WORLD TRADE ORGANIZATION

RESTRICTED IP/C/W/236

11 December 2000

Council for Trade-Related Aspects of Intellectual Property Rights

(00-5379) Original: English

REVIEW OF THE PROVISIONS OF ARTICLE 27.3(b) - JAPAN'S VIEW

Communication from Japan

By means of a communication dated 28 November 2000, the attached paper been received from the Permanent Mission of Japan with the request that it be circulated to Members.

At the meeting of the Council for TRIPS in September 2000, Mauritius on behalf of the African Group (1), India (2) and the United States (3) submitted papers describing their views on the six issues (4) that the Chair of the Council for TRIPS had set out in relation to the review of Article 27.3(b). Japan appreciates their efforts and would like to provide its views concerning the six issues on the review of Article 27.3(b). Japan's view described below, however, does not prejudice its positions to the mandate given by Article 27.3(b).

Article 27.1 of the TRIPS Agreement provides for the principle concerning patentable subject-matter that patents shall be available for any inventions in all fields of technology. On the other hand, Article 27.2 and 27.3 provide for exceptions that the particular subject-matters may be excluded from patentability. The first sentence of Article 27.3(b) provides for particular optional exclusions. (5) The second sentence provides for the "exception to exclusion" (6) from patentabilty. The third sentence then gives a mandate to review, stating that "the provision of this subparagraph" shall be reviewed four years after the date of entry into force of the WTO Agreement.

Judging from these structures of Article 27.1 to 27.3, Japan takes the view that the mandated review under Article 27.3(b) of the TRIPS Agreement is limited to the review of the "optional exclusion" and the "exception to exclusion" which are provided in that particular provision, i.e. Article 27.3(b).

The Link between the Provisions of Article 27.3(b) and Development It was agreed at the General Council meeting in February 2000 that the mandate review under Artic1e 27.3(b) should address the impact on the trade and development prospects of developing countries. (7) The African Group states in their paper that review in relation to "the link between Article 27.3(b) and development" must address specific issues of whether and how intellectual property rights lead to relocation of investment to natural-resource-endowed countries, transfer and dissemination of technology, research and development, and innovation in developing countries.

When considering the mandate given by Article 27.3(b) of the TRIPS Agreement as described above, the review in relation to "the link between Article 27.3(b) and development" should be limited to the linkage of developments with "optional exclusion" and "exception to exclusion" from patentability. With that in mind, however, Japan wishes to express its view on the link between patent protection and development.

First of all, it should be noted that the question of development involves a wide variety of issues, including the environment for attracting investments of particular countries. The patentable subject-matter question is only a small fraction of those issues.

Considering the fact that most of the technologies protected by intellectual property rights are possessed by the private sector, technologies can be transferred in the most efficient manner when they are transferred through a market mechanism. Adequate intellectual property protection of technology is an important premise based on which the private sector conducts licensing agreements of its technology. Lack of adequate intellectual property protection would have detrimental effects for technology transfer by the private sector. Without incentives to the suppliers of technology, technology transfer would not be facilitated. Appropriate intellectual property protection in turn gives large benefits to recipients/users of technology, in that they would eventually become the producers of subsequent technology. This is of particular importance for recipients/users of developing countries.

Japan is one of the countries that have made the transition from a developing to a developed country. Based on its own experience, Japan attaches great importance to the value of adequate intellectual property protection. In the late 1880s, Japan started to introduce legislation on the protection of intellectual property. These early movements resulted not only in a quick catch-up by Japan with the advanced technology of developed countries, but also in promotion of Japan's own research and development activities beyond the contemporary state-of-the-art technology of develop nations. In the 1920s, a Japanese inventor gained considerable royalty from a company in a developed country for his invention. Based on the royalty income, he became an entrepreneur and established a company that has since become a world-famous Japanese car manufacturer. His company was one of the first in Japan to be founded based on royalty-income.

From the early stages of development, many Japanese companies started to introduce patented technologies from developed countries. In the 1950s and 60s, particularly, many important state-of-the-art technologies were introduced to Japan from developed countries in exchange for large royalty payment. The costs have paid off, however, as those introduced technologies boosted industrial development and promoted research and development in Japan.

