[Ip-health] Doha Para 6: WTO in Canadian "Bolar" case on legitmate interests of foreign consumers importance of economies of scale.
James Love
james.love@cptech.org
Wed, 22 May 2002 19:34:22 -0400
I just took a look today at the March 2000 WTO Canadian Bolar case, and it
is a very interesting read, when one looks at the positions being taken by
Canada, the US and the EC in the current WTO negotiations over the issue of
exports of medicines under Article 30 of the TRIPS. Turns out there was a
dispute in the Canadian case over the Canada practice of allowing firms to
do pre-patent-expiration testing for foreign markets, under Article 30, to
speed foreign access to generic drugs. Canada argued that this was allowed
because foreign consumers were legitimate third party interests, it achieved
public health goals, and because economies of scale were very important.
Here is some of the text from this very long opinion. It could easily be
used to justify an Article 30 export exemption. I would check the WTO for
the official version, in case I made any mistakes in editing this. Jamie
CANADA - PATENT PROTECTION OF PHARMACEUTICAL PRODUCTS
WT/DS114/R
17 March 2000
(00-1012)
*Similarly, the United States had expressed the view as a third party in the
present dispute269 that, while a "pre-expiration testing" exception
addressed the legitimate interests of consumers, only the interests of
domestic consumers could be taken into account, as testing for "foreign
regulatory approval" was not within a "properly crafted" exception.
* Canada was of the view that . . . it served the legitimate interests of
third parties in other countries around the world, by enabling them to
obtain needed medicines as soon as possible after patent expiry. The
achievement of that goal was consistent with the objectives of the TRIPS
Agreement, because it sought to protect public health and because it reduced
distortions and impediments to international trade. The following points
were advanced in support of this view.
* Very few countries had fully integrated brand name or generic drug
industries within their borders. Even in large countries, generic producers
frequently had to obtain ingredients such as fine chemicals from producers
in other countries. Many countries had no generic industries at all and had
to obtain generic (as well as brand name) products from other countries.
Smaller countries that did have generic industries did not have domestic
markets sufficiently large to enable those industries to operate on an
economic scale. Those industries had to export in order to be able to
manufacture in sufficient quantities to achieve economies of scale, so that
domestic consumers could receive the benefits of cost-effective generic
products.
* . . . the market in the United States was large enough for generic
producers to manufacture on an economic scale. Very few countries were in
that position. "Pre-expiration testing" exceptions that had the effect of
confining all activities to a single country were of little use to countries
that, unlike the United States, depended on international trade to obtain
generic products.
* In fact, the "Bolar exemption" under United States law recognized one
side of the international trade equation by expressly permitting imports.
* Although not manufactured in all countries of the world, generic
medicines of course had a role to play in promoting public health in all
countries. According to the World Health Organization, more than one third
of the world's population lacked regular access to essential drugs. Every
year, millions of children and adults in developing countries around the
world still died from diseases that could be readily treated by drug
therapies, and more economically treated with generic drugs.273
* Many countries still lacked the facilities and expertise needed to
review the safety, efficacy and quality of drugs destined for their national
markets, and remained dependent on reliable foreign authorities to set the
necessary standards and on foreign generic companies to do the necessary
testing to those standards.
* Consequently, if permissible "pre-expiration testing" were to be
confined to activities related to domestic regulatory review only, the
protection of public health would unquestionably suffer. An important value
expressly recognized in Article 8.1 of the TRIPS Agreement would be
impaired.
* A "pre-expiry testing" exception that did not permit activities in
respect of foreign regulatory approval was useful only to those countries
with markets large enough to sustain domestic generic industries on an
economic scale. It failed to recognize that most countries depended on
international trade for their supply of generic drugs. In order to be
consistent with the first paragraph of the Preamble to the TRIPS Agreement
and with the overarching objective of the WTO Agreement set out in its
Preamble quoted above, a properly crafted "pre-expiry testing" exception[1]
had to take foreign regulatory approvals into account in order that the
objective of removing impediments to international trade could be sustained.
* As the TRIPS system was designed to be international and so to extend
across borders, there was no reason why the legitimate interests of third
parties in other countries could not be taken into account when applying a
limited exception under Article 30. As indicated above, unlike the United
States, very few countries had markets large enough to support domestic
generic drug industries, and many countries had no generic industries at
all. The effect of limiting the scope of a "pre-expiry testing" exception
to domestic regulatory approval was to delay the benefits of generic drugs
to consumers in, and governments of, other countries.
* Alternatively, if the legitimate interests of third parties in other
countries were not to be taken into account, the interests of the patent
owner in those countries also should not be taken into account.
