TITLE: Strategic Recommendations for the Review of TRIPs Article 27.3(b), dealing with Intellectual Property Rights over Biological Resources AUTHOR: The Gaia Foundation PUBLICATION: submitted to BIO-IPR by the authors DATE: October 1998 SOURCE: The Gaia Foundation, London STRATEGIC RECOMMENDATIONS FOR THE REVIEW OF TRIPS [1] ARTICLE 27.3(B), DEALING WITH INTELLECTUAL PROPERTY RIGHTS OVER BIOLOGICAL RESOURCES The Gaia Foundation October 1998 CONTENTS 1. Introduction. 2. The Purpose of the Document: strategic recommendations. 3. TRIPs and the Review of Article 27.3(b) 4. Broad Options for the Review of Article 27.3(b). 5. USA/WTO Position on the Review. 6. Dangers of a full Review of Article 27.3(b). 7. The Case for a full Review of Article 27.3(b). 8. Conclusion 1. INTRODUCTION The Trade Related Intellectual Property Rights (TRIPs) Agreement is part of the new World Trade Organisation which was formed in 1994. TRIPs details a comprehensive set of new rules and standards for intellectual property which must be adopted by all member states of the organisation from the year 2000 onwards, depending on its status of development In particular, TRIPs Article 27.3(b) aims to impose private intellectual property rights (IPRs) on the South?s biological resources. New commercial developments in biotechnology have led to pressures being exerted on developing countries to adopt WTO sponsored rights in this area. TRIPs Article 27.3(b) is a radically new development in international IPR law, as the vast majority of WTO member countries have rejected granting life patents at the national level. Biological resources - which meet the basic food and medicine requirements of human life - have been thought to be completely unsuitable for private monopolistic rights. However, under TRIPs? current obligations all member countries now face the prospect of having to have compatible laws in place to meet their obligations to the treaty, regardless of their objections. This includes patents on biotechnological products and processes, micro-organisms, and patents or sui generis (unique) rights on protection of plant varieties. Article 27.3(b) states: BOX: Article 27.3 Members may also exclude from patentability; (b) plants and animals other than microorganisms, and essentially biological processes for the production of plants and animals other than non-biological and micro-biological processes. [2] However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis [3] system or by any combination thereof. The provisions of this sub-paragraph shall be reviewed four years after the entry into force of the WTO Agreement. Developing states are given until 1st January 2000 to implement and enforce the IPR requirements of Article 27.3(b) [4] laws. However, Article 27.3(b) attracted a great deal of criticism from developing countries during the TRIPs negotiations, especially because of abuses of intellectual property rights by companies who are patenting the biological resources of the third world, such as turmeric and basmati rice. In the Uruguay Round (1986-1993) the European Community also found the complete patentability of biological resources unacceptable, and insisted on the presence of exemptions to patent rights in the text of Article 27. As a result the rights offered by the sub-paragraph are extremely ambiguous and have been subjected to a great deal of conflicting interpretation. It was because of these concerns and ambiguities that members agreed to hold a mandated review of the entire sub-paragraph four years after the WTO entered into force i.e. at some time in 1999. 2. THE PURPOSE OF DOCUMENT: STRATEGIC RECOMMENDATIONS This document is intended to provide an assessment of the strategic options open to developing countries for the Review of TRIPs Article 27.3(b) in 1999. In essence it recommends that: developing countries should use the opportunity which the Review presents to challenge Article 27.3(b) because of the control it gives the WTO over the South?s biological resources. This would involve developing countries substantially widening what is at present thought to be the likely scope of the Review (see below). A 1999 Review of 27.3(b) presents developing countries with a unique chance to develop a negotiating strategy for a single issue area around which there is widespread concern and opposition. There will be no trade-offs to be made with other sectors of the WTO - giving developing countries an important chance to stand firm in the Review. There is also a considerable groundswell of opinion amongst these countries that patents rights to living organisms will be impossible to implement and enforce in the South anyway. The Review agenda is still wide open, but the Council for TRIPs meeting, which will be held from the 1st to 2nd of December 1998, could well be the forum in which the agenda is eventually set. It is therefore up to developing countries to prepare a substantial revision of Article 27.3(b) for the Review process in 1999. Strategic options for developing countries are outlined below. 