International Intellectual Property laws with respect to pharmaceuticals patents in Africa, part 2

A. Patent Rights Under TRIPS

TRIPS is the only agreement established by the World Trade Organization that specifically covers intellectual property rights.[1] The TRIPS agreement sets a minimum standard for international intellectual property protection and allows individual nations to control their domestic intellectual property laws. Furthermore, when the WTO agreed to TRIPS, many different factors such as social, economic, humanitarian, and legal issues were balanced between the needs of developing and developed countries.[2] Article 28 of TRIPS states that the patent owner has the right to “prevent unauthorized persons from using the patent process and from making, using, offering for sale, or importing the patent product or a product obtained directly by the patent process.”[3] Consequently, this standard of protection gave individual nations great flexibility to implement domestic patent laws. [4]

Even though TRIPS provides a minimum standard for intellectual property rights, nations may use exemptions in certain circumstances.[5] Such as, TRIPS permits the government of an individual member nation to “exclude from patentability inventions, the prevention within their territory of the commercial exploration of which is necessary to protect morality, including protecting human, animal or plaint life or health or to avoid serious prejudice to the environment.” [6] Thus, a member nation may deny the patentability of an invention if the government views that the introduction of a patent to the domestic market would have a negative affect on the nation. [7]Second, TRIPS allows member nations to “adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.” [8]This exception allows for member nations to protect the welfare of their citizens by enacting domestic legislation. Through this exception the South African government enacted SAMRSA, which is discussed in detail further in this paper.

B. Effects on TRIPS

            As previously stated, developing nations and developed nations have different views on intellectual property rights.[9] The most obvious concern for corporations in developed nations is that they will not receive full compensation for pharmaceuticals they have produced through compulsory licensing.[10] A second concern for developed nations is that the pharmaceuticals sold to South Africa will be parallel imported, which will undercut the prices of their legitimate pharmaceutical companies.[11] Third, developed nations fear that South Africa may purchase antiviral drugs from third parties that have parallel imported goods from other nations. However, this is not a primary threat to pharmaceutical companies in developed nations because the parallel importation prices can not be that much lower than the compulsory license prices.[12]

i.                    Compulsory Licensing

TRIPS allows compulsory licensing, but the licensee must first attempt to obtain a voluntary license from the patent holder.[13] If an attempt to obtain a voluntary license is unsuccessful, the government may issue a compulsory license and the license-user must compensate the patent owner.[14]

Although there are many benefits of compulsory licensing, such as poor nations are able to obtain pharmaceuticals at a reduced price, there are also negatives with compulsory licensing. [15]Pharmaceutical companies may fear that through compulsory licensing that global intellectual property rights will be weakened. Compulsory licensing encourages free riding of patent pharmaceuticals in developing nations. [16] Due to the lowered standard of global patent protection that compulsory licensing allows, inventors who invest a large sum of money into researching and developing new vaccines will not be fully compensated because other pharmaceutical companies can copy the patent and sell the pharmaceutical.  [17]

This may lead to pharmaceutical companies having fewer incentives to research and develop medicines to treat diseases that are found majority in developing nations. [18] Therefore, pharmaceutical companies may not invest in vaccines unless there is a strong economic incentive to do so; compulsory licensing lowers global international patent rights, thus lowering the motivation to create medicines. [19]

Another danger associated with compulsory licensing in developing nations is that all developing nations are not equal. Countries such as Brazil, South Africa and other developing have different governmental and economic standards.  [20]Thus, nations should have pharmaceutical compulsory licenses determined for each individual nation this is because “middle-income” developing nations may take advantage of compulsory licenses to the detriment of poorer developing nations that truly can not afford to pay for antiviral medications.[21]

Compulsory licensing remains an important tool for getting antivirals to developing countries because the mere threat to use it has caused pharmaceutical companies to reduce drug prices.  [22] However, if pharmaceutical companies will to invents in new medicines unless there is an economic incentive to do so. [23] By weakening international patent protection compulsory license lowers the motivation for pharmaceutical companies to make antivirals which are crucial for South Africa to battle the AIDS epidemic. [24] Thus, although South Africa may benefit short term from compulsory licensing by obtaining cheaper antivirals, long term it is important for stronger global patent protection to make sure pharmaceutical companies have an incentive to make drugs. [25]

ii.                  Article 31 of TRIPS

Article 31 of the TRIPS agreement permits compulsory licensing and states “Where the law of a Member allows for other use of the subject matter of a patent without authorization of the right holder, including use by government or third parties authorized by the government. “[26] Article 31 provides that compulsory licenses are only proper when “the proposed user has made efforts to obtain authorization from the patent holder on reasonable commercial terms and that such efforts have been unsuccessful within a reasonable period of time.” [27] Nonetheless, Article 31 can be waived in a time of a “national emergency.” Thus, Article 31 forces member states to enter into good faith negotiations for a compulsory licenses; however, a loophole remains open if there is a national emergency. [28]

An additional requirement of Article 31 is that compulsory licenses must be “authorized predominantly for the supply of the domestic market of the member state authorizing the use.” [29]This subsection of Article 31 is controversial because it is not clear if countries are required to manufacture the product domestically or if they may have foreign third parties import the manufactured goods. [30]

Additionally, Article 31 provides that “the right holder shall be paid adequate remunerations” for the compulsory license; however, neither article 31 nor TRIPS provide any guidelines for standards to follow. [31]Usually, in domestic transactions adequate remedies may be established but when dealing with international trade differences in costs can cause complications for calculating adequate remunerations. [32]

These Ambiguities in TRIPS cause a weakening of international patent protection. This is due to the fact that poorer nations are able to construe the wording whichever way they choose to obtain patented goods at the cheapest possible price.