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EU-Canada WTO patents row

In the capacity of a third party, India has adopted the classic developing-country stand in the course of the EU-Canada patent-protection dispute relating to pharmaceutical products, its focus being on maintenance of the ``systemic balan ce'' in the TRIPS Agreement between the rights and obligations of the producers of technical knowledge, on the one hand, and the users of that knowledge, on the other, writes Ranabir Ray Choudhury.

THE report of the WTO panel on the dispute between Canada and the European Union on ``Patent Protection of Pharmaceutical Products'' _ distributed as an unrestricted document by the WTO Secretariat in March _ is of interest for two reasons. First, t he subject of patenting pharmaceutical products and processes in India has already become important because of the requirements of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement (among other things, the Indian Patents Act has had to be rewritten because of this). Second, India associated itself with the Canada-EU dispute as a third party by virtue of which it laid out its case before the panel, which has been incorporated in the report.

What are the basics of this particular case? Three specific Sections of the Canadian Patent Law as also the Manufacturing and Storage of Patented Medicines Regulations have been cited by the EU as being inconsistent with the provisions of TRIPS as also w ith those of GATT 1994 and the Understanding on Rules and Procedures Governing the Settlement of Disputes. The Canadian Patent Law sections in question are 55.2(1), 55.2(2) and 55.2(3).

Section 55.2(1) reads: ``It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a p rovince or a country other than Canada that regulates the manufacture, construction, use or sale of any product.''

Section 55.2(2): ``It is not an infringement of a patent for any person who makes, constructs, uses or sells a patented invention in accordance with subsection (1) to make, construct or use the invention, during the applicable period provided for by the regulations, for the manufacture and storage of articles intended for sale after the date on which the term of the patent expires.''

The relevant part of the Manufacturing and Storage of Patented Medicines Regulations applicable to Section 55.2(2) reads: ``The applicable period referred to in subsection 55.2(2) of the Patent Act is the six month period immediately preceding the date o n which the term of the patent expires''.

Section 55.2(3) of the Patent Act reads: ``The Governor in Council may make regulations for the purposes of subsection (2), but any period provided for by the regulations must terminate immediately preceding the date on which the term of the patent expir es.''The EU's case _ as regards Sections 55.2(2) and 55.2(3) of the Patent Act and the Regulations _ was that ``Canada, by allowing manufacturing and stockpiling of pharmaceutical products without the consent of the patent holder during the six months im mediately prior to the expiration of the 20-year patent term by virtue of the provisions of Section 55.2(2) and 55.2(3) of the Patent Act together with the Manufacturing and Storage of Patented Medicines Regulations, violated its obligations under Articl e 28.1 together with Article 33 of the TRIPS Agreement''.

Article 28.1 of the TRIPS agreement says: ``A patent shall confer on its owner the following exclusive rights: (a) where the subject matter of a patent is a product, to prevent third parties not having the owner's consent from the acts of: making, using, offering for sale, selling, or importing for these purposes that product.'' Sub-section (b) of this Article refers to the patent of a ``process'' and is similar to (a). Article 33 of the TRIPS agreement refers to the ``term of protection'' and reads: `` The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date.''

The EU's further case with regard to Sections 55.2(2) and 55.2(3) was that Canada, ``by treating patent holders in the field of pharmaceutical inventions by virtue of these provisions less favourably than inventions in all other fields of technology, vio lated its obligations under Article 27.1 of the TRIPS Agreement requiring patents to be available and patent rights enjoyable without discrimination as to the field of technology''. Article 27.1 of TRIPS reads in part: ``...patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application... patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced''.

Regarding Section 55.2(1) of the Patent Act, the EU said ``that the provisions...concerning activities related to the development and submission of information required to obtain marketing approval for pharmaceutical products carried out without the cons ent of the patent holder violated the provisions of Article 28.1 of the TRIPS Agreement''. The EU also held that Canada, ``by treating patent holders in the field of pharmaceutical inventions by virtue of these provisions less favourably than inventions in all other fields of technology, violated its obligations under Article 27.1 of the TRIPS Agreement requiring patents to be available and patent rights enjoyable without discrimination as to the field of technology''.