Although patent protection is merely one of a wide variety of factors for successful development as mentioned above, Japan takes the view that the intellectual property system plays an important role in promoting technology transfer, its dissemination and research and development, as well as in boosting the economy in both developed and developing countries.

2. Technical Issues Relating to Patent Protection under Article 27.3(b)

Distinction between microorganisms and plants and animals The African group stated in its paper that incongruencies are raised by the artificial distinction made between plants and animals (which may be excluded from patentability) and microorganisms (which may not be excluded).

It should be noted that Article 27.1 provides for the principle that "patents shall be available for any inventions in all fields of technology" as opposed to that in Article 27.3(b) which provides for an exception. Also, Article 27.3(b) does not provide for mandatory exclusion, but provides for optional exclusion. As far as Members are subject to the principle provided in Article 27.1, therefore, the "incongruencies" referred to in the paper of the African Group would not take place. Since both inventions related to plants and animals and inventions related to microorganisms are regarded as patentable subject-matter in the patent law of Japan, there are no "incongruencies" as seen by Japan.

Attention should be also drawn to the fact that the notion of categorizing life forms into plants, animals and microorganisms is widely accepted in international conventions, including the Convention on Biological Diversity. (8) In those international conventions, the term "microorganisms" should be interpreted "in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose" as provided for under Articles 31 and 32 of the Vienna Convention on the Law of Treaties. Therefore, the general definition of "microorganisms" as we see in a dictionary should be sufficient to distinguish plants an animals generally from microorganisms for purposes of the discussion on patentable subject-matter in the Council for TRIPS, as discussed in the United States' paper.

In the patent practice as well as the Patent Law of Japan, a formal definition of the term "microorganisms" is not given. This is, however, because the introduction of such a formal definition would not be responsible enough to accommodate emergence of new inventions in the rapid evolution of microbiology. Therefore, Japan provides a non-exhaustive list of microorganisms instead of a formal definition. (9)

(b) Distinction between inventions and discoveries

The African Group expressed their concerns over the patentability of life forms raised by the fact that discoveries do not amount to inventions.

In the patent practice of Japan, mere discoveries not involving human intervention are not considered patentable subject-matter. Merely discovering naturally occurring things like an ore or natura1 phenomena are not considered inventions. If the subject-matter involves human intervention such as isolation or purification, and if the isolated or purified subject-matter was no previously recognized existence, then it is regarded as an invention. If naturally occurring things such as chemical substances or microorganisms have been first isolated artificially from their surroundings in nature, they are considered inventions. (10) a gene, if isolated and purified from the originating life form, is also considered an invention as a particular kind of chemical substance.

In addition, for those inventions to be patentable, they must be characterized in the patent claims by their structure, by parameters, or by other appropriate means. Not only chemical substances but also microorganisms and genes could well be characterized in such ways.

Technical Issues Relating to Sui Generis Protection of Plant Varieties It is essential for agricultural development to promote the breeding of new varieties with excellent characteristics in productivity, quality, disease resistance and so on by protecting plant breeder's rights and/or patent rights. In Japan, plant breeder's rights are protected under the Seeds and Seedlings Law system which is in conformity with International Convention for the Protection of New Varieties of Plants (UPOV Convention). Japan considers that a system for the protection of plant breeder's rights under the UPOV Convention is an "effective sui generis system" for the protection of plant varieties set forth in Article 27.3(b) of the TRIPS Agreement.

The African Group stated in its paper that the protection of plant breeder's rights raises the following issues:

the relationship between the protection of plant breeder's rights and the protection of farmer's rights (e.g. rights to save, share and replant seeds); and The exemption for other breeders to use protected varieties for further breeding.

As for the first issue, Article 15(2) of the 1991 Act of the UPOV Convention permits that each contracting party may, within reasonable limits and subject to the safeguarding of the legitimate interests of the breeder, restrict the breeder's right in relation to any variety in order to permit farmers to use for propagating purposes, on their own holdings, the protected variety. This means that under a UPOV system, traditional farmer's practice may be allowed within reasonable limits in each country.

In relation to the second issue, the 1991 Act of the UPOV Convention also provides in Article 15(1) that the breeder's right shall not extend to acts done for the purpose of breeding other varieties. It is free for others to use protected varieties for further breeding in order to promote the breeding.

