3. New Zealand as an Exporting Member
3.1 Possible Legislative Amendments
36. As mentioned earlier, New Zealand could, technically, accept the Protocol without making any amendments to its existing legislation. Such amendments would be necessary if New Zealand is to be able to use the Protocol as an exporting member.
37. There does not seem to be any advantage to New Zealand in accepting the Protocol without legislative amendment to enable New Zealand to become an exporting Member. New Zealand has some pharmaceutical manufacturing capacity, and so could export under the Protocol. There does not seem to be any advantage to New Zealand in accepting the Protocol without legislative amendment to enable New Zealand to become an exporting Member.
38. On the other hand, acceptance without legislative amendment could have the same disadvantages as not accepting the Protocol, as set out in paragraph 35 and might suggest a lack of commitment to the principles behind the Protocol by New Zealand. Further, New Zealand has a general policy that, prior to taking on any international commitments, our legislation is amended to give effect to those commitments, even where the commitments do not oblige New Zealand to change its legislation. On this basis, acceptance of the Protocol without legislative amendment is not considered to be a viable option.
39. If New Zealand is to use the Protocol as an exporting Member, it will be necessary to amend New Zealand's patent legislation, the Patents Act 1953. This Act has recently been reviewed, and a draft Patents Bill to replace the Patents Act 1953 is expected to be introduced to Parliament before the end of 2007.
40. The following discussion is directed towards the nature of amendments required if New Zealand is to export under the Protocol. Since New Zealand has indicated that it does not intend to use the Protocol as an importing Member legislative amendments to enable this will not be considered.
3.2 Current Compulsory License Provisions
41. Section 46 of the Patents Act 1953 sets out the conditions for granting a compulsory license in New Zealand. Section 46(4)(c) states that a compulsory license issued under s46 is to be limited to the supply of the patented invention "predominantly in New Zealand". This would not allow the production, primarily for export, of any patented product for which a compulsory license was issued. The proposed Patents Bill does not make any changes to the compulsory license provisions contained in the Patents Act 1953.
42. The Protocol also sets out (in the annex to the Amendment to the TRIPS Agreement) the terms under which an exporting Member may grant a compulsory license in accordance with Article 31bis. Section 46 does not contain these terms. Suitable amendments to the compulsory license provisions will be needed if New Zealand is to be able to use the Protocol as an exporting Member.
43. This raises the question of the nature of the amendments that might be required or desirable. In particular, consideration will need to be given to the level of prescription and detail that might be required. In other countries that have amended their compulsory license provisions to accord with the Protocol, the level of detail and prescriptiveness varies considerably. This paper considers what level would be appropriate for New Zealand.
3.3 What Amendments would be Required?
3.3.1 Other Countries
44. A number of other countries have amended their legislation to meet the requirements of the Protocol as an exporting Member (although some have yet to formally accept the Protocol). The level of prescriptiveness and detail of the amendments varies from country to country, and appears to be influenced by the state of the local pharmaceutical manufacturing industry.
45. Countries with significant pharmaceutical manufacturing industries, such as the EU and Canada, have enacted quite prescriptive regimes. Other countries, such as Norway, with more modest pharmaceutical industries have enacted relatively simple regimes. New Zealand has a relatively small pharmaceutical industry mainly involved in producing "generic" pharmaceuticals (that is, pharmaceuticals for which the patents have expired). In light of this, a relatively simple regime may be the most appropriate for New Zealand, rather than a more detailed framework as adopted by countries with large pharmaceutical industries.
3.3.2 Issues to be considered
46. Any amendments to New Zealand's patent legislation will need to address at least the following issues:
- The purpose of any compulsory license issued;
- Products for which a license may be granted;
- The conditions under which a license may be granted;
3.3.2.1 Purpose of the License
47. This issue deals with the circumstances under which a license may be issued. The Protocol, in its definition of "pharmaceutical product" refers to public health problems as recognised in paragraph 1 of the 2001 Doha Declaration on the TRIPS Agreement and Public Health. Paragraph 1 states:
"We recognize the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics."
Comment
48. This definition might be considered a little restrictive. If New Zealand were to adopt it, there may be a risk that New Zealand may not be able to apply it to assist with access to medicines for a public health issue that may arise in the future and does not fall within the list of health issues in listed in paragraph 1 of the Doha Declaration.4 A less prescriptive definition may avoid this problem. For example, Norway's legislation refers to a "State's current need for the product for health purposes, as described in the notification" (The "notification" refers to the importing Member's notification to the TRIPS Council to import pharmaceuticals that have been produced under compulsory licence for a particular public health reason).
