1. 1 TRIPS Flexibilities and TRIPS-plus Approach Prof. S K Verma ISIL, New Delhi Conference on IP Policy Bangkok, December 1, 2013

2. Post-TRIPS: new vistas of IP protection TRIPS Agreement –a most comprehensive multilateral agreement on intellectual property Provides a prescriptive regime for protection and enforcement of IPRs. Provides a dispute settlement procedure, as a part of WTO trading system. Post-TRIPS era saw efforts to strengthen the protection levels of IP beyond those established under TRIPS, creating the TRIPS-plus phenomenon. a remarkable upsurge in the number of regional and bilateral free-trade agreements (FTAs) during the past decade. TRIPS- plus provisions of FTAs have no time limit. 2

3. Forms of TRIPS-plus agreements Three broad categories of FTAs: 1. involves South-South arrangements, usually among neighbouring countries, and in regional groupings, such as ASEAN, SAARC, SADC, Mercosur, CAFTA-DR; 2. involves an FTA between a developing country or a grouping of developing countries and a developed country or entity, such as the US-Singapore and US-Central America FTAs and the EU-ACP Economic Partnership Agreements (EPAs). 3. involves developed countries, such as US-Australia, Japan- Switzerland. referred to as bilateral agreements as concluded either between two states or two trading blocs. About 400 RTAs as reported to WTO till 2010. currently 159 effective agreements, more than three-quarters of world trade passes through the jurisdiction of these agreements 3

4. Forms of TRIPS-plus agreements 2,573 bilateral investment treaties (2006)- with IPRs provisions. Trade and investment framework agreements (TIFAs), often a precursor and pre-condition for a FTA by the US. Bilateral science and research and development cooperation agreements – indirect form of TRIPS+ Bilateral IP agreement - US–Bulgaria (1995), the US–Nicaragua (1997) and the US–China (1995, 1996) – less popular form now. extensive coverage of FTAs - including trade in goods, trade in services, labour, environment, intellectual property, electronic commerce, competition law, human rights Focus here is on agreements between economically developed countries (the US, EU, EFTA and Japan) with weaker contracting party by using bilateral trade concessions for concessions on IPRs. 4

5. An overview of recent IP-related agreements The US has 14 FTAs in force with 20 countries. Partner Countries: Australia; Bahrain; Chile; Colombia; DR-CAFTA; : Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, & Nicaragua; Israel; Jordon; Korea; Morocco; Oman; NAFTA: Canada & Mexico; Oman; Panama; Peru; and Singapore. Negotiating regional FTAs- the Trans-Pacific Partnership(TTP) with Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam; the Transatlantic Trade and Investment Partnership (TTIP), covering the US and EU. Negotiating with SAUC countries: Botswana, Lesotho, Namibia, South Africa and Swaziland; Malaysia and UAE. Using BITs for IP protection (11 in number) Bahrain, Jordan, Morocco, Oman have AAs/FTAs with EU. EU has FTAs, a large number of EPAs and AAs, with more than 30 countries; concluded agreements with Singapore and Canada; 4 EPAs with ACP countries; negotiating with India, Gulf Cooperation Council and Morcosur. 5

6. …Contd US FTAs a part of its trade policy under the Trade Promotion Authority Act, 2002. Act mandates IP protection in multilateral and bilateral agreements similar to that found in the Unites States law. On some issues, the US legal standards are higher and stricter than those of TRIPS –referred as TRIPS-plus standards. EU agreements - less specific on IPRs protection, viz., Trade, Development and Cooperation Agreement with South Africa (1999), and AAs with Israel (2000), Chile (2002), Jordon (2002) and Mexico (2002). EU agreements till recently emphasized more on GIs protection; now following US approach. EFTA (Iceland, Liechtenstein, Norway and Switzerland) concluded 16 agreements- emphasizing more on ‘data exclusivity’. 6

7. …Contd Japan: has signed several bilateral FTAs with Asian and Latin American countries as EPAs: Singapore (2000), Malaysia (2005), Philippines (2006), Thailand (2007) and Chile (2007) – extensive provisions on IPRs. Recent agreements with Brunei, Australia, India, Indonesia and Switzerland- only one provision on IP – to join IP conventions and to improve IP protection. India has signed free trade pacts with about 20 countries including Japan, Korea, ASEAN nations (Indo- ASEAN Trade in Goods Agreement 2009), Sri Lanka and Nepal, negotiating market opening pacts with Australia, Canada, New Zealand and the EU. 7

8. Interaction between bilateral FTAs and TRIPS/WTO WTO/TRIPS work on MFN principle – Art. I:1 GATT and Art. 4 TRIPS Bilateral agreements may be notified to the WTO as ‘regional agreements’ under Art. XXV:5 GATT – exempting them from the MFNs clause. often referred to as “preferential” in nature, are in fact exceptions to the general rule of MFN, not exempted from Art. 4 TRIPS. If TRIPS plus standards incorporated in national laws, will be a factor in dispute settlement. A tactic to put pressure on the non-signatories of FTAs, denying access to markets of developed nations. Leads to a ‘multilateralization’ of bilateral concessions. LDCs most effected- no strong demand of IP goods in their markets, but need developed markets for their exports. 8