Japan considers that systems for the protection of plant breeder's right under the UPOV Convention maintain a proper balance between the breeder's benefit and farmer's rights and also considers that questions raised by the African Group will be solved by adopting a UPOV system for the protection of plant varieties.

Ethical Issues Related to the Patentability of Life Forms

In general, a patent does not guarantee the patent holder unfettered exploitation of the patented inventions. A Member may, depending on the specifics of a case and in conformity with other WTO agreements, legitimately enforce its national law to prohibit patentees from exploiting patented inventions for various reasons, including ethical grounds. Therefore, there is no need to exclude such an invention from patentability in order to prevent the exploitation of such an invention. This is the reason why the proviso of Article 27.2 provides that Members may not exclude from patentability an invention merely because the exploitation of such an invention is prohibited by their law. This provision implies that Members may prohibit the exploitation of an invention, if there is a legitimate ground to do so, even if that invention is patentable under their law.

It seems that many of the questions of the "ethical issues related to patentability of life forms" are to be dealt with by the patentability exclusion for protecting "ordre public or morality" under Article 27.2. Although some Members might wish to review the appropriateness of patentability exclusion on life forms for the purpose of protecting "ordre public or morality", it would be within the scope of Article 27.2 and outside the mandated review of Article 27.3(b). In the current patent practice of Japan, practices and technology such as a process for cloning human beings are excluded from patentability on the grounds that they constitute contravention to public order or morality as stipulated in Article 32 of the Japanese Patent Law, which is consistent with Article 27.2 of the TRIPS Agreement.

The African Group expressed their concerns: (i) that patents over research material may restrict further research; (ii) that the cost of drugs keeps escalating due to the required systems of patent protection; and (iii) that research increasingly targets products for the affluent rather than for the general public health.

Regarding the above point (i), Japan wishes to point out the particular WTO panel precedent (11) stating that the use of the patented product for scientific experimentation, during the term of the patent and without consent of the patent holder, is one of the exceptions to patent rights under Article 30. It would mitigate to a large extent the concerns expressed by the African Group that patents over research material may restrict further research. In addition, consideration should be given to the other side of the coin that patents over research material would promote the research and development of those research materials.

The above point (ii) addresses the question of drug prices in relation to patent protection. While it is important to ensure adequate access to drugs, it is also important to promote development of new drugs from the viewpoint of public health and nutrition. The patent system is an important basis for promoting development of new drugs. Inadequate intellectual property protection would reduce the incentive and therefore negatively impact the development of new drugs. Attention should be also drawn to the actual linkage between patents and drug prices. It is reported that the link between patents and the price is weak or, in many cases, non-existent due to price levels being determined by many factors - distribution conditions and markups, price controls, inflation, taxes, etc. (12)

The African Group has argued regarding the above point (iii), that is, the impact of patents on the allocation of research resources and fund. It can be generally said that, if the needs of society are greater, the research satisfying these needs is more profitable. Therefore, such research, particularly that conducted by the private sector, would tend to target products that address greater needs. The patent system facilitates this by giving exclusive rights to successful research results. If great social needs exist in the area of public health, research would tend to target products for this area. If private -sector research is not targeted to particular products which nevertheless need to be researched, due to the lack of profitability, then the public sector should step in to target such products through funding or research.

India raised concern that patents also have the danger of causing economic motives to supersede ecological ones. (13) It can be pointed out, however, that the patent system encourage people to deve1op, among other technology, environmentally sound technology to avoid large-scale environmental damage. Moreover, as mentioned above, a patent does not give its owner the unlimited right to exploit the inventions which might cause environmental harm. Japan takes the view that the patent system is neutral to ecological concerns.

Finally, Japan wishes to respond to concern expressed by some Members that the effects of the patent right would extend to original life forms when the invention concerned is a part of the life form. Under the patent practice of Japan, the patent right does not extend to the original life form from which the patented gene was obtained.

The Relationship to the Conservation and Sustainable Use of Genetic Material

Some Members propose that the TRIPS Agreement should contain provisions to promote the conservation and sustainable use or genetic material. Although it is unclear to Japan how these particular issues are related to the review of optional exclusion from patentability to be conducted in the mandated review of Article 21.3(b), we nevertheless wish to respond.

