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FACT SHEET: TRIPS AND PHARMACEUTICAL PATENTS
Obligations and exceptions

Under TRIPS, what are member governments’ obligations on pharmaceutical patents?

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September 2006

Contents
Philosophy: striking a balance
> Obligations and exceptions
What does “generic” mean?
Developing countries

This fact sheet has been prepared by the Information and Media Relations Division of the WTO Secretariat to help public understanding. It is not an official interpretation of the WTO agreements or members’ positions  

IN GENERAL (see also “exceptions”) back to top

Patenting: WTO members have to provide patent protection for any invention, whether a product (such as a medicine) or a process (such as a method of producing the chemical ingredients for a medicine), while allowing certain exceptions. Article 27.1. Patent protection has to last at least 20 years from the date the patent application was filed. Article 33

Non-discrimination: Members cannot discriminate between different fields of technology in their patent regimes. Nor can they discriminate between the place of invention and whether products are imported or locally produced. Article 27.1

Three criteria: To qualify for a patent, an invention has to be new (“novelty”), it must be an “inventive step” (i.e. it must not be obvious) and it must have “industrial applicability” (it must be useful). Article 27.1

Disclosure: Details of the invention have to be described in the application and therefore have to be made public. Member governments have to require the patent  applicant to disclose details of the invention and they may also require the applicant to reveal the best method for carrying it out. Article 29.1

 
Exceptions back to top

ELIGIBILITY FOR PATENTING back to top

Governments can refuse to grant patents for three reasons that may relate to public health:

  • inventions whose commercial exploitation needs to be prevented to protect human, animal or plant life or health — Article 27.2
  • diagnostic, therapeutic and surgical methods for treating humans or animals — Article 27.3a
  • certain plant and animal inventions — Article 27.3b.

Under the TRIPS Agreement, governments can make limited exceptions to patent rights, provided certain conditions are met. For example, the exceptions must not “unreasonably” conflict with the “normal” exploitation of the patent. Article 30.




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The TRIPS Agreement

Article 27
Patentable Subject Matter

1.   Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application (5). Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.

2.   Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.

3.   Members may also exclude from patentability:

(a)   diagnostic, therapeutic and surgical methods for the treatment of humans or animals;

(b)   plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO Agreement.

Article 29
Conditions on Patent Applicants

1.   Members shall require that an applicant for a patent shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention known to the inventor at the filing date or, where priority is claimed, at the priority date of the application.

2.   Members may require an applicant for a patent to provide information concerning the applicant’s corresponding foreign applications and grants.

Article 30
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.

Article 33
Term of Protection

The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date.
(8)
________________
Footnote:

(5)   For the purposes of this Article, the terms “inventive step” and “capable of industrial application” may be deemed by a Member to be synonymous with the terms “non-obvious” and “useful” respectively.
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(8)   It is understood that those Members which do not have a system of original grant may provide that the term of protection shall be computed from the filing date in the system of original grant.
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  RESEARCH EXCEPTION AND “BOLAR” PROVISION back to top

Many countries use this provision to advance science and technology. They allow researchers to use a patented invention for research, in order to understand the invention more fully.

In addition, some countries allow manufacturers of generic drugs to use the patented invention to obtain marketing approval — for example from public health authorities — without the patent owner’s permission and before the patent protection expires. The generic producers can then market their versions as soon as the patent expires. This provision is sometimes called the “regulatory exception” or “Bolar” provision. Article 30

This has been upheld as conforming with the TRIPS Agreement in a WTO dispute ruling. In its report adopted on 7 April 2000, a WTO dispute settlement panel said Canadian law conforms with the TRIPS Agreement in allowing manufacturers to do this. (The case was titled “Canada — Patent Protection for Pharmaceutical Products”)

 
ANTI-COMPETITIVE PRACTICE, ETC back to top

The TRIPS Agreement says governments can also act to prevent patent owners and other holders of intellectual property rights from abusing intellectual property rights, “unreasonably” restraining trade, or hampering the international transfer of technology. Articles 8 and 40
 
 

The TRIPS Agreement

Article 8
Principles

[…]

2.   Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

SECTION 8: CONTROL OF ANTI-COMPETITIVE PRACTICES IN CONTRACTUAL LICENCES

Article 40

1.   Members agree that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology.

2.   Nothing in this Agreement shall prevent Members from specifying in their legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market. As provided above, a Member may adopt, consistently with the other provisions of this Agreement, appropriate measures to prevent or control such practices, which may include for example exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing, in the light of the relevant laws and regulations of that Member.