3. TRIPS AND THE REVIEW OF ARTICLE 27.3(B) COVERING BIOLOGICAL RESOURCES The results of the process will determine the laws by which developing country governments are to regulate the use and ownership of biological resources. This will be the case whether the text is changed or not. Regulation will include access to seed by farmers. The private rights to biological resources that TRIPs currently allows already has serious consequences for sustainable agriculture in the developing world - as more and more crops will become subject to monopolistic ownership by corporations. Likewise, TRIPs will have similar effects on the vast store of traditional medicines used in the South which are increasingly the targets of corporate biopiracy. Article 27.3(b) simply means exclusive control of these resources by firms who have played no role in their conservation or development for human use. The Review is clearly extremely important. We therefore include a basic discussion of the issues which will influence the course of the Review. Outlined below are the cases for and against an effort by developing countries to change Article 27.3(b) in the Review process, followed by our conclusion. The time remaining in which developing countries can frame joint or individual Review strategies is shrinking fast, a fact made more pressing by the WTO scheduling two important related meetings in the next few months. These are the approaching Committee on Trade and the Environment (CTE, Geneva, October 26-28), and the next Council for TRIPs meeting (Geneva, December 1-2). What is clear is that the Review is legally required and will take place in some time in 1999. The agenda will be set by member country representatives at the Council for TRIPs on December 1-2 1998. There is nothing written or stated formally by the WTO or in the TRIPs text to indicate that a Review should not involve a substantial revision of the text. The process therefore presents an important opportunity for developing countries who are dissatisfied with the current provisions of Article 27.3(b) to change the text. This is after all their legal right, as WTO members who signed the TRIPs agreement. Article 27.3(b) is still very much open to substantial interpretation and change. A strategy is required in the near future: one way or another developing countries will be required to construct clear policy positions and negotiating goals in the coming months. 4. BROAD OPTIONS FOR THE REVIEW OF ARTICLE 27.3(B) The current mood in trade policy circles and the WTO itself would suggest that the Review of Article 27.3(b) is likely to be a non-event, in which substantial changes to the existing text are not expected to be undertaken. However, member countries can technically take to the December Council for TRIPs any submissions they choose, (it is their right as WTO members), regarding their interpretation of the eventual scope and substance of the Review. This means that at least for the present time there are alternative options for the Review process which countries can consider pursuing. Two broad choices are outlined here: a) A Status Quo Review: Article 27.3(b) does not change Leave the text as it is because it could be worse, and negotiate the article in the full Review of TRIPs (2000), or in a possible next WTO Round. This would, first, involve little-or-no submissions to the Council for TRIPs in December, resulting in no changes to the existing text during the Review process. In this case the possible options for the eventual Review would be: *Simply leaving the text of the sub-paragraph as it stands. This would mean that existing ambiguities in the text might allow developing countries to avoid having to develop full intellectual property laws covering biological resources. The existing TRIPs text, some say, allows countries to construct IPR regimes for biological resources which do not break WTO rules, but which are also tailored to the particular needs of developing countries in managing their biological resources - e.g. with sui generis right systems *Using the Review as an agenda setting exercise for Article 27.3(b) negotiations during the full negotiating process for TRIPs, that will be part of the next WTO Round. That is - simply delay Article 27.3(b) negotiations in the Review until new trade talks are scheduled in 2000. *Keeping the Review at the level where countries focus on the implementation of Article 27.3(b). This would mean that there would be no chance of strengthening the intellectual property rights in the sub-paragraph. b) A Maximum Type Review Change the text as it cannot be implemented as it stands, and if this does not work keep the existing ambiguities. A substantial Review of the article would require member countries using the December meeting of the Council for TRIPs to effectively re-open the Article 27.3(b) agenda via submissions in this