Consistency between the TRIPS Agreement and the Convention on Biological Diversity

Some Members have insisted that there exists a necessity to harmonize the approach of the TRIPS Agreement with that of the Convention on Biological Diversity (CBD) as regards conservation and sustainable use of genetic resources. (14)

It is the view of Japan that the TRIPS Agreement and the CBD are mutually non-exclusive. Because of the totally different objectives and the flexibility of the provisions of the two treaties, it would be unlikely that one would conflict with the other when implemented.

The CBD requires its Contracting Parties to take "legislative, administrative or policy measures, as appropriate" to implement its relevant provisions. (15) There are a variety of ways for implementing such provisions of the CBD, and Contracting Parties are permitted to take specific measures as far as they deem them appropriate. Japan has been fulfilling its obligations under the CBD concerning technology transfer mainly by means of education and training, and joint research and development conducted by both the public and private sectors. It has been also fulfilling its obligations of benefit sharing under the CBD mainly by means or governmental fund-granting activities through bilateral, regional and other international organizations. (16) Meanwhile, Japan bas been fully implementing the TRIPS Agreement. Therefore, Japan believes that the TRIPS Agreement and the CBD can be implemented in a non-conflicting manner. As mentioned above, a certain degree of flexibility exists for appropriately implementing the CBD. For the sake of mutual benefit of developing and developed countries, it is desirable to explore at the relevant international fora the most appropriate ways of implementing the CBD in a consistent manner with the TRIPS Agreement.

Obligation to identify the origin of biological resources in a patent application

Some Members insist that patent applicants should disclose the origin of biological resources and associated traditional knowledge used in the development of the invention. (17) It is unclear to Japan how this particular proposal is related to the review of the optional exclusion from patentability to be conducted in the mandated review of Article 27.3(b). Nevertheless, Japan wishes to respond in a general manner.

In the context of the CBD, the proposal to oblige the Contracting Parties to require patent applicants to disclose the origin of biological resources and associated traditional knowledge used in the invention would go beyond the obligation of the Contracting Parties under the CBD, since the CBD leaves the specific ways of implementing its relevant provisions to the discretion of each Contracting Party.

The same would apply to the proposal to oblige WTO Members to require patent applicants to disclose the origin of the biological resources and associated traditional knowledge that are used in the invention. Such an obligation would go beyond the obligation of the Members under the TRIPS Agreement.

India has suggested a connection between Article 29.1 of the TRIPS Agreement and the proposed disclosure requirement of the origin of any biological resource used in an invention, stating that the provision of Article 29.1 absolutely allows seeking such a disclosure of information and that a problem arises if patent offices do not seek such a disclosure. (18)

The first part of Article 29.1 deals with the "enablement requirement". It relates to the disclosure requirement for the purpose of ensuring that a disclosure is sufficient to enable a skilled person to "carry out" the invention It is not for the purpose of ensuring "access control" or "benefit sharing" on biological resources. Therefore, the assertion of India is true only to the extent that the proposed requirement of disclosing the origin of any biological resource and associated traditional knowledge is sought in relation to "enablement requirement to carry out an invention". However, unless the proposed requirement is sought for the purpose of ensuring sufficient disclosure enabling a skilled person to "carry out" the invention, it would be an additional requirement which goes beyond the scope of Article 29.1.

Under the patent law of the most Members, the enablement requirement for "carrying out" an invention using biological material is ensured by means of the "depository system". Under the Japanese Patent Law, if an invention is related to a microorganism that is not easily accessible by a skilled person, the patent applicant must deposit the microorganism with International Depository Authorities under the Budapest Treaty or other appropriate depository authorities, and must submit to the relevant patent office the certificate issued by the relevant depository authority. This is a measure to ensure that a skilled person can "carry out" the invention based on the description of the application together with the actual microorganism that is deposited with and available from the Authority. On the other hand, if a microorganism is easily accessible by a skilled person in the art, the applicant is not required to deposit it but is simply required to describe how the invention can be carried out by using the known and publicly accessible microorganism. Japan takes the view that this depository system is sufficient for satisfying the obligation of enablement requirement under Article 29.1 of the TRIPS Agreement and that further requirement would be beyond the obligation of this Article. (The same argument would apply not only to biological resources but also to associated traditional knowledge. There would be very little relevance between the "origin" of traditional knowledge and "enablement requirement to carry out an invention" under Article 29.1)

If the proposed requirements go beyond the obligations of Members under Article 29.1, some Members might instead wish to re-write the TRIPS Agreement to introduce the new requirements. However, we should be cautious to re-write the TRIPS Agreement, because the provisions thereof strike a balance between rights and obligations of inventors/applicants and third parties, which is the result of the long-term negotiation of the Uruguay Round.