3.3.2.2 Products for which a license may be granted
49. The Protocol contains (in the annex to new Article 31bis) a definition of "pharmaceutical product":
"pharmaceutical product" means any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address the public health problems as recognized in paragraph 1 of the Declaration on the TRIPS Agreement and Public Health (WT/MIN(01)/DEC/2). It is understood that active ingredients necessary for its manufacture and diagnostic kits needed for its use would be included
50. The Norwegian legislation adopts this definition.5 Canada does not have a single definition of "pharmaceutical product", instead an annex to its legislation lists particular products or processes that may be subject to the compulsory licensing scheme. The Swiss legislation does not have a specific definition, but an explanatory note states:
"Any medicine, active ingredient, diagnostic kit or vaccine which is patented or produced on the basis of a patented process and which is necessary to remedy public health problems such as HIV/AIDS, tuberculosis, malaria or other epidemics in the country of importation may be the object of a compulsory license. As far as all preconditions for a compulsory licence are met, it is important that such licenses are also available for vaccines, since they allow pandemics to be effectively prevented and combated. Therefore, it is suggested to interpret the Decision of 30 August 2003 broadly and explicitly include vaccines in the scope of the compulsory licensing regime of Article 40d of the draft Patent Act."
Comment
51. The Canadian approach requires regular updating and maintenance as products on the market change and are updated. This approach may not be appropriate for New Zealand given the small size of our pharmaceutical industry. There would be an additional problem of deciding what products or processes to place on the list. This is likely to take time and expend considerable resources.
52. Merely adopting the definition in the Protocol may, however, be restrictive. Switzerland's reference to vaccines may suggest some doubt as to whether the Protocol's definition includes vaccines. It would seem desirable to include vaccines as they can be used to prevent or combat pandemics. On this basis, a definition along the lines of that suggested for Switzerland may be more appropriate for New Zealand, rather than simply adopting the Protocol definition.
3.3.2.3 Eligible Importing Countries
53. The Protocol defines an eligible importing Member as:
"eligible importing Member" means any least-developed country Member, and any other Member that has made a notification to the Council for TRIPS of its intention to use the system set out in Article 31bis and this Annex ("system") as an importer, it being understood that a Member may notify at any time that it will use the system in whole or in a limited way, for example only in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. It is noted that some Members will not use the system as importing Members and that some other Members have stated that, if they use the system, it would be in no more than situations of national emergency or other circumstances of extreme urgency;
54. The following questions arise in deciding how New Zealand should define an "eligible importing Member":
- Should any countries be specifically excluded?
- Should eligible importing countries be required to meet any conditions additional to those set out in the protocol?
- How should non-WTO Members be dealt with?
55. Some countries, for example, Switzerland, have, in their domestic legislation, chosen to exclude those countries that have indicated to the TRIPS Council that they will not use the provisions of the Protocol as an importing nation. This exclusion is not required by the Protocol.
56. Canada's legislation divides WTO Members into different categories and specifies conditions according to the category the importing country belongs to. These are set out in "country schedules" which would need to be amended as circumstances change. Other countries have not followed this approach, and it is not required by the Protocol.
57. The Protocol makes no provision for non-WTO Members, but does not prohibit its application to non-Members. To date all countries that have amended their legislation to accord with the Protocol have provided for non-WTO Members to be considered as eligible importing states.
Comment
58. In accepting the Protocol, New Zealand would be bound to accept the requirements for eligible importing countries. There seems to be no compelling reason for going beyond these requirements, either by excluding some countries or by setting additional conditions. By simply adopting the Protocol's definition, New Zealand would retain the flexibility to decide a country's eligibility, as circumstances demand.
59. There also appears to be no reason to exclude non-WTO Members, particularly as such Members are likely to be poorer countries with little or no pharmaceutical manufacturing capacity. Since the purpose of the Protocol is to promote better access to medicines, it would seem unjust to exclude some poorer countries from its benefits merely because they are not Members of the WTO. Most Pacific Island nations are not Members of the WTO, and given New Zealand's responsibilities to the Pacific region, and its close relationships with some Pacific Island countries, it would seem preferable to include non-WTO Members in any New Zealand legislation implementing the Protocol.
3.3.2.4 Conditions for granting a license
60. The Protocol only amends Article 31(f) of the TRIPS Agreement, and does not change the other requirements for granting a compulsory license. It does, however, introduce a number of additional requirements.
Voluntary license to be sought from patent owner
61. TRIPS Article 31(b) requires that, before a compulsory license is sought, efforts must be made to obtain authorisation from the patent owner to use the patented invention on reasonable terms and conditions and that such efforts have not been successful within a reasonable period of time.
62. Section 46(7) of the Patents Act 1953 requires the person applying for a compulsory license to first have taken "all reasonable steps" to obtain a license or a license from the patent owner. While this is compliant with TRIPS, however, the "all reasonable steps" requirement may be rather more onerous than the "make efforts" requirement of TRIPS. Further, section 46 does not make any reference to "a reasonable time".
63. Article 31(b) of TRIPS allows Members to waive the requirement to seek a voluntary license "in the case of a national emergency or other circumstances of extreme urgency". This waiver is not present in s46, although provisions along these lines appear in s58, which deals with Crown use of a patented invention during an emergency. If this waiver is invoked, the patent owner must be informed as soon as reasonably possible.
