CPTech Note to TRIPS Council Members

Re: 7 Reasons to Reject A Bad Deal
Date: 27 November 2002

Will the TRIPS Council negotiations paragraph 6 expand or shrink export strategies under TRIPS? The US and EU hope to shrink export opportunities. Everything will depend upon the nature of the final proposal, but under most recent draft proposals, and certainly every draft since November 19, the proposals would make countries *worse off* in terms of export strategies. This reveals how little the US and EU are giving up, and how underhanded the negotiations are. Here are 7 reasons to reject a bad deal:

There are two big problems with a "limited" solution to paragraph 6.

1. US will claim high moral ground for limits on compulsory licensing.

   The United States will quite predictably use the limited solution to pressure countries to limit exports even in areas where the TRIPS now provides flexibility. As the recent Rosa Whitaker letter to African governments illustrates, the United States intends to create a "ghetto" for compulsory licensing that is very limited in scope and which will rarely be used. If the TRIPS Council accepts a limited solution, the US will claim the high moral ground in its bullying of developing countries.

2. Potential Unilateral use of Article 30 is prejudiced.

   The real opportunities for "fixing" the irrational and highly inefficient problems in Article 31.f are unilateral Article 30 approaches, based upon the Amendment 196 approach recently adopted by the European Parliament, which itself is a modification of an Article 30 export strategy adopted by Canada for pre-expiration exports. Paragraph 9 of the Chairman's text is cleverly and clearly written to prejudice an Article 30 approach. Why? It says it is without prejudice to the rights reaffirmed by the Doha Declaration on TRIPS, but here it will be argued that this means the items in paragraph 5 of the Doha Declaration, which do not address Article 30. Then the Chairman's text singles out exports under 31(f) as not being prejudiced. In practice, once this crazy system is adopted, it will be much more difficult to take a "better deal" to a panel on an Article 30 case. This could be "fixed" in the paragraph 11 of the Chairman's proposed text, and the reason it isn't is that the US, the EU and the WTO secretariat don't want to do anything to legitimize an Article 30 approach.

   What would happen if the negotiations on paragraph 6 collapse? Countries would find there are plenty of available strategies for exports, and with the Doha Declaration fully intact, and a well advertised failure to get a decent solution to paragraph 6, plenty of high moral grounds to use them. Here are the ways exports can be done:

3. Paragraph 7 of the Doha Declaration.

   Under Paragraph 7 of the Doha Declaration on TRIPS, LDCs can do whatever they need to authorize exports, until 2016 at the earliest. Generic suppliers from anywhere can simply locate factories in these countries. This will do more for technology transfer and economic development in LDCs than anything else in the current drafts on technology transfer.

4. Use Article 31.k.

   The TRIPS already has a green light for exports under a compulsory license. It's called Article 31.k, and is its quite flexible. Consider the following.

   1. Under 31.k, there is no need for prior negotiation on reasonable commercial terms with patent owners.

   2. Under 31.k, everything including compensation can be done through an administrative process. There is no requirement for full blown antitrust case, you only need a simple and cheap administrative authority (many examples in US on this).

   3. Under 31.k, there are no restrictions on products. Typical Asian, US or European cases involve software patents (178 in one month last year), consumer electronics, or biotech (such as the Anderson Gene Patent or the US licenses on Monsanto Corn patents) or even tow-trucks.

   4. There are no restrictive or burdensome safeguards.

   5. Liberal refusal to deal grounds can be used.

5. Use Article 30.

   The Untied States, Canada, Europe and others used Article 30 for a variety of problems. The United States used Article 30 for imports and exports of generic versions of patented products, without notice, without compensation, and without safeguards, related to drug registration and testing. Canada does too, and soon so will the EU. The European Parliament Amendment 196 is now a roadmap for the legal language for authorizing broader exports. Post Doha, this should clear a panel, despite US opposition.

   Manufacturing shall be allowed if the medicinal product is intended for export to a third country that has issued a compulsory license for that product, or where a patent is not in force and if there is a request to that effect of the competent public health authorities of that country.

   Use 31.f. The larger market countries can use 31.f for up to 49 percent of production, and this will allow a fair amount of spill over for several countries. Again, no burdensome requirements or limitations on products or scope.

6. Exports from non-WTO members.

   It will always be possible to have "off shore" production from non-WTO members, if the incentives are right. This happens now for lots of transactions highly regulated in the United States or Europe.