WTO TRIPS Council Debates Competition Law, Plain Packaging’s Spread To Other Products

The World Trade Organization intellectual property committee met last week with lively discussions on the benefit of IP rights protection for new businesses, and on the role of competition law to prevent abuses of those rights and in particular ensure greater access to medicines. Also, considering the recent WTO Dispute Settlement Body ruling on the tobacco plain packaging, some countries warned against this decision becoming a precedent and spreading to other goods, and undermining trademark protection.

The WTO Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) meeting took place on 8-9 November.

IP and Innovation

Australia, the European Union, Japan, Switzerland, Taiwan, South Korea and the United States, later joined by Brazil, following their 2018 chosen theme of discussion on IP and innovation, tabled a paper [pdf] on the societal value of IP in the new economy underlining the strategic importance of IP protection in the process of creating a new and innovative business.

The European Union statement said the IP system is crucial to promote innovation, along with stable and predictable balanced IP rights regimes domestically and internationally. IP is particularly important for start-ups and innovative new businesses, it said.

The EU established a number of measures supporting the use of IP by small and medium-sized enterprises and start-ups and developed the “Startup Europe” initiative, helping new businesses through matchmaking between investors, corporates, and entrepreneurs, the statement said.

Switzerland said large companies consider IP rights key to protecting their investment and reputation against unfair competition, misuse and freeriding, however, small companies and start-ups do not have the same awareness about IP and might be reluctant to engage in administrative and financial investments required to seek IP protection.

According to the Swiss statement, in 2015, over 580,000 companies were located in Switzerland, and 40,000 new businesses started operations in the same year, most of them SMEs.

The Swiss delegate gave examples of new businesses that were the result of partnerships between academia and Innosuisse, Switzerland’s innovation promotion agency. One of those examples, Hemolytics (malaria diagnostic) was also featured at a side event prior to the TRIPS Council (IPW, WTO/TRIPS, 8 November 2018).

According to the Swiss statement, Jonas Pollard, who created Hemolytics, filed a patent which is still owned by his employer, the Adolphe Merkle Institute, which covered the cost of the patent application under the World Intellectual Property Organization Patent Cooperation Treaty. Pollard is now negotiating either to obtain an exclusive licence or to buy the patent from the Adolphe Merkle Institute, the statement said.

Brazil said that the country co-sponsored both the IP and innovation and the IP and the public interest agenda items because they both highlight the complex relationship of the IP system with the concrete reality routinely faced by policymakers and stakeholders.

According to the Brazilian statement, a number of regulatory measures can be used to support new businesses. The Brazilian patent office provides fee reductions for micro and small and medium-sized enterprises as well as to individual inventors, and accelerated patent examination, it said.

Brazil also engages in awareness-raising activities on the importance of IP protection for innovation, according to the statement. The Brazilian delegate presented success stories of start-ups. One was about Integra, a spinoff originated from the University of Brasilia, developing a genetically-modified yeast that can be used to convert residues of the biodiesel industry into bioplastic. The invention is protected by four patents, and received over one million reais (US$267,157), it said.

Barriers to the use of IP by innovative companies include the lack of resources to face legal expenses, patent searches and enforcement, and WTO member states should exchange experiences on solutions found to address those barriers, the statement said. The statement further underlined the fact that patents are but one element driving innovation; others include infrastructure for innovation, collaboration, research, adequate funding for start-ups, tax measures.

According to a source, Australia, Chile, Japan, Norway, Singapore, Taiwan, and Canada underlined the importance of IP in improving lives. India, China, and South Africa underlined the existing barriers to the dissemination of the use of the IP system by innovative companies, the source added.

[Update:] Denis Shea, US Ambassador to the WTO, in his statement emphasised the importance of IP to the economy. “There is a critical nexus between business development, intellectual property, and economic growth,” he said. IP-intensive industries support at least 45 million US jobs and contribute more than $6 trillion dollars to, or 38.2 percent of, US gross domestic product (GDP).”

“The United States’ 30 million SMEs have accounted for nearly two-thirds of net new private sector jobs in recent decades. And our youngest companies – those less than one year old – have created on average 1.5 million jobs annually over the past three decades,” he said.

“These figures indicate that creating the conditions for new businesses and startups to succeed is key to America’s future economic success,” Shea said. [end update]

Competition Law Policy and IP

South Africa had requested a discussion [pdf] on promoting public health through competition law and policy. The item was co-sponsored by Brazil and India.

According to its statement, the EU said it does not find the TRIPS Council the appropriate forum to discuss competition law policy. While TRIPS is compatible with the application of competition policy measures, it “clearly does not allow for ‘absolute policy space,'” the statement said. The EU cooperates with other national authorities “on competition policy and enforcement issues of mutual interest,” it added.

According to a source, the United States said that given the fact that relatively few TRIPS Council delegates can be expected to have deep expertise in both IP and competition law and policy, the council is not an ideal venue to hold this discussion.

Competition policy plays an important role in controlling and sanctioning anti-competitive market behaviour, including the pharmaceutical sector, the EU statement said. It added that “concerning excessive pricing as a competition law infringement in the pharmaceutical sector, there have been only very few decisions in the EU, specifically, by Denmark, Italy, and the United Kingdom.”