9. TRIPS flexibilities Four broad categories of flexibility available under TRIPS that countries may use: 1. flexibilities related to implementation; (Art. 1:1) 2. flexibilities related to substantive standards of protection; 3. flexibilities related to enforcement; 4. flexibilities of areas outside the scope of TRIPS. 9

10. TRIPS flexibilities in the area of public health In health, flexibilities are in-built:  The preamble to TRIPS;  Article 7 of TRIPS – “The protection and enforcement of intellectual property rights should [be] … in a manner conducive to social and economic welfare”,  Article 8 of TRIPS – “Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition….”  Article 66 of TRIPS- extended period and technology transfer for LDCs. Some health-related flexibilities in the TRIPS include: Longer transitional periods for developing countries; Compulsory licensing; Government use exceptions; 10

11. …Contd Parallel importation; Exceptions to patents rights (Article 30 of TRIPS) - Examples of these exceptions include the Bolar exception and the research and experimental use exception. Early working exceptions (Bolar exception) in the field of pharmaceutical drugs, is frequently used in a number of developed countries such as Canada - the Canada—patent protection of pharmaceutical products case (2000); Standards of patentability – no definition of ‘invention’ ‘new’, ‘inventive step/non-obviousness’(most difficult to define) and ‘industrially applicable’ for an invention to be patentable; Doha Declaration of Public Health and the TRIPS Council Decision 2003 endorse these flexibilities. 11

12. FTAs: Salient features no fixed definition for the term TRIPS-plus is an evolving concept and has proven to be case- and country-specific. Negotiated mainly on the basis of “reciprocity”, i.e. that both sides take on similar levels of obligations. Significant lack of “development track” for developing countries. often contain additional demands/ protection levels on these countries beyond that required under the TRIPS/WTO. 12

13. Salient components of TRIPS- plus provisions in FTAs include the elimination and reduction of:  transitional periods,  data exclusivity protection,  extension of patent protection terms,  restrictions on parallel importation,  patentability of new use of known medical substances,  restrictions on compulsory licensing,  patenting of life forms,  limitations on patentability criteria and  accession to a number of international TRIPS-plus agreements. often resulting in the strengthening of the levels of IP protection, which erode the flexibilities available under the TRIPS. 13

14. …contd extending periods of protection beyond the requirements of TRIPS, in addition to forgoing the transitional periods (shorter period of transition for patents – EU-Jordon AA). obliging member countries to extend the protection of pharmaceutical and plant protection products (agrochemicals) beyond the protection period of 20 years provided under TRIPS to 25 years. Providing protection for plant and animal patents, taking away the flexibility provided under Art. 27.3(b) of the TRIPS. Restricting the use of compulsory licensing and government use (Art. 31). 14

15. …contd May oblige countries to join a specific international agreement/ treaty on IP, not a part of TRIPS – WIPO Internet treaties, UPOV convention, PCT, Budapest treaty; Modifying the enforcement provisions and adding to measures above TRIPS; To put in place a system for complying with the IP obligations, restricting options regarding implementation of these agreements. New dispute settlement mechanism, other than that of the WTO, being proposed, i.e., ICSID, ICC, UNCITRAL. 15

16. Patenting of life, biodiversity, genetic resources, agriculture As against Art. 27.3(b), some US FTAs (e.g. Chile) oblige the country to make available “patent protection for plants that are new, involve an inventive step and are capable of industrial application.” On microorganisms/microbiological processes, FTAs require countries to sign Budapest Treaty, which increases patenting of microorganisms. On plant varieties, countries to sign UPOV 1991- will affect the farmers’ rights. On agro-chemicals, a 10-year period of data exclusivity was introduced as part of the US-Australia FTA. Under TRIPS, countries may decide not to give patents on plants, animals or diagnostic, therapeutic and surgical methods (Art. 27.3(a), US FTAs require countries to allow patents on some or all of these items. 16

17. Health-related TRIPS-plus provisions The flexibilities available under TRIPS significant to promote accessibility and affordability of medicines by poor countries. The significance of FTAs is more pronounced in the area of pharmaceuticals and agro-chemical products. They restrict the grounds of resorting to such flexibilities- impacting negatively public health and access to medicines. Examples include the following: 17

18. Health-related TRIPS-plus provisions: ‘Data exclusivity’ Obligation to protect confidential information -‘test data’ submitted for getting market approval for pharmaceutical and agro-chemical products. Results of clinical studies constitute the ‘test data’. Protected under Art. 39.3 of TRIPS (against ‘unfair commercial use’). Important for health and environmental purposes- allow national authorities and users to evaluate the new drugs and agrochemicals. ‘test data’ represents more than 60% of the R&D costs of new drugs. Being scientific data, based on standard protocols, is outside patent protection. Drug companies seek a period of exclusive use of the data after marketing approval. 18

19. …continue During this period national authorities are prevented on relying the data for approving the generic version, even if no patent protection exists on the product. ‘Data exclusivity’ extends the originator company’s market monopoly acts as a de facto patent, preventing competition, likely to result in significant price increases for medicines. A public health justification should be required for data protection beyond TRIPS. Against Para 4 of the Doha Declaration on TRIPS Agreement and Public Health (2001). TRIPS does not specify a minimum period of data exclusivity. 19