Firstly, the new requirement would have an impact on the balance described in Article 62.1 that, while Members may require compliance with procedures and formalities as a condition of th4e acquisition of patents, such procedures must be reasonable ones. Keeping in mind that the question as to whether it is reasonable or not should be left to Members, Japan is of the view that requiring patent applicants to disclose the origin of any biological resource and associated traditional knowledge used in the invention could be unreasonably burdensome to patent applicants, and thereby upset the present balance.

Secondly, if a new additional requirement is sought only for a particular invention that uses a biological resource, its conformity with Article 27.1 that a requirement for obtaining patents should be imposed on any invention in an equal manner regardless of the field of technology needs to be examined. It can be generally said that an invention using a biological resource belongs to particular types of technological fields such as biotechnology or pharmaceuticals. It is the view of Japan that a heavier burden should not be imposed on any particular field of invention, as prescribed in Article 27.1. The above-mentioned requirement for a "depository system" on inventions related to microorganisms that is adopted by many Members would be consistent with the Article 27.1 requirement for equality, as far as the depository system is aiming at compliance with "enablement requirement to carry out an invention" under Article 29.1, which equally applies to any invention in any field of technology.

Obliging private sectors to share benefits

Some Members suggest that an enforcement mechanism at the WTO is required to ensure benefit sharing, authorization of access to genetic material, and contractual arrangements between developing countries and entities seeking genetic material. (19) It is unclear to Japan how these issues are related to the review of the optional exclusion from patentability to be conducted in the mandated review of Article 27.3(b) of the TRIPS Agreement. It also seems that the proposed introduction of new provisions regarding benefit sharing into the TRIPS Agreement is beyond the obligations of the CBD.

A general way of benefit sharing would be a contractual arrangement that is concluded between a country offering biological resources and a public and a private entity that wishes to access such resources. (20) Some countries have proposed in several for a the introduction of an international obligation of monetary benefit sharing to require patentees to pay royalty fees to the holders of biological materials if the patented invention exploits these materials. However, it should be noted that inventions of varying economic value can be made based on the exploitation of the same biological resource. That is, the economic value of the patented invention is largely attributed to the inventive efforts of the inventor as well as the commercialization efforts by the patent holder, and not largely attributed to a biological resource as such. Of course, the value of the biological resource as such should be recognized, and compensation should be paid if it is accessed and used. For the sake of balance benefits of holders of biological resources and inventor/patentees, it is also appropriate that the benefit sharing be determined upon mutually agreed terms. (21) The conditions of payment, therefore, should be determined by the contractual agreement concluded at the time of access.

The Relationship with the Concepts of Traditional Knowledge and Farmer's Rights

Traditional Knowledge

Some Members propose examining possible protection of traditional knowledge, and even suggest the establishment of a new sui generis system for protecting traditional knowledge which is different from a sui generis system for plant variety protection under Article 27.3(b). (22) It is unclear to Japan how these issues can be subject to the mandated review under Article 27.3(b) of the TRIPS Agreement, which is to be limited to the review of the optional exclusion from patentability and exception to the exclusion.

If nevertheless we were to discuss the issue3, we should at first clarify some issues, such as what the definition of traditional knowledge is or who owns it. This exercise should be done by collecting and analysing examples. After that, consideration also must be given as to how traditional knowledge can be protected under the existing framework of legal protection such as patents, trade secrets and private contracts. Discussion on traditional knowledge should not pre-empt the establishment of new intellectual property systems for the protection of traditional knowledge. We should closely follow future discussion at the "WIPO Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore", whose establishment was approved in September 2000 and is due to begin operations in the spring of 2001.

