Rethinking TRIPS: 'Adequate remuneration' for non-voluntary patent licensing

Journal of International Economic Law

Volumn 11, Issue 4, 2008, Pages 927-970

  Taubman, Antony ^a  

^a WORLD INTELLECTUAL PROPERTY ORGANIZATION   (Switzerland)

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EID: 57149089707     PISSN: 13693034     EISSN: 14643758     Source Type: Journal    
DOI: 10.1093/jiel/jgn035     Document Type: Review

References (220)

1. World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 ('TRIPS').
2. TRIPS is one of the 'Multilateral Trade Agreements' mat 'are integral parts' of the 1994 Agreement Establishing the World Trade Organization ("WTO Agreement'), which is 'the common institutional framework for the conduct of trade relations among its Members in matters related to' TRIPS, inter alia. (WTO Agreement, Article II). TRIPS is a covered agreement under the Understanding on Rules and Procedures Governing the Settlement of Disputes ('DSU'). DSU Article 23 ('Strengthening of the Multilateral System') provides that '[w]hen Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of [the DSU]'.
3. TRIPS, preamble.
4. DSU, Article 3.2.
5. To take one instance among many, specifically regarding compulsory licensing, the Agreement between the United States of America and the Hashemite Kingdom of Jordan on the Establishment of a Free Trade Area, 2001 (Article 4.20) restricts and clarifies permissible grounds for compulsory licenses, but also requires parties to 'respect the provisions of Article 31 of TRIPS and Article 5A(4) of the Paris Convention'.
6. For instance, regarding remuneration for compulsory licensing, the Australia - United States Free Trade Agreement 2004 (Article 17.9.7(b)(ii)) requires 'reasonable compensation' as against the TRIPS requirement for 'adequate remuneration' (Article 31).
7. For instance, the Singapore - United States Free Trade Agreement provides for the complaining party to suspend benefits of 'equivalent effect' (Article 20.6.2) to the nullification and impairment suffered, but the level of retaliation can only be reviewed if it is 'manifestly excessive' (Article 20.6.3).
8. For instance, Article 21.2(c) ('Scope of Application') provides for dispute settlement under me Australia - United States Free Trade Agreement 2004 to apply, inter alia, 'wherever a Party considers that:... a benefit the Party could reasonably have expected to accrue to it under Chapter... Seventeen (Intellectual Property Rights) is being nullified or impaired as a result of a measure that is not inconsistent with this Agreement'.
9. Article 64.2; the moratorium was renewed by the Hong Kong Ministerial Declaration, adopted on 18 December 2005 (WT/MIN(05)/DEC, 22 December 2005), para 45.
10. See Appellate Body Report, India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998, at 9.
11. For example, J. H. Reichman, 'Intellectual Property in International Trade: Opportunities and Risks of a GATT Connection', 22 Vand. J. Transnat'l L. 747 (1989), at 754-67; Diplomatic Conference on the Conclusion of a Treaty Supplementing the Paris Convention as far as Patents are Concerned, 1991.
12. 'It is advisable to establish legal rules, according to which the patentee may be induced, in cases in which the public interest should require it, to allow the use of his invention to all suitable applicants, for an adequate compensation', from Resolutions of the International Congress for the Consideration of Patent Protection, convened at the Universal Exhibition 1873 in Vienna, reprinted in part I of Foreign Relations of the United States 75 (1873-74) at II (f).
13. See, e.g. Negotiating Group on TRIPS, including Trade in Counterfeit Goods, Compilation of Written Submissions and Oral Statements Prepared by the Secretariat (Revision) GATT document MTN.GNG/NG11/W/12/Rev.1 (5 February 1988);
14. see also conflicting textual proposals in the Anell draft of TRIPS, GATT document MTN.GNG/NG11/W/76 (23 July 1990).
15. See also negotiating proposals from the United States (MTN.GNG/NG11/W/14 (20 October 1987)), from the EU (MTN.GNG/NG11/W/26 (26 July 1988)), and from India (MTN.GNG/NG11/W/37 (10 July 1989).
16. Declaration on the TRIPS Agreement and Public Health, WT/MIN(01)/DEC/2, adopted on 14 November 2001.
17. WTO General Council, Amendment of the TRIPS Agreement, decision of 6 December 2005 (document WT/L/641, 8 December 2005) introducing a new Article 31bis;
18. but see also WTO General Council, Amendment of the TRIPS Agreement-Extension of the Period for the Acceptance by Members of the Protocol Amending the TRIPS Agreement (document WT/L/711, 21 December 2007), necessitated as only 14 WTO Members had notified acceptance before the original deadline of 1 December 2007, well short of the necessary two-thirds of the membership for the amendment to enter into force (which it is yet to do)-until it does, a waiver with similar effect will continue.
19. For example, Ministry of Public Health and National Health Security Office, Thailand: Facts and Evidences on the 10 Burning Issues Related to the Government Use of Patents on Three Patented Essential Drugs in Thailand, February 2007;
20. Lawrence A. Kogan, 'Brazil's IP Opportunism Threatens U.S. Private Property Rights' (2007) 38 University of Miami Inter-American Law Review at 1.
