Free Trade of Pharmaceutical Products: The Limits of Intellectual Property Enforcement at the Border

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1 March 2010

SummaryThe ICTSD Programme on IPRs and Sustainable Development is pleased to announce the availability of Issue Paper No.27, entitled “Free Trade of Pharmaceutical Products: The Limits of Intellectual Property Enforcement at the Border” by Xavier Seuba, Senior Lecturer in Public International Law, at the Universitat Pompeu Fabra, Barcelona.

The detentions of generic medicines in transit as a result of the implementation by certain countries of border measures, which go beyond the minimum standards set by the TRIPS Agreement, have attracted international attention. At the same time, such measures are often considered, by these countries, as instrumental in the fight against the circulation of “counterfeit” medicines. Clearly, the border measures in question raise complex legal and technical issues under the rules of the World Trade Organization (WTO).

In order to achieve a better understanding of the issues at stake, ICTSD released, last summer, a working paper, by the same author, entitled: Border Measures Concerning Goods Allegedly Infringing Intellectual Property Rights: the Seizures of Generic Medicines in Transit..

In the months that followed, the working paper received numerous comments and was presented at a number of seminars and meetings. The challenges posed to the free trade of generic medicines by TRIPS-plus border measures and strengthened IPRs enforcement emerged as the most important reflection resulting from the months of dialogue between issuing the working paper and the present publication. It is also the reason why the author has changed the title to a more appropriate one that fully reflects this new emphasis: Free Trade of Pharmaceutical Products: the Limits of Intellectual Property Enforcement at the Border.

Against this background, the paper shows how detentions of generic medicines in transit have revived long standing tensions between the principles of free trade and those of intellectual property.

In this context, the paper provides an in depth analysis of the complex legal issues raised by the EC custom border regulations and their relationship with the General Agreement on Tariffs and Trade (GATT), the TRIPS Agreement and subsequent WTO instruments, particularly the Doha Declaration on TRIPS and Public Health (2001) and the General Council Decision of 30th August 2003.

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SummaryThe ICTSD Programme on IPRs and Sustainable Development is pleased to announce the availability of Issue Paper No.27, entitled “Free Trade of Pharmaceutical Products: The Limits of Intellectual Property Enforcement at the Border” by Xavier Seuba, Senior Lecturer in Public International Law, at the Universitat Pompeu Fabra, Barcelona.

The detentions of generic medicines in transit as a result of the implementation by certain countries of border measures, which go beyond the minimum standards set by the TRIPS Agreement, have attracted international attention. At the same time, such measures are often considered, by these countries, as instrumental in the fight against the circulation of “counterfeit” medicines. Clearly, the border measures in question raise complex legal and technical issues under the rules of the World Trade Organization (WTO).

In order to achieve a better understanding of the issues at stake, ICTSD released, last summer, a working paper, by the same author, entitled: Border Measures Concerning Goods Allegedly Infringing Intellectual Property Rights: the Seizures of Generic Medicines in Transit..

In the months that followed, the working paper received numerous comments and was presented at a number of seminars and meetings. The challenges posed to the free trade of generic medicines by TRIPS-plus border measures and strengthened IPRs enforcement emerged as the most important reflection resulting from the months of dialogue between issuing the working paper and the present publication. It is also the reason why the author has changed the title to a more appropriate one that fully reflects this new emphasis: Free Trade of Pharmaceutical Products: the Limits of Intellectual Property Enforcement at the Border.

Against this background, the paper shows how detentions of generic medicines in transit have revived long standing tensions between the principles of free trade and those of intellectual property.

In this context, the paper provides an in depth analysis of the complex legal issues raised by the EC custom border regulations and their relationship with the General Agreement on Tariffs and Trade (GATT), the TRIPS Agreement and subsequent WTO instruments, particularly the Doha Declaration on TRIPS and Public Health (2001) and the General Council Decision of 30th August 2003.

The author highlights that the power granted to WTO members to set higher standards of enforcement than those stipulated by Articles 51 and 52 of the TRIPS Agreement has to be consistent with other TRIPS provisions and balanced with the key legal principle of territoriality of IPRs. The principle of free trade in the GATT Agreement and the aim of the TRIPS Agreement to reduce any “distortion and impediments to international trade” should also be respected.

Finally, the author points to the risks that similar detentions occur in developing countries in the future as a result of the implementation of the EU border measures scheme in these countries through the free trade agreements that the EU concludes with them.

For further information, please contact Ahmed Abdel Latif at [email protected]

Foreword



Recent cases of detentions of generic medicines in-transit have attracted wide international attention in view of their implications for efforts to promote greater access to medicines, particularly in developing countries. They often result from the application, by certain countries, of border measures that go beyond the minimum standards set by the Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS) and that are often considered, by the same countries, as instrumental in impeding the trade of \\\"counterfeit\\\" medicines. Clearly, the border measures in question, their interpretation and implementation, raise complex legal and technical issues under the rules of the World Trade Organization (WTO).

In order to facilitate dialogue and achieve a better understanding of the issues at stake, ICTSD released, in June 2009, a working paper entitled Border Measures Concerning Goods Allegedly Infringing Intellectual Property Rights: the Seizures of Generic Medicines in Transit. The author, Xavier Seuba, is Senior Lecturer in Public International Law at the Universitat Pompeu Fabra, Barcelona.

In the months that followed its release, the working paper received numerous comments and was presented at two seminars (Barcelona and Prangins) and at one informal meeting with WTO trade diplomats (Geneva). Exchanges about the paper, further readings and reflections enriched the analysis of a complex topic with important economic, social and legal repercussions.

From a legal perspective, the controversy created by these detention cases revolves around two main interrelated topics: first, the adoption of new intellectual property IP enforcement rules affecting third countries\\\' markets; second, the enforcement of intellectual property rights at the border in a manner that tends to strengthen the position of intellectual property rights holders.