The first point of the Canadian defence was that Sections 55.2(1) and 55.2(2) of the Patent Act conformed to the TRIPS agreement because ``each of these provisions is a `limited exception' to the exclusive rights conferred by a patent within the meaning of Article 30 of the TRIPS Agreement''. Article 30 of TRIPS reads: ``Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.''

Secondly, Canada argued that neither Section 55.2(1) nor 55.2(2) ``discriminates, within the meaning of Article 27 of the TRIPS Agreement, as to the field of technology in which any relevant invention occurs or has occurred, because (i) the prohibition i n Article 27.1 against discrimination on the basis of field of technlogy does not apply to allowable limited exceptions; or, if the Panel were to find Article 27.1 applicable, because (ii) the limited exceptions of Sections 55.2(1) and 55.2(2) are not ex pressly related to any particular field of technology''. Thirdly, Canada argued that ``neither of these provisions reduces the minimum term of protection referred to in Article 33 of the TRIPS Agreement to a term that is less than that minimum''.

Trying to establish that commercial damage had been done to the European manufacturers of pharmaceutical products, the EU also argued that the relevant parts of the Canadian Patent Law and the Regulations had resulted in ``economic losses'' to the tune o f Canadian $100 million per year. The Panel report said: ``This analysis was based on the conservative assumption that, while the operation of the provisions referred to above would allow copy manufacturers to market the product immediately upon patent e xpiry, in the absence of these provisions effective marketing would only be possible at the earliest two years after patent term expiry.''

The arguments advanced by India _ as a third party to the dispute _ are interesting because they effectively incorporate the standpoint of the developing world, which is basically an importer of pharmaceutical technology patented abroad both as regards p roducts and processes. Thus, India said at the very beginning of its representation that ``while its trade interest in the matter before the Panel was limited, it had (a) substantial systemic interest in the case at hand''. To quote from the Panel report : ``The matter related to the more fundamental issue of the appropriate balance between private intellectual property rights and public policy objectives. The crux of this systemic issue was the balance in the TRIPS Agreement between the rights and oblig ations of the producers of technical knowledge on the one hand and the users of that knowledge on the other.''

The representation cited the Preamble of the TRIPS Agreement which emphasised ``the need to promote effective and adequate protection of intellectual property rights'', at the same time ensuring ``that measures and procedures to enforce intellectual prop erty rights do not themselves become barriers to legitimate trade''. It also drew attention to ``the underlying public policy objectives of national systems for the protection of intellectual property, including developmental and technological objectives ''. India cited Article 7 (``Objectives'') of the TRIPS Agreement which reads: ``The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of techno logy, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.''

Having laid stress on this aspect of systemic balance, the Indian argument went on to state that though Articles 27 and 28 of the TRIPS Agreement did confer rights on the owner of a patent, Article 30 provided certain conditional exceptions to these excl usive rights. The problem, as India saw it, was whether the two provisions in the Canadian Patent Act ``were exceptions to rights conferred within the meaning of Article 30 of the TRIPS Agreement''. The considered conclusion was that the exceptions conta ined in Sections 55.2(1) and 55.2(2) ``met both the spirit and the letter of the criteria set out in Article 30''.

Of interest is the point made that if the Canadian exceptions were not there, the patent ``would go well beyond the term of protection and the interests of third parties would be seriously prejudiced''. India maintained that the EU had itself admitted th at in the absence of the ``stockpiling'' exception made in Section 55.2(2), the patented product would enjoy an advantage over others for at least two years after the termination of the patent. As India pointed out, ``patent protection was valid only for 20 years and not for 22 years''.

In the event, the Panel ruled that while Section 55.2(1) was ``not inconsistent'' with Canada's obligations under Article 27.1 and Article 28.1 of the TRIPS Agreement, Section 55.2(2) was ``not consistent'' with the requirements of Article 28.1. The Pane l, therefore, asked the WTO Dispute Settlement Body to request Canada to bring Section 55.2(2) into conformity with the TRIPS Agreement.