21. See, e.g. letter of EU Commissioner for Trade, Peter Mandelson, to Minister for Commerce of Thailand, Krirk-Krai Jirapaet, 10 July 2007, concerning compulsory licensing in Thailand.
22. DSU, Article 3.7.
23. DSU, Article 3.10.
24. According to TRIPS Article 31(b), in the case of public non-commercial use, the patent holder should be informed 'prompdy' if the government or contractor 'knows or has demonstrable grounds to know' mat a valid patent covers the authorized activity, but there is no obligation to conduct a patent search, implying that a relevant authorization may proceed without awareness of relevant patent rights, for instance in the event of an emergency. The required compensation in such a case need not be paid directly, but may also result as the only remedy available under an infringement action, as TRIPS Article 44.2 spells out-an injunction need not be available to restrain such use.
25. TRIPS, Article 44.2.
26. TRIPS, Article 31.
27. Negotiating Group on TRIPS, including Trade in Counterfeit Goods, Meeting of Negotiating Group of 12-14 July 1989, Note by the Secretariat, GATT document MTN.GNG/NG11/14 (12 September 1989) at 2 (Swiss delegation).
28. Ibid.
29. TRIPS itself does not refer to 'compulsory licenses'; TRIPS Article 31 refers to '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'. Other use means other than me public policy and de minimis exceptions permitted under the three-step test of Article 30. The TRIPS negotiators wrestled with the concept, at one stage working with the term 'compulsory licence' as covering 'licences of right [and government use without the authorisation of the patent owner]' (para 5a.1, MTN.GNG/NG11/W/76), but this formula was not adopted. The subsequent Doha Declaration and the ensuing waiver and amendment to TRIPS did employ the term 'compulsory licensing': see n 44 below.
30. Paris Convention on the Protection of Industrial Property, 20 March 1883, Article V.
31. Negotiated prior to TRIPS but substantially incorporated within it: TRIPS, Article 2.
32. Paris, Articles 5A(2) and 5A(4).
33. For 'other cases where the public interest is deemed to require such measures... Member States have freedom to legislate'; G. H. C. Bodenhausen, Guide to the Application of the Paris Convention for the Protection of Industrial Property (BIRPI 1969) 70; military security, public health, and dependent patents are cited as instances in this standard commentary.
34. Christopher Scott Harrison, 'Protection of Pharmaceuticals as Foreign Policy: The Canada-U.S. Trade Agreement and Bill C-22 versus the North American Free Trade Agreement and Bill C-91', 26 North Carolina Journal of International Law and Commercial Regulation 457 (2001).
35. Omnibus Trade and Competitiveness Act (1988), s 1303.
36. Peter Drahos, Information Feudalism: Who Owns the Knowledge Economy? (The New Press New York 2003).
37. Bodenhausen, above n 29, at 73 suggests as much.
38. UK Patents Act 1977 still distinguishes as a ground for compulsory licensing mat of the commercial working in the UK 'being prevented or hindered' by importation (s 48B1(c)).
39. Drafters of the UK Patent Act appear implicitly to accept this reading, since the local working provision, above n 34, applies only to non-WTO proprietors of patents, i.e. those for which the United Kingdom is not obliged to extend the benefits of WTO obligations.
40. Report of Mutually Agreed Solution, Brazil - Measures Affecting Patent Protection - Request for Consultations by the United States, 8 June 2000, G/IV385, IP/D/23, WT/DS199/1 (mutually agreed solution found widiout panel report).
41. The Agreement between the United States of America and the Hashemite Kingdom of Jordan on the Establishment of a Free Trade Area (24 October 2000) provides as a ground for compulsory licensing 'failure to meet working requirements, provided that importation shall constitute working' (at Article 4.20(c)).
42. UNCTAD and ICTSD, Resource Book on TRIPS and Development (Cambridge 2005) 482.
43. TRIPS, Article 31(k).
44. See, below n 54.
45. For example, MTN.GNG/NG11/W/14-Suggestion by the United States for Achieving the Negotiating Objective (20 October 1987).
46. For example, Miriam Jordan, 'Brazil May Flout Trade Laws To Keep AIDS Drugs Free For Patients,' Wall Street Journal, 12 February 2001, B1.
47. A very late amendment did restrict the grounds for CLs on semiconductor technology ('U.S. Accepts Dispute Moratorium to Protect Chips in Trade Deal', Inside U.S.Trade, 16 December 1993), at 45. TRIPS Article 31(d) authorized use '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'.
48. Declaration on the TRIPS Agreement and Public Health, No. WT/MIN(01)/DEC/2, 14 November 2001 ('Doha'), which appears [paras 5 (b) and 6] to use the term 'compulsory licensing' to refer to all forms of NVUA covered by TRIPS Article 31.
49. Jayashree Watal, Intellectual Property Rights in the WTO and Developing Countries (London/The Hague/ Boston 2001) 320.
50. Decision of the General Council of 30 August 2003, Implementation of para 6 of the Doha Declaration on the TRIPS Agreement and public health, WTO document WT/I7540 and Corr.1, 1 September 2003.
51. See above n 15.
52. Yet to enter into legal force: see above n 15.
53. TRIPS, Article 7.
54. John Linarelli, 'What Do We Owe Each Other In The Global Economic Order?: Constructivist and Contractualist Accounts', 15J. Transnat'l L. & Pol'y 181 (2006).
