decision is not limited to "grave" diseases, since "gravity" in paragraph 1 of the Declaration is generally referred to "the public health problems" and is not intended to qualify the type of diseases to be addressed.
It is unclear whether a patent covering a therapeutic use (generally called "second indication") is covered by the Decision. The protected invention in this case is a method of treatment and not a product as such.25 However, such patents can be effectively used to restrict access to the products for important therapeutic purposes. In the absence of an exception, and in view of the intended objectives of the Decision, it seems reasonable to interpret that the Decision can also be applied in these cases.
25 For instance, AZT - an important antiretroviral - was developed in the 1950s, and later on its use for HIV/AIDS was patented in many countries.
Which countries can use the system?
The Decision defines the "eligible importing Member[s]". They include:
a) Any least developed country Member. The only qualification is that the LDC must be a WTO Member.
b) Any other Member that has made a notification to the Council for TRIPS of its intention to use the system as an importer. As discussed below, the notification may be unqualified or qualified.
The Chair’s Statement indicates that the following Members have agreed to opt out of using the system as importers: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States of America. Until their accession to the European Union, the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia agreed that they would only use the system as importers in situations of national emergency or other circumstances of extreme urgency. These countries further agreed that upon their accession to the European Union, they would opt out of using the system as importers.
Other WTO Members have agreed that they would only use the system as importers in situations of national emergency or other circumstances of extreme urgency: Hong Kong, China; Israel; Korea; Kuwait; Macao, China; Mexico; Qatar; Singapore; the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Turkey; and the United Arab Emirates.
For what purposes can the system be used?
LDCs can use the system to import pharmaceutical products under a compulsory licence granted according to any of the grounds authorized by their national laws. As the Doha Declaration has expressly confirmed, WTO Members are free to determine such grounds, which may include, inter alia, non-working, public interest, public health, remedying anti-competitive practices, emergency, and refusal to deal. It is clear that while a public health emergency may be one of the grounds for granting a compulsory licence, Member countries may invoke any other ground for that purpose.
The same applies to any other Member, except those Members who opt out of the system, or designate that they will use the system for limited purposes, such as in the case of national emergency.
A question arises as to the extent to which the wording in the Chair’s Statement may limit the reasons for which a compulsory licence may be issued. The Statement indicates that the system "should be used in good faith to protect public health and, without prejudice to paragraph 6 of the Decision, not be an instrument to pursue industrial or commercial policy objectives".
At the same time, paragraph 7 of the Decision states that "Members recognize the desirability of promoting the transfer of technology and capacity building in the pharmaceutical sector in order to overcome the problem identified in paragraph 6 of the Declaration". Paragraph 6 of the Decision aims at "harnessing economies of scale for the purposes of enhancing purchasing power for, and facilitating the local production of, pharmaceutical products" in the context of some regional trade agreements.
This wording suggests that industrial and commercial policy objectives should not be pursued by Member countries under the system established by the Decision, but that Members recognize such objectives cannot be excluded altogether. Thus, eligible importing Members may grant compulsory licences to foster the development of capacity in their pharmaceutical industry as a sustainable way to address their public health problems, for instance by importing active ingredients under the Decision for the local formulation of medicines.
Further, it seems clear that prospective suppliers of pharmaceutical products under the Decision include private companies, notably from countries where a strong generics industry has developed. Such companies will not make the needed investments nor bear the opportunity costs of supplying products under the Decision, unless they are able to obtain some commercial benefit.