(2004; 49 pages)
Compulsory licence in the importing country
Notification of intention to use the system
Implementation of the Decision involves two kinds of notifications to the Council for TRIPS: a general notification about the intention to be an eligible importing Member, and a specific notification about the products, quantities, etc. that it intends to import.26 This second type of notification is examined below. In both cases, "[t]hese notifications are for the sake of transparency and information only… [They] do not amount to authorization requests; Members concerned will not need to be approved by any WTO body in order to be able to use the system. They can automatically use the system once they have made the notifications".27
26 Except as required by Article 31 (b), where applicable, there is no obligation to notify the patent owner about the intention to grant a compulsory licence and the conditions thereof. Likewise, there is no obligation to offer the patent owner the option to supply the required products under the terms and conditions established for the compulsory licence, as proposed in Canadian Bill C-56 (2003).
27 Vandoren, Van Eeckhaute, op. cit., p. 789.
The notification to the Council for TRIPS by a prospective importer Member is about the intention to use the Decision, and not about its actual use. This notification seems to be a condition to qualify as an "eligible importing Member". It is not a requirement for LDCs, however, which automatically qualify as eligible importing Members.
The notification may be unqualified, when the Member does not declare any limitations to its potential use of the system, or it may be qualified, when the Member voluntarily states that it will only use the system in a limited way. This limitation may be expressed in terms of the grounds of the compulsory licences (e.g. national emergency or other circumstances of extreme urgency) or otherwise. There is nothing in the Decision preventing a Member from changing, at any time, the terms of its notification. Thus, a Member that declared it would only make limited use of the system may later notify the TRIPS Council of its intention to expand its use.
The effect of the notification is declaratory. A Member can declare itself an "eligible importing Member". Footnote 2 of the Decision clarifies that this notification "does not need to be approved by a WTO body in order to use the system set out in this Decision". This means that the neither the Council for TRIPS nor any other WTO body is entitled to review, approve or reject a notification and the specific terms under which it is made.
Notification about needed products, compulsory licence
The second notification to be made by the eligible importing Member28 relates to the importation of particular product(s).29 It must include three elements:
28 This notification also is for transparency purposes only and does not amount to an authorization request.
29 “Joint notifications providing the information required under this subparagraph may be made by the regional organizations referred to in paragraph 6 of this Decision on behalf of eligible importing Members using the system that are parties to them, with the agreement of those parties” (footnote 4 of the Decision).
The would-be importing country is bound to notify the Council for TRIPS of:
(i) the names of the needed product(s): the generic names of the required pharmaceuticals are to be mentioned;
(ii) the "expected quantities": the notified quantities may not exactly correspond to the quantity of product finally requested or purchased. However, importing countries should carefully assess the quantities needed since, as mentioned below, the corresponding compulsory licence in the exporting country can be granted only for a specified amount.
The specification of quantities may be made in different ways. It may refer to the number of pills or other doses, to a quantity of active ingredients (e.g. 50 kilograms of drug X), to the number of patients to be treated over a period of time, or to other parameters.
The obligation to specify the expected quantity only applies to the notification. It does not refer to the specific terms of the compulsory licence. The compulsory licence issued in the importing country is not required to establish a determined quantity. The authorization could be given to import whatever is required over the duration of the compulsory licence. It would be too cumbersome for the importing country to issue a compulsory licence each time it needs to import a given quantity of a product.
A situation may arise in which the notified "expected" quantities may not correspond to the quantities effectively imported. A country may need, in particular, to import more than expected because it had underestimated its needs. This discord would not affect the right to import, so long as the compulsory licence was not limited to the amounts specified in the TRIPS Council notification.
The application of the Decision does not exclude the application of tendering procedures by the importing country. Moreover, there is no obligation on the importing country to determine a specific timeframe in which importation would take place.
Establishing lack of or insufficient manufacturing capacity
This requirement does not apply to LDCs.
For other countries, the insufficient or no manufacturing capacity is not to be assessed in general, but for the particular pharmaceutical product(s) required.
There are two alternative ways to establish these circumstances, as set out in the Annex to the Decision:
(i) The first option applies when the Member has established that it has no manufacturing capacity in the pharmaceutical sector.
(ii) The second option applies when the Member has some pharmaceutical manufacturing capacity, has examined its capacity and found that, excluding any capacity owned or controlled by the patent owner, it is currently insufficient for the purposes of meeting its needs.
What manufacturing capacity means in either of the options is open to interpretation. In a market economy, pharmaceutical manufacturing capacity has two dimensions: technical capability (dependent on availability of technology, trained personnel, equipment, access to raw materials, etc.) and the economic feasibility of production. The technical capability alone does not make it possible to undertake production. The Decision recognizes this limitation and, in particular, the importance of economies of scale in its paragraph 6,30 thereby suggesting that assessment of the existence of manufacturing capacity should not be limited to technical aspects.