55. Laurence R. Helfer, 'Human Rights and Intellectual Property: Conflict or Coexistence?', Minn. Itell. Prop. Rev., 47 (2003), at 61, http://mipr.umn.edu/ archive/v5n1/Helfer.pdf.
56. Drahos, Peter, 'BITS and BIPS: Bilateralism in Intellectual Property' 4(6) Journal of World Intellectual Property (2001), at 791-808.
57. Anheuser-Busch Inc. v Portugal (European Court of Human Rights (Grand Chamber)), application 73049/01, 11 January 2007
58. (closer to the present issue, see also Balan v Moldova, European Court of Human Rights 19247/03, 29 January 2008, holding that unauthorized and uncompensated government use of copyright works interferes with the right to peaceful enjoyment of possessions).
59. Statute of Monopolies of 1623, 21 Jac. 1, c. 3.
60. Ergas Report, Report of the Intellectual Property and Competition Review Committee on the Review of Intellectual Property Legislation under the Competition Principles Agreement (Canberra 2000), at 24.
61. Paul Romer, 'Ideas and things: The concept of production is being retooled' (The Future Surveyed: 150 Economist Years), The Economist, 11 September 1993, F70(3).
62. It is not here suggested that IP protection is the sole means of ensuring necessary innovation (or even necessarily the most effective for each and every market and technology) but that in a modern market economy some level of IP protection is an essential component of the policy mix mat ensures market entry for firms relying on innovation to compete.
63. TRIPS, Article 7.
64. Although TRIPS language is often used in national laws, including in the laws on compulsory licensing cited below, and TRIPS may have direct effect in some jurisdictions.
65. One controversial exception may be geographical indications: negotiators continue to debate proposals for a multilateral register of geographical indications that, in some forms at least, could create a rebuttable presumption that individual registered terms should be entitled to protection under national laws (e.g. see Communication from the European Communities, Geographical Indications, WTO document TN/IP/W/11, WT/GC/W/547, TN/C/W/26 (14 June 2005);
66. cf. the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration (31 October 1958, revised at Stockholm on 14 July 1967 and amended on 28 September 1979) establishing a register of protected appellations of origin. In both cases, however, the legal protection still requires national laws and means of enforcement: the treaty itself would still not directly 'protect' subject matter, and failure to give protection under national law would breach the expectations of protection agreed between trading partners at treaty level.
67. See above n 28.
68. Despite strong interest from developed economies, in July 2004, the WTO General Council of the WTO excluded trade and competition policy from the scope of trade negotiations under the Doha Round. The Working Group on the Interaction between Trade and Competition Policy (WGTCP) had been created by the 1996 Ministerial Conference in Singapore when competition was formally introduced into the work program of the WTO, but the WGTCP is currently inactive (it undertook a valuable survey of the interaction between IP and competition policy, drawn on briefly below).
69. Communication from Republic of Korea, Working Group on the Interaction between Trade and Competition Policy, WT/WGTCP/W/105, 23 October 1998, at 2.
70. Communication from Japan, Working Group on the Interaction between Trade and Competition Policy, WT/WGTCP/W/106, 27 October 1998, at 3.
71. See, e.g. Doha Declaration, above n 14.
72. Communication from Republic of Korea, see above n 63, at 2.
73. The present article does not seek to advocate or justify the use of compulsory licenses, or their avoidance; it only considers the general legal framework within which domestic policy-makers exercise choices.
74. Attorney General v Adelaide Steamship Co., House of Lords (1913) AC 781 (Lord Parker).
75. Section 133 (2) (a)(ii) Patents Act 1990 (as amended). This concept is defined in s 135 as: (a) an existing trade or industry in Australia, or the establishment of a new trade or industry in Australia, is unfairly prejudiced, or the demand in Australia for the patented product, or for a product resulting from the patented process, is not reasonably met, because of the patentee's failure: (i) to manufacture the patented product to an adequate extent, and supply it on reasonable terms; or (ii) to manufacture, to an adequate extent, a part of the patented product that is necessary for the efficient working of the product, and supply the part on reasonable terms; or (iii) to carry on the patented process to a reasonable extent; or (iv) to grant licences on reasonable terms; or (b)a trade or industry in Australia is unfairly prejudiced by the conditions attached by the patentee (whether before or after the commencing day) to the purchase, hire or use of the patented product, the use or working of the patented process; or (c) if the patented invention is not being worked in Australia on a commercial scale, but is capable of being worked in Australia.
76. TRIPS, Article 64.1 and GATT 1994, Article XXIII 1(a).
77. DSU, Article 22(1).
78. DSU, Article 22(2).
79. DSU, Article 22 (4) provides that the 'level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment'.
80. Decision by the Arbitrator, United States - Measures Affecting The Cross-Border Supply Of Gambling And Betting Services - Recourse to Arbitration by the United States under Article 22.6 of the DSU, WTO document DSUWT/DS285/ARB, 21 December 2007, at 12-13,
81. citing EC - Hormones (Canada),
82. Decision by the Arbitrators, para 37 and EC - Bananas III (United States),
83. Decision by the Arbitrators, para 7.1.
84. United States-Section 110(5) of the US Copyright Act-Recourse to Arbitration under Article 25 of the DSU-Award of the Arbitrators, WT/DS160/ARB25/1, 9 November 2001.