direction. Insisting on a complete revision of the sub-paragraph could result in: *Developing countries submitting individual interpretations of Article 27.3(b) in which the difficulties or impossibilities of implementing IPRs over biological resources in the South are highlighted. *Country submissions [5] by which the patentability of biological resources can be excluded on the grounds of (a) national sovereign choice and policy preferences, (b) moral or environmental considerations, and (c) as a result of making exemptions to the patenting of living organisms compatible with legally binding obligations developed in the CBD and the FAO's International Undertaking. *Insistence on alternative interpretations of sui generis systems for the South which are appropriate to each country - e.g. legal regimes which really protect farmer and community rights to continue to use biological resources sustainably, and promote benefit sharing and access laws. *Making the whole sub-paragraph subject to national discretion - i.e. completely changing its multilateral character and thereby restricting the WTO-TRIP's authority over the biological resources of the South. *A worst case scenario, where developed countries use the Review to further strengthen the IPR requirements of Article 27.3(b). This could involve the removal of all exceptions to the patenting of biological resources, or the insistence that effective sui generis systems conform to UPOV [6] standards. Both the options outlined above would require preparations for the Review process. Our recommendation is that the best option for developing countries would be to push for a maximum type of a Review in which Article 27.3(b) is seriously challenged. This would mean that a fall-back position of keeping the text of Article 27.3(b) as it is would be more likely to succeed. 5. USA/WTO POSITION ON THE REVIEW Focus on implementation, keep the Review low key We suspect that the USA, in particular, would rather NOT have a maximum type Review of TRIPs Article 27.3(b) in 1999. The probable reasons for wanting a delay are: *Holding back the Review would mean that the opposition to political 'hot potato' of IPRs on biological resources might be diffused given time. *If delayed to the possible next WTO Round, then the question of IPRs for biological resources would be one of many negotiating areas in the TRIPs, and in the WTO negotiating groups as a whole. There is a clear momentum toward the new WTO Round of negotiations at some time after 2000. If meaningful negotiations of the sub-paragraph were delayed completely until this juncture then Article 27 would be only one of a 'job lot' of other articles subject to negotiation, with TRIPs being just one of a larger group of negotiating areas. *This would allow traditional 'carrot and stick' North-South negotiations: whereby implementation of Article 27.3(b) by developing countries could be achieved via the promise of concessions in other negotiating areas (agriculture and textiles for example). *Negotiating TRIPs as one of many issues means that the energies of under-resourced developing country trade representatives will be diluted. *The recent European Patent Directive (1998) means that there is potentially an emerging convergence between European and US life patenting laws. However, a Dutch initiative of 16th October 1998 has highlighted a lack of consensus amongst the EU countries on life patenting. The Dutch will now challenge the Directive in the European Court of Justice. But if the Dutch challenge fails, then holding back full negotiations of the sub-paragraph until the full Review of TRIPs (or a next Round of WTO negotiations) could mean that a stronger Article 27.3(b) would be presented to the South as a fait accompli. [7] The Dutch challenge might therefore form another reason as to why the US (and some EU countries) would wish to delay negotiating the sub-paragraph. The WTO-TRIPs Council secretariat has remained non-committed on what will transpire in the Review process. Their view has consistently been that the Review is subject to submissions made by member countries (and they act purely as facilitators for them) - and, therefore, the agenda is open. However, they have also stated that the Review will probably concentrate on implementation of the current text - i.e. a Status Quo type of Review. It is fairly clear that the WTO is keen to appear to play only a facilitating role in the Review process, but would prefer a low key meeting and keeping the current text as it is (a status quo Review). But the TRIPs secretariat is certain of one thing regarding the sub-paragraph: namely that alternative interpretations of the existing text (such as what constitutes an effective sui generis system) will not be considered as meeting the minimum standards of laws demanded by the text (i.e. alternative interpretations of the article will not be tolerated). This would point to future actions by the WTO's Dispute Settlement Body to discipline any country that attempts to exploit the current ambiguities of Article 27.3(b) by creating, for example, sui generis systems which bar the patenting of a nations biological resources. 