PATENT RIGHTS IN THE PHARMACEUTICAL AREA AND THEIR ENFORCEMENT: EXPERIENCE IN THE WTO FRAMEWORK WITH THE IMPLEMENTATION OF THE TRIPS AGREEMENT
by Matthijs Geuze*
I. INTRODUCTION
The Agreement on Trade-Related Aspects on Intellectual Property Rights (TRIPS Agreement), which forms part of the Marrakesh Agreement Establishing the World Trade Organization (WTO) has now been in existence for three years.[1] Transitional arrangements stipulated in the TRIPS Agreement regulate at which moment WTO Members are obligated to comply with its provisions. Some of these provisions apply from the outset, i.e. 1 January 1995. These include the so-called "mailbox" and exclusive marketing rights provisions of Article 70.8 and 70.9 of the Agreement relating to inventions of pharmaceuticals and agricultural chemical products. Other provisions apply since 1 January 1996. Developed country Members of the WTO are under the obligation to comply fully with all provisions of the Agreement from that date. The Council for TRIPS, the WTO body responsible for overseeing the functioning of the TRIPS Agreement, is monitoring the operation of the Agreement, and in particular, Members' compliance with their obligations thereunder, in accordance with Article 68 of the TRIPS Agreement. Much of the attention has focused on what countries have, or have not, done, to implement existing obligations under Article 70.8 and 70.9 concerning patent applications for pharmaceutical and agricultural chemical products; and on the review of legislation notified to the council as containing provisions implementing obligation under the agreement. Issues about compliance with the Agreement or its interpretation have arisen and, in twelve instances, dispute settlement procedures under the WTO have been formally initiated. Five of these cases concern the area of patents, of which three come under the provisions of article 70.8 and 70.9.
II. THE MAIN FEATURES OF THE TRIPS AGREEMENT
A. Intellectual Property Protection as an Integral Part of the Multilateral Trading System
Through the TRIPS Agreement, the protection if Intellectual Property has become an integral part of the multilateral trading system as reflected in the WTO. Indeed it is one of the three pillars of the WTO, the other two being trade in goods (the area traditionally covered by the GATT) and the new General agreement in Trade and Services (GATS). The fact that the protection of intellectual property has thus moved to the center stage of international economic relations is not surprising, gives its major and growing importance for the conditions of international competition in many areas of economic activity. It is important that three consequences of the place that intellectual property has thus acquired be stressed, in view of their likely impact on the implementation of the TRIPS Agreement.
The first point is that it explains why it was possible to negotiate in the context of the Uruguay Round such a major advance in the international protection of intellectual property. It became accepted, at least from the half-way point of the Uruguay Round negotiations, that a major agreement on intellectual property was a necessary component of a successful conclusion to the negotiations, and therefore, in a certain sense, to the maintenance and strengthening of the multilateral trading as a whole.
The second consequence of the place of the TRIPS Agreement within the trading system is that there is a good prospect that, in due course, there will be something near to the universal acceptance of the obligations of the
TRIPS Agreement. One of the important changes in the WTO compares to the GATT is that all countries that wish to be Members, and to enjoy the market access it provides, will have to accept all the main WTP Agreements including TRIPS Agreement. The WTO currently has one hundred and thirty two members and many other countries are expected to become Members in the not too distant future, one their accession negotiations will have been concluded.
The third consequence of the place of TRIPS within the multilateral trading system is that, under the WTO dispute settlement mechanism, a link may be made between a country's compliance with its TRIPS obligations and its enjoyment of the benefits that the WTO provides to it, including with regard to market access. IN other words, in case of non-compliance with a TRIPS obligation, a WTO Member country could ultimately be faced with sanctions of significance to its economy.
B. A Brief Summary of the Agreement
The TRIPS Agreement covers each of the main areas of intellectual property - copyright and related rights; trademarks, including service marks; geographical indications, including appellations of origin; industrial designs; patents, including plant variety protection; layout designs of integrated circuits; and undisclosed information including trade secrets. Most substantive provisions of the main pre-existing international intellectual property conventions have also been incorporated in the TRIPS Agreement, so that non-compliance with any of these provisions will also be subject to dispute settlement within the framework of the WTO. But the TRIPS Agreement goes much further, especially in the area of industrial property, where it also establishes, unlike (for the most part) under the Paris Convention, obligations on the essential features of the intellectual property protection such as what subject-matter must be protected, what rights must be conferred to the right-holders, what exceptions to these rights are permitted or what must be the minimum terms of protection. And when a country decides to provide more extensive protection that specified in the Agreement, the national treatment and most-favoured-nation clause prohibit discrimination between right-holders that are nationals of a WTO Member, subject to a few exceptions only. The Agreement also specifies, in a fair amount of detail, procedures and remedies that must be available so as to allow right-holder to effectively enforce their rights with the assistance of the judicial authorities. All these obligations apply equally to all Member countries, subject only to a number of transitional periods, which will be discussed later.
