For the half-year to 30 June 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Alberto Bellan, Darren Meale and Nadia Zegze.

Two of our regular Kats are currently on blogging sabbaticals. They are David Brophy and Catherine Lee.

Wednesday, 5 May 2010

Border detention of counterfeit and/or "counterfeit" pharma products

Words like "free trade" and "pharmaceutical products" are often guaranteed to spark off a knee-jerk response. Put the two together in a single sentence and you can be sure that someone, somewhere will take note. "Free Trade of Pharmaceutical Products: The Limits of Intellectual Property Enforcement at the Border", is a paper by Spanish academic Xavier Seuba (Universitat Pompeu Fabra, Barcelona) which forms part of a series under the ICTSD [International Centre for Trade and Sustainable Development] Programme on IPRs and Sustainable Development.

So what is this 60 page document (which you can download here) all about? As ICTSD's website explains:

"The detentions of generic medicines in transit as a result of the implementation by certain countries of border measures, which go beyond the minimum standards set by the TRIPS Agreement, have attracted international attention. At the same time, such measures are often considered, by these countries, as instrumental in the fight against the circulation of “counterfeit” medicines [The Kat thinks these countries, in so far as they are personified, are concerned with counterfeits, not "counterfeits". The agenda of specific rights owners may be a different matter]. Clearly, the border measures in question raise complex legal and technical issues under the rules of the World Trade Organization (WTO).

... the paper shows how detentions of generic medicines in transit have revived long standing tensions between the principles of free trade and those of intellectual property. [... It] provides an in depth analysis of the complex legal issues raised by the EC custom border regulations and their relationship with the General Agreement on Tariffs and Trade (GATT), the TRIPS Agreement and subsequent WTO instruments, particularly the Doha Declaration on TRIPS and Public Health (2001) and the General Council Decision of 30th August 2003.

The author highlights that the power granted to WTO members to set higher standards of enforcement than those stipulated by Articles 51 and 52 of the TRIPS Agreement has to be consistent with other TRIPS provisions and balanced with the key legal principle of territoriality of IPRs. The principle of free trade in the GATT Agreement and the aim of the TRIPS Agreement to reduce any “distortion and impediments to international trade” should also be respected.

Finally, the author points to the risks that similar detentions occur in developing countries in the future as a result of the implementation of the EU border measures scheme in these countries through the free trade agreements that the EU concludes with them".
What are the author's conclusions? Let's take a look:
"Developed countries’ efforts to strengthen intellectual property enforcement can, in some cases, contradict the principles underpinning the WTO legal regime. In fact, when analyzing the detention of goods in transit allegedly for the protection of patents, it becomes clear that the most prominent systemic matter raised concerns about the challenges to international trade implied by certain levels of intellectual property protection. It is, therefore, necessary to ask whether Council Regulation (EC) 1383/2003 contradicts several of the agreements included under the WTO Agreement umbrella, particularly due to the potentially trade restricting effects of EU Regulation and the difficultly involved in reconciling its coexistence with basic intellectual property law principles. Considering the systemic consequences of the EU Regulation and given that it affects both third countries’ markets and the integrated global market, it would be worth asking a DSB panel to examine the EU Regulation’s compatibility with WTO law. When assessing such compatibility, both the GATT and the TRIPS Agreement must be taken into account. This cumulative reading has been mandated by WTO DSB organs, which have also affirmed that one logical approach is to begin the analysis with the TRIPS Agreement.
It is necessary to distinguish between the WTO compliance of Regulation 1383/2003 and the WTO compatibility of the Regulation’s implementing measures. As far as the former is concerned, particularly problematic are its trade restrictive provisions, the rights it grants to patentees and the reference to the transit law to assess the legality of products not intended for the European market. According to ECJ jurisprudence, the Regulation would be justified only as a means to avoid introducing goods infringing intellectual property rights in the European market, but not to control the protection of intellectual property rights in third countries. If a DSB panel assessed the necessity of such a legal scheme, as well as its relationship with other WTO obligations and its practical consequences, it would probably take into account the apparent contradiction between the ECJ restrained jurisprudence and the almost unrestrained stance of Regulation 1383/2003.

The TRIPS Agreement only mandates controlling the importation of potentially counterfeit and pirated goods. However, it permits the adoption of a more extensive protection under the condition that said protection does not contravene TRIPS itself. The practical consequences of the EU Regulation when mandating the implementation of all kinds of border measures in relation to goods protected by almost all types of intellectual property categories are problematic and may be TRIPS infringing. At least, directly affected are i) the foundational principles of independence; ii) TRIPS Article 28 regime on the rights conferred to patentees; iii) TRIPS references to avoid intellectual property becoming a barrier to legitimate trade; iv) the pro-public health interpretation mandated by the Doha Declaration; and, v) the feasibility of the scheme created by the WTO General Council Decision of 30 August 2003 and the decision to permanently amend Article 31 of TRIPS.

With respect to the practical consequences that would be presented to a WTO panel, the EU is detaining products that are not intended for the European market and for which no peril of diversion exists. Moreover, those products are legal in exporting and importing countries. In practical terms, under the current EU legal framework even if a product is not patentprotected in its destination, patent holders are able to block it at the hubs where it necessarily transits, which implies disrupting generic medicines distribution and access. Hence, if detentions continue, the goals pursued by the Doha Declaration and the mechanism operationalized in the Decision of 30 August 2003 may be in jeopardy.

