[Hague-jur-commercial-law] Attaran on use of contracts to overcome TRIPS exceptions on patents
love@cptech.org
love@cptech.org
Tue, 06 Nov 2001 17:28:56 -0500
In October of 1999, Amir Attaran told an MSF meeting on R&D that poor
countries could never make compulsory licenses work. In December 1999,
Jeffrey Sachs, Michael Kremer and Amir Attaran gave talks at a Sabin
Vaccine colloquium on "Who Will Pay?" for vaccine development. There
Attaran explained that rules under the WTO were very liberal and would
permit all sorts of exceptions to patent rights. He then outlined a
strategy to use private international law provisions on contracts to
overcome the TRIPS exceptions. This is relevant to the current
negotiations over the Hague Convention on Jurisdictions and Foreign
Judgments, where the proposed Hague treaty would greatly enhance the
cross border enforcement of these judgments. Attaran's talk provides an
aggressive view of how contract provisions can radically strengthen IP
rights, and even bind future governments not to override IP rights.
Jamie
http://www.sabin.org/vaccines%5Fdevelop%5Fecon.htm
http://www.sabin.org/pdf/whowillpay.pdf
Chapter 4-Amir Attaran Adds His Voice To Sachs's
Attaran Brings A Lawyer's Insights To The Discussion
While Jeff Sachs's major points were firmly seconded by
Michael Kremer, Sachs received an extra measure of support
from Amir Attaran, an environmental lawyer and
epidemiologist, who discussed how to use the international
legal system to change the vaccine fund from a promising
idea into an executable plan. Attaran set out to demonstrate
that the legal system provided the public sector with a
powerful tool to convince industry that the public's
commitment to future vaccine purchases was both credible and
enforceable. Attaran began by saying that he was
going to talk about two different branches of law.
One is essentially public law, international
intellectual property law, which has a public
aspect. We are also going to be talking about
private international law, contract law for
commercial disputes. What I'm
going to tell you.is that many of the.omissions,
of IP [intellectual property] law can be
supplemented in a very desirable way by contract
law.
This substitution is vital because existing intellectual
property law may create an insurmountable obstacle to
public/private cooperation in developing new orphan
vaccines.
On the surface it may appear that protection for industrial
interests have recently expanded:
One of the ways to secure some kind of return
following.investment of time and money is through
intellectual property rights. Now.intellectual property
law.has been through a tremendous revolution in this
decade with the emergence of what we call the TRIPs
[Trade-Related Aspects of Intellectual Property Rights]
Agreement, which is a WTO [World Trade Organization]
agreement.
It is true that many new possibilities exist:
Since the TRIPs has come into place, you can obtain a
patent for either a product, a process, or both. That
is very important in the pharmaceutical field. In fact,
in the 1970s many European countries were not giving
patents on pharmaceutical products, so for developing
countries to take that step forward is a very large one
at this stage of their development.
The TRIPs provide legal protection against anyone trying to
steal or infringe on a patent, and includes both damages and
the use of injunctions to stop them. This all looks very
good on paper. However, the situation is not as positive for
business as it appears because
[t]here are.limitations on rights. The best known right
now, and most hotly contested, is Article 31, which
deals with compulsory licensing. A compulsory license
is a license awarded without the consent of the person
who holds the patent. There are also exceptions dealing
with human health, human life, and also for the
"legitimate rights of third parties," whatever that
means.
Where the major or only market for a product is in the
developing countries, the right of local governments to
limit intellectual property protection is going to have a
significant negative effect on the willingness of companies
to invest.
However, as bad as this situation is for encouraging R & D,
the new situation creates even a worse effect on the legal
environment:
[M]ore important.than what developing countries may
do,.are the actual uncertainties in TRIPs [itself].
[L]awyers shake when they see new law; it makes their
palms sweat. The public at large sees certainty.
Lawyers see uncertainty. In the TRIPs Agreement,
uncertainty is everywhere.[V]ery few TRIPs disputes
have yet gone to hearing at the WTO, which basically
means there's no judicial interpretation. No one knows
how many of these provisions are going to be
interpreted.
Uncertainty In The Law Kills
The lack of certainty inherent in some of the provisions is
nothing short of amazing:
The "legitimate rights of third parties" is a
derogation [limitation, allowed for in the TRIPS
Agreement]. What does that mean? I can no more tell you
than another lawyer, or perhaps your own idea is better
than mine.