In both cases, the controversy in the area of intellectual property poses significant challenges to free trade. The consolidation of this conclusion, which was mentioned in the working paper, did not occupy the centre stage. Yet, it is the most important reflection resulting from the months of dialogue that took place between issuing the working paper and the present publication. It is also the reason why the author has changed the title to a more appropriate one that fully reflects this new emphasis:  Free Trade of Pharmaceutical Product: The Limits of Intellectual Property Enforcement at the Border.

As the author correctly points out, tensions between the principles of free trade and intellectual property protection are not new. In fact, to a certain extent, the TRIPS Agreement acknowledges these tensions. It was adopted to promote effective and adequate protection of intellectual property rights. However, its Preamble also emphasizes the need \\\"to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade\\\". In this case, the trade in generic pharmaceuticals is both legitimate and permitted under WTO agreements and jurisprudence.

Against this background, the paper examines the nature and scope of existing EC custom border regulations - Council Regulation (EC) 1383/2003 - in light of WTO law, including the General Agreement on Tariffs and Trade (GATT), the TRIPS Agreement and other WTO Members instruments, particularly the Doha Declaration on TRIPS and Public Health (2001) and the General Council decision of 30 August 2003.

The paper reminds us that, although TRIPS Article 1 allows WTO Members to \\\"implement in their law more extensive protection\\\", this faculty is made conditional on not contravening other TRIPS provisions. In this respect, the author argues that Regulation 1383/2003 grants to patentees  rights not contemplated in TRIPS Article 28. In particular, the right granted to seize goods in transit is difficult to reconcile with the territorial nature of intellectual property rights, because in seizing a specific product not intended for the European Union (EU) market, it mandates taking as reference the patent status in the European Member State in which application for customs action is made. Furthermore, the TRIPS Agreement does not include the control of goods in transit, or this potential control is not clearly considered: transit has nothing to do with the release of goods by custom authorities foreseen in TRIPS Article 51.

The author further argues that Regulation 1383/2003 might impose unnecessary restrictions and delays that impede the freedom of transit enshrined in GATT Article V, which permits the control of in-transit goods under the condition that they are not made subject to \\\"unnecessary delays and restrictions\\\". It also does not fulfil the reasonability test set forth in GATT Article V:4, which establishes that regulations imposed on traffic in transit shall be \\\"reasonable\\\". While both customs and patents regulations are recognized in Article GATT XX(d) as grounds that permit measures derogating from GATT obligations, if those regulations were inconsistent with TRIPS, they could not be defended through the exception set forth in this article .

The author emphasizes that the Doha Declaration, and its command to interpret the TRIPS Agreements in a manner supportive of WTO Members\\\' right to protect public health, could be decisive in a WTO panel\\\'s ruling on the TRIPS compliance of Regulation 1383/2003 and its implementing measures.

Often border measures taken in relation to in-transit medicines arise in the context of efforts aimed at combating \\\"counterfeit\\\" drugs, which is a laudable objective. However, there has been a generalized use of \\\"counterfeit\\\" drugs to designate all types of intellectual property rights infringements and simultaneously indicate products\\\' lack of quality. This sends a confusing message to border authorities, countries and international organizations. This matter deserves to be thoroughly clarified in order to avoid mixing public health considerations with other unrelated issues pertaining to intellectual property rights (IPRs) enforcement.

Finally, the paper underlines that attention should be paid to the transposition of the EU border measures scheme in developing countries through the free trade agreements that the EU concludes with these countries. If that were the case, similar detentions could occur in developing countries in the future.

The paper addresses some of the most salient legal questions raised by the recent cases of detentions of generic medicines in transit. We also hope that it could contribute to fostering a constructive dialogue that would clarify the main provisions in the EC border regulation that lend themselves to abuse by right holders, with potential disruptive consequences on the legitimate trade of generic medicines. Beyond the EC regulation, a number of recent laws adopted in developing countries include provisions on border measures that raise similar concerns.

Beyond the legal analysis, the paper seeks to contribute to the wider global debate on the strengthening of IPRs enforcement measures and its repercussions. Indeed, such strengthened enforcement of IPRs has gained prominence in recent years on the global trade and intellectual property agenda. A number of initiatives and developments in this area at the global, regional and bilateral level carry wide-ranging implications for the regulation of the knowledge economy. Strengthened border measures that result in detentions of goods in transit are part of this overall picture. They crystallise the already conflicting relationships between public health and intellectual property on one hand, and free trade and intellectual property on the other.

This paper was commissioned under the ICTSD Programme on IPRs and Sustainable Development. The Programme has sought to achieve a better understanding of IP in the context of sustainable development with a view to ensuring proper balance between the different interests at stake in designing appropriate IP regimes supportive of development objectives and compliant with international commitments. Another central objective has been to facilitate the emergence of a critical mass of well-informed stakeholders in developing countries - including decision-makers and negotiators, but also actors in the private sector and civil society - able to define their own sustainable human development objectives in the field of IP and effectively advance them at the national and international levels.

The premise of ICTSD\\\'s work is based on the understanding that IPRs have never been more economically and politically important - or controversial - than they are today. Patents, copyrights, trademarks and geographical indications are frequently mentioned in discussions on such diverse topics as public health, climate change, food security, education, trade, industrial policy, traditional knowledge, biodiversity, biotechnology, the Internet and creative industries. In a knowledge-based economy, a better understanding of IP is indispensable to informed policymaking in all areas of development.

In this context, we trust that you will find this issue paper a useful contribution to the global debate on the enforcement of intellectual property rights and its repercussions on public policy objectives.

Ricardo Meléndez-Ortiz

Chief Executive, ICTS