30 “With a view to harnessing economies of scale for the purposes of enhancing purchasing power for, and facilitating the local production of, pharmaceutical products …”.
A Member country may establish its lack of or insufficient manufacturing capacity and use the system to procure an active ingredient, even though it may have manufacturing capacity to formulate the corresponding product. Formulation is a less technically arduous process and occurs later in the production chain than manufacture of active ingredients.
It is important to note that the Decision does not determine particular criteria or methods to establish the lack of or insufficient capacity. This is a matter of self-assessment,31 the outcome of which cannot be challenged by another Member and cannot be subject to review, reversed or rejected by the Council for TRIPS. The Chair’s Statement indicates that "[t]o promote transparency and avoid controversy, notifications under paragraph 2(a) (ii) of the Decision would include information on how the Member in question had established, in accordance with the Annex, that it has insufficient or no manufacturing capacities in the pharmaceutical sector". The Statement, however, does not amend the Decision. It only suggests that Members’ communicate information, for instance, about the type of analysis made, but not about the criteria or method employed, the data used, or the way in which conclusions were reached.32
31 Vandoren, Van Eeckhaute, op. cit., p. 785.
32 The following types of notifications would indicate how the assessment was made:
“The Department/Ministry of … has [reviewed information in its possession and] [, upon consultations with experts in the field of pharmaceuticals,] found that there is currently no capacity to manufacture [product(s)] in the country.” or
“The Department/Ministry of … has undertaken an enquiry among pharmaceutical producers established in [country] and determined that, excluding the patent owner’s facilities, there is currently no capacity in the country to manufacture [product(s)] for the purposes of meeting its needs.”
Confirming the intention to grant a compulsory licence
Finally, where a pharmaceutical product is patented in its territory, the importing country must notify the Council for TRIPS that it has granted or intends to grant a compulsory licence. It would be sufficient to notify the Council that the competent authority intends to grant a compulsory licence. There is no specified timeframe in which the compulsory licence must be issued after the notification is made.
The only condition imposed on the compulsory licence to be granted is that it be "in accordance with Article 31 of the TRIPS Agreement".33 Hence, the importing country has to respect the conditions set out in this Article. It is not bound to apply more stringent conditions. In particular, there is no obligation to limit the compulsory licence to a limited quantity of the required product(s). The compulsory licence may be granted - as in any other situation - for the lifetime of the patent, subject only to the requirement of Article 31 (g) that the licence may be terminated under certain circumstances, "subject to adequate protection of the legitimate interests" of the compulsory licensee.
33 A question may be raised as to whether this condition means that a compulsory licence may be granted to import pharmaceutical products under Article 31 even in cases where the national legislation does not provide for such grant or for the execution of the licence through importation. The adopted waiver means that a Member country will not have the right to complain against another Member not complying with Article 31 (f) or (h) but would not prevent, in principle, the patent owner from interfering with the granting of a compulsory licence if inconsistent with national law.
In addition, there is no obligation in the importing country to provide a compensation to the patent holder. The Decision waives application of Article 31 (h) and stipulates that compensation must be paid in the exporting country.
However, the Decision does not waive the application of Article 31 (b) of the TRIPS Agreement, despite the fact that countries willing to use the system would not be looking for a voluntary licence (unless some phases of production are locally made) but to purchase the final product. This can make the application of that provision a rather futile exercise.
It is to be noted that, although paragraph 6 of the Doha Declaration and the Decision refer to “compulsory licences”, the system established by the Decision applies to any use without authorization of the right holder as contemplated in Article 31 of the TRIPS Agreement. This means that the importing country (as well as the exporting country) may apply the system on the basis of an authorization for public non-commercial use, and not necessarily under a compulsory licence granted to a third party. For such use without the authorization of the patent holder - often known as “government use” or “crown use” - the obligation for prior negotiation with the patent holder under Article 31 (b) is waived in all cases. In these cases, Members may also limit the remedies available to permit patent holders to seek compensation, without possibility of injunction (Article 44.2 of the TRIPS Agreement).
As mentioned before, notification of the grant of a compulsory licence, or the intention to grant a compulsory licence, is for informational purposes only. The importing country is not required to prove that the conditions provided for by Article 31 have been met, nor can the Council for TRIPS review or contest the content of the notification.34
34 However, the Statement by the Chair of the General Council indicates that:
• "In accordance with the normal practice of the TRIPS Council, notifications made under the system shall be brought to the attention of its next meeting.
• Any Member may bring any matter related to the interpretation or implementation of the Decision, including issues related to diversion, to the TRIPS Council for expeditious review, with a view to taking appropriate action.
• If any Member has concerns that the terms of the Decision have not been fully complied with, the Member may also utilize the good offices of the Director-General or Chair of the TRIPS Council, with a view to finding a mutually acceptable solution".
The notification will be made publicly available by the WTO Secretariat through a page on the WTO web site dedicated to the Decision. If the notification was made before the granting of the compulsory licence by the importing country, there is no need to make another notification after grant of the licence.