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TRIPS and compulsory licensing problems in developing countries India, Sri lanka, Myanmar and Bangla

Meaning and Scope of TRIPS

Currently, international protection for intellectual property is provided within the framework of the TRIPS agreements, this agreement is signed in Uruguay Round of the World Trade Organisation in 1994, and this agreement came into force from 1st Jan 1995. [1]The objective of TRIPS agreement is laid down in Article 7 of the agreement which states that the protection and enforcement of Intellectual Property Rights should contribute to promotion of innovation and development of technology and also to transfer and disseminate the technology as per the mutual advantage of procedures and requirements of knowledge and in a manner which is conclusive to the welfare of society and economy in order to a balance the rights and obligations of people.

Thus article 7 recognizes the protection to the intellectual property which is not supposed to be ended by itself instead it should be balanced to benefit the society at large. Article 8 of the TRIPS agreement sets forth the principles of the agreement and provides that additional measures may be needed to achieve the desired balance between intellectual property protection and larger societal goals.
Article 73 provides security exceptions and permits actions that would otherwise contravene TRIPS agreement but only in limited circumstances i.e. during war or other emergencies that arise in the international relationships or the pursuance of the United Nations Charter obligations for the maintenance of peace and security of each nation.

Concept of Compulsory Licensing- The Indian and International Perspective

India Perspective
Compulsory Licenses are licenses that are granted by a government to an individual or company seeking to use patents, copyrighted works or other types of intellectual property, to do so without seeking the owner's consent. the Compulsory license is the involuntary contract between a willing buyer and an unwilling seller imposed or enforced by the state. The individual or a company granted with a compulsory license is to prevent the abuse of a monopoly granted. Nations currently have the right to issue compulsory licenses or patents and copyrights.

International Perspective

Various conventions that convey the use of the compulsory license and the same can be highlighted as follows:

Paris Convention - The Protection to the Industrial Property

The purpose of the Paris Convention was to establish a system for inventors to protect their inventions internationally. Compulsory licenses over a patented product cannot be granted on the grounds of failure to work or insufficiency of working in a particular field.

The Paris Convention exists for the protection of industrial Property states in which each contracting state shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for instance- failure of work.

Berne Convention - The Protection of Literary and Artistic Works

The provision of the Berne Convention deals with compulsory licensing at the international level, Article 11 bis (2)[2] states that ‘It shall be a matter for legislation in the countries of the Union to determine the conditions under which the rights mentioned in the preceding paragraph may be exercised, but these conditions shall apply only in the countries where they have been prescribed. They shall not in any circumstances be prejudicial to the moral rights of the author, nor to his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority.

On the other hand Article 13(1) states that "Each country of the Union may impose for itself reservations and conditions on the exclusive right granted to the author of a musical work and the author of any words, the recording of which together with the musical work has already been authorized by the latter, to authorize the sound recording of that musical work, together with such words, if any; but all such reservations and conditions shall apply only in the countries which have imposed them and shall not, in any circumstances, be prejudicial to the rights of these authors to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority.

Trade-Related Aspects of Intellectual Property Rights Agreement

The WTO provides the rules on patents, copyright and, trademarks. The concept of Compulsory licenses and several restrictions on the use of the same are highlighted under article 31 of TRIPS. This article focuses on the authorization of the rights holder to use the patent without permission in various situations such as the authorization should be considered as per the individual merits, the proposed user must have made efforts for obtaining the patent, the duration of such use of patent must be limited for which it was authorized.

Concept of developing nations
International investors The concept of developing nations[3] basically, classify nations around the world based upon their level of economic development which included several classification levels ranging from per capita income to life expectancy to literacy rates. Developing countries are those nations that have lower ratings based on these statistical criteria.

Different organizations use separate measures to classify countries into different economic standards, but a few common denominators appear in the mix. For instance, Brazil, Russia, India, China, and South Africa (BRICS) are generally considered developing countries, but examples of common developing countries go far beyond these popular emerging markets.

Requirement or Need of Compulsory Licensing

Compulsory licensing as discussed earlier is when a government Need for compulsory licensing allows someone else to produce a patented product or process without the consent of the patent owner or plans to use the patent-protected invention itself.

The compulsory licensing is promoted to accelerate innovation not only in developed nations but also in developing nations and underdeveloped nations. In Underdeveloped countries, the innovation of pharmaceutical companies is weak and they will prefer getting the compulsory license to a generic drug rather than funding the Research & Development separately, which is often a very costly thing.

Competition and Cost
Compulsory licensing helps to increase the number of companies that produce generic medicines. Hence the supply of generic medicines would rise, and the cost will reduce. This will also force the innovator countries to introduce the differential pricing of their patent module so that they can stand on the market.

