Unforced Errors

It’s easy enough to fall into the trap. In hot pur­suit of an argu­ment we some­times grasp at evi­dence that isn’t quite what it seems.

Jane”>http://www.janegalt.net/blog/archives/004357.html”>Jane Galt has put an odd spin on the prob­a­ble WTO deal on patents and drugs

” The WTO has just cut a deal to let coun­tries that break patents, such as India and Brazil, export their drugs.  The agree­ment is very lim­it­ed in scope.  But it goes to show that phar­ma com­pa­nies are right to be wor­ried about the sup­port from governments—ours and others—for main­tain­ing their intel­lec­tu­al property. ”

Although I agree with her that drug patents should be pro­tect­ed, it’s mis­lead­ing to sug­gest that India or oth­er coun­tries that may be using, or threat­en­ing to use com­pul­so­ry licens­es to man­u­fac­ture drugs are “break­ing patents”. Com­pul­so­ry licens­ing is a long-estab­lished fea­ture of the glob­al patents sys­tem that has a legit­i­mate ratio­nale relat­ed to com­pe­ti­tion pol­i­cy goals.  Far from endan­ger­ing patents, the WTO Agree­ments in fact pro­vide the only enforce­able rules lim­it­ing the use of com­pul­so­ry licens­es. You’ll find more about this on my “World Trade Rules(link to the TRIPS Man­u­al on WorldTradeRules.com)”:http://www.inquit.com/wtr/trips/TripsManual.html#Patents%20-%20compulsory%20licensing site. Does the new WTO pro­pos­al favor the greater use of com­pul­so­ry licens­ing? Not as much as Jane implies …
The TRIPS(Trade Relat­ed Intel­lec­tu­al Prop­er­ty Rights) Agree­ment is, in part, about is lim­it­ing the “com­pul­so­ry licens­ing pro­vi­sions of inter­na­tion­al patent treaties that have been around for over a cen­tu­ry to ensure that gov­ern­ments do not abuse these pow­ers.  The pre-emi­nent inter­na­tion­al treaty on the cre­ation and main­te­nance of Patents is the Paris Con­ven­tion of 1883.  “Arti­cle 5 of the Convention(link to the text of Art. 5 on the WIPO site)”:http://www.wipo.int/clea/docs/en/wo/wo020en.htm#P121_15034 says that gov­ern­ments may, in effect, acquire the right to exploit a patent for var­i­ous rea­sons that go to the nation­al inter­est; for exam­ple, if the patent own­er is using the monop­oly right in an anti-com­pet­i­tive way. The TRIPS Agree­ment makes two cru­cial changes to this estab­lished sys­tem. First, it makes it pos­si­ble to enforce the inter­na­tion­al rules on patents. There is no effec­tive inter­na­tion­al enforce­ment of the Paris Con­ven­tion rules, except through the WTO. The sec­ond inno­va­tion of the TRIPS Agree­ment was to “spell out(link to the TRIPS Man­u­al on WorldTradeRules.com)”:http://www.inquit.com/wtr/trips/TripsManual.html#Patents%20-%20compulsory%20licensing some rea­son­able lim­its on the use of this com­pul­so­ry licens­ing pow­er, as it affects patents on trad­ed goods includ­ing # Ade­quate remu­ner­a­tion of the rights hold­er: TRIPS says a gov­ern­ment may not just ‘rip-off’ the patent. It must pay for the pri­vate rights it is acquir­ing
# Judi­cial or oth­er inde­pen­dent review: TRIPS says that the patent own­er must have the right to an inde­pen­dent review of a gov­ern­men­t’s actions in acquir­ing the patent
# Pre­dom­i­nant­ly for sup­ply of domes­tic mar­ket: Com­pul­so­ry licens­es must be pre­dom­i­nant­ly for the sup­ply of the domes­tic mar­ket of the coun­try in which the gov­ern­ment com­pul­so­ri­ly acquires the patent You can prob­a­bly see now where the con­flict arose between the TRIPS pro­vi­sions and drugs that are need­ed for pub­lic health: the third of these entire­ly rea­son­able con­di­tions on the use of the com­pul­so­ry licens­ing pow­ers turned out to have some unex­pect­ed con­se­quences. If com­pul­so­ry licens­es were not restrict­ed “pre­dom­i­nant­ly” to the domes­tic mar­ket of the coun­try mak­ing the acqui­si­tion, then the inter­na­tion­al patent sys­tem would quick­ly break down. All patents would be under the threat that a sin­gle com­pul­so­ry license in one state would sup­ply goods embody­ing the patent world wide, under­min­ing the patent wher­ev­er it still held. The ‘TRIPS and pub­lic health’ issue is a con­flict between this pro­vi­sion of the TRIPS agree­ment and the wish of gov­ern­ments in poor coun­tries to access drugs that have been man­u­fac­tured under com­pul­so­ry licens­es issued in oth­er coun­tries. In truth, it’s not much of a pub­lic health prob­lem at all. More than 90% of the drugs on the World Health Orga­ni­za­tion’s list of essen­tial pub­lic health med­i­cines are not patent­ed any­where. Of the oth­ers, some are not patent­ed in e.g. African coun­tries. Most are already avail­able under pref­er­en­tial pric­ing arrange­ments (typ­i­cal­ly free) between the glob­al drugs com­pa­nies and gov­ern­ments of poor coun­tries. The legal con­flict in the TRIPS Agree­ment, too, is pret­ty small beer. You can prob­a­bly think of a cou­ple of sen­tences that could be added to the TRIPS Agree­ment to work around spe­cif­ic prob­lems with a small num­ber of patent­ed drugs with­out under­min­ing the glob­al patent sys­tem. So why the agony? The real prob­lems appear to have been * ide­o­log­i­cal NGO’s who have been press­ing exag­ger­at­ed claims about the pub­lic health con­se­quences of the patents and
* a legal­is­tic approach by the offi­cials and lawyers advis­ing the drug com­pa­nies that seemed to exag­ger­ate the threat to the com­pa­nies’ glob­al inter­ests Most of the nego­tia­tors at WTO in Gene­va share the gen­er­al increduli­ty that this basi­cal­ly sim­ple issue was not solved a year ago. Let’s hope it’s now behind us.

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