Comment
64. The requirement in s46, for an applicant for a compulsory license to have taken "all reasonable steps" to obtain a voluntary license may be a higher standard than the "make efforts" requirement of TRIPS. Given the humanitarian objectives of the Protocol, it may be appropriate to adopt the TRIPS standard, at least for compulsory licenses granted under the terms of the Protocol.
65. There is also the question of what constitutes a "reasonable period of time". This, like "reasonable terms and conditions" is likely to depend on the circumstances of each particular case and it would seem appropriate for the authority issuing the license to determine.
66. New Zealand's current compulsory license provisions (excluding those for "Crown Use") do not contain a waiver of the requirement to seek voluntary licenses in cases of national emergency or other similar circumstances. Countries seeking compulsory licenses under the Protocol may well do so to deal with an emergency situation such as an epidemic or natural disaster in the importing country. Under such circumstances it would seem unreasonable, and at odds with the humanitarian objectives of the Protocol, not to waive the requirement to seek a voluntary license. On this basis, New Zealand should consider introducing such a waiver.
Importing country must grant or intend to grant a compulsory license
67. The Protocol requires that if the products for which a compulsory license is sought are protected by a patent in the country of importation, the importing country, must, of course have granted or intend to grant a compulsory license. The TRIPS Council must be notified of this.
Comment
68. It would be in keeping with the Protocol for New Zealand's legislation to require that, before a compulsory license was granted under the Protocol, the importing country must have granted or intend to grant a compulsory license. This would, of course, only apply if the pharmaceutical concerned was protected by a patent in the importing country. In the event that a pharmaceutical is not protected in the importing country, only the exporting Member would be required to issue a compulsory licence.
Limits on production
69. The Protocol (in paragraph 2(b)(i) of the Annex) states that:
"only the amount necessary to meet the needs of the eligible importing Member(s) may be manufactured under the licence and the entirety of this production shall be exported to the Member(s) which has notified its needs to the Council for TRIPS;"
The Protocol does not specify how the "amount necessary" should be determined. This is left up to individual Members to decide.
Comment
70. There would seem to be no reason for New Zealand's legislation to prescribe how the "amount necessary" is to be determined. There will be a number of factors that will need to be taken into account, such as the nature and scope of the health problem being addressed, or the amount of product being manufactured under other compulsory licenses in New Zealand or other countries. These factors are probably best left to the license granting authority to decide, as this will enable the circumstances of individual cases to be taken into account.
3.3.2.5 Remuneration
71. There is a requirement in Article 31(h) that, if a compulsory license is granted, "adequate remuneration" be paid to the patent owner, taking into account the circumstances of the case and the economic value of the license. Article 31(h) does not define what is meant by "adequate".
72. Section 46(6) of the Patents Act 1953 requires a compulsory licensee to pay the patent owner such remuneration as may be agreed between them. In the event that agreement cannot be reached, the remuneration is set by the Court.
Comment
73. New Zealand's current legislation is compliant with Article 31(h) and there should be no need to go further.
3.3.2.6 Identification of products produced under the license
74. The Protocol specifies that products to be produced under the license must be clearly identified as such through appropriate labelling or marking. There is a recommendation that the products "should" be distinguished by special packaging and/or special colouring or shaping provided that this does not have a major impact on the price. The purpose of this requirement is to make it easier to identify products that have been diverted from the markets they were produced for, so as to protect the legitimate interests of patent owners.
Comment
75. At the very least, the mandatory requirement to clearly identify such products through labelling or marking should be contained in New Zealand's legislation. The recommendation regarding packaging, colouring or shaping is not mandatory, but it may be worthwhile for New Zealand to implement this as a legislative requirement. Norway and Switzerland follow this approach in their legislation.
3.3.2.7 Penalties for Violations of License Conditions
76. Another issue that will need to be considered is what (if any) penalties should be provided for violations of these (and other) conditions of the compulsory license.
3.3.3 Notifications
77. The Protocol has the following requirements regarding notifications:
- The person to whom the compulsory license ("licensee") has been granted must post on a website (either the licensee's website or the WTO website) the following information:
- the quantities of product being supplied; and
- the nature of the special marking, labelling or packaging used to identify product produced under the license.
- The exporting Member is required to notify the TRIPS Council of the grant of the licence, the notification including the conditions attached to it, information about the licensee, the products concerned, the quantities to be supplied and the country(ies) being supplied.
Comment
As the notification requirements described above are mandatory, they will need to be in New Zealand's legislation. The main issue to be decided is which government agency should be responsible for notifying the WTO of the grant of the license. In this respect, there may be a need to ensure that the agency concerned is notified of the grant, as the grant will be made by a court. The most likely candidates as responsible agencies would be IPONZ as it administers the Patents Act, through the Ministry of Foreign Affairs and Trade, as it has responsibility for New Zealand's relationship with the WTO.
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