6. DANGERS OF PUSHING FOR A MAXIMUM TYPE REVIEW Keeping the text as it is allows for the possibility of states developing alternative systems of rights for protecting biological resources. A maximum Review could well backfire on developing countries! There are obvious dangers in developing countries pushing for a Maximum type Review: *One reason not to push for a maximum Review in 1999 is the time element. At present, there is no detectable developing nation strategy in place with respect to the Review. Neither are there, as of yet, any submissions to the Council for TRIPs directed toward opening the Review process any wider. At the earliest, the Review could take place in January 1999, although in practice this is unlikely. *Time is also required to organise and capacity build amongst developing country ministries and trade missions. If countries agreed to the Status Quo type of Review, valuable time could be gained. This is an attractive strategy. *The task of trying to implement TRIPs in 2000 might highlight the costs and difficulties of imposing IPRs on living organisms in the South. This might produce consolidated resistance to the sub-paragraph amongst developing country policy circles as to the future of Article 27.3(b) in the 2000 Review of TRIPs. *An Inter-sessional Panel of the CBD is set to report on the potential conflict between the CBD and TRIPs in the summer of 2000. [7] Whereas the likely results of this cannot be exactly anticipated, there is just a chance that the CBD will make a statement which could support developing country positions on the sub-paragraph in 2000 Review of TRIPs. *Similarly, there might arise a substantial conflict between developing countries' obligations to the CBD (or, indeed, any existing laws protecting biological resources) and the requirements of the Article 27.3(b) during the period between implementation and the start of the 2000 Review of TRIPs, or indeed a possible next WTO Round. This would serve to highlight the tensions between the sustainable use of biological resources and the system of their private appropriation entailed by TRIPs. *Delaying negotiations would allow time for the increasing European public resistance to the European Patent Directive and Genetically Engineered foods, to continue to build. Indeed, opposition movements are well established throughout the world at large. So there is already antagonism to these issues and a network in place which will continue to keep discussion in the public domain. Pressure in Europe is undoubtedly vital to negotiating success in both the Review and/or a potential next WTO Round, as it could hold the balance of power between the US and the South. Time is evidently important here. *Time could be decisive with respect to developing countries implementing legal regimes which defend their biological resources and resist TRIPs pressures. It has been argued by some that the current textual ambiguities allow the development of legal regimes that conform with the existing TRIPs Article 27.3(b), whilst providing some degree of protection for communities . *A maximum type Review might cause a great deal of damage if only one or two countries are opposing the Article 27. The most likely candidate for leading opposition is India, and if India receives no support in a maximum type Review this leaves the door open for the US. This is a real danger. *Finally, perhaps the biggest danger of initiating a full Review of the sub-paragraph is that attempts to change the text will be rejected by a concerted bloc of developed countries. This might mean: (i) that the chance of changing the text is lost, and (ii) that any laws or alternative rights regimes developed in the next few years would more obviously contravene a better defined sub-paragraph that would result from the rejection of such interpretations in a maximum type Review process. This would mean that the TRIPs status quo would be substantially changed. 7. THE CASE FOR A MAXIMUM TYPE REVIEW OF ARTICLE 27.3(B) Push for a maximum type Review and use every chance to expose its problems and the need to change the text. It might mean a more realistic chance of retaining the current ambiguities of the existing text, if a more challenging position is taken at the outset. The Uruguay Round of WTO negotiations (1986-93) proved that many developing country trade missions are simply not equipped for negotiations in multiple issue areas. Just the TRIP's negotiations alone were a massive undertaking in human resources, and even now the whole agreement is still poorly understood. Therefore, choosing to negotiate Article 27.3(b) as a single issue offers a number of strategic advantages: *Pushing for a maximum type Review of the sub-paragraph would mean the question