[…]

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  COMPULSORY LICENSING back to top

Compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner. In current public discussion, this is usually associated with pharmaceuticals, but it could also apply to patents in any field.

The agreement allows compulsory licensing as part of the agreement’s overall attempt to strike a balance between promoting access to existing drugs and promoting research and development into new drugs. But the term “compulsory licensing” does not appear in the TRIPS Agreement. Instead, the phrase “other use without authorization of the right holder” appears in the title of Article 31. Compulsory licensing is only part of this since “other use” includes use by governments for their own purposes.

Compulsory licensing and government use of a patent without the authorization of its owner can only be done under a number of conditions aimed at protecting the legitimate interests of the patent holder.

For example: Normally, the person or company applying for a licence must have first attempted, unsuccessfully, to obtain a voluntary licence from the right holder on reasonable commercial terms — Article 31b. If a compulsory licence is issued, adequate remuneration must still be paid to the patent holder — Article 31h.

However, for “national emergencies”, “other circumstances of extreme urgency” or “public non-commercial use” (or “government use”) or anti-competitive practices, there is no need to try for a voluntary licence — Article 31b.

Compulsory licensing must meet certain additional requirements. In particular, it cannot be given exclusively to licensees (e.g. the patent-holder can continue to produce), and usually it must be granted mainly to supply the domestic market.

 
WHAT ARE THE GROUNDS FOR USING COMPULSORY LICENSING? back to top

The TRIPS Agreement does not specifically list the reasons that might be used to justify compulsory licensing. In Article 31, it does mention national emergencies, other circumstances of extreme urgency and anti-competitive practices — but only as grounds when some of the normal requirements for compulsory licensing do not apply, such as the need to try for a voluntary licence first. Doha declaration 5(b) and (c).
 

The TRIPS Agreement

Article 31
Other Use Without Authorization of the Right Holder

Where the law of a Member allows for other use of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government, the following provisions shall be respected:

[…]

(b)   such use may only be permitted if, prior to such use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. This requirement may be waived by a Member in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. In situations of national emergency or other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable. In the case of public non-commercial use, where the government or contractor, without making a patent search, knows or has demonstrable grounds to know that a valid patent is or will be used by or for the government, the right holder shall be informed promptly;

(c)   the scope and duration of such use shall be limited to the purpose for which it was authorized, and in the case of semi-conductor technology shall only be for public non-commercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive;

[…]

(f)   any such use shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use;

[…]

(h)   the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization;

[…]

(k)   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 anti-competitive. The need to correct anti-competitive practices may be taken into account in determining the amount of remuneration in such cases. Competent authorities shall have the authority to refuse termination of authorization if and when the conditions which led to such authorization are likely to recur;

[…]

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  PARALLEL IMPORTS, GREY IMPORTS AND ‘EXHAUSTION’ OF RIGHTS back to top

Parallel or grey-market imports are not imports of counterfeit products or illegal copies. These are products marketed by the patent owner (or trademark- or copyright-owner, etc) or with the patent owner’s permission in one country and imported into another country without the approval of the patent owner.

For example, suppose company A has a drug patented in the Republic of Belladonna and the Kingdom of Calamine, which it sells at a lower price in Calamine. If a second company buys the drug in Calamine and imports it into Belladonna at a price that is lower than company A’s price, that would be a parallel or grey import.

The legal principle here is “exhaustion”, the idea that once company A has sold a batch of its product (in this case, in Calamine), its patent rights are exhausted on that batch and it no longer has any rights over what happens to that batch.

The TRIPS Agreement simply says that none of its provisions, except those dealing with non-discrimination (“national treatment” and “most-favoured-nation treatment”), can be used to address the issue of exhaustion of intellectual property rights in a WTO dispute. In other words, even if a country allows parallel imports in a way that another country might think violates the TRIPS Agreement, this cannot be raised as a dispute in the WTO unless fundamental principles of non-discrimination are involved. The Doha Declaration clarifies that this means that members can choose how to deal with exhaustion in a way that best fits their domestic policy objectives. Article 6 and Doha declaration 5(d).

