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News blog11 August 2022

Guest article from EuroCham Malaysia (IPR Committee): Updates on patent waivers and recent World Trade Organization (WTO) decisions – where are we now?

eucham

The COVID-19 pandemic has thrust the issue of patents and patent waivers into the global spotlight. It was one of the most pressing issues on the agenda at the Twelfth WTO Ministerial Conference in Geneva [1] (12–17 June 2022), and was also discussed extensively in the press in many countries. This article examines the impact of the recent WTO decisions made in Geneva on the issue of patent waivers. 

Why are patents important, and why have some countries called for waivers?

Pharmaceutical companies conduct research and develop vaccines, as well as diagnostic and therapeutic tools that are essential in the fight against things like viruses such as COVID-19. These are highly technical products, and companies apply for patents of their inventions in this area. Patent law requires the companies to publicly disclose their inventions, and, in return, they are given a period of monopoly during which no one else is permitted to produce or sell the invention without their authorisation. 

The rationale for patents was articulated in the report of a WTO dispute settlement panel (the Panel) on “Canada – Patent Protection of Pharmaceutical Products” in 2000 [2]. In its review of Canada’s patent regime, the Panel emphasised the fact that patent laws exist to ‘establish a carefully defined period of market exclusivity as an inducement to innovation’ (point 7.55 of section VII ‘FINDINGS’) This is an articulation of the ‘incentive’ rationale often put forward in support of patent regimes. It is said that patents encourage innovators to take entrepreneurial risks in anticipation of the commercial reward bestowed by market exclusivity. Furthermore, the requirement to publicly disclose inventions provides material on which other innovators can work.

If patents are so beneficial for long-term innovation, why are there calls from various countries to waive them, especially in the context of COVID-19? Some argue that the incentive behind patents does not adequately consider the interests of consumers. While, in the long term, patent regimes may lead to more innovative products for consumers, in the short-term consumers may face higher prices than usual (due to patent holders’ monopoly power), compromising overall consumer welfare. Article 7 of the TRIPS Agreement (‘TRIPS’) [3] acknowledges these competing concerns – it mentions the ‘promotion of technological innovation’ and the ‘transfer and dissemination of technology’ on one hand, and ‘the mutual advantage of producers and users’ and ‘social and economic welfare’ on the other, ultimately requiring an overall ‘balance of rights and obligations’.

These policy tensions are cast in stark relief when consumers’ needs become acute. This is no truer than when intellectual property (IP) protection meets a public health crisis plaguing the whole world (both rich and poor), and when a ‘mere consumer’ becomes a ‘potential health patient at risk of death’. These competing concerns were already expressed in the WTO’s Doha Declaration of 2001 [4], the first significant statement on the impact of IP protection on public health. It acknowledged the importance of IP protection for encouraging the ‘development of new medicines’ and recognised ‘concerns about its effects on prices’ (see paragraph 3).

During times of special consumer need – like a public health crisis – the ‘traditional’ TRIPS way to get around these potential disadvantages found in patent regimes is to make use of compulsory licensing. TRIPS allows governments to operate compulsory licensing systems (see Art. 31) that permit certain producers to use the subject matter of a patent without the patent holder’s authorisation. Governments are free to determine the grounds on which to grant such licences (see paragraph 5(b) of the WTO’s Doha Declaration).

Earlier during the COVID-19 pandemic, there were arguments from some quarters that compulsory licensing systems were insufficient; they could not meet the urgent need for adequate and affordable vaccines. A significant number of developing countries lacked such systems and would be unable to quickly set them up. There was also serious tension between developed and developing countries, where the latter accused the former (where most vaccines were developed and manufactured) of hoarding vaccines for domestic supply.

In response to these concerns, India and South Africa submitted a proposal to the TRIPS Council in 2020, asking for a ‘blanket’ waiver of obligations and enforcement actions relating to Sections 1, 4, 5 and 7 of Part II of TRIPS and concerning the prevention, containment, or treatment of COVID-19 [5]. It was co-sponsored by 60 Members, mostly developing countries, and opposed by several notable developed Members, such as the European Union (they encouraged compulsory licensing instead). These Members argued that the patent system was not at fault and instead attributed vaccine shortages to other factors, such as export constraints, regulatory processes and limited manufacturing capacities. This highly emotionally charged debate finally reached its climax (and perhaps resolution) at the latest WTO Ministerial Conference in June 2022.