The complications of the new legal situation seem endless:
Also, there are apparently some inconsistencies between
the GATT [General Agreement on Tariffs and Trade]
Agreement, which is the foundational agreement of the
WTO and.the TRIPs. There is a very serious question
over whether parallel importation. can be fully banned
or not. The TRIPs Agreement would seem to say you
could. The GATT Agreement.would seem to say you cannot.
We don't know how that is going to sort out.
Attaran feels that the recent demonstrations against the
World Trade Organization in Seattle have added to the
general uncertainty:
[B]ecause of the political pressures that are on the
intellectual property regime internationally right now,
we don't know what's really going to happen to the
TRIPs Agreement. The risks are actually very unclear in
light of these uncertainties.
Contract Law To The Rescue
Fortunately, there exists a supplement to intellectual
property rights protection that can go a long way toward
eliminating the uncertainty that now surrounds it. That
supplement is private international contract law, which is
part of the public law. This is so valuable because
you have almost unfettered freedom of contract.
Contract law is about as wide as your mind can imagine
it to be.17
Some of the qualities of this type of law are directly
relevant to the goal of finding a way for the private and
public sectors to work together for emerging country vaccine
development. For example,
contracts can bind future governments.[and] provide
stability across changes in government. Contracts have
been found to bind governments after a revolution, so
they can give you certainty against that risk.Contracts
bridge different legal systems. When you write a
contract, you can specify what law governs the
contract. You could [even] have.a Canadian company make
a contract with a French company and have the contract
governed by the law of Japan.
Even more relevant, existing investment can be protected in
a direct and unambiguous
manner. The law provides many safeguards for investors:
Contracts routinely have penalty clauses. They can
provide for liquidated damages. They can provide for
guarantees from a third party.
And if something goes wrong, there is an existing process to
deal with that, because
with international contracts, there are very nice
institutions and procedures that already exist that
perform a beautiful job in arbitrating disputes. The
best known is the International Center for the
Settlement of Investment Disputes. They have a series
of procedural rules that are there. You can incorporate
them into your contract; you can vary them in any way
you want.
The existing procedure for arbitration provides a lot of
control to the participants:
What's nice about arbitration is that you have greater
control than you do in a lawsuit. You actually get to
pick your arbitrators. Usually, the parties decide on a
bench of three arbitrators: [they] pick one acceptable
to Smith, one acceptable to Jones, and then Smith and
Jones fight it out until they find a third person on
whom they can mutually agree.
Attaran believed that contract law would be very helpful in
making Sachs's proposed vaccine fund workable by helping to
shape the structures that the fund entails [e.g., a
scientific panel of experts, a governing board, a set of
donors] and their interaction with the key players in
vaccine development and delivery. Contract law could set up
a situation in which the procedures they used to judge the
acceptability of a new vaccine were both clear and
predictable. This would allow the establishment of a
"conditional sales contract" between the fund and a private
company that was reliably enforceable. Such a contract can
exist for years while the research is conducted and nothing
has to be done until the vaccine is actually developed. At
that point:
the funds to effect the sale can be derived from a
second contract, which has also been done years in the
past, in this case with donors. The donors can make a
purchase commitment to buy vaccines. That can be put
into contractual form. It does not require any
dispersal of the funds by the donors until there is
something to buy. Similarly, if you have a second,
third, fourth, fifth company, you can make agreements
this way.
Contract Law Is Versatile
International contract law gives you great flexibility to
deal with different situations :
It is conceivable that a company with vaccine
production is in a very different position from a
company without it, a small biotech is in a very
different position from a major pharmaceutical company,
and the contracts that are entered into may need to
reflect that.
Flexibility exists not just for dealing with the private
sector, but the public sector as well. For example,
[y]ou may have a donor that wants to support blood-
stage [malaria] vaccines [that are needed] only [by the
poor]; the contract could reflect that as well. These
things can be particularized. Get a menu that suits the
participants to that contract.
Contract law also makes it possible to deal with a major
concern of industry: how do you deal with the existence of
competing vaccine products from different companies?
[I]f there are several vaccines, how will the division
or the segmentation of the market take place?.If the
contracts.arrive at a "winner take all" situation, one
can write them this way. One can also write them in
such a way that a certain scientific assessment takes
place to share out the market. One can also write it in
such a way that when a vaccine is available, a certain
length of time of sale is guaranteed even if another
one comes. There's a million ways to do this.
