TPP Negotiating Parties' Counterproposal to the US on Medicines Represents a More Flexible Approach

On November 13, 2013, Wikileaks obtained and published a copy of the consolidated IP negotiating chapter for the Trans-Pacific Partnership Agreement (TPP). This leak has allowed the public to learn what is in the text, including about the reported five country counterproposal to the United States' proposal on pharmaceuticals and medicines.

In September 2011, the United States tabled controversial text on pharmaceuticals which it called it "Trade Enhancing Access to Medicines (TEAM)" text. This proposal, which included provisions on exclusive rights over test data, patent linkage and patent term extensions, included a complicated system for countries using systems of registration by reference. The proposal was met with heavy opposition and all eight of the then-negotiating parties (Canada, Mexico and Japan had yet to enter into the negotiations) opposed the United States' proposal. After the March 2012 round in Melbourne, the United States entered into its infamous "period of reflection" which reportedly ended in the August 2013 round in Brunei. A review of the newly leaked text shows that the United States has not changed its so-called "TEAM" text or withdrawn its proposal.

In the meantime, other countries offered a counterproposal to the United States' proposal on medicines. This counterproposal was first reported as being discussed in the May 2013 round in Lima and again in the July 2013 round in Kota Kinabalu before being tabled in Brunei. According to news reports, the counterproposal initially was drafted by six countries, Australia, Canada, Chile, Malaysia, New Zealand and Singapore, though Australia dropped out of the group when the proposal was tabled in Brunei due to the fact that Australia was in its period of elections. Overall, the proposal is a very positive one that preserves important TRIPS flexibilities and will do far more to promote the public health than the United States' proposal.

Based on the following block of countries (NZ/CA/SG/CL/MY) below is a review of some of the text of the counterproposal on pharmaceuticals. While it may not cover every issue tabled as part of the counterproposal during the Brunei round, it does include many of the important features:

Objectives
In Article QQ.A.2 on objectives, six countries have proposed additional objectives related to technology transfer and the protection of public health. The objectives and principles section of the agreement can play an important role in interpreting the substantive provisions of the agreement, including in dispute settlement.

[NZ/CA/SG/CL/MY/VN propose. g. The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.
h. Support each Party's right to protect public health, including by facilitating timely access to affordable medicines.]

Principles
Five countries have proposed principles for the agreement that specifically take into account important issues such as development and the public interest. The principles proposed would also allow countries to "prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology." It would also allow countries to take measures to address anticompetitive behavior.

[Article QQ.A.2bis: {Principles}
[NZ/CA/SG/CL/MY propose:1. Each Party may, in formulating or amending its laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to its socio-economic and technological development, provided that such measures are consistent with the provisions of this Chapter.

2. Each Party may adopt or maintain appropriate measures, provided that they are consistent with the provisions of this Chapter, to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

3. Each Party may adopt or maintain, consistently with the other provisions of this Chapter, appropriate measures to prevent or control practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market.]]

Other Use Without Authorization of the Right Holder
The group of five countries proposed a provision that would preserve the limitations and exceptions under Article 31 of the TRIPS Agreement for compulsory licenses. This text represents an important preservation of the flexibilities that exist under the TRIPS Agreement which does not appear elsewhere (and presumably has not previously been proposed) in the TPP negotiating text.

Article QQ.E.5quater: {Other Use Without Authorisation of the Right Holder}
[NZ/CA/SG/CL/MY propose: Nothing in this Chapter shall limit a Party's rights and obligations under Article 31 of the TRIPS Agreement or any amendment thereto.]

Pre-Grant Opposition
The group of five countries have also proposed an explicit provision that would require parties to provide for third-party oppositions to the grant of the patent. According to the proposal, parties would be given the option to permit pre-grant opposition, post-grant opposition or both. One of the important criticisms of the United States proposal was the attempt to eliminate all forms of pre-grant opposition to patents, though it appears that the United States has withdrawn its proposal in this regard. Pre-grant opposition is an important mechanism to promote high patent quality, by ensuring that weak patent claims are properly opposed and patents that should not have been granted are not given monopoly status for any period of time. Pre-grant opposition has been successfully used in countries such as India to promote access to medicines by ensuring that spurious patents are not granted, thereby allowing generics to enter the market rather than forcing them to litigate patent claims in expensive and time-consuming court battles.

