US tries to thwart TRIPS flexibilities in the midst of a pandemic

While covid-19 is prompting countries to consider exercising flexibilities in the World Trade Organization’s TRIPS (trade-related aspects of intellectual property rights) agreement for facilitating the supply of affordable and effective medicines to patients, the recently-released Special 301 Report by the United States Trade Representative (USTR) exhibits a neglect of the difficulties that countries are going through. India continues to be placed on the USTR’s “Priority Watch List”. US regulations empower the USTR to pursue a course of action that would elicit a favourable response from countries placed on this list.

The USTR raises three major charges against India pertaining to medicines: that India may invoke its compulsory licence (CL) provisions and patent revocations; that the country lacks proper incentives for innovators due to Section 3(d) of its Patents Act; and that India is a major source of fake products. These are allegations without much merit. Let’s take a closer look.

First, the alleged threat of India’s exercise of compulsory licence (CL) and patent revocations: India has used CL only once, in 2012, on Bayer’s anti-cancer drug Nexavar. Thereafter, India never issued any CL although the need for affordable medicines required many more CL issuances. It is not that India is the only country that has issued these. The US itself has issued many in the past to promote market competition. It has also threatened pharmaceutical firms with the use of CLs to reduce prices of medicines. Article 31 of the TRIPS agreement provides for issuing of CL to meet public-health objectives. The Declaration on the TRIPS Agreement and Public Health (Doha Declaration 2001) makes it clear that the TRIPS agreement allows members to grant CLs for the protection of public health and that members have the freedom to determine the circumstances in which one can be granted.

Israel has already issued a CL to ensure the supply of medicines for treatment of covid-19 patients. Countries like Chile, Ecuador, Germany and Canada have already prepared the ground for issuing CLs and may follow Israel soon. In the midst of a pandemic, when countries are contemplating on using the flexibilities provided by the TRIPS agreement, placing India on the Priority Watch List seems to reveal America’s insensitivity to the country’s crisis and a lack of respect for a well-established international law.

Revocation of a patent takes place when it is found that the patented subject matter fails to meet the patentability criteria. Revocation is the process of correcting the errors that may have crept in while processing a patent application. The US also has a provision for revocation. A report of Congressional Research Service (The Design and Implementation of Patent Revocation Proceedings: Innovation Issues) points out that maintaining consistency of patent grant determinations is a huge challenge for the United States Patent and Trademark Office, as patent examiners have varying degrees of experience, exposure to law and technical education.

Section 3(d) of The Patents Act: The TRIPS agreement provides freedom to its members in deciding the criteria for patentability. India, or any other country for that matter, is well within its rights to have a patent regime that checks the evergreening of patents and frivolous patenting. Section 3(d) permits only those innovations in the pharmaceuticals arena to be patented that are prove to enhance therapeutic efficacy. Contrary to the argument of the USTR that this provision fails to incentivise innovation, it actually raises the bar for innovation. Many countries, such as the Philippines, South Africa and Brazil, have emulated this section for their own respective patent laws.

Recently, Israel issued a CL on AbbVie’s Kaletra, which is found to be effective in treating covid-19 patients, for the import of a generic version of the drug. While this drug was patented in Israel, it was not patented in India, as it did not meet the patentability criteria, and thus the generic version is available here. The US has been demanding that India does away with section 3(d). Any move in that direction will be a huge blow to access to affordable medicines across the world.

India as a major source of fake products: The Special 301 Report states that intellectual property (IP) endorsement in India is very poor. As an indication of this, it points out that India tops among the five source economies of fake goods, as captured by the OECD 2019 report ‘Trends in Trade in Counterfeit and Pirated Goods’. Pharmaceutical products are a leading category of counterfeit and pirated products that figure in this report. This OECD report states that it is based on the definitions of ‘counterfeit’ and ‘piracy’ provided by the TRIPS agreement. At the same time, it also states that the term counterfeit used in the report refers to “tangible goods that infringe trademarks, design rights or patents”. Whereas the term ‘counterfeit’ in the TRIPS agreement is defined only in the context of trademarks and not other intellectual property such as patents. The report that the USTR relies on for making this allegation is not founded on a proper definition of counterfeit goods and therefore the data it captures could be misleading.

The OECD report also provides a comparison of top source countries in terms of global customs seizure of counterfeit and pirated goods for the years 2013 and 2016. While the share of India in the global customs seizure of such goods has declined nearly by half, the share of the US, which also figures on the list of top 12 source economies, has in fact increased. While blaming India, the US should admit its rising share as a source of counterfeit and pirated goods, and appreciate the progress India has made in addressing counterfeiting and piracy.

The author is associate professor at Institute for Studies in Industrial Development, New Delhi.