Implementation: “Clawing back” policy space and flexibilities after an FTA

1. Implementation: “Clawing back” policy space and flexibilities after an FTA Intellectual Property, Free Trade Agreements, and Sustainable Development CIEL- American University, Washington School of Law, Washington, February 26-27, 2006 Andrés Moncayo von Hase, Professor, Faculty of Law and Social Sciences, University of Buenos Aires, Argentina.

2. The legal framework of FTAs and the economic structure of the developing parties • Economic structure of the party to an FTA is significant when it comes to enact the implementing legislation and select policy options. • Different degree of incentives to enhance IP protection: (i) Countries with demand and market for IP goods; (ii) countries with no demand but a market for IP goods; (iii) countries with demand but no market for IP goods; (iv) countries with no demand and no market for IP goods.

3. The legal framework of FTAs and the economic structure of the developing parties • Some (few) developing countries (“DCs”), mainly Asian DCs, with manufacturing capacities, high level of education and absorption of new technologies capabilities are assuming a growing role in the R&D networks of TNCs. • The share of developing Asia in US TNCs overseas rose from 3% in 1994 to 10% in 2002 (UNCTAD, World Investment Report, 2005). Such DCs may have certain incentives to enhance IP standards (lower wages and R&D costs may foster local R&D). • The rest of the DCs are kept apart form such a trends.

4. The legal framework of FTAs and the economic structure of the developing parties • The promotion of IP standards is a driving force for the conclusion of FTAs with a wider scope of application (including trade in goods). • FTAs are notified as “Regional Agreements” (art. XXIV.5 of GATT) exempting goods from the MFN clause (art. I GATT). • US efforts to enhance IP standards may result in different conditions of access to the US market: detrimental effects on DCs/LDCs that do not have any manufacturing capacities for IPR related goods and have no demand for such goods (or a weak consumer demand).

5. General Interpretation Framework of IP standards in FTAs • Public Health: Doha Declaration, Doha Declaration on TRIPS and Public Health reflects an “opinio iuris” (sense of legal obligation) that patents may not hamper access to medicines. • Access to medicines as concrete expression of a basic human right: right to health. • “Opinio iuris + state practice= customary law and “ius cogens” (imperative rule above treaties) ?

6. General Interpretation Framework of FTAs IP standards • Limitations to FTAs rooted in basic human rights (access to education) (e.g., to counterbalance the unqualified/unconditional extension of reproduction rights in Internet (e.g., temporary reproductions) • Non-derogation clause as a tool to implement some of the flexibilities under FTAs and TRIPS. • “Nothing in this Chapter concerning IPRs shall derogate from the obligations and rights of one Party with respect to the other one Party by virtue of the TRIPS Agreement or multilateral IP Agreements concluded or administered under the auspices of WIPO” (Art.17.1.5 Chile-US).

7. General Interpretation Framework of FTAs IP standards • “Freedom of implementation” principle (effects on the application and interpretation of side letters). • TRIPS Plus: (i) extends IP protection beyond TRIPS Minimum Standards; (ii) restricts or wipe out some of TRIPS options or flexibilities. • TRIPS Extra: creation of rights or introduction of issues not covered in TRIPS (Effect on MFN treatment ? “Havana Club” Case at WTO).

8. Post-TRIPS Era and FTA’s • Concept of invention is not defined. • Patent subject matters (PSMs): art. 27.1.2. And 3 of TRIPS (public health/environment/diagnostic, ther. And surgical methods for the treatments of humans or animals, freedom in some FTA’s regarding “second uses”. - Possibility to regulate the “negative requirements” of PSMs (negative definition of inventions) - Flexibility in some FTAs to apply the objective patentability requirements: novelty, non-obviousness and industrial application/utility (Exc.: CAFTA identifies“industrial application with “specific, substantial, and credible utility”).

9. Flexibilities in the Post-TRIPS Era • Possibility of limiting the scope of patent claims. • Restrictive interpretation of the “equivalents” (identity test against the producer of a “device” if it performs substantially the same function in substantially the same way to obtain the same result). • Distinction between discoveries and inventions (eg., genetically modified microorganisms).

10. Exceptions to IPRs • Trademarks: Each party may provide limited exceptions to trademarks (including Geographical Indications) such as fair use of descriptive terms, provided that such exceptions take account of the legitimate interests of the owner of the trademark and third parties (art. 15.2.5 US-Morocco FTA). • Patents: Any Party may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with the normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking into account of the legitimate interests of third parties (CAFTA, art. 15.9.3).

11. Exceptions • Experimental use • Bolar exception • New trends and practice in developed countries can be reflected in the implementing legislation (Klinik Versuche I and II cases in Germany; Merck case in the US).

12. Patent Term • Extension of patent terms to compensate unreasonable delays to obtain a patent/to restore curtailment of term due to delays in the approval process of a regulated product: implementing legislation may reflect existing limitations under US law (e.g., 14 years of effective term).

13. Making use of “pro-competitive antibodies” within the system • Compulsory Licensing (lack of exploitation, refusal to deal, etc.). • Exhaustion of IPRs (in those agreements where this flexibility has been preserved). • Adequate interaction between “Sui Generis Systems” to protect plant varieties and patent protection for plants (at national, regional and international levels): cross licenses “between systems” to foster dissemination and innovations.

14. Interaction between IP and Competition law • Article 40 of TRIPS reiterates the legitimacy of controlling anticompetitive practices in contractual licenses (only some licensing practices are listed which are considered to be abuses in developed countries). • However, under art. 7 and 8 of TRIPS developing countries may proceed on other grounds (more practices may be subject to competition law) (Reichman). • Submission of undisclosed information to competition laws.

15. Enforcement provisions • Part III of TRIPS: Maximum Standards: “more intense protection” is prohibited to the extend that it fixes general procedural provisions to the benefit of any party to an IP litigation (Equitable procedures). • US FTAs only stress enforcement provisions to the advantage of title holders: they may not hamper some procedural rights spelled out in TRIPS (right to be heard after adoption of preliminary measures; art. 50.4) (Drexl, 2005).

16. Protection of undisclosed information in national legislations • Restrictive definition of “new chemical entities” • 5 or 3 years of maximum protection: duration or protection shall be proportional to the efforts made to produce the information. • Only confidential information shall be protected: exclusion of data revealed in other countries. • No linkage (or notification to patent holders). • Exceptions: (i) use of data for non-commercial purposes; (ii) anticipation of a sanitary approval (Bolar type exception), (iii) compulsory licenses.

17. Initiatives • IP protection not implemented in an isolated way. • Disagreements on new extensions of IP protection or TRIPS-plus standards even exist within industrialized nations (e.g., protection of non-original data base, patents on information, business methods, etc.) • Moratorium on TRIPS-PLUS standards until IP systems become integrated to innovation systems (Maskus-Reichman, 2004).

18. Initiatives • Reshaping the local exploitation requirement • Coalition of DCs and LDCs: TRIPS plus standards conditioned to local exploitation of patents (and optional: + national/territorial exhaustion +controlled international exhaustion (by government but not by contract).