85. A complication arises if adequate remuneration is awarded, for instance, by a court, but is not actually paid by the licensee or authorized party; then the matter may turn on whether the failure to pay the awarded sum was the responsibility of the Member concerned: it is note-worthy that TRIPS Article 31(h) requires not that remuneration be available (as for infringement remedies, such as damages under Article 45 ('shall have the authority to order [adequate compensation]') but that it 'shall be paid' (emphasis added).
86. In Canada-Pharmaceuticals (WT/DS114/R, 17 March 2000, at 7.35), the panel considered 'die market benefits' that fell within the purpose of patent rights under TRIPS as comprising 'competitive commercial activity by others', including 'manufacturing for commercial sale' and not merely sale as such.
87. Jagdish Bhagwati, Free Trade Today (Princeton, 2002) 75.
88. The 'reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations' of the preamble of the Agreement Establishing the World Trade Organization (WTO Agreement).
89. TRIPS, Article 1.1.
90. Resolving this tension-sustaining due freedom of trade and commerce while carving out beneficial exclusions for inventions to promote public welfare-is the thrust of the Jacobean Statute of Monopolies, above n 54, and the elaboration of patent law since is essentially a dynamic process of ensuring the balanced recognition of bom forms of pro-competitive behaviour.
91. For example, Panel Report on Japan - Film, equating 'nullification and impairment' with 'upsetting the competitive relationship' (10.83-10.88).
92. See also Panel Report on EEC - Oilseeds I, para 144.
93. Kyle Bagwell and Robert W. Staiger, 'A Theory of Managed Trade', 80(4) The American Economic Review (1990), at 779-795.
94. See most recently U.S. Department of Justice & Federal Trade Commission, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition (2007). Available at www.usdoj.gov/atr/public/ hearings/ip/222655.pdf (accessed 5 September 2008).
95. Remedies for abuse of patent rights may, of course, extend to financial compensation. For instance, Pakistan's Patents Ordinance 2000 (s 61 (11)) provides in the case of abuse of enforcement procedure the same formula-'adequate compensation'-as for a legitimate compulsory licence.
96. Laurence R. Helfer (2003) 'Human Rights and Intellectual Property: Conflict or Coexistence?', 5 Minnesota Intellectual Property Review, at 47.
97. International Covenant on Economic, Social and Cultural Rights (General Assembly resolution 2200A (XXI) of 16 December 1966), Article 15 (a) and (b).
98. DSU, Article 3.7.
99. Jagdish Bhagwati, The World Trading System at Risk (Princeton, 1991).
100. Sub-Commission for the Protection and Promotion of Human Rights, Resolution on Intellectual Property Rights and Human Rights (August 2000), E/CN.4/Sub.2/Res/2000/7.
101. The Swiss Delegation in the TRIPS negotiations distinguished the two forms of intervention as follows: 'The first situation ... was a sort of safeguard measure to maintain the correct functioning of the market despite the temporary monopoly accorded to the patent holder. The patent holder would escape the application of such provisions if he acted in line with normal commercial practice and assumed his responsibilities as an actor on the market. The second situation that would permit recourse to compulsory licences was that of an overriding public interest. This would be a situation of necessity where rapid action was required, such as the case of an epidemic. Not every case of need would justify recourse to compulsory licences; for example, fiscal motives would not be a sufficient justification'. Meeting Of Negotiating Group Of 12-14 July 1989, GATT document MTN.GNG/NG11/14 (12 September 1989), at 2.
102. TRIPS, Articles 31 and 44.
103. The bare existence of a patent is operationally far less determinative of its social and economic impact, and a fortiori of any remedies necessary to respond to any negative impact, than choices taken as to how license or waive specific exclusive rights under that patent; the identity of the owner and licensees under the patent may also be significant; which is why the compulsory assignment of patents (rather than licenses or revocation) have been ordered in some pro-competition decisions.
104. For example, Australia - United States Free Trade Agreement, s 17.9.7: 'A Party shall not permit the use of the subject matter of a patent without me authorisation of the right holder except in the following circumstances: (a) to remedy a practice determined after judicial or administrative process to be anti-competitive under the Party's laws relating to prevention of anticompetitive practices;
105. or (b) in cases of public non-commercial use, or of national emergency, or other circumstances of extreme urgency ...'.
106. See Anthony Yorke, 'Is it time to bust the Cipro patent?', Salon, 18 October 2001;
107. Press Release, New York's Senator Charles Schumer 16 October 2001 Schumer: New Cipro Source Could Dramatically Increase Supply.
108. TRIPS, Article 31(b).
109. Ibid.
110. TRIPS, Article 44.2.
111. Mary Moran, Anne-Laure Ropars, Javier Guzman, Jose Diaz and Christopher Garrison, The New Landscape of Neglected Disease Drug Development (London School of Economics London 2005).
112. TRIPS Article 31 (c) provides for severely limited grounds for compulsory licensing patents on semiconductor technology.
113. Jerome Reichman and Catherine Hasenzah, Non-voluntary Licensing of Patented Inventions: Historical Perspective, Legal Framework under TRIPS, and an Overview of the Practice in Canada and the USA, Geneva (UNCTAD/ICTSD), 2003.
