ANTI-DIVERSION MEASURES UNDER THE TRIPS PROTOCOL ON PUBLIC HEALTH — A COMMENTARY

• Published date: 01 December 2008
• Date: 01 December 2008
• Citation: (2008) 20 SAcLJ 217
• Author: Alvin SIM Kia Hong LLB (Hons)(National University of Singapore); Deputy Director/Legal Counsel, Legal Policy & International Affairs Department, Intellectual Property Office of Singapore.

The Agreement on Trade Related Aspects of Intellectual Property (“TRIPS”) is the legal instrument which sets common standards for World Trade Organization (“WTO”) members regarding, inter alia, the use of patents. Article 31 of TRIPS provides for Government use of a patent without the rights holder’s authorisation (ie, under a “compulsory licence”). It was recently amended to allow the export of patented pharmaceutical products under compulsory licence subject to certain safeguards. This article explains the rationale behind the amendment and examines the nuances of one such safeguard — that of anti-diversion measures. It suggests possible interpretations of the text in question and proposes approaches which WTO members may consider when implementing such measures.

I. Background to Art 31bis of the TRIPS Agreement

1 Under Art 31(f) of the TRIPS Agreement, WTO members may use (or allow the use of) patents without authorisation of the rights’ holders. Such arrangement is commonly known as “compulsory licensing”. While Art 31(f) covers all kinds of patents, this provision is especially useful when a member needs to procure supplies of patented pharmaceutical products, especially in health crises.

II. Limits of Art 31(f) — A legal and health problem

2 However, Art 31(f) provides that products made under compulsory licensing must be “predominantly for the supply of the domestic market of the Member”. In other words, a member can authorise the production of a required product, but the amount they can export is very limited as a “predominant” portion of what is produced must be consumed domestically. Therefore, members who are willing and able to export substantial quantities of patented pharmaceutical products are legally constrained from doing so by Art 31(f).1

3 From the viewpoint of members who have insufficient or no manufacturing capacity for pharmaceutical products, they are unable to utilise Art 31(f) to help them access important patented drugs to resolve health problems because of the legal constraint described above.

III. The solution — Art 31bis of TRIPS

4 TRIPS was formally amended for the first time on 6 December 2005 to address this problem, and is currently pending acceptance by the WTO membership. As at December 2007, only 14 members or 9.3% of membership2 have accepted this amendment. The Protocol amending Art 31 of TRIPS (the “Protocol” or “Art 31bis”) essentially “waives”, or exempts members from the above-mentioned limitation in Art 31(f) so as to allow the export of patented pharmaceutical products manufactured under compulsory licence, subject to certain conditions. These include, inter alia, notifications to the TRIPS Council of the import of such products, and measures to prevent wrongful re-export and import of such products (which is the subject of this paper). These measures are meant to ensure that Art 31bis is used strictly to deal with public health needs and not for commercial purposes.

5 Art 31bis thus delicately balances the existing rights of patent owners of pharmaceutical products under Art 31 of TRIPS, with the need to address the lack of access to such products — a key cause of public health concerns in developing countries.

IV. Anti-diversion measures under Art 31bis

6 As the Protocol sets up a system to allow just the export of patented pharmaceutical products to meet the public health needs of importing countries, it was imperative that safeguards were incorporated to ensure that the Protocol would not be abused. One of these safeguards deals with ensuring that pharmaceutical products manufactured under the Protocol reach the member that actually requested for it.

7 The Chairman’s Statement accompanying the Protocol of 6 December 20053 sets out the spirit of this safeguard. It states that to fulfil the purpose of the amendment:4

[A] ll reasonable measures should be taken to prevent such diversion [of products supplied under the Protocol] in accordance with the relevant paragraphs of the amendment.

8 This article identifies, and comments on pertinent issues arising in the “relevant paragraphs” of the Protocol pertaining to anti-diversion measures.

9 There are two categories of anti-diversion measures, which may be summarised from the Protocol as follows:

(a) members importing pharmaceutical products (“PP”) under the Protocol must put in place “reasonable measures”, within their means and proportionate to their administrative capacities as well as the risk of trade diversion, to prevent their re-exportation5; and

(b) all members (regardless of whether they use the system under the TRIPS Protocol6) must put in place “effective legal means” to ensure that such PP made under compulsory licence elsewhere and not meant for their domestic markets do not get diverted into these markets7. [emphasis added]

10 The issues under each category will be examined separately.

V. For importing members —“Reasonable measures” to prevent re-export

A. What are “reasonable measures”? — A search for guidance

11 It is important for members to understand the exact nature of “reasonable” measures, in order to formulate and implement appropriate actions to prevent the re-export of PP.

12 However, there does not appear to be any specific guidance on the definition of...