of IPRs over living organisms would not be muddied by other negotiating areas in the Review of the entire TRIPs agreement in 2000, or a possible next WTO Round. As a single issue, trade-off deals between different sectors of TRIPs, or the WTO, might be difficult for developed countries to make. *The single issue of patent and sui generis rights to biological resources is clearly an area around which there is a potential for a degree of united third world opposition. Evidence of opposition is already apparent. This situation compares favourably to other areas of the TRIPs, where opinion is either divided, or is completely ambivalent. If Article 27.3(b) was negotiated alongside the other areas of intellectual property, then the resistance that exists might be diluted and clouded completely. *The process of capacity building amongst third world governments and trade missions will be a lot more simple when focused on a single article. As the Agriculture Review approaches attention will shift to other sectors which are often perceived of as more important. *A direct focus on the sub-paragraph will allow negotiators to bring into centre stage the conflict between the article's obligations and those of the CBD. There is a stronger chance that this strategy will carry weight if it is not lost amongst other concerns and issues. If there is strong support for pushing the CBD versus TRIPs discussion other countries might come on board. Indeed, there have been critical instances where governments and politicians have called for the supremacy of the CBD over TRIPs - e.g. European Environment Ministers meeting in Denmark, June 1998 and European Parliament Environment Committee, September 1998. *Some developing countries might generally favour patent rights on specific products, but not on biological resources. Negotiating the sub-paragraph alone would enable opposition without compromising policy positions on other areas of IPRs. Also individual WTO agreements are accepted or rejected as 'job-lot' packages, (as are entire WTO Round agreements the Uruguay Round), and countries cannot 'pick-and-mix' specific articles of the TRIPs which they accept or reject. In this sense, a single article Review should be seen as a once and only golden opportunity. *If developing countries have not developed a strategy and negotiating goals for Article 27.3(b) by the 1999 Review then it is unlikely that they will for the full Review of TRIPs or the possible next WTO Round. Capacity building has to be undertaken now anyway. Developing countries must also be ready for any agenda setting moves by the US in the Council for TRIPs in December, and, likewise, similar moves in the Review with respect to the 2000 Review of TRIPs. So a basic strategy has to be prepared anyway. *Many people are taking for granted that the US want a low key Review (outlined in section 6 above). This assumption could prove dangerously complacent. Since the EC adopted the European Patent Directive there is now a potential Quad [9] constituency which would support stronger TRIPs rules covering all living organisms. (Although the Dutch challenge referred to earlier severely weakens this potential). Past GATT history would suggest that the US will be prepared for all eventualities in the Review, and are more than capable of introducing nasty surprises on to the agendas of negotiators at the last minute. They are also more than capable of doing so with or without a divided EU. Preparation for such a move seems necessary. *There is a real danger that an interpretation of the sub-paragraph will be delivered by the WTO's Dispute Settlement Body in the future. The role of this body is to arbitrate disputes between members arising from conflicting understandings of WTO rules, or their non-implementation in a given country. The body has already begun to deliver an increasing number of TRIPs-related judgements, and it seems likely that any dispute resulting from conflicting interpretations of Article 27.3(b) will lead to a decision which could well pre-empt re-negotiation of the text in the 2000 TRIPs Review, or in what the Europeans are calling the ?Millennium Round?. That is, a dispute settlement ruling will create a form of Article 27.3(b) jurisprudence which will influence future treatment of the text. *If the opportunity to revise the sub-paragraph is not taken in 1999 we could well predict the United States taking a position in the 2000 entire TRIPs Review that the correct opportunity to revise the existing text has passed. As such they could argue that there is no going back on the standards of IPRs for biological resources that have, de facto, been accepted because no-one asked for their re-negotiation in 1998. *The Review could provide a forum to highlight and oppose the increased targeting of developing country seed markets by corporations such as Monsanto, thus exposing the implications of patents for Southern countries. Monsanto?s desire to sell