Compulsory Licensing for Public Health Needs
This paper discusses facilitating effective use of compulsory licensing to address public health needs, analysing relevant legal issues from the perspective of developing country members. Recommendations include either amending the TRIPS agreement to delete article 31f, thereby permitting compulsory licensing predominantly for export, or adopting an interpretation of article 30 that makes it clear that members may produce, sell and export of medicines without consent of patent-holders to address unmet public health needs.
II. Lead-Up to the Doha Ministerial Conference
III. Changes Brought About in Dohaa.
a. Extension of LDC transition time period
b. Other Doha developments
IV. The Objectives of the Discussion
a. Capacity to exploit
b. Need to exploit
c. The pharmaceutical sector
V. WTO Constitutive Principles
a. Action by decision-making bodies
b. Amending the TRIPS Agreement
d. Interpretation under Article IX:2
e. The role of Appellate Body and panel reports in the interpretative process
f. The text of paragraph 6 of the Declaration
VI. The TRIPS Agreement
a. A multi-dimensional problem set
b. Article 31(f)
1. Implementation by importation
2. Legal mechanisms for non-infringement in the country of export
3. Potential infringement in the country of export
VII. Article 31-Based Solutions
a. Parallel compulsory licensing
b. Regional market arrangements
c. The legal fiction of the pharmaceutical production export zone (PPEZ)
d. Anticompetitive practices remediation
e. Article 31(f) conclusion
VIII. Article 30-Based Solutions
a. Interpretation of express text
1. "Limited exceptions"
2. "provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent"
3. "and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties"
4. The significance of footnote 7
b. Application of interpretation based on express text
1. Normal exploitation of the patent right
(a) Right to export
(b) Higher income market conditions
(c) Lower income market conditions
(d) Developing country requirements as criteria
2. Unreasonable prejudice to the interests of the patent holder, taking into account third party interests
c. Additional interpretative factors
1. The Vienna Convention on the Law of Treaties
2. The Doha Declaration
3. Negotiating history
4. The Canada-Generics panel report
d. Compulsory license in importing countries
IX. The Issue of Remuneration
a. Compulsory licensing
X. Application of Article 27:1 of the TRIPS Agreement
XI. Amendment and Waiver
a. Amendment and waiver alternatives
1. Authorizing Exemption from Subject Matter Scope of Patent Protection
2. Consistency of Safeguard Clauses
3. Broaden Scope of Exceptions Provision
4. Remove Restriction on Compulsory Licensing for Export
b. The exhaustion issue
c. Recommendations regarding amendment
1. Ministers to the WTO directed the TRIPS Council to find ways to facilitate effective use of compulsory licensing to address public health needs. This paper analyses relevant legal issues from the perspective of developing Members and makes recommendations for action.
2. Developing Members sought to address the obstacles created by Article 31(f) at Doha and presented concrete proposals. These involved interpreting Article 31 to allow Members to recognize and give effect to compulsory licenses granted by other Members, and interpreting Article 30 to allow for export to meet public health needs. These proposals met resistance from some developed Members.
3. The Doha Declaration provided for extension of transition periods for LDCs to implement and enforce pharmaceutical product patent protection. The extension provides some flexibility for continuing importation of low-priced drugs, and may facilitate the creation of local manufacturing capacity. However, there is considerable uncertainty regarding the applicability of mailbox and exclusive marketing rights requirements that should be addressed by the TRIPS Council. LDCs may want to pursue a broadening of the subject matter scope of the extension.
4. Compulsory licensing is an important public policy tool for all WTO Members. Developing Members in particular have a compelling need to use compulsory licensing to improve access to medicines, vaccines and other public health related inventions. There are preconditions to the effective use of compulsory licensing that are difficult for many developing countries to meet. This leads to problems in producing needed products and in establishing a network of low price suppliers.
5. The TRIPS Council may recommend amendment, waiver or interpretation of TRIPS Agreement provisions. The amendment and waiver mechanisms are not constrained by existing text, and provide the maximum flexibility. Amendment may be politically more difficult and time-consuming. Waiver presents political and timing advantages. The Ministerial Conference and General Council may formally interpret the TRIPS Agreement, and in so doing are bound to respect the terms, context, and object and purpose of the agreement. They are not, however, bound by previous interpretations by panels and the Appellate Body.
The TRIPS Agreement authorizes the TRIPS Council to review and propose amendments and modifications. The TRIPS Council is not limited by the express terms of the Doha Declaration regarding the subject matter of its work program.