III. THE PATENT SECTION OF THE AGREEMENT
The TRIPS Agreement requires Member countries to make patents available for any inventions, whether products or processes, in all fields of technology without discrimination, subject to the normal tests of novelty, inventiveness and industrial applicability. It is also required that patents be available and patent-rights enjoyable without discrimination so as to the place of invention and whether products are imported or locally produced (Article 27.1).
There are three permissible exceptions to the basic rule on patentability. One is for inventions contrary to ordre public or morality; this explicitly includes inventions dangerous to human, animal or plant life or health, or seriously prejudicial to the environment. The use of this exception is subject to the condition that the commercial exploitation of the invention must also be prevented and this prevention must be necessary for the protection of ordre public or morality (Article 27.2).
The second exception is that Members may exclude from patentability diagnostic, therapeutic and surgical methods for the treatment of human or animals (Article 27.3(a)).
The third is that Members may exclude plants and animals other than microorganisms and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, any country excluding plant varieties from patent protection must provide an effective sui generis system of protection. Moreover, the whole provision is subject to review four years after entry into force of the Agreement (Article 27.3(b)).
The exclusive rights that must be conferred by the product patent are the ones of making, using, offering for sale, selling, and importing for these purposes. Process patent protection must give rights not only over use of the process but also over products obtained directly by the process. Patent-owners shall also have the right to assign, or transfer by succession, the patent and to include licensing contracts (Article 28).
Member 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 the third parties (Article 30).
The term of protection available shall not end before the expiration of a period of twenty years, counted from the filing date (Article 30).
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 (Article 29.1).
If the subject-matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process, where certain conditions indicating a likelihood that the protected process was used are met (Article 34).
Compulsory licensing and government use without authorization of the right-holder are allowed, but are made subject to conditions aimed at protecting the legitimate interests of the right-holder. The conditions are mainly contained in Article 31. These include the obligation, as a general rule, to grant such licenses only if an unsuccessful attempt has been made to acquire a voluntary license on reasonable terms and conditions within a reasonable period of time; the requirement to pay adequate remuneration in the circumstances of each case, taking into account the economic value of the license; and the requirement that decisions be subject to judicial or other independent review by a distinct higher authority. Certain of these conditions are relaxed where compulsory licenses are employed to remedy practices that have been established as anti-competitive by a legal process. These conditions should be read together with the related provision of Article 27.1, which require that patent-rights shall be enjoyable without discrimination as to the field of technology, and whether products are imported or locally produced.
Provisions relevant to procedures for the acquisition and maintenance of patents and other intellectual property rights are contained in Article 62; particular attention should be paid to paragraphs 2, 4 and 5 of that article.
IV. ENFORCEMENT
High substantive standards of protection of intellectual property are of little use if rights cannot be effectively enforced. The establishment of such enforcement rules has, therefore, had much attention from the TRIPS negotiators and, as a result, the TRIPS Agreement lays down, in a fair amount of detail, the domestic procedures and remedies that Members have to provide so that the right-holders can enforce their intellectual property rights effectively.
The TRIPS rules on enforcement constitute the first time in any area of international law that such rules on domestic enforcement procedures and remedies have been negotiated. The Agreement therefore breaks new ground in elaborating rules on the procedures and remedies that must be available under national law. These rules aim to recognize basic differences between national legal systems, while being sufficiently precise to provide for effective enforcement action as well as safeguards against abuse in the use of procedures. As provided in Article 1.1 of the Agreement, Member countries are free to determine the appropriate method of implementing these and other provisions of the Agreement within their own legal system and practice.