Article QQ.E.4: {Opposition to Grant of Patent}
[NZ/CA/SG/CL/MY propose: Each Party shall provide a procedure for third persons to oppose the grant of a patent, either before or after the grant of a patent, or both.]

Protection of Undisclosed Data
Six countries (with the inclusion of Vietnam) support a more flexible approach on the protection of undisclosed test data used for regulatory approval. The United States proposal would require exclusive rights over test data for a period of at least five years, with an additional three years of exclusivity for the submission of new clinical information. The United States has not yet proposed text to replace its "placeholder" for biologics.

By contrast, the alternative proposal would not require exclusive rights over test data. Instead, it largely replicates the language used in Article 39.3 of the TRIPS Agreement, providing only for the protection of undisclosed test data. It preserves the TRIPS flexibilities and safeguards, applying protection requirement only to "new chemical entities" for "undisclosed test or other data," and that data must involve "considerable effort." It only requires parties to protect the data against "unfair commercial use," but adds the caveat that an exception occurs "where necessary to protect the public or unless steps are taken" to protect against unfair commercial use. This approach allows flexibilities in implementing the provision and would allow for cost-sharing mechanisms to be adopted.

The language also explicitly provides for a number of ways that parties may limit the protection of undisclosed data, including providing that it may only be available for a new chemical entity, available only once per pharmaceutical product, or not available for new uses or dosage forms.

There are, perhaps, two areas for concern, however in subparagraphs 2(f) and 2(g). With regard to (f), it may be seen as a positive that parties may limit it to a specified period of time; however such time-limited periods raise an implication that exclusive rights are provided for. Because most countries do implement Article 39 of TRIPS by providing for exclusive rights over test data, this provision is likely to apply to those countries. Subparagraph (g) is potentially problematic because it may imply that such waiver only applies in cases where there is a voluntary or compulsory license and does not address the situation where there may not be a valid patent on the product. In those cases, no license would be necessary, but where protection or exclusivity exists, this language may become problematic. The language would be stronger if it addressed situations where no patent exists and explicitly noted that one may override data protection or data exclusivity.

Paragraph 3 is positive, explicitly recognizing the Doha Declaration and any waiver or amendment of the TRIPS Agreement.

Overall, this proposal is much better in terms of protecting the public health than the United States' proposal.

Article QQ.E.XX.4: {Protection of Undisclosed Data}
[NZ/CA/SG/CL/MY/VN propose: 1. Where a Party requires, as a condition of marketing, regulatory or sanitary approval for pharmaceutical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, that Party shall protect such data against unfair commercial use. In addition, each Party shall protect such data against disclosure, except where necessary to protect the public or unless steps are taken to ensure that the data is protected against unfair commercial use.

2. Each Party may provide that the protection of data under paragraph 1, inter alia:
(a) is limited to undisclosed test or other data, the origination of which involves a considerable effort;
(b) is limited to pharmaceutical products that do not contain a new chemical entity that has been previously approved for marketing in the Party;
(c) is limited to pharmaceutical products which utilize a new chemical entity;
(d) is available only once per pharmaceutical product;
(e) is not available for new uses or indications, new dosage forms or methods of making a pharmaceutical product;
(f) is limited to a period of time as determined by the Party; or
(g) may be waived to facilitate the marketing, regulatory or sanitary approval of a pharmaceutical product that is the subject of a voluntary or compulsory license, or a licence otherwise issued pursuant to the TRIPS Agreement.

3. Each Party may take measures to protect public health in accordance with:
(a) the Declaration on the TRIPS Agreement and Public Health (WT/MIN(01)/DEC/2) (the “Declaration”);
(b) any waiver of any provision of the TRIPS Agreement granted by WTO Members in accordance with the WTO Agreement to implement the Declaration and in force between the Parties; and
(c) any amendment of the TRIPS Agreement to implement the Declaration that enters into force with respect to the Parties.]

Patent Term Extensions
The United States proposal includes a system of mandatory patent term extensions, including for countries who use a reference by registration system where companies file for marketing approval within an "access window." Patent term extensions for both patent delays and delays in the regulatory approval process extend the term of the patent beyond the international standard of twenty years and can delay entry of generic medicines.