What did the WTO decide in its Twelfth Ministerial Conference?

At the WTO Ministerial Conference in June 2022, several decisions and declarations were adopted, including the Ministerial Declaration on the WTO Response to the COVID-19 Pandemic and Preparedness for Future Pandemics (‘the Declaration’) [6] and the Ministerial Decision on the TRIPS Agreement (‘the Decision’) [7]. The Declaration, which examined the broad concerns discussed and the WTO’s responses to COVID-19, referred to diverse issues such as food insecurity and the instability of the tourism sector. A good portion of the Declaration was dedicated to TRIPS. It referred to the Doha Declaration of 2001 and affirmed the Members’ rights to use the flexibilities in TRIPS to protect public health, including the compulsory licensing system permitted under Article 31. Regarding the developed/developing country disparity, the Declaration also affirmed Article 66.2 of TRIPS, which expresses the developed Members’ commitment to encourage technology transfers to least developed countries. Overall, the Declaration was a helpful reiteration of the Members’ commitments to ensuring IP protection does not hinder public health responses.

As far as the Decision is concerned, the focus was specifically on TRIPS provisions as a response to the patent waiver lobby. In terms of its legal effects, the Decision was made under the Ministerial Conference’s power (under Article IX:3–4 of the WTO Agreement) to waive obligations under a multilateral trading agreement such as TRIPS. One can surmise that the Decision was far more modest than the original patent waiver proposal from 2020, which suggested that large chunks of TRIPS should be ignored in response to COVID-19. The Decision reiterated the patent rights enumerated in Article 28.1 of TRIPS but also highlighted Article 31, which provides for the use of patent subject matter without the need for patent holder’s authorisation (mainly in the realms of compulsory licensing). Framed as a list of ‘clarifications and waiver’, the Decision essentially clarified or extended the flexibilities in Article 31 regarding compulsory licensing provisions (effective for a period of 5 years) in response to issues in relation to COVID-19 vaccine production and supply. The ‘clarifications and waiver’ of the Decision are summarised below.

Use of non-legislative instruments (see paragraph 2)

Firstly, the Decision clarified that authorisation to use the subject matter of a patent (under Article 31) can be granted through ‘any instrument available in the law of the Member’ without the need for a formal compulsory licensing regime to be in place. Countries can use, for example, ‘executive orders, emergency decrees, government use authorisations, and judicial or administrative orders’ (see paragraph 2 of the Decision). This seems tantamount to a temporary reinterpretation of the phrase ‘the law of a Member’ in Article 31 of TRIPS, which ‘[f]or the purpose of this Decision’ (i.e. only in relation to COVID-19 vaccines, and for 5 years) now can include non-legislative instruments, which for instance can comprise decisions of the executive branch of the Member that have not been passed (or not yet been passed) by the law-making body of the Member.

No requirement to seek patent holder’s prior authorisation (see paragraph 3(a))

Secondly, the Decision clarified that, in the context of the pandemic, there is no requirement for the proposed user of the patent subject matter to first make efforts to obtain authorisation from the patent holder. This is a re-emphasis of the exception that already existed in Article 31(b) of TRIPS, which allows a waiver (with the ‘in the case of a national emergency’ prerequisite).

Exports permitted (see paragraph 3(b))

Thirdly, the Decision also explained that products manufactured under this special authorisation do not need to be predominantly for domestic use. As a result, it permits countries to export domestically produced vaccines to countries that lack sufficient manufacturing capacity. This part of the Decision is in fact a reminder; flexibility was already allowed in the context of pharmaceutical products (under Article 31bis.5 of TRIPS).