In some respects the origin of the TRIPS Agreement lies in proposals put forward in 1978 and 1979 in the final stages of the Tokyo Round of multilateral trade negotiations for a GATT agreement on the; prevention of the import of counterfeit goods. These proposals were not accepted then, but work continued in the GATT, in particular after the 1982 ministerial meeting. The ideas put forward at that time correspond broadly to those which were finally contained in the Section on special requirements related to border measures in Part III , on enforcement, of the TRIPS Agreement. However, during the Uruguay Round negotiations it was agreed that the Agreement should also cover obligations on internal enforcement procedures and remedies and on minimum substantive standards.
The provisions on enforcement are contained in Part III of the Agreement, which is divided into five Sections. The first Section lays down general obligations that all enforcement procedures must meet. These are notably aimed at ensuring their effectiveness and that certain basic principles of due process are met. The following Sections deal with civil and administrative procedures and remedies, provisional measures, special requirements related to border measures and criminal procedures.
These provisions have two basic objectives: one is to ensure that effective means of enforcement are available to right-holders; the second is to ensure that enforcement procedures are applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.
The obligations set out are of two main types. The first type are those which prescribe procedures and remedies that must be provided by each Member-- much of this is set out in terms of the authority that must be available to judges and courts or other competent authorities, such as customs. The second type of obligation is what might be described as "performance" requirements in relation to the workings of these procedures and remedies in practice; for example, they must be such as to permit effective action against infringing activity, expeditious and deterrent remedies and applied in a manner that will avoid the creation of barriers to legitimate trade.
The agreement makes a distinction between infringing activity in general, in respect of which civil judicial procedures and remedies must be available, and counterfeiting and piracy-- the more blatant and egregious forms of infringing activity-- in respect of which additional procedures and remedies must also be provided, namely border measures and criminal procedures. For this purpose, counterfeit goods are, in a essence, defined as goods involving slavish copying of trade marks, and pirated goods as goods which violate a reproduction right under copyright or related right.
The general obligations relating to enforcement are contained in Article 41. Paragraph 1 contains the "performance" requirements: enforcement procedures must be such as to permit effective action against any act of infringements of intellectual property rights, and the remedies available must be expeditious in order to prevent infringements and they must constitute a deterrent to further infringements. On the other hand, these procedures must be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.
The following three paragraphs contain certain general principles, the aim of which is to guarantee due process. Paragraph 2 deals with enforcement procedures. Such procedures must be fair and equitable, and they may not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwanted delays. Paragraph 3 concerns decisions on the merits of a case. Such decisions shall preferably be reasoned in writing and they shall be made available at least to the parties to the proceeding without undue delay. Decisions on the merits of a case shall be based only on evidence in respect of which parties were offered that opportunity to be heard. Paragraph 4 requires that parties to a proceeding shall have an opportunity for review by a judicial authority of final administrative decisions and, subject to jurisdictional provisions in a Member's law concerning the importance of a case, of at least the legal aspects of initial judicial decisions on the merits of a case. However, there is no obligation to provide an opportunity for review of acquittals in criminal cases.
As mentioned earlier, Member countries are free to determine the appropriate method of implementing the provisions on enforcement within their own legal system and practice. In addition, Paragraph 5 contains an understanding according to which the provisions on enforcement do not create any obligation to put in place a judicial system for the enforcement of law in general, nor does it affect the capacity of Members to enforce their law in general. In addition, it is stated that nothing in these provisions create any obligation with respect to the distribution of resources as between enforcement of intellectual property issues in one or a limited number of courts, in order to ensure the availability of necessary expertise.
Section 2 of Part III, on enforcement, requires that civil judicial procedures must be available in respect of any activity infringing intellectual property rights covered by the Agreement. The provisions of the Section elaborate in more detail basic features that such procedures must provide for: on evidence, injunctions, damages and some other remedies. These provisions apply also to administrative procedures on the merits of a case, to the extent that any civil remedy can be ordered as a result of such procedures.
The Section also contains certain principles aimed at ensuring due process. Defendants are entitled to written notice which is timely and contains sufficient details of the claims. Parties must be allowed to be represented by independent legal counsel, and procedures may not impose overly burdensome requirements concerning mandatory personal appearances. All parties are entitled to substantiate their claims and to present all relevant evidence, while confidential information must be identified and protected.
Section 3 of Part III concerns provisional measures. Again, as specified in Article 41 of the Agreement, enforcement procedures must permit effective action against infringements and must include expeditious remedies. As judicial authorities are empowered to provide provisional relief for the right-holder in order to stop an alleged infringement immediately.