The Doha declaration

5.   Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:

[…]

(b)   Each Member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.

(c)   Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

(d)   The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4.

[…]

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The TRIPS Agreement

Article 6
Exhaustion

For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.

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  THE DOHA DECLARATION ON TRIPS AND PUBLIC HEALTH back to top

Some governments were unsure of how these TRIPS flexibilities would be interpreted, and how far their right to use them would be respected. The African Group (all the African members of the WTO) were among the members pushing for clarification.

A large part of this was settled at the Doha Ministerial Conference in November 2001. In the main Doha Ministerial Declaration of 14 November 2001, WTO member governments stressed that it is important to implement and interpret the TRIPS Agreement in a way that supports public health — by promoting both access to existing medicines and the creation of new medicines.

They therefore adopted a separate declaration on TRIPS and Public Health. They agreed that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. They underscored countries’ ability to use the flexibilities that are built into the TRIPS Agreement, including compulsory licensing and parallel importing. And they agreed to extend exemptions on pharmaceutical patent protection for least-developed countries until 2016.

On one remaining question, they assigned further work to the TRIPS Council — to sort out how to provide extra flexibility, so that countries unable to produce pharmaceuticals domestically can obtain supplies of copies of patented drugs from other countries. (This is sometimes called the “Paragraph 6” issue, because it comes under that paragraph in the separate Doha declaration on TRIPS and public health.)

 
  IMPORTING UNDER COMPULSORY LICENSING (‘PAR.6’) back to top

Article 31(f) of the TRIPS Agreement says products made under compulsory licensing must be “predominantly for the supply of the domestic market”. This applies to countries that can manufacture drugs — it limits the amount they can export when the drug is made under compulsory licence. And it has an impact on countries unable to make medicines and therefore wanting to import generics. They would find it difficult to find countries that can supply them with drugs made under compulsory licensing.

The legal problem for exporting countries was resolved on 30 August 2003 when WTO members agreed on legal changes to make it easier for countries to import cheaper generics made under compulsory licensing if they are unable to manufacture the medicines themselves. When members agreed on the decision, the General Council chairperson also read out a statement setting out members’ shared understandings on how the decision would be interpreted and implemented. This was designed to assure governments that the decision will not be abused.

The decision actually contains three waivers:

  • Exporting countries’ obligations under Article 31(f) are waived — any member country can export generic pharmaceutical products made under compulsory licences to meet the needs of importing countries.
  • Importing countries’ obligations on remuneration to the patent holder under compulsory licensing are waived to avoid double payment. Remuneration is only required on the export side.
  • Exporting constraints are waived for developing and least-developed countries so that they can export within a regional trade agreement, when at least half of the members were categorized as least-developed countries at the time of the decision. That way, developing countries can make use of economies of scale.

Carefully negotiated conditions apply to pharmaceutical products imported under the system. These conditions aim to ensure that beneficiary countries can import the generics without undermining patent systems, particularly in rich countries. They include measures to prevent the medicines from being diverted to the wrong markets. And they require governments using the system to keep all other members informed each time they use the system, although WTO approval is not required. At the same time phrases such as “reasonable measures within their means” and “proportionate to their administrative capacities” are included to prevent the conditions becoming burdensome and impractical for the importing countries.

All WTO member countries are eligible to import under this decision, but 23 developed countries  have announced voluntarily that they will not use the system to import: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the US.

After they joined the EU in 2004, another 10 countries have been added to the list: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia.

And 11 more said they would only use the system to import in national emergencies or other circumstances of extreme urgency: Hong Kong China, Israel, Korea, Kuwait, Macao China, Mexico, Qatar, Singapore, Chinese Taipei, Turkey, United Arab Emirates.

After that, several potential exporting countries changed their laws and regulations in order to implement the waivers and to allow production exclusively for export under compulsory licence. At the time of writing (September 2006) Norway, Canada, India and the EU have formally informed the TRIPS Council that they have done so.

The 2003 waivers are interim; the ultimate goal is to amend the TRIPS Agreement itself, and a decision to do this was reached in December 2005, accompanied again by a chairperson’s statement. The amendment — a direct translation of the waivers — enters into force when two thirds of members accept it.

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