1. Seventh Annual WTO Conference
Suspension of Obligations under TRIPS as an Effective Means to Induce Compliance?
Dr Henning Grosse Ruse - Khan
University of Leicester

2. Outline
Why Use the Suspension of TRIPS Obligations as Compliance Mechanism?
Economic feasibility of Suspending Obligations under TRIPS
Conditions for Suspending IP Obligations under DSU Rules
Conflicts with International Agreements
Practical Implementation of IP Cross-retaliation
Conclusions

3. Why Use TRIPS Suspension as a Compliance Mechanism?
DSU allows to suspend obligations under the WTO Agreements as last resort to induce compliance with DSB rulings (Art.3.7, 22.3 DSU)
Does cross-retaliation under TRIPS offer an effective enforcement tool for DCs?
Background:
EC – Bananas III (Ecuador) Arbitration
Recent request from Brazil to suspend TRIPS obligations in US – Cotton case
Potential wave of litigation in case DDA fails? Potentially enforced via TRIPS suspension?

4. Why Use TRIPS Suspension as a Compliance Mechanism?
Arguments for TRIPS suspension:
Asymmetry in market size often makes traditio-nal retaliation by suspending tariff concessions ineffective: Imagine Antigua suspending GATS obligations to influence US Gambling laws...
TRIPS crucial for most industrialised countries
Suspending TRIPS likely significantly impact on these countries’ key industries
Further welfare effects (technology transfer, boosting nat. industry, access to drugs,)?

5. Economic feasibility of Suspending Obligations under TRIPS
Limitations:
Territoriality of IP protection: Suspension only justifies unauthorised domestic use; no exports!  compliance inducing effect depending on size of domestic market (see EC – Bananas III)
Lack of domestic production facilities in DCs – imports only from countries with no IPR grant…
(Private) Producers need certainty/security
Welfare effects equally dependent on technolo-gical capacity & willingness of local producers

6. Economic feasibility of Suspending Obligations under TRIPS
Options to Circumvent Territoriality?
Potential for trade diversion onto foreign markets - but Art.51 TRIPS
Worldwide online distribution of copyrighted material for downloads abroad…
International exhaustion by ‘state authorised’ first sale abroad, Art.6 TRIPS?  Art.51 TRIPS (fn.13): border measures against IP infringing goods; exempted are only goods “put on the market in another country by or with the consent of the right holder”  Art.6 TRIPS (-)

7. Conditions for Suspending IP Obligations under DSU Rules
Focus on Art.22.3 (a)-(c), (d) DSU:
Requirement to substantiate re. all sectors & all agreements where a violation occurred that suspension is not effective or not practicable
In cases of economic asymmetries, considering in which sector/agreement suspension would be potentially least harmful for the retaliating coun-try suffices for an effectiveness determination
Seriousness of circumstances to be measured under Art.22.3 (d) factors, esp. importance of impaired trade

8. Conflicts with International Agreements
Obligations under PC, RBC incorporated into TRIPS: Art.2 (2) TRIPS (-) as its obligation does not extend to dispute settlement (Part V TRIPS)
Independent obligations deriving from multila-teral IP Agreements:
Art.30 VC (-) as TRIPS is no ‘successive treaty’ to other int. IP Agreements; does not address (hierarchy of) suspending obligations
Art.60 VC (-) as it only authorises suspending obliga-tions relating to the treaty that has been breached
Counter-measures (reprisal) doctrine: Addressee of suspension states? Exhaustion of remedies?

9. Conflicts with International Agreements
IP obligations under bilateral FTAs:
If bound to ‘TRIPS-plus‘ FTAs, suspending TRIPS does not make any sense…
Again potential justification of extending the TRIPS suspension to FTA obligations only under the counter-measures (reprisal) doctrine:
Direct Effect of FTA protection for right holders?
Need to exhaust FTA dispute settlement remedies in case initial breach also a violation of the FTA?
In cases of TRIPS-plus rights, equivalence test (Art.22.4 DSU) does not guarantee proportionality

10. Implementing IP Cross-retaliation
General remarks:
Need to modify nat. IP laws to allow for suspension mechanism
Suspension should be subject to discretion
Need to ensure that only nationals (Art.1 (3) TRIPS) of the non-complying state are targeted
Awareness that products/services are often co-vered by several distinct layers of IP protection
Difficulty to ensure ‘equivalence of harms‘

11. Implementing IP Cross-retaliation
Specific implementation mechanisms:
Limiting the eligibility (qualification) for protection
Suspending further grants of IP rights
Compulsory Licensing
Early termination of protection
Suspending IP Enforcement
Freezing Royalties?
 Necessary control over the retaliation ( equivalence, Art.22.4 DSU) only if state authorities aim to take over the right holders’ position as much as possible…

12. Conclusions
Suspension of IP protection under TRIPS can induce compliance if:
The domestic market is relevant enough for right holders (& local production facilities exist);
the retaliating state has assessed practicality and effectiveness of suspending same sector/same agreement obligations;
Conflicts with international/bilateral obligations are solved on the basis of counter-measure doctrine; and
National law provides for a functioning implementation mechanism which ensures equivalence of harms

13. Thank you for your attention
Suggestions, critique and remarks to