* As regards the EC's observation that, by allowing the activities
referred to in Section 55.2(1) of the Canadian Patent Act with a view to
obtaining marketing approval in any country in the world, the extent of such
activities and their duration during the patent term was totally open-ended
and completely outside the control of the Canadian authorities278, it should
be noted that the whole point of the TRIPS Agreement was to establish
standards for intellectual property protection in all WTO Members.
Accordingly, while the conduct of foreign regulatory approvals was not
within the control of Canadian authorities, the use of patented inventions
in foreign countries was within the control of the patent laws of those
countries, most of which were, or would soon be, subject to the requirements
of the TRIPS Agreement.
7.46 The Panel found no basis for believing that activities seeking product
approvals under foreign regulatory procedures would be any less subject to
these limitations. There is no a priori basis to assume that the
requirements of foreign regulatory procedures will require activities
unrelated to legitimate objectives of product quality and safety, nor has
the EC provided any evidence to that effect. Nor is there any reason to
assume that Canadian law would
apply the exception in cases where foreign requirements clearly had no
regulatory purpose. Nor, finally, is there any reason to assume that it
will be any more difficult to enforce the requirements of Canadian law when
Canadian producers claim exceptions under foreign procedures. With regard
to the latter point, the Panel concurred with Canada's point that the
government is not normally expected to regulate the actual conduct of third
parties in such cases. The enforcement of these conditions, as with other
enforcement of patent rights, occurs by means of private infringement
actions brought by the patent owner. The
patent owner merely has to prove that the challenged conduct is inconsistent
with the basic patent rights created by national law. Once that initial
case is made, the burden will be on the party accused of infringement to
prove its defence by establishing that its conduct with respect to foreign
regulatory procedures was in compliance with the conditions of Section
55.2(1).
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[1] The term "properly crafted pre-expiration testing exception" was used by
the United States as a third party in the dispute (see under section V.
below).
CANADA - PATENT PROTECTION OF PHARMACEUTICAL PRODUCTS
WT/DS114/R
17 March 2000
(00-1012)
Complaint by the European Communities and their member States
Report of the panel
(4) EXCEPTION FOR A REGULATORY SUBMISSION TO A "COUNTRY
OTHER THAN CANADA" 79
(a) The Global Nature of the Pharmaceutical Industry 79
(b) The Global Need for Access to Essential Medicines80
(c) The Context of the TRIPS Agreement 81
(d) Foreign Regulatory Approval and Article 30 of the
TRIPS Agreement 82
(e) Creation of a Trade Barrier 83
(4) EXCEPTION FOR A REGULATORY SUBMISSION TO A "COUNTRY OTHER
THAN CANADA"
4.38 Expanding its arguments268 in response to the EC's
allegation that, since a submission to a regulatory authority
in a country other than Canada was included in the exception
stipulated in Section 55.2(1) of the Canadian Patent Act, the
extent of permissible activities under that provision was
completely out of the control of the Canadian authorities,
Canada submitted that the "other country" aspect of Section
55.2(1) met the requirements of Article 30 of the TRIPS
Agreement. According to the EC, this aspect unreasonably
conflicted with a normal exploitation of a patent, because it
excepted from infringement liability uses of a patented
invention reasonably related to the development and submission
of information required under a law of a country other than
Canada. Similarly, the United States had expressed the view
as a third party in the present dispute269 that, while a "pre-
expiration testing" exception addressed the legitimate
interests of consumers, only the interests of domestic
consumers could be taken into account, as testing for "foreign
regulatory approval" was not within a "properly crafted"
exception. Canada was of the view that this element of the
regulatory use exception was the same as the other elements,
in that it did not affect the core rights of a patent holder
during the term of protection and only impacted upon a
patentee's economic exploitation after the term had expired.
It differed from the other elements only in that it served the
legitimate interests of third parties in other countries
around the world, by enabling them to obtain needed medicines
as soon as possible after patent expiry. The achievement of
that goal was consistent with the objectives of the TRIPS
Agreement, because it sought to protect public health and
because it reduced distortions and impediments to
international trade. The following points were advanced in
support of this view.
(a) The Global Nature of the Pharmaceutical Industry
- Both the brand name and generic pharmaceutical
industries were global in nature. Very few countries had
fully integrated brand name or generic drug industries
within their borders. Even in large countries, generic
producers frequently had to obtain ingredients such as
fine chemicals from producers in other countries. Many
countries had no generic industries at all and had to
obtain generic (as well as brand name) products from
other countries. Smaller countries that did have generic
industries did not have domestic markets sufficiently
large to enable those industries to operate on an
economic scale. Those industries had to export in order
to be able to manufacture in sufficient quantities to
achieve economies of scale, so that domestic consumers
could receive the benefits of cost-effective generic
products.