The stipulations on provisional measures require each country to ensure that its judicial authorities have the authority to order such measures promptly and effectively. The measures must be available in respect of any intellectual property right. These provisions apply also to administrative procedure. Two main objectives for the use of provisional measures are spelled out. One is to prevent an infringement from occurring, and to prevent infringing goods from entering into the channels of commerce. This includes preventing imported goods from being dispersed into domestic distribution channels immediately after customs clearance. The other purpose is to preserve relevant evidence with regard to the alleged infringement. In order to accomplish these objectives, it may be necessary to take action without prior hearing of the other side. Therefore, the judicial authorities must have the authority to adopt provisional measures without hearing the defendant, where appropriate, in particular where any delay is likely to cause irreparable harm to the right-holder, or where there is a demonstrable risk of evidence being destroyed. Sections 3 and 4 of Part III contain, in particular, specific provisions on safeguards against abuse of such measure.
Section 4 of Part III contains special requirements related to border measures. The emphasis in the enforcement part of the TRIPS Agreement is on internal enforcement mechanisms, which, if effective, would enable infringing activity to be stopped at the source of production. Compared to special border measures, this is both a more efficient way of enforcing intellectual property rights and one which is less liable to give rise to risk of discrimination against imports. However, the Agreement recognizes that enforcement at the source of production will no always be possible and that in any event not all countries in the world are Members of the WTO and, therefore, have obligations under the TRIPS Agreement. Consequently, the Agreement recognizes the importance of border enforcement procedures that will enable right-holders to obtain the co-operation of customs administrations so as to prevent the release of infringing imports from passing the customs and dispersing into domestic distribution channels, which would often make it more difficult to take efficient action. In this regard, the Agreement will require, for many countries, the establishment of new legislation and the putting in place of new procedures.
The fifth and final Section in Part III of the TRIPS Agreement deals with criminal procedures. Provision must be made for these to be applied at least in cases of willful trade-mark counterfeiting or copyright piracy on a commercial scale.
Reference should also be made to Article 69 of the Agreement, which requires WIPO Members to co-operate with each other with a view to eliminating international trade in goods infringing intellectual property rights. In this regard, they have committed themselves to establish contact points in their national administrations and be ready to exchange information with each other on trade in infringing goods. In particular, they must promote the exchange of information and co-operation between customs authorities with regard to trade in counterfeit and pirated goods. Co-operation within this framework will also facilitate customs' work in fighting counterfeiting and piracy.
V. GENERAL PROVISION AND BASIC PRINCIPLES
Like the pre-existing international intellectual property rights conventions, the TRIPS Agreement is a minimum standards agreement. It leaves Members free to provide more extensive protection of intellectual property if they so wish--for purely domestic reasons or because they have concluded international agreements to this effect, whether bilateral, regional, as for example in the case of the European Communities and the North American Free Trade Agreement (NAFTA), or multilateral, such as in the World Intellectual Property Organization(WIPO). This is made clear in Article 1.1, which provides that Members may, but shall not be obliged to, implement in their law more extensive protection than is required by the Agreement, provided that such protection does not contravene the provisions of the Agreement. Article 1.1 also makes it clear that the Agreement is not intended to be a harmonization agreement; provided that Members conform to the minimum requirements established by the Agreement , they are left free to determine the appropriate method of doing so within their own legal system and practice.
As in the main pre-existing intellectual property conventions, the basic obligation on each Member country is to accord the treatment in regard to the protection of intellectual property provided for under the Agreement to the persons of other Members. Article 1.3 defines who these persons are. These persons are referred to as "nationals" but include persons, natural or legal, who have a close attachment to other Members without necessarily being nationals. The criteria for determining which persons must thus benefit from the treatment provided for under the Agreement are those laid down for this purpose in the main pre-existing intellectual property conventions of the WIPO, applied of course with respect to all WIPO Members whether or not they are party to those conventions.
Article 3, 4 and 5 include the fundamental rules on national treatment and most-favoured-nation (MFN) treatment of foreign nationals, which are common to all categories of intellectual property covered by the Agreement. These obligations cover not only the substantive standards of protection but also matters affecting the availability, acquisition, scope, maintenance, and enforcement of intellectual property rights as wall as those matters affecting the use of intellectual property rights specifically addressed in the Agreement. While the national treatment clause forbids discrimination between a Member's own nationals and the nationals of other Members, the MFN treatment clause forbids discrimination between the nationals of other Members. In respect of the national treatment obligation, the exceptions allowed under the pre-existing intellectual property conventions of WIPO are also allowed under TRIPS. Where these exceptions allow material reciprocity, a consequential exception to MFN treatment is also permitted. Certain other limited exceptions to the MFN obligations are also provided for.