The compulsory licensing in the developing nations ensure the availability of goods and services that are available around the world but are not available in the domestic country due to lack of resources. The existence of compulsory licensing ensures the availability of such goods and services at affordable prices to the developing and underdeveloped countries.

As and when a new product or service gets introduced to any new country it accelerates the particular sector, the economy of the country as well as the employment of people in that particular sector. As the local industries of any country would obtain the compulsory license over patented goods, that they can also produce the same good in their respective country which ultimately leads to more employment for thousands of citizens and therefore leads to a reduction in the level of unemployment.

More than 80% of patents in developing and underdeveloped countries are owned by citizens of developed countries. So, compulsory licensing will help the underdeveloped countries to have access to such patented products and would also avoid exploitation of the rarely available goods and services.

Compulsory Licensing Problems Faced By India, Sri Lanka, Myanmar And Bangladesh

  1. Creation of Gray Market
    When the patented products are locally supplied, then it may lead to the grey market in various ways. Gray markets arise when a product is designed and destined for a particular market, but it is also brought in another market known as a ‘gray market’ to sell it for less than its list price in the targeted market. In comparison to black marketing which involves counterfeit or illegal goods, gray marketing may not be called illegal. Grey market may lead to an economic burden on the country.
  2. Difference in standards of National Emergency
    A National emergency has no international standardized definition. This is one of the issues being raised from time to time against compulsory licensing that no fixed standardized definition of a national health emergency is available. A state of health emergency in a country with a lesser population is different from that of a big nation. The outbreak of Swine Flu in India in 2014-15 caused the death of 2,123 people. The number of infected individuals is reported to be 34,656 till 6th April 2015 (according to the Health Ministry).
  3. Apprehensions of the Patent holder
    The Applicant of a compulsory license who has not spent a single penny on the invention cannot be equated with the inventor. The patent holders are of the view that compulsory license would dishearten the inventors as well as discourage them from executing innovative activities. According to them, the patentee spends a lot of money and effort to develop the invention but the compulsory license holder gets the benefit without any effort. In explanation to this, compulsory license will only be granted if some violation is taking place or the demand of drug supply is not completed.
  4. Royalty Free Practice or Low Royalty
    Compulsory license[4] is granted in the situation of crisis, emergency or urgency which means it is granted for the people in great need. At the time of crisis, the product is required in bulk as well as at affordable prices so that it should be in reach of everyone belonging to any financial class. In that case, royalty for a compulsory license cannot be given very high so that price should not get higher.

But still, the patentee is given some royalty as per the agreement. Royalty is decided on many bases like market value of the product, area of marketing, the quantity of product to be marketed, percentage of customers, time period of the license, etc. If marketing is to be done in bulk then royalty is mostly less because even 1% of a huge quantity means a lot of money and it also shows that the requirement of the product is higher. Royalty can be higher in middle and high-income countries with low burdens of disease and royalty is much lower for low-income countries with higher rates of disease burden.

In Myanmar, a Draft on the law has been framed by the government and was published in 2015, which is endowed with the procedural and substantive provisions in the patent laws of major Paris Convention countries. According to the Draft Patent Law, the invention must be novel which involves an inventive step and must have industrial applicability. These requirements are the basic requirements of patent protection globally.

As per the draft bill, Patent applications can be submitted in Myanmar Intellectual Property Office[5] (IPO) and the registration procedure is similar to the other ASEAN countries. IPO is responsible for all IP registrations in the country. After the receipt of the application, the preliminary examination will be conducted by the IPO and at last, the application will be published after the security that it does not defy the integrity, national security, and public safety.

At present, the patent protection in Myanmar is extremely difficult due to the absence of reasonable patent law. Hence, innovations and intellectual inventions can't be protected in Myanmar.

Sri Lanka
Developing country inventors own less than 5 % of world patents. The costs of pharmaceuticals decreased drastically in Sri Lanka about ten years ago with the discovery that Indian drugs were much cheaper than those imported from the West. With TRIPS, all this has changed. All members of the World Trade Organization (WTO) are compelled to recognize product patents. No longer can Indian pharmaceutical companies devise alternate methods for manufacturing patented products. This means that cheap medicines will no longer be available to develop countries like Sri Lanka. Developing countries with weak or no pharmaceutical industries have little hope of building up a vibrant pharmaceutical sector within their economy.

As far as health is concerned, intellectual property has, therefore, meant higher drug prices and lower access to health to us in Sri Lanka[6]. The WTO has through TRIPS dealt a fatal blow to the World Health Organization's Global Strategy for Health for All by the Year 2000. The pressure to enforce third party Intellectual Property Rights (IPR) in developing countries has been increased with TRIPS, which apparently is the only international agreement containing articles requiring its enforcement.

