UNDP-OSI, Kiev, Sept., 2009Pedro Roffe

Senior Fellow ICTSD

FTAs and flexibilities Approaches and models followed by major

trading partners The US model as one being followed and

strengthened by Europe The health related issues The consequences Lessons, conclusions, questions

TRIPS minimum standards and the protection of pharmaceutical products ◦ Patents available for any inventions in all fields of

technology◦ Minimum protection of 20-year◦ Protection of undisclosed information

Flexibilities in the Agreement

TRIPS minimum standards and freedom of implementation

FTAs adopt different names (EPAs, Trade Promotion)

Major trading partners promoting FTAs with IP chapters: US, EFTA, EU ◦ different paths, no single model

Impact on the perceived balance reached around TRIPS and its flexibilities

Flexibilities: possible typology◦ Pre-grant and post-grant flexibilities

How these flexibilities could be affected by FTAs?

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o Use of transition periods where available

oAdministrative observations and opposition procedures ( note: post grant oppositions)

o Patentable subject matter-Role of patent examiners

-Exclusions from patentability (27.2 and 27.3.a TRIPS)

-Definition of invention (treatment of new uses, new chemical entities)

oPatentability criteria (novelty, inventive step, industrial application). Narrow or wide interpretationsoGuidelines on pharmaceutical granting (WHO, UNCTAD, ICTSD)

oOptions outside the patent system in cases of incremental innovations: utility models, compensatory liability regimes

oPatent claim construction: delimiting the boundaries of the invention

oDisclosure of patented inventions: in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art

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Post grant oppositionsExceptions to patent rights (scientific research, experimental use; Bolar or regulatory exemption; medical treatment or medical practitioner)Parallel importsCompulsory licensing

-Doha regimeControl of patent abuses and anticompetitive licensing practices

Protection of clinical test data, modalities

-Misappropriation

-Data exclusivity (FTAs)

-Cost sharing

USA: Even before TRIPS it has pursued a broader IP agenda. ◦ First major FTA: NAFTA followed by Jordan which

consolidated a new model The Trade Promotion Authority Act (2002):

new push and parameters for negotiations:◦ Provisions on any FTA should “reflect a standard

of protection similar to that found in US law”

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First generation of MOUs or special agreements on IP protection/enforcement

China (1992, 1995); Croatia (1998); Ecuador (1996); Hungary (1993); India (1993); Jamaica (1994); Korea (1986, 1990); Latvia (1995); Nicaragua (1997); Paraguay (2004); Peru (1997); Philippines (1993); Singapore (1987); Sri Lanka (1991); Taiwan (1992, 1993); Thailand (1994); Viet Nam (1997); Trinidad & Tobago (1994)

Canada (199 NAFTA (1994)

FTAs in with IP chapters Australia (2005); Israel (1996);

Singapore (2004) Jordan (2001); Bahrain; Morocco;

Oman; United Arab Emirates Chile (2004); CAFTA-Dominican

Republican; Peru (2009) FTAs not yet in force Panama; ColombiaFTAs under negotiation The Free Trade Agreement of the

Americas (FTAA); Southern Africa Customs Union (SACU) countries (Botswana, Lesotho, Namibia, South Africa and Swaziland); Thailand

No single model of FTAs in the period following the adoption of TRIPS

Negotiations and coverage was dependent on level of involvement and association with EU

For third countries (cases of Mexico, Chile, Mediterranean countries) main objectives:

adherence/efforts to ratify a number IP treaties ensuring adequate and effective protection in

accordance with highest international standards

The 2008 EPA with CARIFORUM including broad TRIPS-Plus enforcement measures

Model being used in a number of ongoing negotiations using a more aggressive prototype that includes strong protection to pharmaceutical products coming closer and going beyond the US prototype

Has followed the EU model but more ambitious in areas related to protection of test data including in most cases an exclusivity period

European agreements have evolved from an incipient framework approach to ensure compliance with TRIPS and adherence to new treaties to models that resemble the US prototype but in improved forms to address concerns of IPRs holders

Examination of the US experience as the model that has been tested

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◦ general provisions◦ trademarks◦ domain names on the internet◦ geographical indications ◦ copyright, related rights and obligations common to

copyright and related rights◦ protection of encrypted program-carrying satellite signals◦ patents and measures related to certain regulated

products◦ enforcement of intellectual property rights

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1. Build on the international IP architecture and the TRIPS minimum standards

2. Extension of subject matter of protection (e.g., digital environment)

3. Ratification of selected IP treaties (e.g., UPOV 1991)

4. Protection of life forms under certain conditions5. Limited use of public policy instruments (e.g.,

compulsory licences, parallel imports)6. Stronger enforcement provisions including

settlement of disputes (e.g., non-violation complaints)

7. Strong protection of pharmaceuticals products

Adjustment of the term of the patent to compensate for delays in its granting

Extension of patent term to compensate for curtailment of patent term as a result of marketing approval

Patent on second uses. Not being a general practice, in some FTAs Parties shall make patent available for any new uses for a known product, “including new uses and new methods for the treatment of particular medical conditions” (Oman, Morocco)

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Reinforcement of provisions on marketing approval: Prohibition of the use of undisclosed information about the safety and efficacy of pharmaceutical products for 5 years from date of its marketing or sanitary approval◦ Article 39(3), TRIPS

Granting of marketing approval to third parties conditioned to the consent or acquiescence of the patent owner by linking the marketing approval to the patent status

In earlier FTAs, limitations on the use of compulsory licenses only in cases of anti-trust remedies, public non-

commercial use and national emergencies or circumstances of extreme urgency (Australia, Jordan, Singapore).

