The Quad WTO proposal on COVID 19 and TRIPS proposal is tied for the 5th best option for exports
As discussed elsewhere, recently leaked proposal by the United States, the European Union, India and South Africa (the Quad) to resolve WTO negotiations over intellectual property rights and the COVID 19 pandemic are considerably more narrow than the original proposal.
When proposed in 2020 as IP/C/W/669, there was a call for a broad, temporary waiver. The specific wording was that:
“The obligations of Members to implement or apply Sections 1, 4, 5 and 7 of Part II of the TRIPS Agreement or to enforce these Sections under Part III of the TRIPS Agreement shall be waived in relation to prevention, containment or treatment of COVID-19”*
*With an exception for :protection of Performers, Producers of Phonograms (Sound Recordings) and Broadcasting Organizations under Article 14 of the TRIPS Agreement.”
For those not familiar with the TRIPS, the Part II sections of the TRIPS to be waived included the provisions on: 1. Copyright and Related Rights, 4. Industrial Designs, 5. Patents and 7. Protection of Undisclosed Information. Part III of the TRIPS concerns the enforcement of those rights, and includes sections on 1. General Obligations, 2. Civil and Administrative Procedures and Remedies, 3. Provisional Measures, 4. Special Requirements Related to Border Measures, and 5. Criminal Procedures.
Collectively, the original 2020 proposal would have waived 19 separate articles with 2,715 words in Part II of the TRIPS, and 21 Articles with 2,994 words in Part III of the TRIPS, and apply the waiver “in relation to prevention, containment or treatment of COVID-19.”
The QUAD “compromise” proposal would temporarily modify a 20 word paragraph (f) in Article 31, to eliminate the requirement that exports under a compulsory license be predominately for the domestic market, but only for COVID 19 vaccines, only for some countries. and only when subject to new TRIPS plus obligations.
The Quad proposal included TRIPS plus requirements to (1) name patents, (2) notify of the WTO for each authorization, and (3) implement anti-diversion obligations.
If the Quad proposal is rejected, do WTO members have options? The answer is yes, there are six alternatives for exports in the current text, and the Quad proposal seems inferior to at least four of them.
Governments can provide exceptions to patent rights under Article 30 of the TRIPS, as long as the exceptions are limited and reasonable.
Exceptions to Rights Conferred
Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.
The use of Article 30 for exports was litigated in the Canada/EU pharmaceuticals case, DS114. In this case, Canada made the followig argument:
“Both the brand name and generic pharmaceutical industries were global in nature. Very few countries had fully integrated brand name or generic drug industries within their borders. Even in large countries, generic producers frequently had to obtain ingredients such as fine chemicals from producers in other countries. Many countries had no generic industries at all and had to obtain generic (as well as brand name) products from other countries. Smaller countries that did have generic industries did not have domestic markets sufficiently large to enable those industries to operate on an economic scale. Those industries had to export in order to be able to manufacture in sufficient quantities to achieve economies of scale, so that domestic consumers could receive the benefits of cost-effective generic products.” DS 114, Page 79.
Canada won the right to import and export under Article 30. This was an early working case, decided without compensation to patent holders, and before the 2001 Doha Declaration. A decision today, with compensation to patent holders, and to address COVID 19, would survive any challenge in our opinion.
In the 2001 to 2003 negotiations, over the implementation of paragraph 6 of the Doha Declaration on TRIPS and Public Health, the Article 30 approach was the solution advocated by all access to medicines NGOs, the Canadian generics pharmaceutical industry, several WTO members and the World Health Organization (WHO). Instead, the WTO adopted the much criticized 31bis outcome advocated primarily by the European Commission and preferred by patent holding drug companies.
Article 31 of the TRIPS sets out an alternative to Article 30 for exeptions to patent rights. This is commonly referred to as the Article setting out standards for compulsory licensing of patents. The whole Article 31 has 631 words, with a chapeau and twelve lettered paragraphs. Paragraph 31.f provides that exports under a compulsory license would be “predominantly for the supply of the domestic market.” Paragraph 31.k provides an exception to that obligation. The first sentence in Article 31.k reads as follows:
“Members are not obliged to apply the conditions set forth in subparagraphs (b) and (f) where such use is permitted to remedy a practice determined after judicial or administrative process to be anticompetitive.”
This is a clear waiver, often used outside of the medicines area, to eliminate the Article 31.f restriction on exports. The only requirement is that there be a “process” that determines a practice is anticompetitive. This can include a failure to license on reasonable terms. Everything from the initial determination to an appeal can be done administratively, even eliminating rights to judicial appeals. National implementation of this exception is typically more difficult because national laws are not designed to take full advantage of the TRIPS text flexibility. A special law on COVID 19 or pandemics or a more general law could fix this, and unlike the Quad proposal it would not be temporary or limited to eligible countries.
Article 44 of the TRIPS sets out when injunctions have to be available or enforced. What is often overlooked is that injunctions do not even have to be available (44.2), and when available, enforcement is optional (44.1). The leading example of this flexibility is the US law 28 USC 1498 which eliminates injunctions for government use, or the many injunction cases litigated under the US Supreme Court doctrine in eBay v MercExchange, including cases where 100 percent of output was exports. These are some examples of medical and non medical cases injunction cases in the United States.
There have several discussions of Article 44 flexibility in TRIPS council discussions and at WIPO. In 2016, the Africa Group tabled a proposal on Patents and Health at the 24th Standing Committee on Patents meeting at the World Intellectual Property Organization (WIPO), as SCP/24/4. The document made three separate references to Article 44, including this proposal for technical assistance:
“Development of a technical assistance module that explicitly demonstrates the difference between compulsory licenses that are granted under the procedures of Part II of the TRIPS Agreement, concerning patent rights, and those granted under Part III of the Agreement, concerning the remedies for infringement of those rights. This module would explain both approaches, and focus on the flexibilities afforded to both systems, noting that under the structure of the TRIPS Agreement, Article 44 compulsory licenses are not subject to the restrictions that exist for Article 30 and 31 of the Agreement.”
The South Centre has published several papers and policy briefs that argue that countries can invoke Article 73 of the TRIPS for COVID 19 exceptions. This includes the August 2020 Research Paper 116, titled “The TRIPS Agreement Article 73 Security Exceptions and the COVID-19 Pandemic,” by Professor Fred Abbott.
“The paper concludes that the COVID-19 pandemic (1) constitutes an emergency in international relations, (2) that measures taken by WTO members to override IPRs may be considered necessary to protect their essential security interests, and (3) specific provisions in the TRIPS Agreement addressing emergencies do not preclude members from invoking Article 73.”
Countries can also obviously use Article 31bis of TRIPS of exports, which has the advantage of being a permanent rather than a temporary flexibility. In many respects, the Quad proposal could be described as 31bis light, making it somewhat easier to use, but also somewhat narrower and more protectionist regarding exporters and importers. 31bis would allow a company from Canada, China, Korea or Belgium to export, while the Quad proposal would not, for example. The the eligible importing countries for 31bis are somewhat larger as well.
Finally, some have argued that Article 6 of the TRIPS is an underused mechanisms for parallel trade that is only subject only to the MFN and national treatment provisions of Articles 3 and 4.
Overall, I would rate the Quad proposal on COVID 19 and TRIPS as tied for the 5th best option for exports. Between 31bis and the Quad proposal, it just depends upon which requirements will be more problematic, in terms of burdens and complexity and restrictions on eligible countries for imports and exports, and perhaps more important, how permanent will be the exception.