As issue that the Uruguay Round negotiations left unresolved is the question of exhaustion. Article 6 provides that for the purposes of dispute settlement under the TRIPS Agreement, nothing in the Agreement shall be used to address the issue of the exhaustion of intellectual property rights, provided that the national treatment and MFN treatment obligations are compiled with.
Article 7 of the Agreement is entitled "Objectives." It should be read in conjunction with the Preamble which reproduces the basic Uruguay Round negotiating objectives established in the TRIPS area by the 1986 Punta del Este Declaration and the 1988/89 Mid-Term Review. There is also an Article entitled "Principles" (Article 8) which recognizes the right of Members to adopt measures for public health and other public interest reasons and to prevent the abuse of intellectual property rights, provided that such measures are consistent with the provisions of the TRIPS Agreement. Developing countries attach importance to these Articles, which put emphasis on the transfer and dissemination of technology.
VI. TRANSITIONAL ARRANGEMENTS AND TECHNICAL CO-OPERATION
A. Transitional Periods
The Agreement gives all original WTO Members transitional periods so that they can meet their obligations under it.[2]
The transitional periods, which depend on the level of development of the country concerned, are contained in Articles 65 and 66. The general transitional period applicable to developed country Members was one year; this period ended on 1 January 1996. For developing countries, the general transitional period is five years, i.e. until 1 January 2000, and for those countries on the United Nations list of least-developed countries the period is eleven years, i.e. 1 January 2006. A country whose economy is in transition, but which is not a developing country, may nonetheless delay application until the year 2000, if it meets the three tests specified in Article 65.3.
However, all Members, even those availing themselves of the longer transitional periods, have had to comply with the national treatment and MFN treatment obligations as of 1 January 1996. Moreover, there are two important substantive obligations that have been effective for all Members from the entry into the force of the TRIPS Agreement on 1 January 1995. One is the so-called "non-backsliding" clause in Article 65.5 which concerns changes made during the transitional period, and the other so-called "mailbox" obligations relating to pharmaceutical and agricultural chemical products that are the subject of patent applications filed during the transitional period (Article 70.8 and 70.9).
The "non-backsliding" clause in Article 65.5 forbids countries from using the transitional period to reduce the level of protection of intellectual property in a way which would result in a lesser degree of consistency with requirements of the Agreement. In the connection, it may also be noted that the transition periods of the TRIPS Agreement cannot provide, of course, any legal basis for a country to escape from international obligations that it has already accepted in another context.
Somewhat more complicated transition rules apply in the situation where a developing county does not at present give product patent protection to pharmaceutical or agricultural chemical inventions. According to Article 65.4, such a developing country may delay up to ten years the extension of patent protection to such inventions. However, in accordance with the "mailbox" obligations referred to above, it has to accept, form 1 January 1995, the filing of patent applications in these areas of technology (Article 70.8) and, if a product that has been the subject of such a patent application obtains marketing approval before the decision on the grant of the patent is taken, there is an obligation under Article 70.9 to grant, subject to certain conditions, exclusive marketing rights for a period of up to five years to tide over the gap. The practical effect of these various transition provisions should be that inventions which meet the criteria for patentability on or after the date of entry into force of the Agreement itself will normally be eligible for protection in such countries by the time that protection becomes of commercial significance--either by the grant of a patent after the expiry of the ten-year transition period or by an exclusive marketing right if such products get marketing approval before that time.
B. Protection of Existing Subject-Matter
Another important aspect of the transition arrangement under the TRIPS Agreement is contained in the provisions relating to the treatment of subject-matter already existing at the time that a Member starts applying the provisions of the Agreement. As provided in Article 70.2, the rules of the TRIPS Agreement generally apply to subject-matter existing on the date of the Agreement for the Member in question and which is protected in that Member on the said date. Some more specific provisions in this regard, relevant to the patent area, can be found in paragraphs 4, 6 and 7 of Article 70.
C. Technical Co-operation
Given the extensive changes to the legislation, institutions and practices of may Member, especially developing ones, required by the TRIPS Agreement, technical co-operation is of great importance. Article 76 of the TR