JVnet Forum posting** - April 23, 2004
Trang and Ngoc

As mentioned in earlier messages, it is common that patents are effective for 20 years. Let's take the example of a pharmaceutical product patent. During the effective period of the patent, other than the patent right holder, usually only those who are licensed by the patent right holder can legally produce, sell, buy and import this product. On the other hand, there are cases where the patent right holder does not issue a licence, but the government issues a license for government or third party to produce this product. This is compulsory licensing, and the licence in this case is a compulsory licence.

TRIPS Agreement article 31 and compulsory licensing

The 4th message in this series talked about WTO's TRIPS Agreement. Article 31 of this agreement specifies rules for WTO members related to the use of an invention without authorization of the patent right holder. We will now brief you on some of these rules. For details, see the text of the agreement.

In general, governments can only allow use of a patented invention without authorization of the patent right holder in the following cases:

- The proposed user has made efforts to obtain authorization from the patent right holder, on reasonable commercial terms and conditions, and that such efforts have not been successful within a reasonable period of time.

- In the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. In these situations, the government may waive the requirement of the first case (i.e. the proposed user has made efforts to obtain authorization from the patent right holder...).

There are the following requirements for this kind of permit:

- The scope and duration of such use is limited to the purpose for which it was authorized.

- The use is non-exclusive and non-assignable.

- The use is predominantly for the supply of the domestic market (article 31(f))

- The patent right holder must be paid adequate remuneration.

TRIPS Agreement article 31 provides an important legal framework for WTO member countries to take action in a flexible manner to secure access to important pharmaceuticals. However, it was not used by member countries, because, as explained in the document Understanding WTO, "some governments were unsure of how these [rules] would be interpreted, and how far their right to use them would be respected."

This issue was discussed in the WTO Ministerial Conference fourth session in Doha, Qata, 9-14 November 2001. The results of this discussion is the Doha Declaration on TRIPS Agreement and Public Health.

Doha Declaration on the TRIPS Agreement and Public Health (of WTO ministers, November 2001)

This declaration emphasizes that the TRIPS agreement do not and should not prevent WTO members from taking measure to protect public health. The declaration reaffirms countries' right to use the flexibilities in the TRIPS Agreement to promote public health and access to medicines for all.

The whole text of this declaration can be found at the end of this message, or downloaded from <http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trip s_e.htm.>

Regarding compulsory licensing, this declaration makes two important points:

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

5.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 related to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

Compusory licensing and countries with insufficient production capacity:

As mentioned above, according to article 31(f) of the TRIPS Agreement, use under a compulsory licence is to be predominantly for the supply of the domestic market. This means that countries that produce medicines under a compulsory licence are not to export to other countries. Therefore, countries with insufficient production capacity, even if they want to issue compulsory licences, may not have any source from which to buy the medicines.

WTO ministers recognized this as an important issue that needs to be resolved, and assigned the WTO's TRIPS Council to seek a solution and present it to the General Council. This is mentioned in paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health.

On August 30, 2003, the General Council issued a decision on Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health. This decision provides for countries to import and export under compulsory licences. In particular,

- The exporting country, if following the requirements in this decision, will be waived the obligation under TRIPS article 31(f)--i.e. will be allowed to produce for export.

- The importing country, if not a least developed country, will have to make a notification to the TRIPS Council, that: specifies the names and expected quantities of the product(s) needed; confirms that the country has insufficient or no manufacturing capacities for this/ese pharmaceutical product(s); and confirms that, where this/ese product(s) are patented, it has granted or intends to grant a compulsory licence in accordance with TRIPS Article 31.

- The exporting country according to this decision is allowed to issue a compulsory licence to produce and export this/ese pharmaceutical product(s) to the importing country. This compulsory licence must contain the following conditions: only the amount necessary to meet the needs of the importing country shall be produced and the whole production shall be exported to the importing country; products produced under the licence shall be clearly identified through specific labelling or marking and/or special coloring/shaping; and before shipment begins, the licensee shall post on a website: the quantities, the destination, and the distinguishing features of the product(s) as defined above.

- The exporting country has to notify the TRIPS Council on the granting of the compulsory licences and its conditions.

You may find the text of this decision at http://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm.

In the next message, we will talk about two cases related to compulsory licensing from Thailand and Malaysia. Your comments and contributions are welcomed.

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DECLARATION ON THE TRIPS AGREEMENT AND PUBLIC HEALTH

Adopted on 14 November 2001

1. We recognize the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics.

2. We stress the need for the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to be part of the wider national and international action to address these problems.

3. We recognize that intellectual property protection is important for the development of new medicines. We also recognize the concerns about its effects on prices.

4. We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.

In this connection, we reaffirm the right of WTO Members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose.

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

(a) In applying the customary rules of interpretation of public international law, each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles.

(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.

6. We recognize that WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002.

7. We reaffirm the commitment of developed-country Members to provide incentives to their enterprises and institutions to promote and encourage technology transfer to least-developed country Members pursuant to Article 66.2. We also agree that the least-developed country Members will not be obliged, with respect to pharmaceutical products, to implement or apply Sections 5 and 7 of Part II of the TRIPS Agreement or to enforce rights provided for under these Sections until 1 January 2016, without prejudice to the right of least-developed country Members to seek other extensions of the transition periods as provided for in Article 66.1 of the TRIPS Agreement. We instruct the Council for TRIPS to take the necessary action to give effect to this pursuant to Article 66.1 of the TRIPS Agreement.

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