114. Noting, however, scholarly debate over the 'legitimacy' of the WTO regime and of TRIPS itself: e.g. Daya Shanker, 'Legitimacy and the TRIPS Agreement' (2003) 6(1) The Journal of World Intellectual Property, at 155-189.
115. TRIPS, Article 31(a).
116. Paul Romer, 'Ideas and things: The concept of production is being retooled', The Economist, 11 September 1993, F70(3).
117. An issue also expressed in terms of available relief for infringement - expectation of an automatic injunction or simply a reserve entitlement to damages or an account of profits: eBay Incv MercExchange, L.L.C. [1], 126 S. Ct. 1837 (2006) (cf. also TRIPS, Article 44.2).
118. Canada - Patent Protection of Pharmaceutical Products, 2000 WTO WT/DS114/R.
119. Advisory Council on Intellectual Property (ACIP), Report on Patents and Experimental Use, Canberra, October 2005.
120. Paris Convention, Article 5 ter.
121. For example, under TRIPS, Article 31 ('Other Use Without Authorization of the Right Holder'): authorization is considered on its individual merits (subparagraph (a));
122. 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, unless it concerns a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use (subparagraph (b));
123. scope and duration is limited to the purpose for which it was authorized (subparagraph (c)), it is non-exclusive (subparagraph (d), etc.
124. TRIPS, Article 61: The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settiement Understanding shall apply to consultations and the settlement of disputes under this Agreement except as otherwise specifically provided herein.
125. Canada - Patent Term (DS170), Canada - Pharmaceutical Patents (DS114), EC-Trademarks and Geographical Indications (DS290, DS174), India-Patents (EC) (DS79), India - Patents (US) (DS50), US - section 110(5) Copyright Act (DS 160), US - section 211 Appropriations Act (DS176).
126. Award of the Arbitrators, United States - Section 110(5) of the US Copyright Act - Recourse to Arbitration under Article 25 of the DSU, WT/DS160/ARB25/1, 9 November 2001.
127. Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones) WT/DS26/AB/R, WT/DS48/AB/R, 16 January 1998, see below n 154.
128. Cf. in investment law, Lee O'Connor, Note, 'The International Law of Expropriation of Foreign-Owned Property', 6 Loyola of Los Angeles International & Comparative Law Journal (1983), at 355, 356 ('international law grants the primary responsibility of setting the amount of compensation to the taking state. Only when the amount of indemnification paid does not comport with some subjective, ad hoc standard of reasonableness will international law refuse to defer to the sovereignty of the expropriating nation').
129. Appellate Body report, Japan - Alcoholic Beverages II.
130. Cf. the recognition of 'acquired rights' of third parties following the application of retroactive protection to new copyright subject matter, Bruce Lehman, Article 18 of the Berne Convention: Correspondence Between WIPO Director General Arpad Bogsch and Assistant Secretary of Commerce and Commissioner of Patents and Trademarks, 43 Journal of the Copyright Society of the U.S.A. 181 (1995).
131. Articles 11bis and 13(1).
132. 'Governments should generally not grant compulsory licenses to patents and shall not grant a compulsory license where there is a legitimate reason for not practicing the invention such as government regulatory review. If a government grants a compulsory license, it shall not discriminate against inventions in particular fields of technology and it shall provide for full compensation to the patentee for the license. No compulsory license shall be exclusive'. Suggestion by the United States for Achieving the Negotiating Objective, United States Proposal for Negotiations on TRIPS, Negotiating Group on TRIPS, including Trade in Counterfeit Goods, MTN.GNG/NG11/W/14, 20 October 1987, 3 November 1987.
133. Earlier proposed-as alternative in square brackets. The terms 'fair and equitable' 'adequate' in provision on remuneration of the patent holder (Article 34(h), Brussels Draft), as well as in the clause on public non-commercial use.
134. Stressed in the Panel Report, Canada-Pharmaceutical Patents, WT/DS114/R, 17 March 2000, para 7.83, finding that patent holders have no 'legitimate interest' in preventing competitors from undertaking regulatory preparations during the term of the patent.
135. Brussels draft: '(k) Laws, regulations and requirements relating to such use may not discriminate between fields of technology or activity in areas of public health, nutrition or environmental protection or where necessary for the purpose of ensuring the availability of a product to the public at the lowest possible price consistent with giving due reward for the research leading to the invention'.
136. See also the discussion below regarding comparisons with the law of expropriation.
137. Nuno Pires de Carvalho, The TRIPS Regime of Patent Rights (Aspen 2002) 249.
138. For example, a consent agreement to allow merger to continue: United States Federal Register: March 9, 1995 (Vol. 60, No. 46), at 12948-55: 'The purpose of the [royalty-free] license is to create an independent competitor in the development, production and sale of IVUS Catheters and to remedy the lessening of competition resulting from the CVIS Acquisition and the SCIMED Acquisition as alleged in the Commission's Complaint'.
139. See, Article 31(d).
140. See, Article 31(e).
141. See, Article 31(c): 'the scope and duration of such use shall be limited to the purpose for which it was authorized'.