20. …continue part of many US FTAs : with Australia and many developing countries – Chile; CAFTA-DR; Peru; Colombia; Bahrain, Morocco Most US FTAs have five years exclusivity, counted from the date of the approval in the party- might lead to 10 years exclusivity. agreements with Peru and Panama have, however, introduced the concept of ‘concurrent protection’, i.e., ‘date exclusivity’ protection to be counted from the date of marketing approval in the USA and not in the Party where protection is sought 20

21. Obligation not to grant marketing approval to third parties prior to the expiration of the term of pharmaceutical patents The drug regulatory authority (DRA) does not normally have jurisdiction over patents or the patent status of the drug – confirm only the safety and benefits of the drug. Some FTAs require that the DRA “shall not grant marketing approval to any third party prior to the expiration of the patent term unless by consent of the patent owner” – not required by TRIPS. Effectively prevents generics from being available through the whole patent term Philippines and EU have refused to have such a clause. 21

22. Extension of the patent term to compensate for unreasonable delays at the patent office/due to the marketing approval process Argument: drug companies need to be “compensated” for any “unreasonable” time a national drug authority or patent office takes to examine or approve an application. The life of the patent would be extended by the “unreasonable time” taken. This extension measure is in all the US FTAs since NAFTA. Longer patent protection means longer market monopoly, Clauses in the FTAs are also for extension of the patent term due to the unreasonable delays in marketing approval process. Includes obligation to disclose to the patent owner the identity of third party seeking marketing approval during the term of the patent 22

23. Patentability of new uses or methods of using known products/substances: “Evergreening” the patent. Under TRIPS, members are not obliged to grant patents on new uses of existing substances. Several US FTAs: Agreements with Australia, Bahrain, Morocco – require patents to be granted for each “new use” of a product, thus allowing the patent protection beyond the expiry of the patent. 23

24. Limitation to conditions for compulsory licensing TRIPS allow countries to issue CLs under certain conditions. The Doha Declaration on TRIPS and Public Health confirms that countries have “the freedom to determine the grounds upon which such licences are granted.” FTAs seek to limit the circumstances for CLs on drugs. the US-Singapore FTA : CLs to remedy anti-competitive practices by the patent holder; for public non-commercial use; and in cases of national emergency or circumstances of extreme urgency FTAs concluded after 2004 or those concluded earlier have now appended with ‘Understanding regarding certain public health measures’, e.g. US-Peru agreement (2006); CAFTA- DR-USA agreement (2004)to take necessary measures to protect public health. 24

25. Exhaustion of patent rights Art. 6 of the TRIPS- each State is free to adopt its own regime on exhaustion, also part of the Doha Declaration EU and US advocates for national exhaustion in FTAs US agreements with Australia and Morocco have national exhaustion system. Recent agreements by the US do not have any provision on parallel imports (US Congress decision) 25

26. CIPIH Report 2006 Views have been expressed that the IP provisions in FTAs would make medicines more expensive 2006 Report of WHO’s Commission on Intellectual Property Rights, Innovation and Public Health warns against the TRIPS-plus measures in bilateral trade agreements “in ways that may reduce access to medicines in developing countries”. urges developing countries to enhance their national regimes of checks and balances through legislative and institutional tools, viz., competition laws and regulations 26

27. Copyright Copyright term extensions: most US FTAs have 70 years + author’s life term except for Oman’s - requires 70, 95 or 120 years protection depending on which measurement system is used. Have Anti-circumvention provisions: A technological protection measure (TPM) prevents even legal copying after the term has ended –leading to infinite monopoly. Circumvention devices are allowed under TRIPS. The WCT has an anti-circumvention provision, but allows national copyright exceptions. US FTAs go beyond the WCT. FTAs oblige countries to join Internet treaties 27

28. Why FTAs? Difficulty in achieving uniformity and consensus in procedural and substantive patent law in multilateral instruments, reason behind the conclusion of FTAs (e.g. PLT and FTAA). Developed countries seek the forum of the FTA to: (a) remove or reduce the flexibilities in the TRIPS Agreement and (b) establish even higher standards of IPRs in developing countries. The FTAs threaten the use of TRIPS flexibilities in relation to (a) patents and access to medicines; (b) IP protection of plant varieties with respect to the sui generis system, and the rights of farmers; biodiversity; (c) the ability to ban patenting of some lifeforms. 28

29. What is at stake? Multilateral system of the WTO/TRIPS is at stake. FTAs in fact discouraging countries from reaching multilateral trade agreements, hence slowing down the pace of multilateral trade negotiations. Suggested that bilateral agreements between geographically distant countries should not be considered regional and hence not eligible for exemption from the GATT MFN principle. On flip side, bilateralism may eventually lead to international/regional uniformity or harmonization that neither regional or multilateral approaches have achieved. the economic and legal impact of the interaction of bilateral agreements with each other and with the multilateral system of the WTO has yet to be fully evaluated. 29