By William New
The ambassadors to the World Trade Organization from Brazil and India on Tuesday charged that other WTO members had no grounds to block legitimate shipping of generic medicines on the basis of potential intellectual property rights conflicts in the transit country and said recent cases of doing so in the Netherlands call into question WTO rules. The concern was supported by 17 other developing country governments at Tuesday’s WTO General Council meeting.

Meanwhile, the ambassadors of Brazil, India, the European Union and Switzerland are expected to meet on Wednesday, according to an official, to discuss ways to start negotiating within the WTO on a proposal to extend higher name protection wines and spirits enjoy to geographical indications on other products, and on a proposal to amend WTO rules on intellectual property rights to require the disclosure of origin of genetic material in patent applications. Over 100 WTO members have called for these topics to be negotiated but a smaller number has resisted.

On Thursday, the official said, a group of 16 interested parties also will meet at the ambassador level on the same subject. IP rules at the WTO mainly fall under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Proponents of these two issues would like them to join a proposed register for geographical indications as mandated for negotiation in the ongoing round of talks. There was a meeting on the GI register last week with Barbados Ambassador Trevor Clarke, who chairs special sessions on the matter. The European Union remains potentially in a defensive posture as it is being asked to explain its proposal on the GI register. It appears that what was agreed in the meeting with Clarke was to hold a TRIPS special session in conjunction with the next TRIPS Council meeting in early March.

The flare-up on generics shipments came in the context of a somewhat sobering meeting in which ambassadors and WTO Director General Pascal Lamy stressed a need to keep free-trade talks going at the WTO to counter increasingly negative global economic news. Trade is projected to reach its lowest levels since 1982, Lamy said. Governments have begun again to negotiate.

In addition to Brazil and India, those voicing concerns about access to medicines and customs were: Argentina, Bolivia, Burkina Faso, China, Costa Rica, Cuba, Ecuador, Egypt, Indonesia, Israel, Nigeria, Pakistan, Paraguay, Peru, South Africa, Thailand and Venezuela.

The statement by Brazil to the General Council is available here [doc]; the statement by India to the General Council is available here [doc].

Meanwhile, the ambassador from the European Union sought to defend the actions and come to a better understanding of what happened. Both sides plan to speak further about the matter.

The statement by the European Union to the General Council is here [doc].

On 4 December, Dutch customs authorities seized an air shipment of generic medicines sent by generics producer Dr Reddy’s in India bound for Brazil, and held it for 36 days allegedly on suspicion of being counterfeit. The cargo was 500 kilos of losartan potassium, an active ingredient used in manufacturing medicines for arterial hypertension, a shipment the EU valued at €55,000 euros. The action was taken on the request of a company (possibly brand-name drug producer Merck, Sharp and Dohme) which holds the patent in the Netherlands, the EU said. The ingredient is not patented in India or Brazil and therefore could not be violating IP rights in those markets. In the end, the drug shipment was released back to the Indian owner, which decided at that point to return the shipment to India.

Trade in generics is fully legal worldwide - and governments and activists have been fighting to clear up any confusion between generics and counterfeits, which unlike generics might be substandard or illegal. Under the TRIPS agreement, medicines are considered to be generic based on the country in which they are meant to be commercialised, meaning either Brazil or India, they said. The law of the country of transit does not matter, Brazil argued.

The Dutch authorities’ action “clearly violates the freedom of transit, which is a right enshrined in GATT [General Agreement on Tariffs and Trade] Article V,” Brazilian Ambassador Roberto Azevêdo told the WTO General Council Tuesday. “Only very exceptional circumstances warrant restrictions on that freedom. Brazil is not aware of any such circumstance in this concrete case.”

EU Ambassador Eckart Guth countered at the General Council that the Dutch seizure “is allowed by TRIPS and is based on provisions in EU customs law that allow customs to temporarily detain any goods if they suspect that these goods infringe an intellectual property right.” As the goods were eventually determined not to be headed for the EU market, they were returned to the owner.

But Azevêdo said that the decision to impede a shipment of generic medicines not destined for the Dutch market “is unacceptable and sets a dangerous precedent.” And, he said, there are “indications” that this is not an isolated case, raising concerns about systemic problems with WTO rules if they do not prevent a transit country from interfering with legitimate trade. India also asserted that this case is not alone.

“Brazil is gravely concerned with the setting of a precedent for extraterritorial enforcement of IP rights,” Azevêdo said. “Attempts to extend the rights granted by patents beyond national borders have critical systemic implications.”

Furthermore, extraterritorial enforcement of patent rights cannot be reconciled with the 2001 Doha Declaration on TRIPS and Public Health, Brazil said. The declaration reinforced nations’ sovereign rights to take measures to protect public health, and includes access to medicines.

The Dutch action also could undermine use of the so-called paragraph 6 system at the WTO, which refers to paragraph 6 of the TRIPS and public health agreement and allows countries lacking manufacturing ability to import needed medicines from other members under a compulsory cross-licensing arrangement.

‘IP Maximalists’ at the WCO, WHO

Concern also was raised about efforts by some countries to increase enforcement on goods in transit and blur the line between generic and counterfeit medicines at international organisations such as the Brussels-based World Customs Organization, the World Health Organization, and the Universal Postal Union.

There is a concerted effort among these organisations to “promote the IP maximalist agenda,” which is upsetting the delicate balance achieved in the 1994 TRIPS agreement, India said.

“There is an attempt to enlarge the definition of counterfeits beyond its definition in the TRIPS Agreement, to set maximalist enforcement norms, and to include TRIPS-plus provisions in RTAs [regional trade agreements],” Indian Ambassador Ujal Singh Bhatia said. “These are subtle and concerted ways of circumscribing the flexibilities of the TRIPS agreement. They also run counter to the spirit of the TRIPS agreement, which is a minimum standards agreement. And this is certainly counter to the understanding given to developing countries when the TRIPS agreement was being negotiated.”

“Neither the WCO nor the WHO are adequate fora for discussing IP rights enforcement,” Azevêdo said. “In the WHO, the focus should be on the quality, safety and efficacy of medicines, as well as on the issue of access.” The WCO, he said, “should concentrate on developing methodologies for enhancing customs’ performance, rather than venturing into TRIPS-plus norm-setting.”

The Indian ambassador said repeated actions like Holland’s could cause exporters to change routes possibly having a negative impact on access to essential drugs and on public health budgets in developing countries. The health of poor populations could be at risk if their medicines access is impaired, he added.

“What if countries commenced to create impediments to the legitimate trade of generic medicines based on the wrongful allegation that it violates national patent rights?” said Azevêdo. “In that case, trade in generic medicines would be rendered virtually impossible.”

EU Ambassador Guth responded to the charges by saying it would have been preferable for Brazil and India first to raise the issue bilaterally in order to clarify facts “before triggering a highly emotional debate.” Guth also referred to TRIPS Article 51, which allows customs authorities to suspend the release of goods, and he said under EU law, companies whose goods are wrongly detained are eligible for reimbursement.

“Let me make it very clear that the EU has absolutely no intention to hamper any legitimate trade in generic medicines or to create legal barriers to prevent movement of drugs to developing countries, nor have our measures had this effect,” Guth said. “We are absolutely committed to all the efforts that are being made to facilitate access to medicines.”

But India said it raised the issue at the General Council “with the expectation that the EC will urgently review the relevant regulations and the actions of the national authorities based on such regulations, and bring them in conformity with the letter and spirit of the TRIPS agreement and the rules-based WTO system.”

William New may be reached at wnew@ip-watch.ch.