142. See, Article 31(f).
143. '[t]he drugs derived from the Government Use of Patent in Thailand will be distributed only to diose patients who are covered by the government. Those who are well off and can afford to pay out of dieir own pocket including around 2 million foreign patients still have to pay the high price of patented products. These well off people and the foreign patients are actually the only current market of the patented products. The patented products have little or no access at all, by the majority of Thais whose medicine cost are paid by the government. So they are not the effective market of the patented products. The Government Use of Patents has opened this new market, among those who cannot afford them, for these drugs. However, due to limited budget and the mandate to achieve universal access, the government cannot afford to pay the price of the patented products. Opening of this new market for competition among all generics as well as with the patented products will allow the government to provide good quality essential drugs at an affordable price to all Thais, to fulfill the legal and political commitment to universal access to essential medicine', The Ministry of Public Health and The National Health Security Office, Thailand: Facts and Evidences on the 10 Burning Issues Related to the Government Use of Patents on Three Patented Essential Drugs in Thailand, February 2007.
144. See also ICTSD, see above n 38, at 476-7: 'if a developing country government is granting a compulsory licence to address a public health crisis that affects a large segment of its population, the government could justify the payment of a minimal royalty on grounds that the public interest in the circumstances of the case warrants a reduced royalty'.
145. UK Patent Act 1977 (as amended to April 2007), s 57A.
146. ICTSD, at 475.
147. Carvalho, above n 122, at 247.
148. Ibid, at 246.
149. TRIPS, Article 45.
150. See above n 7 of TRIPS clarifies that the 'other use' of Article 31 'refers to use other than that allowed under Article 30'.
151. The analogy with copyright should not be forced.
152. Panel report (not reviewed by the Appellate Body) on Canada- Pharmaceutical Patents, para 7.55.
153. International Covenant on Economic, Social and Cultural Rights, adopted and opened for signature, ratification and accession by General Assembly resolution 2200A (XXI) of 16 December 1966 (entry into force 3 January 1976) ('the International Covenant'). Article 12 provides for 'the right of everyone to the enjoyment of the highest attainable standard of physical and mental health' identifying necessary steps including those for the 'prevention, treatment and control of epidemic, endemic, occupational and other diseases' and 'the creation of conditions which would assure to all medical service and medical attention in the event of sickness'.
154. For example, the Mexican revolution that led to the Hull doctrine, the nationalization of resources in the post-colonial era, and the Iranian revolution that produced the jurisprudence of the Iran-United States Claims Tribunal.
155. Again, international law of compensation provides a parallel: 'the determination of the amount of an award of "appropriate" compensation is better carried out by means of an enquiry into all the circumstances relevant to the particular concrete case, than through abstract theoretical discussion', Arbitration between Kuwait and the American Independent Oil Co. (AMINOIL), 21 ILM 976 (1982), at 1033 (para 144). One writer favours the criterion of 'appropriate' compensation, rather than 'just' or 'adequate' as this would better convey 'the complex circumstances which may be present in each case', Eduardo Jiménez de Aréchaga, 'International Law in the Past Third of a Century', 159 Recueil des Cours 1, 302 (1978-1), at 1-344.
156. Panel report, Canada - Pharmaceutical Patents, WT/DS114/R, 17 March 2000.
157. Article 31(3)(b), Vienna Convention: treaty interpretation should take into account 'any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation'.
158. The Appellate Body in Japan - Alcoholic Beverages II, WT/DS8/AB/R, at 11, noted that '[g]enerally, in international law, the essence of subsequent
159. TRIPS, Article 31(a) requires that 'audiorization of such use shall be considered on its individual merits', in other words mandating a case-by-case approach, not a systematic, routine or ex ante grant of blanket compulsory licenses.
160. See above n 142.
161. The panel in Canada - Pharmaceuticals comes close to criticizing Canada's position on the basis that the government's choice to create an exclusion to patent rights was sufficient to establish that it was a legimate balancing of interests.
162. Article 31(3)(b), Vienna Convention; see discussion in Panel Report, Canada - Pharmaceutical Patents: 'The Panel did not accord any weight to either of those arguments, however, because there was no documented evidence of the claimed negotiating understanding, and because the subsequent acts by individual countries did not constitute "practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation" within the meaning of Article 31.3(b) of the Vienna Convention'., at 7.47.
163. See AB report, India - Patents (US), at 20: WTO Members are 'free to determine how best to meet their obligations under the TRIPS Agreement within the context of their own legal systems'.
164. For example, among many examples, Intellectual Property Code of the Philippines [Republic Act No. 8293], s 100.6: 'The patentee shall be paid adequate remuneration taking into account the economic value of the grant or authorization, except that in cases where the license was granted to remedy a practice which was determined after judicial or administrative process, to be anti-competitive, the need to correct the anti-competitive practice may be taken into account in fixing the amount of remuneration. (Sec. 35-B, R. A. No. 165a)'; see also Ukraine, Law on Protection of Rights to Inventions and Utility Models, adopted on 15 December 1993, as last amended on 22 May 2003, Article 30.8 ('adequate compensation') (document IP/N/1/UKR/1); and UK Patent Act 1977, Article 48 (6)(d) ('remuneration adequate in the circumstances of the case, taking into account the economic value of the licence').
165. For example, in the United States (28 U.S.C s 1498), for government use: 'Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture'.