In contradiction with the obligation enshrined in EU Regulation to follow the law of the State in which the application is made when controlling in-transit products, and also contradicting letters addressed to generic manufacturers and importers, the EU and the EFPIA affirmed that if products are not patent-protected in exporting or importing countries, no action will be taken against them. In fact, it seems as if the EU had been surprised either by the real power Regulation 1383/2003 grants to European rightholders or by the public outcry that its border measures on life-saving drugs have provoked. In any case, to sustain the affirmation that the EU Regulation does not impede legitimate drugs transit through European customs, it would be
necessary to amend - or at minimum clarify - Regulation 1383/2003 Article 2.1.c) (i) and (ii), and Article 10, which make the detention of a specific good dependant on the status of patents and supplementary protection certificates in the transit country. The ongoing process to amend Regulation 1383/2003 is a good opportunity to
introduce said changes.

If the controversy finally finds its way through the WTO DSS, a WTO Panel could establish that
• Council Regulation (EC) 1383/2003 impedes the respect of the free transit principles laid down in the GATT and in TRIPS.

• Regulation 1383/2003 grants to patentees rights not contemplated in TRIPS Article 28.

• The right granted to seize goods in transit badly reconciles with the territorial nature and independence of intellectual property rights.

• The TRIPS Agreement does not include the control of goods in transit or this potential control is not clearly drafted; transit has nothing to do with the release of goods by custom authorities foreseen in Article 51.

• Regulation 1383/2003 imposes unnecessary restrictions and provokes unnecessary delays that impede the freedom of transit enshrined in GATT Article V.

• Regulation 1383/2003 does not fulfil the reasonability standard set forth in GATT
Article V:4.

• GATT Article XX (d) is of no application to the case.

In this context, it is worth recalling that Article XXVI.4 of the Agreement Establishing the WTO lays down that “Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements”.

Two additional issues must be considered when assessing recent detentions. On the one hand, the European push for the introduction of legislation that emulates that of the EC in developing countries and on the other hand, the problematic misuse of “counterfeit” terminology when assessing patent infringements and public health problems.

Through the conclusion of association agreements, economic partnership agreements,
partnership and cooperation agreements and free trade agreements, the EU is trying to fully or partially export Regulation 1383/2003 to developing countries. This was a goal clearly stated in the EU Strategy for the Enforcement of Intellectual Property Rights in Third Countries, in which the Commission DG Trade undertook to “revisit the approach to the IPRs chapter of bilateral agreements, including the clarification
and strengthening of the enforcement clauses” taking Regulation 1383/2003 as a “source of inspiration and a useful benchmark”. The EU has already managed to introduce a twin regime for the detention of protected products while in transit in the EC-CARIFORUM Agreement and has proposed a stricter regime to Andean and ASEAN countries, this last one covering all intellectual property categories. If the power granted to right holders to detain in-transit goods on alleged patent infringements is extended, generics trade will be at risk of being seriously hampered. Moreover, inducing developing countries to concentrate their resources on highly sophisticated intellectual property rights enforcement regulations is of dubious compatibility with European undertakings in the health and intellectual property field.

A worrying and not entirely accidental confusion regarding the “counterfeit” term has been created. The use of “counterfeit” as a generic word that refers to a mix of public health concerns, trademark violations and unrelated patent conflicts has been instrumental in giving extra legitimacy to patentees’ claims. This explains why in the controversy that has arisen from European detentions of safe and legitimate products, the EU and the European rights-holders invoke public health worries to justify their actions. It is necessary to address the misuse of the counterfeit terminology not only to avoid the reoccurrence of arguments deployed to detain medicines allegedly infringing intellectual property rights, but also to not create confusion among consumers, who until now have relied on generic drugs as a safe and effective tool".
Says the IPKat, debate as to the legality of Council Regulation 1383/2003 is welcome and the report is right to require its justification in terms of the international trade norms to which the European Union has signed up. Having said that, he believes that this measure will stand up fairly well to some quite robust scrutiny and he believes that, in so far as it does not enable the seizure of manifestly infringing goods in transit, it needs strengthening. The Court of Justice of the European Union will be considering the issue in two upcoming references (here and here) relating to non-pharma products and the IPKat doesn't see why infringing and potentially lethal pharma products shouldn't be treated the same way.

3 comments:

Anonymous said...

Why all the whingeing from india in the first place? Do your homework - don't bring patent protected material into a patent protected country. There are plenty of ways in which pharmaceutical products en route from, say, India to Brazil, can get there without going through those European countries in which patents / SPCs are in place, say the Netherlands. If fortress Europe loses out on some shipping traffic as a result, then so be it.

If the EU legislators wobble on this point, and allow some exception for "goods in transit", then a great number of sharp teeth are removed from the legislation allowing customs seizures, and thus devaluing patent rights.

I'm with the Kat on this one.

Derek said...

"[t]he IPKat doesn't see why infringing and potentially lethal pharma products shouldn't be treated the same way." (italics added.)
Methinks the IPKat is falling into the hole dug by the IP rights holders - the conflation of IP rights (here the right to prevent the import, or even perhaps the transit, of infringing goods) and the public safety. The Kat's evident view that goods infringing an IP right in a territory should not be allowed to transit that territory while moving between two other territories in which the right does not exist is all very well, though I disagree with it; but the gratuitous suggestion that such goods might be lethal does not help the argument when the countries of manufacture and intended consumption consider them acceptable.

Anonymous said...

I am from the generic drug business in India and will try to give a simple answer:
Why through Europe!

The answer is simple- European airlines provide some of the best connectivity and access to the markets from India.

So, its not like Indian generic sellers purposely want to enter Europe in the first place...
A look at the globe will make you realise that our air trade routes will mostly pass via Europe or rarely some place in the UAE/ Constantinopole / Istanbul segment.

So if there are no flights from most Indian cities to South America, then we are forced to use European carriers.

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