The European Commission is watchful of possible IP abuses, and the commission is currently conducting an investigation into unfair pricing of medicines, the statement said, adding that this investigation concerns pricing practices by Aspen, a global pharmaceutical company headquartered in South Africa producing generic pharmaceutical products for cancer. Other actions included sanctioning AstraZeneca for misleading patent offices to enjoy a patent extension to which it was not legally entitled, the EU said.

At the EU level, however, the application of competition policy has so far not been needed as a remedy against excessive pricing as a result of IP rights protection or to remedy patent barriers to generic entry, according to the statement. The EU “gives particular attention to preserving the balance between static competition (short term price effects) and dynamic competition (long term innovation effects), it specifies.

Brazil on the contrary said the debate on the relation between IP and competition law lies at the heart of the IP system and is of interest to the TRIPS Council, according to the Brazil statement.

According to Brazil, IP and antitrust law are considered incompatible, but the debate has evolved to consider that antitrust and IP are complementary. This is particularly true in the new economy “in which innovation, knowledge and intellectual property rights are a central part of the competition dynamics.”

Brazilian competition authority (CADE) conditioned the approval of the merger filing between Bayer and Monsanto, on remedies that addressed the competitive concerns caused by the concentration of IP rights of the two companies, the statement explained. For the merger to go through, it said, the two companies were required to licence certain patented seed traits and protected plant varieties.

Abuses of IP rights, “such as reverse payment agreements, and anticompetitive licensing practices, may favor undue extension of the market power granted by a patent,” the statement said.

“In the pharmaceutical industry, competition policy benefits consumers in the form of increased access to affordable medicines by detecting, halting and correcting anti-competitive practices, without harming the dynamic competition effect granted by IP rights,” thus countries should be free to use the full flexibilities available in the TRIPS to ensure better access to medicines, it further said.

According to its statement, Indonesia said IP plays an important role to stimulate research and development in the fields of medicines and medical technologies but research and development is also stimulated by a fair working market-competition process.

Indonesia enacted Law 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition. This law contains rules governing competition between business actors, the statement said. An independent enforcement agency to enforce this legislation has been established (Komisi Pengawas Persaingan Usaha – KPPU).

Doctors have a dominant role in determining the choice of drugs, and KPPU suspected that some transactional deals between doctors and pharmaceutical companies would give incentives to doctors in prescribing particular medicines. As a result, according to the statement, KPPU issued recommendations to the Ministry of Health to favour generic medicines, both for pharmacists and doctors.

WHO: Anti-Competitive Practices Issue for Poor Countries

The World Health Organization, commenting on the promotion of public health through competition law and policy, said competition law is an important tool to promote innovation and access to health technologies.

Strategic patenting, secondary and defensive patenting, restrictive conditions in medical technology licencing, and mergers between pharmaceutical companies that can lead to undesirable concentration of research and development and IP rights can considerably delay generic entry of innovative medicines as well as innovation, the WHO said in its statement.

Anti-competitive practices create particular challenges in low and middle-income countries, and may lead to barriers to innovation and access in the medical sector, the statement said.

“IP protection is not exempt from the application of competition law and provides a useful tool for correcting abuses of IPRs [IP rights] on a case by case basis,” the WHO said, adding that competition law is applicable to patented and not patented medicines.

No Answers Yet to India Question on EU Customs Law

India had introduced a number of questions to the EU on its customs regulation regarding goods in transit. The EU, in its statement, said it took note of the questions from India but only received them “a couple of days ahead of the TRIPS Council on a subject involving several services of the European Commission,” so the EU was not in a position to provide replies.

The EU added that it is not aware of “a single recent case in the EU where there was an issue of seizure of legally transiting pharmaceutical products not destined for the EU internal market.” There is an ongoing bilateral dispute settlement consultation process on matters of transit between India and the EU, the statement said.

Plain Packaging: Some Warn Against Spread to Other Goods

Some comments were made on the WTO Dispute Settlement panel reports on tobacco plain packaging cases (IPW, WTO/TRIPS, 28 June 2018). Honduras and the Dominican Republic appealed the cases (IPW, WTO/TRIPS, 20 July 2018). According to a source, both countries said from a legal interpretation perspective and in its assessment of the facts, the panel made mistakes. The two countries said the panel reports set a dangerous precedent for all members and undermine trademark protection, according to the source.

In its statement, Indonesia, which did not appeal the ruling, said the panel report will harm trade in “other perfectly legal and legitimate products such as certain foods and drinks.”

“There have been calls to introduce measures similar to tobacco plain packaging to high-fat and high-sugar products in order to combat obesity and diabetes,” the statement said, warning that the panel’s decision may now be applied to alcoholic beverages for religious or moral reasons. Indonesia said the ruling signal “the beginning of a slippery slope to fundamental disruption of global consumer markets.”

Australia, and Norway said countries should be able to take measures to protect public health as long as it is consistent with WTO agreements, the source said.

The next meetings of the TRIPS Council are tentatively the 13-14 February, 4-5 June, and 15-16 October 2019.

 

Image Credits: Catherine Saez