◦ They are not found in new FTAs as those in LA Some FTAs (Morocco) interfere with issue of

exhaustion of IPRs by recognizing that patentees could prevent parallel imports through the use of contracts or other means

A number of FTAs establish that patents can only be revoked or cancelled on grounds that would have justified a refusal to grant the patent initially

One FTA (Bahrain) goes further by providing oppositions shall not be available prior to the grant of the patent◦ Remember our typology of flexibilities

Term extensions are made non-mandatory But, parties need to make a best effort to process patent and

marketing approval applications expeditiously The protection of undisclosed test or other data should not exceed “a

reasonable period of time.” The period of exclusive use shall begin when the drug was first

approved in the US (a so-called “concurrent period”), provided that the other Party grants the approval of the compound within six months of an application.

‘Linkage’ is made optional, not requiring that sanitary authorities withhold approval of a generic until they can certify that no patent would be violated if the generic were marketed.

But, parties need to provide procedures and remedies for adjudicating expeditiously patent infringements of validity or disputes arising with respect marketing approval.

Parties should also make available: ◦ a) expeditious procedures to challenge the validity or

applicability of the patent and ◦ b) effective rewards for a successful challenge to the

validity or applicability of the patent.  

FTAs revised by Congress call on Parties, in the actual text of the FTAs and not in side letters, to affirm their commitments to the Declaration, particularly emphasising that the provisions on data exclusivity should be subordinated to the right of a party to take measures to protect public health.

The revised texts further oblige Parties to respect existing waivers granted by WTO Members regarding provisions of the TRIPS Agreement.

There has been some studies recently publicized

ICTSD together with WHO/PAHO and local partners, based on an established methodology, did work in two Central American countries: Costa Rica and Dominican Republic.

Findings differs due to the structure of the market and different roles play by institutional and private agents

TRIPS plus generate economic effects on the increase in prices and consequently the public and private cost destined for the acquisition of medicines , as well as a reduction in the role of the generic pharmaceutical industry.

The major impact will be felt in the private market where the amount of price increase of medicines is projected to be between 9%-15% in absolute terms of the whole medicines market by the year 2027, as compared with the situation of no application of new intellectual property standards.

Certain market failures are more relevant for the variation of prices than new standards of intellectual property,  particularly where there are asymmetries in information.

In terms of the capacity of the national industry, its sales will be reduced (between 3% and 7%) particularly in the private market and, as a consequence of this, a reduction of its participation in the national market, that which can come to be important in the passage of time (going from 33% in 2007 to 24% in 2027).

Prices might increase in certain years up to 40%

Social security system might need to reduce the supply of medicines in 14-24%, thus affecting the most vulnerable part of the population

Local industry might reduce its market participation in 24-27%

Country differ in the modalities of implementation as well as in the negotiation process

Countries that negotiated FTAs in an earlier phase (Mexico, Chile) appear to have enjoyed more space for implementation including less intervention from the counter part

Chile took advantage of implementing a modern legislation on industrial property that undergone several phases, the latest important one in early 2008. 

Chile for example included a more expanded articulation of CL and competition policies and recently modernized the institutions dealing industrial property

Protection will not be granted or continue in cases of:◦Anticompetitive behavior;◦Public health, national security, non-

commercial public use, national emergency;◦The pharmaceutical product is subject of a

compulsory license;◦The product has not been commercialized in

Chile within 12 months from the date of registry or sanitary approval in the country; and

◦The product has a registry or authorization in a foreign country of more than 12 months.

Under US law, countries are under the obligation to take measures to adjust their internal IP regimes to the new FTA standards, prior to the entry into force of the Agreement.

With respect to the USA these agreements are first, non self-executing, and explicitly do not affect domestic legislation.

The USTR has expressly advised Congress that it may adopt subsequent legislation inconsistent with the terms of an FTA. USTR has also advised Congress that decisions of

dispute settlement panels under the FTAs do not affect US Federal law unless those decisions are expressly given effect by Congress.

FTAs partners risk a more serious monitoring process◦ USTR annual reviews◦ Case of Chile and other countries signing FTAs

Close and aggressive oversight by private agents

Countries fare better if they know what they negotiate

FTAs has meant the “importation” of sophisticated pieces of legislation that might have proved of some usefulness in more advanced countries

The “exporting” countries are endowed with resources, institutions and a system that provides “checks and balances”

“Importing” countries lack those checks and balances, lack sophisticated courts, critical academia and a non-biased law bar that could be the guarantor of a balanced system

Legal implementation of FTAs is not enough Negotiating FTAs with IP chapter constitute a

major challenge: demands resources, competent people and assuming the risks and possible challenges of an appropriate implementation

IP reform could not be enough. Reforms need to be embedded in broader issues beyond IP: how the innovation system of a country operates; how the changes would affect access to medicines, knowledge and fair use of genetic resources.

Need to reassure that countries negotiating FTAs consider costs and benefits. No free process.

Countries need to act accordingly by attributing corresponding resources to the process and demand compensatory schemes for the costs involved.

Do you have an appropriate regulatory system to assume the FTAs obligations and responsibilities, including price regulations?

Do you have the institutional base to act accordingly and responsibly towards your own community and foreign partners?

Do you have in place the checks and balances mentioned above?

Do you have in place instruments to control anticompetitive behavior?

Do you have a system that balance the interests of the research based industry and those of the generic?