Adequacy of remuneration (see paragraph 3(d))

Fourthly, the Decision permitted Members to determine the level of adequate remuneration for the patent holder when adopting such measures, by taking into account the ‘humanitarian and not-for-profit purpose of vaccine distribution programmes’. This is perhaps the most novel and far-reaching aspect of the clarifications/and waiver in the Decision, as Article 31.5 and Article 31bis.2 of TRIPS usually require the remuneration to consider the ‘economic value’ of the product. The novelty of the Decision in this regard is that the level of remuneration need not be based on the financial value of the opportunity to exploit the patent, and can perhaps be set at the ‘level of affordability’ of the Member that is developing or procuring the vaccine and distributing the same to its citizens without any profit element or for humanitarian purposes.

Where to from here? Implications for Malaysia and beyond

It appears that the Declaration and Decision will have a limited impact on Malaysia, as the country already has a compulsory licensing system in place (through Part X of the Patents Act 1983). Under this Part, a compulsory licence may be granted on the following grounds: (a) unreasonable pricing, non-production, non-availability, or insufficiency of the subject matter of the patent (Section 49); (b) inter-dependence of patents (Section 49A); (c) government use (due to the anti-competitive behaviour of the patent holder, or a national emergency) (Section 84). As mentioned above, the significant new aspects of the Decision are the waiver of the requirement to seek the patent holder’s prior authorisation (Section 49) and the waiver of the requirement to reflect economic value when compensating the patent holder. However, based on how vaccines are currently being procured by the Ministry of Health, it is unlikely that the Malaysian Government will necessarily make use of such waivers.

Beyond Malaysia, the Declaration and Decision will obviously have more implications for countries that have yet to implement a compulsory licensing system – thanks to the clarification provided under Article 31 of TRIPS stating that there is no need for such a system to be in place. In the longer term, this years-long deliberation on patent waivers shows that wholesale waivers (such as those first proposed by India and South Africa – i.e. whole waivers regarding obligations and the enforcement of IP rights without having to operate a licensing/exempting system) are unlikely to be favoured by the global community. Moving forward, compulsory licensing will therefore probably continue to be the primary means used to re-calibrate IP systems for public health purposes.  

The WTO Ministerial Conference of June 2022 can thus best be seen as a reminder that TRIPS already facilitates certain types of waivers of patent rights in various public health scenarios, and the mechanisms provided therein should be fully explored and exploited before one concludes that they are not good enough.

 

 

[1] WTO | Ministerial conferences - Twelfth WTO Ministerial Conference - Geneva Switzerland

[2] Panel Report, ‘Canada – Patent Protection of Pharmaceutical Products’, WTO Doc. WT/DS114/R  (adopted 7 April 2000), available at https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=Q:/WT/DS/114R.pdf&Open=True (last visited 10 August 2022).

[3] Agreement on Trade-Related Aspects of Intellectual Property Rights, 15 April 1994, Marrakesh Agreement Establishing the WTO, Annex 1C, 1869 UNTS 299, 33 ILM 1197 (1994), available at https://www.wto.org/english/docs_e/legal_e/27-trips.pdf (last visited 10 August 2022).

[4] ‘Declaration on the TRIPS agreement and public health’, WTO Doc. WT/MIN(01)/Dec/2 (adopted 14 November 2001), available at https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm (last visited 10 August 2022).

[5] Communication from India and South Africa: ‘Waiver from Certain Provisions of the TRIPS Agreement for the Prevention, Containment and Treatment of COVID-19’, WTO Doc. IP/C/W/669 (2 October 2020), available at https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W669.pdf&Open=True (last visited 10 August 2022).

[6] Ministerial Declaration on the WTO Response to the COVID-19 Pandemic and Preparedness for Future Pandemics, WTO Doc. WT/MIN(22)/31, WT/L/1142 (adopted 17 June 2022), available at https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/31.pdf&Open=True (last visited 10 August 2022).

[7] Ministerial Decision on the TRIPS Agreement, WTO Doc. WT/MIN(22)/30, WT/L/1141 (adopted 17 June 2022), available at https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/30.pdf&Open=True (last visited 10 August 2022).

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Publication date
11 August 2022