6. The relatively modest use of compulsory licensing by developing Members to date is explained by a variety of factors. Recognizing the multidimensional nature of the problem, the restriction imposed by Article 31(f) that the licensee must "predominantly" supply the local market operates as a significant restriction on the capacity of developing Members to make and acquire medicines and other public health related products. Prospective importing Members are limited as to the sources of products, and prospective exporting Members are limited in their capacity to establish economies of scale.
7. The problems created by Article 31(f) may be ameliorated somewhat by creating streamlined parallel compulsory licensing arrangements and regional patent arrangements. Creative legal structures such as pharmaceutical production export zones (PPEZs) might be contemplated. When compulsory licenses are granted to remedy anticompetitive practices, the limitation imposed by Article 31(f) does not apply. Each of these solutions is problematic for operational or interpretative reasons. As a practical matter, it is difficult to interpret Article 31(f) in a manner that addresses the concerns of developing Members.
8. The express text and context of Article 30, particularly in light of paragraph 4 of the Doha Declaration, allows Members to authorize the making and export of patented public health related products to address unmet health needs in countries without the financial resources to provide access to medicines for all. Article 30 authorizes "limited exceptions", meaning deviations from general rules within established boundaries. These exceptions should not "unreasonably conflict" with the "normal exploitation" of patents. Exports of public health related products to markets requiring low price access do not so conflict. Exceptions should not "unreasonably prejudice" the "legitimate interests" of patent holders, taking into account the legitimate interests of third parties. The interests of patent holders are protected if exports are not authorized for developed Member markets, and if there is not systematic diversion to those markets. Individuals in developing Members with need for access have legitimate interests to be taken into account.
Discretion whether to authorize an exception under Article 30 is in the hands of the Member that would grant the authorization.
9. Patent holders are entitled to adequate remuneration in the circumstances of the case when subject to compulsory license. When compulsory licenses are issued both in the country of export and import, the patent holder will ordinarily be compensated within the importing Member. When no license is required for importation, the patent holder will be compensated in the exporting Member. There is no basis for suggesting that patent holders are entitled to double-compensation when products are exported and imported under compulsory license.
10. Some have argued that Article 31 of the TRIPS Agreement is subject to the Article 27:1 rule against discrimination as to field of technology. There is good reason to conclude that Article 30 is not so subject. Article 27:1 does not in any case prevent Members for bona fide reasons from adopting rules that differentiate among patents in diverse fields of technology. Ministers in fact differentiated among fields of technology in the Doha Declaration.
11. As a first best solution, Developing Members should propose amending the TRIPS Agreement to delete Article 31(f). This would permit compulsory licensing predominantly for export, thereby eliminating the most serious impediment to manufacture and trade in public health related products, including medicines and vaccines. If Article 31(f) is deleted, an amendment to Article 30 may be useful, though not essential. A waiver of Article 31(f) might be adopted pending conclusion of amendment of the TRIPS Agreement.
Article 27:3(a) of the TRIPS Agreement might be amended to permit Members to exempt public health related inventions from patenting, recalling that this position was advocated by a number of developing Members during the Uruguay Round negotiations. Article 8:1 should be amended so that the safeguard provision relating to intellectual property is consistent with the safeguard provisions relating to goods and services.
12. As an alternative to amendment of the TRIPS Agreement, the Ministerial Conference and General Council may adopt an interpretation of Article 30 making clear that Members may authorize the making, sale and export of public health related products without the consent of patent holders. Such an interpretation might indicate:
1. Authorization to make, sell and export patented public health related products is a limited exception to the rights of patent holders;
2. Such authorization does not conflict with the normal exploitation of the patent when:
a. Undertaken to address unmet public health needs in countries of import, and;
b. Financial constraints in countries of import restrict attention to the public health requirements of all individuals.
3. Such authorization does not prejudice the legitimate interests of patent holders, taking into account the legitimate interests of third parties when:
a. The authorization is not directed to supplying a developed importing Member;
b. Without prejudgment as to the form such mechanism may take, the country of import accepts to provide the patent holder in the country of export with a reasonable opportunity to prevent the systematic diversion to developed Members of products supplied under exception.
4. Nothing in the foregoing precludes Members from authorizing exceptions regarding developed Members as circumstances justify.
Whether there is manufacturing capacity in a prospective importing Member is a factor that may be taken into account when determining whether that Member has unmet public health needs.