- The United States agreed that a "pre-expiration
testing" exception was a reasonable exception to the
exclusive rights conferred under the TRIPS Agreement.270
However, the market in the United States was large enough
for generic producers to manufacture on an economic
scale. Very few countries were in that position. "Pre-
expiration testing" exceptions that had the effect of
confining all activities to a single country were of
little use to countries that, unlike the United States,
depended on international trade to obtain generic
products.
- In fact, the "Bolar exemption" under United States
law recognized one side of the international trade
equation by expressly permitting imports. By including
this provision, the United States Congress had clearly
contemplated that some aspects of the "pre-expiration
testing" process would take place in countries other than
the United States.271 The Statement of Administrative
Action by the United States Government in respect of the
Uruguay Round Agreements Act expressly referred to the
United States exemption as an example of a limited
exception permitted under Article 30 of the TRIPS
Agreement.272 Since the TRIPS Agreement required patent
protection in all 134 WTO Members by the year 2005 at the
latest, the drafters of the Statement of Administrative
Action must have contemplated that other countries would
have "pre-expiration testing" exceptions that would
permit activities to be carried on for the purposes of
obtaining regulatory approval in the United States.
Canada's limited exception was one such case.
(b) The Global Need for Access to Essential Medicines
- Although not manufactured in all countries of the
world, generic medicines of course had a role to play in
promoting public health in all countries. According to
the World Health Organization, more than one third of the
world's population lacked regular access to essential
drugs. Every year, millions of children and adults in
developing countries around the world still died from
diseases that could be readily treated by drug therapies,
and more economically treated with generic drugs.273
- Many countries still lacked the facilities and
expertise needed to review the safety, efficacy and
quality of drugs destined for their national markets, and
remained dependent on reliable foreign authorities to set
the necessary standards and on foreign generic companies
to do the necessary testing to those standards. For
example, a 1993 study of 36 African countries conducted
by the World Health Organization had found that only
three had a "limited drug regulatory capacity". Not one
African nation had what the WHO called a "comprehensive
drug regulatory capacity".274
- A refusal to allow testing of generic medicines for
the purposes of foreign regulatory submissions during the
term of patent protection, while permitting it for
domestic submissions, would needlessly delay the
regulatory review process in many countries. As a
result, generic drugs would not be readily available, and
many treatable diseases would remain untreated, in the
period following patent expiry. Moreover, such a refusal
would require that tests be repeated in their entirety in
foreign countries. The World Health Organization opposed
multiple human testing because of its resource
implications for developing countries.275
- Consequently, if permissible "pre-expiration
testing" were to be confined to activities related to
domestic regulatory review only, the protection of public
health would unquestionably suffer. An important value
expressly recognized in Article 8.1 of the TRIPS
Agreement would be impaired.
(c) The Context of the TRIPS Agreement
- The TRIPS Agreement was not a free-standing
intellectual property convention like the Paris
Convention for the Protection of Industrial Property
and the Berne Convention for the Protection of Literary
and Artistic Works. Rather, it was a part of a much
larger system, the overarching purpose of which was to
reduce barriers to trade. The full title of the TRIPS
Agreement was the Agreement on Trade-Related Aspects of
Intellectual Property Rights, and the very first line
of its Preamble recited the desire of Members "to
reduce distortions and impediments to international
trade [...]". The TRIPS Agreement was one of 15
agreements listed in Annex I of the Marrakesh Agreement
Establishing the World Trade Organization (the "WTO
Agreement"). One of the objectives of that Agreement
was set out in its Preamble as follows: "[...] being
desirous of contributing to these objectives by
entering into reciprocal and mutually advantageous
arrangements directed to the substantial reduction of
tariffs and other barriers to trade and to the
elimination of discriminatory treatment in
international trade relations". As noted in Article
XVI:3 of the WTO Agreement, provisions of the WTO
Agreement prevailed over provisions of the Multilateral
Trade Agreements, of which the TRIPS Agreement was one.
- Protection of intellectual property rights was
necessary to the integrity of the international trading
system, because countries that did not respect
intellectual property rights could gain unfair
advantages over countries that did respect and protect
such rights. A principal objective of the TRIPS
Agreement, as one of the agreements comprising the
international trading system, was to eliminate "free-
riding" distortions resulting from the failure of some
countries to respect intellectual property rights by
establishing standards to be applied by all Members.
