1. Introduction
1. The purpose of this consultation document is to obtain the views of the public on whether New Zealand should accept a Protocol amending the World Trade Organisation (WTO) Agreement on Trade Related Aspects of Intellectual Property Rights ("the TRIPS Agreement").1 This Protocol, which implements the Doha Declaration on the TRIPS Agreement and Public Health was agreed to in December 2005.
2. The Doha Declaration deals with the granting of compulsory licenses for the production of patented pharmaceuticals for export to countries which require such pharmaceuticals to deal with public health problems, but have insufficient or no capacity to produce them themselves.
3. This document sets out the issues and considers legislative amendments necessary to give effect to the Protocol if New Zealand accepts it, and seeks public input on these issues.
1.1 Background
1.1.1 Patents and the TRIPS Agreement
4. Members of the World Trade Organisation (WTO) must provide minimum standards of patent protection. These standards are set out in Articles 27 – 34 of the TRIPS Agreement. Among other requirements, the TRIPS Agreement requires all WTO Members to grant patents for any invention, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.2 In particular, this requires WTO Members to grant patents for pharmaceuticals.
5. The grant of a patent for an invention gives the patent owner the exclusive right to exploit the invention, for a maximum period of twenty years. That is, the patent owner can prevent any other person from exploiting the invention without the patent owner's permission.
1.1.2 Compulsory Licenses and the TRIPS Agreement
6. A compulsory license allows a party to exploit a patented invention without the permission of the patent owner. Parties seeking compulsory licenses must usually apply to a court or a government agency (depending on the country). Holders of compulsory licenses are required to pay the patent owner "adequate remuneration", which may be decided by negotiation, or if this fails, it is decided by a court or other agency. New Zealand's current legislation requires applications for compulsory licenses to be made to the High Court.
7. Compulsory licenses are usually granted for activities that are considered to be abuse of the patent right. These could include the following:
- a refusal by the patent owner to supply or license the invention in reasonable quantities and at a reasonable price;
- refusal to supply the invention to the market at all;
- using the patent in a manner determined to be an anti-competitive practice.
8. Article 31 of the TRIPS agreement permits signatories to issue compulsory licenses over patents, and sets out the conditions under which compulsory licenses can be granted. One of the conditions, set out in Article 31(f), is that any use of the invention authorised by the compulsory license:
"shall be predominantly for the supply of the domestic market of the [WTO] Member authorising the use".
The provisions of Article 31(f) can be waived if the license is issued to deal with a practice determined to be anti-competitive (see Article 31(k)).
9. The effect of Article 31(f) is that products produced under a compulsory license can only be produced for, and sold predominantly within the country that granted the license. The license cannot authorise production for export as this would breach Article 31(f).
1.1.3 Patented Pharmaceuticals and the TRIPS Agreement
10. As noted earlier, the TRIPS Agreement requires all WTO Members to grant patents for, inter alia, pharmaceuticals. This, together with the provisions of Article 31(f) (see above), has been identified as a potential problem for developing countries facing public health problems, such as, for example an epidemic of a serious disease such as AIDS, where:
- one or more patented pharmaceuticals are required to deal with the problem; and
- the country is unable to obtain sufficient supplies of the pharmaceutical, at a reasonable price, from the patent owner; and
- the country has no or insufficient manufacturing capacity for the pharmaceutical concerned.
11. In these circumstances, a developing country could issue a compulsory license to produce the pharmaceutical. But such a license would, by itself, have little effect, as no-one within the country would be in a position to exploit it. Since patent rights are granted on a national basis, a compulsory licence issued by one country has no effect in another.
12. One way around this would be for another country which does possess sufficient manufacturing capacity to issue a compulsory license. However, since the pharmaceuticals produced under the license would not be predominantly for the supply of the market of the country issuing the license, such a license would be in breach of Article 31(f).
1.2 The Doha Declaration
13. In an effort to deal with the problem mentioned above, the fourth WTO Ministerial Conference held at Doha in November 2001 adopted a Declaration on the TRIPS Agreement and Public Health ("the Doha Declaration"). The text of this declaration can be found at the WTO website.
14. This declaration (in paragraph 6) recognised that:
" WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement [and instructed] the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002."
15. The Declaration, in particular the instruction in paragraph 6, was implemented by a decision of the WTO General Council on 30 August 2003. The text of this decision can be found at the WTO website. As a result of this decision, the requirements of Article 31(f) of the TRIPS Agreement were waived, to the extent WTO Members could issue compulsory licenses for the production and export of patented pharmaceuticals to "eligible importing Members" (defined in paragraph 2 of the decision). The 2003 decision also set out a number of other conditions that would need to be satisfied by Members making use of the system that it had established.
16. Eligible "importing Members" include any least developed country, and any other country that has notified the TRIPS Council of its intention to use the waiver as an importing Member. A number of developed countries, including New Zealand, have indicated that they will not use the waiver as an importing Member.3 This indication has been recorded in the Protocol and will become part of an annex to the TRIPS Agreement.
17. The 2003 decision was an interim measure that did not amend the TRIPS Agreement. It merely established a waiver from the requirements of Article 31(f) of the Agreement. It was further agreed (in paragraph 10 of the 2003 decision) that Members would not challenge any measures taken by another WTO Member in conformance with the waiver established by the decision. The General Council also agreed to begin work on a Protocol amending the TRIPS Agreement to replace the waiver.
18. This Protocol was agreed to by a decision of the General Council on 6 December 2005. The Protocol adds an additional Article, 31bis, to the TRIPS Agreement which creates an exception to Article 31(f). This exception allows Members to issue compulsory licenses for the production and export of pharmaceuticals to an eligible importing Member. The text of the decision, including the text of the protocol and new Article 31bis can be found at the WTO website.
19. The proposed Protocol to the TRIPS Agreement is open for acceptance by WTO Members until 1 December 2007 or any later date that may be agreed upon by the WTO, and will take effect when two thirds of Members have accepted it. In the meantime the waiver established by the 2003 decision will remain in effect.
20. As of October 2007, ten WTO Members have accepted the Protocol. These Members are: the United States, Switzerland, El Salvador, the Republic of Korea, Norway, India the Philippines and Israel, Japan and Australia. A number of other Members, including Canada, Kenya and the EU have begun their domestic processes for formal acceptance. Most of these countries have decided to amend their patents legislation prior to accepting the protocol. Legislative amendments will be required if a country is to be able to use the provisions of the Protocol as an importing or exporting Member.
21. This protocol amending TRIPS Agreement will make it easier for countries with insufficient or no manufacturing capacity for pharmaceuticals to gain access to essential pharmaceuticals at a price they can afford. It will be of particular value to least developed and developing countries facing significant public health problems. Under the TRIPS Agreement as originally drafted, such countries might encounter difficulties in obtaining sufficient quantities of the pharmaceuticals they need at prices they can afford. As of August 2007 one country, Rwanda, has notified its intent to use the waiver established by the Doha Declaration to import pharmaceuticals produced under a compulsory license.
Back to Top