The counterproposal, supported by six countries, addresses delays by encouraging parties to promote efficiency and using language that parties "shall endeavor" to address those delays. It does not mandate any specific mechanism that countries must follow to address the delays and makes no mention of patent term extensions. This proposal is much more flexible and allows countries to determine how to promote efficiency. Furthermore, with regard to the efficiency in the patent registration system, the proposal also notes that parties also "shall endeavour to improve quality," an important aspect in improving the patent system and ensuring that weak patents are not granted.

Article QQ.E.XX.2: {Patent Quality and Efficiency}
[NZ/CA/SG/CL/MY/VN propose: 1. Each Party shall endeavour to improve quality and efficiency in its patent system.

2. Each Party shall endeavour to enhance its patent registration system by maintaining examination procedures, cancellation procedures and, where provided, opposition procedures that consistently provide high quality rights for granted patents, and endeavour to simplify and streamline its administration system for the benefit of all users of the system and the public as a whole.]

Article QQ.E.XX.3: {Processing Efficiency}
[NZ/CA/SG/CL/MY/VN propose: 1. Each Party shall endeavour to process applications for patents, and applications for marketing, regulatory or sanitary approval of pharmaceutical products, in an efficient and timely manner.

2. Each Party may provide a procedure for patent applicants to apply to expedite the examination of their patent application.

3. If there are unreasonable delays in a Party's processing of applications for patents, or processing of applications for marketing, regulatory or sanitary approval of pharmaceutical products, the Party shall endeavour to address those delays.]

Patent Linkage
Like exclusive rights over test data and patent term extensions, the United States would mandate that parties adopt systems of patent linkage. Patent linkage is a highly inappropriate system where patent status is linked to the systems for drug registration. Patent linkage is not used in most European countries and is also inappropriate for developing countries. Abuses of the patent linkage system have been well documented, yet the United States continues to push countries to adopt these systems.

The counterproposal does not include any provisions regarding patent linkage.

Measures to Encourage Timely Entry of Pharmaceutical Products
The United States proposal included a complicated "access window" system for countries using registration by reference, providing that parties would be required to provide for patent linkage, patent term extensions and exclusive rights over test data if a company filed for marketing approval within a certain window of time after being granted approval in another TPP country. The term of years for the access window had not been determined or proposed. Aside from the fact that patent linkage, patent term extensions and exclusive rights over test data are inappropriate mechanisms that simply lengthen monopolies and delay generic entry into the market, the proposal was further problematic because companies were not required to ever finish the process for registration in order to receive these benefits. For countries not using registration by reference, patent linkage, patent term extensions and exclusive rights over test data would always be mandatory, regardless of the fact that companies may not choose to quickly market in smaller high-income markets (that do not use reference by registration).

The counterproposal does not specify what a party must do in order to promote timely entry of pharmaceutical products. Instead, it simply leaves it up to each party, stating that parties "may adopt or maintain" such measures, without specifying the exact mechanisms to be used.

Article QQ.E.XX.1: {Measures to Encourage Timely Entry of Pharmaceutical Products}
[NZ/CA/SG/CL/MY/VN propose: Each Party may adopt or maintain measures to encourage the timely entry of pharmaceutical products to its market.]

Experimental Use of a Patent
Five countries have also proposed a section permitting parties to allow the experimental use of a patent. The proposal clearly states that experimental purposes may encompass a wide range of activities and provides for a non-exhaustive list that includes "determining how the invention works, determining the scope of the invention, determining the validity of the claims, or seeking an improvement of the invention (for example, determining new properties, or new uses, of the invention." This experimental use provision, if accepted, would be a welcome one. The United States does not have a statutory experimental use exception and the Federal Circuit case in Madey v. Duke greatly reduced the scope of the common law experimental exception.

Article QQ.E.5ter: {Experimental Use of a Patent}
[NZ/CA/SG/CL/MY propose: 1. Consistent with [Article QQ.E.5 (Exceptions) ], each Party may provide that a third person may do an act that would otherwise infringe a patent if the act is done for experimental purposes relating to the subject matter of a patented invention.

2. For the purposes of this Article, experimental purposes may include, but need not be limited to, determining how the invention works, determining the scope of the invention, determining the validity of the claims, or seeking an improvement of the invention (for example, determining new properties, or new uses, of the invention).]

Conclusion
The counterproposal is a positive one and represents a much more flexible approach than the one set forth by the United States. The counterproposal is not only flexible, but also less complicated, preserves TRIPS flexibilities, and specifically takes into account important factors including the public interest, levels of development, and the potential for abuse of intellectual property rights by the right holders.