- However, intellectual property rights, in
conferring exclusive rights on those entitled to them,
were themselves trade-inhibiting if interpreted in an
absolute fashion. The first paragraph of the Preamble
to the TRIPS Agreement recognized this. The paragraph
in its entirety provided as follows: "Desiring to
reduce distortions and impediments to international
trade, and taking into account the need to promote
effective and adequate protection of intellectual
property rights, and to ensure that measures and
procedures to enforce intellectual property rights do
not themselves become barriers to legitimate trade;
[...]". The emphasis of the paragraph was on the
reduction of "distortions and impediments to
international trade". The protection of intellectual
property rights was referred to as a factor that must
be taken into account in achieving this overall
objective. As was evident from the Preambles to both
the TRIPS Agreement and the WTO Agreement, the
protection of intellectual property rights provided for
in the TRIPS Agreement had to be considered in the
broader context of achieving the reduction of "barriers
to trade" (WTO Agreement), as well as to ensuring that
the existence and enforcement of intellectual property
rights did not result in "distortions and impediments
to international trade" (TRIPS Agreement).
Accordingly, while the protection of intellectual
property rights under the TRIPS Agreement had to be
adequate for achieving these purposes, it clearly must
not be allowed to frustrate these broader objectives.
- A "pre-expiry testing" exception that did not
permit activities in respect of foreign regulatory
approval was useful only to those countries with
markets large enough to sustain domestic generic
industries on an economic scale. It failed to
recognize that most countries depended on international
trade for their supply of generic drugs. In order to
be consistent with the first paragraph of the Preamble
to the TRIPS Agreement and with the overarching
objective of the WTO Agreement set out in its Preamble
quoted above, a properly crafted "pre-expiry testing"
exception276 had to take foreign regulatory approvals
into account in order that the objective of removing
impediments to international trade could be sustained.
(d) Foreign Regulatory Approval and Article 30 of
the TRIPS Agreement
- The inclusion of "foreign regulatory approval" in
a "pre-expiry testing" exception was consistent with
the requirements of Article 30. As the purpose of the
TRIPS Agreement was to "reduce distortions and
impediments to international trade", the TRIPS system
extended across borders. As stated by Australia as a
third party in the dispute, the TRIPS Agreement
recognized that the need for this balance extended
across borders, acknowledging the trade-distorting
effects of insufficient or inappropriate protection of
intellectual property rights, and the impact of uneven
or inconsistent forms of protection.277
- As the TRIPS system was designed to be
international and so to extend across borders, there
was no reason why the legitimate interests of third
parties in other countries could not be taken into
account when applying a limited exception under Article
30. As indicated above, unlike the United States, very
few countries had markets large enough to support
domestic generic drug industries, and many countries
had no generic industries at all. The effect of
limiting the scope of a "pre-expiry testing" exception
to domestic regulatory approval was to delay the
benefits of generic drugs to consumers in, and
governments of, other countries.
- Alternatively, if the legitimate interests of
third parties in other countries were not to be taken
into account, the interests of the patent owner in
those countries also should not be taken into account.
If the country in question was a Member, the interests
of the patent owner in that country would be protected
in accordance with that country's intellectual property
laws, which had to conform to the TRIPS Agreement as it
applied to that country. If the country in question
was not a Member and did not protect intellectual
property rights, the patent owner had no interests in
that country to protect.
- As regards the EC's observation that, by allowing
the activities referred to in Section 55.2(1) of the
Canadian Patent Act with a view to obtaining marketing
approval in any country in the world, the extent of
such activities and their duration during the patent
term was totally open-ended and completely outside the
control of the Canadian authorities278, it should be
noted that the whole point of the TRIPS Agreement was
to establish standards for intellectual property
protection in all WTO Members. Accordingly, while the
conduct of foreign regulatory approvals was not within
the control of Canadian authorities, the use of
patented inventions in foreign countries was within the
control of the patent laws of those countries, most of
which were, or would soon be, subject to the
requirements of the TRIPS Agreement.
(e) Creation of a Trade Barrier
- As noted above, the "Bolar exemption" under United
States law expressly excepted from infringement
liability the "import into the United States" of a
patented invention "solely for uses reasonably related
to the development and submission of information under
a Federal law" (and the Food and Drug Administration
permitted the submission of foreign-generated clinical
data). The import exemption assumed third party
activity in other countries that would otherwise
constitute an infringement of TRIPS requirements.
- An indirect ban (through foreign patent systems)
on foreign "pre-expiration testing", in the face of
allowable domestic testing, would thus be inconsistent
with the apparent United States policy of accepting
foreign testing and samples for FDA purposes and would
constitute a shift towards protectionism. Generic
manufacturers in the United States would thenceforth be
protected against competition from countries which,
like Canada, allowed foreign "pre-expiration testing".