166. See also New Zealand Patent Act 1953 s 57.3(b) directing the Court to have regard to the: 'need to ensure that the patentee shall receive reasonable remuneration having regard to the nature of the patented invention'.
167. The US code, see above n 149, was amended in 1995 to specify that 'reasonable and entire compensation' includes 'reasonable costs, including reasonable fees for expert witnesses and attorneys, in pursuing the action' for independent inventors, non-profit organizations, or defined SMEs.
168. See, e.g. Netherlands Patent Act 1995, Article 58.6.
169. 'Le titulaire du brevet a droit à une rémunération adéquate. Celle-ci est déterminée compte tenu du cas d'espèce et de la valeur économique de la licence'. Federal Law on Patents of Invention, 232.14, Article 40e.
170. '[L]a rémunération est déterminée en tenant compte de la valeur économique de la licence dans le pays d'importation, du niveau de développement et de l'urgence sanitaire et humanitaire', Ibid.
171. Jean Chrétien Pledge to Africa Act (Royal Assent 14 May 2004, Entry into force 14 May 2005). While this provision is currently debated, the level of remuneration as such is not apparently an issue:
172. see Richard Elliot, 'Delivery past due', 13 HIV AIDS Law & Policy Review 1 (2008), at 1.
173. 'The remuneration, or royalty fee, to be paid by the licencee to the patentee is calculated by multiplying the monetary value of the supply contract by an amount that fluctuates on the basis of the importing country's standing on the UN Human Development Index. According to this formula, the lowest country on the index would pay a royalty of approximately 0.02 percent, and the highest 3.5 percent', Government of Canada, Canada's Access to Medicines Regime, Consultation Paper, 2006, at http://camr-rcam.hc-sc.gc.ca/review-reviser/camr- rcam-consult-e.html.
174. Canada Patent Act, (R.S., 1985, c. P-4), s 21.08.
175. Regulation (EC) No 816/2006 of the European Parliament and of me Council (17 May 2006, OJ No L 157, 9.6.2006) on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems sets a level of a maximum of 4% of the total price to be paid by the importing country or on its behalf, in the case of situations of national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. 'In all other cases, the remuneration must take into account 'the economic value of the use authorised under the licence to the importing country or countries concerned, as well as humanitarian or noncommercial circumstances relating to the issue of the licence'. It provides the following explanation: 'The simple formula for setting remuneration is intended to accelerate the process of granting a compulsory licence in cases of national emergency or other circumstances of extreme urgency or in cases of public noncommercial use under Article 31(b) of the TRIPS Agreement. The figure of 4% could be used as a reference point for deliberations on adequate remuneration in circumstances other than those listed above'.
176. For example, Netherlands, Policy Rules for the issuance of a compulsory licence under s 57 of the Patents Act 1995, Article 5: 'The Minister of Economic Affairs shall determine adequate remuneration to be paid by the licensee taking into account the economic value of the product to the importing state'.
177. James Love, Remuneration guidelines for non-voluntary use of a patent on medical technologies (WHO/TCM/2005.1, Geneva 2005).
178. The EU regulation explicitly cited the need for expedience as a consideration in setting its standard rate, see note 157.
179. For example, the Netherlands rule, see above n 158, provides: 'Under normal circumstances, the remuneration that the licensee pays to the patent holder must be commensurate with the economic value of the authorisation in ordinary trade. In the present case, the remuneration will be based on the value of the pharmaceutical products in the importing country. If price and income levels are lower in that country than in the Netherlands, that fact will play a leading role in the calculation of the remuneration owed. As a result, the pharmaceutical products should be affordable to everyone in the importing country".
180. Or a variant, the proposed Medical Innovation Prize Fund (MIPF), cited as a form of compensation in Love, see above n 159, at 77.
181. For the lowest level under the Canadian system, see above n 155. For most African countries the rate would be under 1%.
182. German Federal Supreme Court (BGH) decision in Case No. X ZR 26/92, of 5 December 1995: a compulsory license with an 8% license fee was upheld, dismissing the patentee's claim for 40%, in view of public interest considerations.
183. For example, Philippines, Smith Kline & French Laboratories, Ltd. v Court Of Appeals, et Al. (G.R. No. 121867, 24 July 1997), upholding a rate of 2.5% of wholesale sales.
184. See also above n 164.
185. M. H. Mendelson, 'Compensation for Expropriation: The Case Law', 79 The American Journal of International Law 414 (1985).
186. Somarajah, M., The International Law on Foreign Investment (Cambridge: Cambridge University Press 1994) 258-59.
187. Arbitration between Kuwait and the American Independent Oil Co. (AMINOIL), 21 ILM 976 (1982), concerning oil concessions.
188. As one case among hundreds, the Agreement on Encouragement and Reciprocal Protection of Investments between the Arab Republic of Egypt and the Kingdom of the Netherlands defines 'investments' to include 'rights in the field of intellectual property, technical processes, goodwill and knowhow'.
189. Andreas F. Lowenfeld, International Economic Law (Oxford University Press Oxford 2003) 480.
190. 'Certainly, the grant of a compulsory license is not an expropriation in the strict meaning of this term, because an assignment of property rights or other private rights from the current to another legal entity would be characteristic... however, it is a limitation of the patent right, namely an inventory contract, especially a compulsory lease', Inderal case, Op1/72, Decision of the Austrian Supreme Patent and Trademark Senate (OPM) of 26 June 1972.