Some Members raised concerns on patent rights being obtained for subject-matters covered by traditional knowledge of their parties. (23) Under the Patent Laws of many Members, including Japan, not only inventions which have been described in documents but also inventions which have been publicly known or used elsewhere in the world prior to the filing of the patent application constitute prior art. (24) Therefore, traditional knowledge, most of which travels by the word of mouth, is recognized as prior art under the patent laws of many Members. Even if a patent right is mistakenly granted to traditional knowledge, such a patent right can be revoked through post-grant opposition procedures. Patent examiners can have easier access to traditional knowledge if it is documented, and can effectively examine an invention which is to be denied on the grounds of lack of its novelty/inventive step over prior-art traditional knowledge. In this light, efforts by some Members in recent years at documenting traditional knowledge are highly appreciated. (25)

Farmer's rights

The concept of farmer's rights was described in FAO resolution 5/89, adopted on 29 November 1989, as "[f]armers" rights mean rights arising from the past, present and future contribution of farmers on conserving, improving, and making available plant genetic resources, particularly those in the centers of origin/diversity". This concept has been incorporated into a composite draft text of the Revised International Undertaking on Plant Genetic Resources. (26) Article 15.2 of the draft text further provides that it is each Party's responsibility to realize farmer's rights and also that each Party should, as appropriate and subject to its national legislation, take measures to protect and promote farmer's rights. Japan supports this approach and considers that WTO Members should closely follow discussion on the revision of the International Undertaking at FAO.

Footnotes

IP/C/W/206.
JOB(00)/6091.
IP/C/W/209.
IP/C/M/26, footnote 5.
I.e.: (i) plants and animals other than microorganisms; and (ii) essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. The sentence provides that plant varieties shall be protected by pataents or by an effective sui generis system or by any combination thereof. WT/GC/M/53, paragraph 39.
Article 2 of the Convention on Biological Diversity.
The implementing guideline for biological inventions, which is published by the Japanese Patent Office in February 1997 and available at http://www.jpo-miti.go.jp/infoe/sisine.htm, defines microorganisms in a non-exhaustive manner as follows: "The term 'microorganism' means yeast, moulds, mushrooms, bacteria, actinomyces, unicellular algae, virus, protozoa, etc., and further includes undifferentiated animal or plant cells as well as animal or plant tissue cultures."
Because a microorganism exists in nature together with varieties of different microorganisms, human intervention must be involved to isolate that particular microorganism. The same applies to isolation and purification of a chemical substance from its status in nature. Canada - Patent Protection of Pharmaceutical Products, WT/DS114/R, paragraph 7.69.
"TRIPS, Pharmaceuticals and Developing Countries: Implications for Drug Access and Drug Development" presented by Dr. Harvey E. Bale, Director-General of IFPMA at "WHO Workshop on the TRIPS Agreement and Its Impact on Pharmaceuticals", Jakarta, Indonesia - 2 May 2000; available at http://www.ifpma.org/.
JOB(00)/6091, "Ethical issues related to the patentability of life forms".
JOB(00)/6091, "The relationship to the conservation and sustainable use of genetic material".
Article 15.7, 16.3 and 19.1 of the CBD.
Some examples of Japan's activity are as follows: the total amount of Japanese economic cooperation in the environmental field was 414 billion yen in 1998 (see the Internet Website of the Ministry of Foreign Affairs at: http://www.mofa.go.jp/policy/oda/category/environment/2000coop.html or http://www.mofa.go.jp/policy/oda/summary/1999/ov3_1_01.html.
JOB(00)/6091.
Comment on Japan's intervention on agenda item K at the TRIPS Council meeting in June 2000 given by the delegation of India at the TRIPS Council meeting in September 2000.
IP/C/W/206, paragraph 5.5.
IP/C/W/209, section 6.
Article 15.7 of the CBD: "Such sharing shall be upon mutually agreed terms".
WT/CTE/W156; JOB(00)/6091.
JOB(00)/6091, "Technical issues relating to patent protection under Article 27.3(b)".
Japanese Patent Law, Article 29.1.
WT/CTE/W/156.
CGFRA/CG4/00/2, Article 15.1 "The Parties recognize the enormous contribution that the local indigenous communities and farmers of all the regions of the world, particularly those in the centers of region and crop diversity, have made and will continue to make for the conservation and development of plant genetic resources which constitute the basis of food and agriculture production throughout the world."