modified and patented seed in developing countries is topical, well catalogued, and unpopular. It would be an excellent high-profile example of the implications of Article 27.3(b). *If the issue of Article 27.3(b) is tackled in the Review process developing countries will save a great deal of time and money in developing laws and implementing them. *Perhaps most importantly of all, developing countries have to implement ALL of TRIPs in its current form in the year 2005. Some countries will not have IPR laws in place, and others will not want to introduce IPRs on seed and plant varieties. If the Review was used to completely re-open the Article 27.3(b) agenda, then it would reduce to the pressures toward implementation that these countries will undoubtedly face and help prepare them with information to make informed choices. In conclusion, we suggest that the Review is a very important strategic opportunity for developing countries and as such should not be rejected out of hand. 8. CONCLUSION We would suggest that developing countries should push for a full Review of TRIPs with a realistic view to what may be achieved in the process. The opportunity to challenge the existing sub-paragraph as a single issue should not be by-passed. 1)First, in order to retain the existing text it will be necessary for developing countries to seek a maximum negotiating goal of overturning the sub-paragraph. 2)Second, the ambiguities in the existing text will be clarified by WTO dispute rulings in the longer-term. 3)Third, a Quad coalition will likely seek higher standards of IPRs for living organisms in the longer term, if, for example the Dutch challenge to the European Patent Directive fails. 4)Finally, given the bilateral pressures on developing countries to implement IPR laws which conform to western standards, it seems that they have very little to lose in pushing for a maximum type Review. Developing countries, therefore, have more to gain from developing a common and shared position now. Proposing a Maximum Review does not mean that alternative strategies should be abandoned. Pushing for this type of Review should be combined with the development of alternative rights systems in developing countries that offer rights for community and farmer use of biological resources, and are CBD compatible. One strategy does not cancel out the other. In fact, countries are legally obliged to develop legislation for community rights, access to biological resources and the equitable sharing of benefits derived from biological resources in the CBD. NOTES [1] The Agreement on Trade Related Aspects of Intellectual Property Rights [2] Other grounds for countries to exempt biological resources from patents include environmental prejudice, morality and ordre publique. These are found in Article 27.2 of TRIPs. [3] A sui generis system of rights simply means a unique form of intellectual property for a specific item or technology. [4] The implementation schedule of TRIPs and calendar of TRIPs-mandated reviews is as follows: 1st January 1999 - Review of TRIPs Article 27.3(b) 1st January 2000 - implementation deadline Art. 27.3(b) developing countries; Review of TRIPs (entire text, all countries) 1st January 2005 - implementation deadline Art. 27.3(b) LDCs; implementation deadline of product-patenting for all technologies in countries whose laws excluded such technologies (e.g. pharmaceuticals) from product patenting when TRIPs came into effect (Art. 65.4). [5] The content of submissions proposing a maximum Review could be: (1) re-write the whole paragraph to allow for the non-patentability of plants, animals, microorganisms and micro-biological processes, plus conditioning biological patents (where governments allow them) to compliance with access legislation in countries of origin (as required in the Convention on Biological Diversity (CBD)), (2) replace the last 2 sentences of the paragraph with CBD compliance. (3) simply delete the last two sentences of paragraph 27-3-b, or (4) combinations, variations, etc. of 1 and 2 and 3. [6] The Union for the Protection of New Varieties of Plants (UPOV) is the major international convention governing plant variety-related intellectual property - it provides sui generis rules in this area in the form of Plant Breeders Rights (PBRs). [7] However on 16th October 1998, the Dutch Government submitted a challenge to the Directive in the European Court of Justice. In addition the Norwegian Government will refuse to comply with the European Patent Directive. This effectively opens up the whole discussion again in Europe, which will undermine a firm Northern alliance in the TRIPs Review. [8] However, the body will also meet in June 1st - 3rd 1999, and could deliver a statement at this date. [9] Japan, EU, USA, and Canada. For more information please contact The Gaia Foundation 18 Well Walk Hampstead, London NW3 1LD United Kingdom Tel: (44-171) 435 50 00 Fax: (44-171) 431 05 51 Email: gaia(at)gaianet.org