191. For example, Comprehensive Economic Cooperation Agreement Between The Republic Of India And The Republic Of Singapore, Article 6.5 ('Expropriation'): 'This Article does not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to the revocation, limitation or creation of intellectual property rights to the extent that such issuance, revocation, limitation or creation is consistent with [TRIPS]'. Cf. similar text in Article 10.13 (Expropriation And Compensation), Free Trade Agreement Between The Government of the Republic of Korea and the Government of the Republic of Singapore, and US - Singapore Free Trade Agreement, Article 15.6 ('Expropriation').
192. 'That general rule of interpretation has attained the status of a rule of customary or general international law. As such, it forms part of the "customary rules of interpretation of public international law" which the Appellate Body has been directed, by Article 3(2) of the DSU, to apply in seeking to clarify the provisions of the General Agreement and the other "covered agreements" of the Marrakesh Agreement Establishing the World Trade Organization (the "WTO Agreement"). That direction reflects a measure of recognition that the General Agreement is not to be read in clinical isolation from public international law', Appellate Body Report, United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, at 15-16.
193. Committee on Economic, Social and Cultural Rights, General Comment No. 14 (2000), The right to the highest attainable standard of health (Article 12 of the International Covenant on Economic, Social and Cultural Rights).
194. Sub-Commission for the Protection and Promotion of Human Rights, Resolution on Intellectual Property Rights and Human Rights (August 2000), E/CN.4/Sub.2/Res/2000/7.
195. Commission on Human Rights Resolution: 2004/26 (16 April 2004), Access to medication in the context of pandemics such as HIV/AIDS, tuberculosis, and malaria.
196. International Covenant on Economic, Social and Cultural Rights (adopted and opened for signature, ratification and accession by General Assembly resolution 2200A (XXI) of 16 December 1966, entry into force 3 January 1976), Article 15.1(b) on the right to enjoy the benefits of scientific progress and its applications.
197. Article 15 1(c).
198. Committee On Economic, Social And Cultural Rights, General Comment No. 17 (2005). The right of everyone to benefit from the protection of the moral and material interests resulting from any scientific, literary, or artistic production of which he or she is the author (Article 15, para 1 (c), of the Covenant), E/C.12/GC/17, 12 January 2006.
199. Ibid, at 7.
200. Ibid, at 1.
201. Intellectual property rights and human rights, Sub-Commission on Human Rights resolution 2000/7.
202. Ibid.
203. General Comment No. 17, at 14.
204. Note, for instance, at a regional level that human rights entitlements to the peaceful enjoyment of property have been applied to intangible property and IP in particular. Thus Protocol 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms (done at Paris, 20 March 1952), establishing an entitlement 'to the peaceful enjoyment of [one's] possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties'. For the application of this right to IP,
205. see for example Anheuser-Busch Inc. v Portugal, see above n 53.
206. General Comment No. 17, at 11.
207. Consider the US Federal Trade Commission's intervention in the merger Ciba-Geigy Limited and Sandoz Ltd into Novartis, stemming from loss of competition in research and development in the field of gene therapy, rather than simply loss of competition in sales. A consent order was agreed providing for patent licences to allow competition in gene therapy innovation, and 'to restore full competition in the broader gene therapy market, it was necessary to require the unusual remedy of compulsory licensing'. (Competition Policy and Intellectual Property Rights in the International Trade Context, WT/WGTCP/W/101, 25 September 1998, Working Group on the Interaction between Trade and Competition Policy, Communication from the United States, at 11-12).
208. See above n 183.
209. Universal Declaration of Human Rights (Adopted and proclaimed by General Assembly resolution 217A (III) of 10 December 1948), Article 17.
210. Anheuser-Busch Inc. v Portugal, see above n 53.
211. WTO dispute settlement panels reviewing TRIPS issues have, for instance, found against legislative choices made by Canada, the European Union, and the United States.
212. Article 22.4: '[t]he level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of nullification or impairment'.
213. See United States-s 110(5) of the US Copyright Act-Recourse to Arbitration under Article 25 of the DSU - Award of the Arbitrators, WT/DS160/ARB25/1, 9 November 2001.
214. Arbitrators have read into the text of the DSU that retaliation has the purpose to 'inducing compliance', but equally affirm that Article 22.4 of the DSU requires 'correspondence or identity' between the level of retaliation authorized and the level of nullification or impairment (e.g. Decision by the arbitrators, EC - Bananas III (US) (Article 22.6- EC), para 4.3);
215. see also Award of the Arbitrator, US - Gambling-Arbitration under Article 22.6 of the DSU, WT/DS285/ARB, 21 December 2007, at 3.24.
216. DSU, Articles 22.1 and 22.8.
217. DSU, Articles 22.2 and 25.
218. DSU, Articles 5 and 25.
219. See e.g. Status Report, US - Section 110(5) Copyright Act, WT/DS160/24/Add.45, 10 September 2008, reporting that '[t]he US Administration is working closely with the current US Congress and will continue to confer with the European Communities in order to reach a mutually satisfactory resolution of this matter'.
220. See above n 114.