In the same way you can deal with problems of first- and
second-generation vaccines with various levels of
effectiveness:
[I]f you have a five-year commitment to buy and in year
two some competing product comes up.doesn't that create
a problem? It creates an outcome; it doesn't
necessarily create a problem. The nice thing about the
ability to control those contracts is you can come up
with what is most palatable.
At some point the conditional contract that forms the basis
of the vaccine fund has to be "determined"-which means that
someone has to judge whether or not the terms of the
contract have been met. This often involves a third party,
someone other than the contracting parties. To work, the
group doing the judging
must have certain qualities:
[W]hen one sets the contract up in this way, the party
doing the determining must enjoy the trust of both of
the contractual parties. It must not be arbitrary.
What that usually means is that the party making a
decision to "determine" the contract should have
institutional independence and, obviously, should be
free of bias.
What this means in practice is that if the fund has a
governing board that appoints a scientific panel as the
judge of whether the contract terms have been met, it is
vital that the members of the judging panel
should.have security of tenure. Security of tenure
means that nobody can pull you from your job when you
make a decision they don't like. That, in essence, is
able to nurture a very.principled, politically
unclouded type of scientific assessment. That.serves
everybody in this scheme.
Attaran's presentation added a new dimension to the evolving
discussion of how the private and public sectors could
cooperate in developing new vaccines for emerging economies.
He demonstrated that a feasible way to circumvent many of
the problems involved in intersector interaction existed,
and they did not entail the sacrifice of the interests of
any of the parties.
Vaccine Policy
The Sixth Annual Sabin Vaccine Colloquium at Cold Spring Harbor
Vaccines for Developing Economies, Who Will Pay?
Sponsored by:
The Albert B. Sabin Vaccine Institute
5 December - 7 December 1999
Cold Spring Harbor Laboratories
Clod Spring Harbor, NY 11724-2213
Edited by:
William Muraskin, Ph.D.
Participants
Amir Attaran, The Malaria Project (Canada)
Amie Batson, The World Bank
Seth Berkley, International AIDS Vaccine Initiative (IAVI)
Robert F. Breiman, National Vaccine Program, Centers for Disease Control
Yves Bergevin, Policy Branch, Canadian International Development
Kenneth W. Bernard, National Security Council (Washington D.C.)
Claire V. Broome, Centers for Disease Control and Prevention
John Clymer, Albert B. Sabin Vaccine Institute
Nils Daulaire, Global Health Council
Laura Efros, Technology Policy, White House Office of Science and
Technology Policy
Paul G. Ehmer, US Agency for International Development
Charlene A. Flash, Albert B. Sabin Vaccine Institute
Tore Godal, Global Alliance for Vaccines & Immunizations, UNICEF
Barbara Herz, United States Department of the Treasury
David L. Heymann, Communicable Diseases, World Health Organization
Lynne M. Holloway, General Accounting Office US Government
Peter Hotez, Yale University School of Medicine
Dean T. Jamison, World Health Organization
Mark Kane, Bill and Melinda Gates Children’s Vaccine Program
Gerald T. Keusch, Fogarty International Center, NIH
Michael Kremer, Department of Economics, Harvard University
Jean O. Lanjouw, Netherlands
Adel Mahmoud, Merck Vaccines, Merck & Co., Inc.
Mark Miller, Children’s Vaccine Initiative, World Health Organization
John R. La Montagne, National Institute of Allergy & Infectious Diseases
Melinda Moree, Malaria Vaccine Initiative, PATH
Ariel Pablos-Mendez, Health Sciences Division, The Rockefeller
Foundation
Gordon W. Perkin, Bill and Melinda Gates Foundation
J. Leighton Read, Aviron
Kevin L. Reilly, Wyeth Vaccines and Nutrition
Philip K. Russell, The Albert B. Sabin Vaccine Institute
Jeffrey D. Sachs, Centers for International Development, Harvard
University
Sheryl K. Sandberg, US Department of the Treasury
Alain B. Schreiber, Vical Inc.
Benjamin Schwartz, Epidemiology and Surveillance Division, CDC
H. R. Shepherd, The Albert B. Sabin Vaccine Institute
Richard Skolnik, SASHP, The World Bank
Robert E. Shope, Dept. of Pathology, University of Texas Medical Branch,
Galveston
Walter Vandersmissen, SmithKline Beecham Biologicals (Belgium)
David Webber, Glaxo Wellcome
Roy Widdus, Children’s Vaccine Initiative