With CBD too remaining largely a paper treaty and of no help to developing countries, the world Intellectual Property system has little to offer the citizens of small developing countries like Sri Lanka. Their very future depends on their ability to mobilize international support in devising strategies, which would help protect them from its detrimental effects.

In Bangladesh, the patent protection is governed by the age-old Patents and Designs Acts of 1911, as amended repeatedly, and the Patents and Designs Rules of 1933. Patents protection can be obtained for both the process and product patent rights for pharmaceutical products. As a least developed country, Bangladesh was exempted from bringing its patent regime into compliance with TRIPS until 2016.

Bangladesh is exempted from the pharmaceutical patent protection prescribed by the TRIPS. On the other hand, it has limited exporting advantages to be used until 1 January 2016 as per the provisions of the TRIPS Agreement under the Doha Declaration of the TRIPS and Public Health. Bangladesh imports approximately 80% of its Active Pharmaceuticals Ingredients (APIs) for domestic production, 20-25% of which are patented.

The TRIPS Agreement has received special attention in the context of pharmaceutical sector of Bangladesh and the pharmaceutical patents since Bangladesh[7] is not obliged to make pharmaceutical patent protection in pursuance of the extended transition period until 2016. However, in order to export essential drugs to regulated market policy should be framed urgently for the formulation of GMP compliant standard for the pharmaceutical sector and establishment of the bio-equivalence laboratory within the country.

Policy assistance to set up common industry infrastructure should focus initially on the setting up of the API Park on priority-based and starting construction is vital as the TRIPS‟ 2016 deadline nears. Lastly, to strengthen the performance of the pharmaceutical sector of the country an integrated approach to innovation and coordination between different components is needed that pave the way for the development of the workforce, skills and technical resources of relevant sectors.

Combating The Problems of Compulsory Licensing

The Patentees’ Right to Hearing

A Patent is a trade-off between private and public benefit and as ‘adequate remuneration’ remains highly subjective being based on the controller’s discretion; patent holders cannot be denied the right to hearing as royalty considerations have great economic significance to the patent holder and it will be unfair to decide without even hearing the stakeholder.

Issue of Adequate Remuneration

The issue of what is an adequate remuneration also needs to be considered. Firstly, TRIPS requires countries utilizing compulsory licensing to pay ‘adequate remuneration’ without specifying a method of calculation. If the reward system is not adequate to recoup an innovator’s investment in the high cost, long gestation R&D activity, that will be a serious disincentive for the furtherance of much-needed drug discovery and development programs.

More Determinate terms in Compulsory Licensing Provisions

On its face, the compulsory licensing provisions contain a number of vague terms that are intended to broaden the scope of terms like public health, essential drugs, etc. In reality, it can create more problems as any country can declare emergency on public health for questionable reasons to assign the compulsory license for any patented drug.

Measures against Counterfeiting and Arbitrage to be a Precondition for Granting a License

As already stated, the concepts of arbitrage and counterfeiting of drugs are safeguarded[8] in TRIPS in a very broad-spectrum. The provisions are widely worded and again, ‘Reasonable measures’ should be allotted a more specific and concrete meaning and lucid standards together with stringent legal barriers to arbitrage should be incorporated in the national law. The status of the importing jurisdiction as regards its legal position to put off arbitrage and thwart counterfeiting should be assessed. Such measures should be made a precondition to the issue of a compulsory license and unless the importing country is equipped and geared up to control the circulation of drugs.

As is reflected by the enormity this verdict is to assume, no prudent IPR legalist would choose to stay oblivious to the commotion caused in the legal circuits as compulsory licensing The examination of the wavering possibilities between which the judgment floats exposes the need for changes in the presently worded provisions so that both at the interpretation and implementation stages there will be more clarity and equity.

Going by the experience of Indian Patents Act 1970, which had provisions for compulsory licenses as well as licenses of right (for pharmaceuticals), the present provisions, if they are not amended to make them user-friendly and practical are unlikely to be a major factor for either India as a supplier or for the recipients (patients in India, other developing and least developed countries).

One of the findings of this paper is that patents are not the only barriers to fair accessibility to drugs and present provisions for the issue of compulsory licenses are certainly not the answer to the problems faced by large populations in need of drugs, patented or off-patent in the poor countries of the world At the same time the role of patents as system of reward for offer a major stimulus to continued R & D in pharmaceuticals cannot be minimised.

[1] Article 7 of the TRIPS agreement

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