This would defeat the objective of the TRIPS Agreement,
as set out in the first paragraph of the Preamble, "to
ensure that measures and procedures to enforce
intellectual property rights do not themselves become
barriers to legitimate trade". Moreover, such a
requirement would be contrary to the spirit of the
Agreement on Technical Barriers to Trade which, in
Articles 2.2 and 6.1 respectively, required that
"Members shall ensure that technical regulations are
not prepared, adopted or applied with a view to or with
the effect of creating unnecessary obstacles to
international trade [...]" and "[...] Members shall
ensure, whenever possible, that results of conformity
assessment procedures in other Members are accepted,
even when those procedures differ from their own,
provided they are satisfied that those procedures offer
an assurance of conformity with applicable technical
regulations or standards equivalent to their own
procedures [...]".
- Such a restriction on the interpretation of
Article 30 of the TRIPS Agreement would, thus, be
contrary to the principle in Article 31.3 of the Vienna
Convention on the Law of Treaties, which required that
account be taken not only of the context of the treaty
in question, but also "any relevant rules of
international law applicable in the relations between
the parties". Further, the TRIPS Agreement and the
Agreement on Technical Barriers to Trade both formed
part of an integrated treaty framework created by
Article II:2 of the WTO Agreement, all of whose
provisions should be construed together so as to create
a coherent system. The Agreement on Technical Barriers
to Trade was part of the context in which the TRIPS
Agreement was to be interpreted pursuant to Article
31.2 of the Vienna Convention.
[snip]
7.46 The Panel found no basis for believing that activities
seeking product approvals under foreign regulatory
procedures would be any less subject to these limitations.
There is no a priori basis to assume that the requirements
of foreign regulatory procedures will require activities
unrelated to legitimate objectives of product quality and
safety, nor has the EC provided any evidence to that effect.
Nor is there any reason to assume that Canadian law would
apply the exception in cases where foreign requirements
clearly had no regulatory purpose. Nor, finally, is there
any reason to assume that it will be any more difficult to
enforce the requirements of Canadian law when Canadian
producers claim exceptions under foreign procedures. With
regard to the latter point, the Panel concurred with
Canada's point that the government is not normally expected
to regulate the actual conduct of third parties in such
cases. The enforcement of these conditions, as with other
enforcement of patent rights, occurs by means of private
infringement actions brought by the patent owner. The
patent owner merely has to prove that the challenged conduct
is inconsistent with the basic patent rights created by
national law. Once that initial case is made, the burden
will be on the party accused of infringement to prove its
defence by establishing that its conduct with respect to
foreign regulatory procedures was in compliance with the
conditions of Section 55.2(1).
_______________________________
268 See paragraph 4.37 above, under (c)(iii).
269 See under section V. below.
270 See under section V. below.
271 Foreign testing is accepted by the Food and Drug
Administration: "The FDA permits the submission of foreign-
generated clinical data so long as the procedures used in
compiling the data comply with FDA requirements."
Intermedics, Inc. v. Ventritex, Inc. (see footnote 185 above),
p. 1284.
272 Reference was made to what is reflected above in
paragraph 4.21, under (b), 5th indent.
273 The Worldwide Role of Generic Pharmaceuticals,
Presentation to International Generic Pharmaceuticals
Association by Dr. Jonathon D. Quick, Director of Essential
Drugs and Other Medicines, World Health Organization,
June 1999. The diseases and death rates are: respiratory
infections (4 million); diarrhoeal disease (3 million);
tuberculosis (2 million); measles (1 million); malaria (1
million); tetanus (½ million); heart attack and strokes (5 ½
million); and cancer (3½ million).
274 Status of Drug Regulation and Drug Quality Assurance in
WHO African Region and Selected Countries, World Health
Organization, March 1999.
275 Developing International Standards for the Generic
Pharmaceutical Industry, Presentation to International Generic
Pharmaceuticals Association by Dr. Juhana E. Idanpaan-
Heikkila, Special Advisor, Quality Assurance and Safety, World
Health Organization, June 1999.
_______________________________
276 The term "properly crafted pre-expiration testing
exception" was used by the United States as a third party in
the dispute (see under section V. below).
277 See under section V. below.
278 See paragraph 4.37 above, under (c)(iii), 2nd indent.
--------------------------------
James Love mailto:james.love@cptech.org
http://www.cptech.org +1.202.387.8030 mobile +1.202.361.3040