[Ip-health] U.S. WARNS OF POSSIBLE CHALLENGE TO AUSTRALIAN FTA PATENT PROVISION

[James Love]

Inside US Trade

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U.S. WARNS OF POSSIBLE CHALLENGE TO AUSTRALIAN FTA PATENT PROVISION
____________________________________________

Date: **December 10, 2004

Letters released late last week by the U.S. and Australian governments
indicate the U.S. may challenge certain provisions in a bilateral free
trade agreement related to pharmaceutical patents in the World Trade
Organization. The letters confirming each country=92s implementing
legislation is consistent with its obligations under the FTA were posted
on U.S. and Australia government trade websites Dec. 2.

The Nov. 17 letter from U.S. Trade Representative Robert Zoellick to
Australian Trade Minister Mark Vaile highlights as a continued problem
provisions of the Australian legislation that allow the imposition of
penalties of up to 10 million Australian dollars on pharmaceutical
patent holders that are found to have filed frivolous suits to extend
their patents and prevent generic copies of patented drugs from being
marketed in Australia. This controversial language was added to the
implementing legislation on the demands of the minority Labor party
after the FTA negotiations concluded.

These provisions impose =93a potentially significant, unjustifiable, and
discriminatory burden on the enjoyment of patent rights, specifically on
owners of pharmaceutical patents,=94 the Zoellick letter said. The letter
urges Australia=92s government to review the matter, =93particularly in
light of Australia=92s international legal obligations,=94 and states that
the U.S. =93reserves its rights to challenge the consistency of these
amendments with such obligations.=94

The Bush Administration and U.S. pharmaceutical companies have not
argued that the penalties violate the FTA, but have said they violate
the WTO=92s rules on protections of intellectual property rights by
imposing burdens on pharmaceutical patent holders that other patent
holders do not have to meet. In negotiations over the last month with
the U.S., Australia has rejected changes to the FTA=92s pharmaceutical
provisions.

The pharmaceutical penalties are one of several outstanding issues that
were not completely resolved by the agreement that allowed Vaile and
Zoellick to exchange the Nov. 17 letters, which will enable the two
countries to implement the FTA on Jan. 1, 2005 as scheduled. Australia=92s
parliament this week approved legislation making some technical and
substantive changes to its implementing legislation as a result of the
negotiations between the two countries over the last few months.
Australia first approved implementing legislation in August, a few
months before Prime Minister John Howard=92s government won re-election.

The letters indicate the U.S. remains unsatisfied, even with Australia=92s
new legislation, and that the U.S. will be monitoring implementation of
the agreement to ensure Australia fulfills its obligations.

For example, the FTA requires patent holders of pharmaceuticals to be
notified in advance of a generic pharmaceutical entering the Australian
market. This gives a patent holder sufficient opportunity to apply to a
court for injunctive relief to prevent the generic drug from coming on
market if it believes its patent is being violated. Australia insisted
no change was needed to its implementing legislation because it was
providing sufficient time for challenges, although U.S. pharmaceutical
companies had expressed skepticism on this point.

The Zoellick letter notes that Australia has provided assurances that
sufficient time will be provided, and warns that if this is not the
case, Australia will have acted inconsistently with the FTA. =93We will be
monitoring this matter closely, and reserve all rights and remedies. .
.=94 the letter said.

The two sides also disagreed over whether the agreement requires
criminalizing all willful and unauthorized reception and use of encoded
satellite signals, as Australia argued the agreement did not require
that home viewing of encoded satellite signals be made a criminal act.
Both sides agreed that broadcasting an encoded signal without
authorization in a bar or restaurant would be a criminal act.

Australia agreed to review this as a result of the talks with the U.S.
and talks with its own industry. =93We expect that this review will
include a full opportunity for participation by U.S. and other
interested parties,=94 the Zoellick letter said.

The Zoellick letter also indicates the U.S. has problems with a system
that would allow some companies to use copyrighted material after a
50-year protection period ends without having to pay the rightholder,
even though the U.S. and Australia agreed to create a 70-year protection
period. Language for handling this change in the agreement, which was
worked out last month, is meant to close what was seen as a loophole in
the legislation that could have allowed certain companies to violate the
70-year patent protection period (/Inside U.S. Trade/, Dec. 3, p. 4).

Even after the changes Australia agreed to make, the Zoellick letter
said this transitional scheme =93is unwarranted and burdensome to right
holders, and we intend to monitor its implementation and effect on U.S.
rights holders.=94

Australia also agreed to change its implementing legislation to require
Internet service providers (ISP) to expeditiously take down material if
they have actual or constructive knowledge of copyright infringements,
according to the Vaile letter. It states that Australia will have to
develop regulations related to ISP liability that would spell out what
is meant by expeditious action.

The Zoellick letter also encourages Australia to provide a =93meaningful
opportunity=94 for interested U.S. and Australian stakeholders to comment
on aspects of the ISP regulations.


/The Zoellick and Vaile letters are available to subscribers of Inside
//U.S.// Trade=92s online new service World Trade Online at
www.insidetrade.com/