Among the public health-related measures, one important feature in the context of China is the disclosure requirement for traditional knowledge and genetic resources. The Chinese government supports and encourages research on local traditional knowledge and genetic resources. It therefore tried to preserve the interests of local producers and users by introducing strict requirements. Article 26 of the 2008 Patent Law adopted disclosure requirements, which require that the applicant disclose and explain the direct and original source of the genetic resource. If the applicant is not able to disclose the original source, the applicant must provide the reasons why.123 However, Article 26 has some weakness in its implementation. For example, it is not clear how to define "direct source" and "original source", or acceptable and reasonable grounds for not disclosing the original source. This vagueness may create uncertainties and some companies may avoid the provision by using weak excuses.124 The novelty provision is another important provision for the local generic producers in China.

Under the 2000 Patent Law of the PRC, novelty was not considered to be destroyed if an invention had already been used in foreign countries, provided it had not been used in China or published anywhere in the world before its filing in China.125 That is why, in comparison to the Indian approach, Chinese patentability requirements were criticised for being weak and for allowing foreign pharmaceutical producers to exploit the law and keep their patent rights for a longer time than intended, delaying the entry of generics to the market.126 Thus, China should raise the bar for medical patentability standards to prevent the patenting of medicines with small changes; the government could thereby encourage the production of generic drugs immediately after the expiry of patent.127 However, the provision on novelty was amended

123 SIPO, 2008 Patent Law of the PRC, Art. 26.

124 Shruti Bhat, 'New Chinese Patent Law: What Does It Mean For Life Sciences Companies?', 6 February 2011, http://pharmaceuticalpatents.weebly.com/ pharmaceutical-patents-and-intellectual-property-blog/new-chinese-patent-law

125 Ibid.

126 Sasha Kontic 'An Analysis of the Generic Pharmaceutical Industries in Brazil and China in the Context of TRIPS and HIV/AIDS', pp.9–12, https://www.law.utoronto. ca/documents/ihrp/HIV\_kontic.doc

127 Elliot Hannon, 'How an India Patent Case Could Shape the Future of Generic Drugs', *Time World*, 21 August 2012, http://world.time.com/2012/08/21/how-anindian-patent-case-could-shape-the-future-of-generic-drugs

under the Article 22 of the 2008 Patent Law of the PRC, which stipulates that "novelty" means the invention or utility model does not belong to prior art [disclosure or publication of the relevant invention anywhere in the world prior to patent application], which is also called "absolute novelty".128 Therefore, patent examiners need to make the assessment that, prior to the date of filing, no other person shall have filed an application for an identical invention and that there is no evidence of public use either inside and outside of China. Adoption of an absolute novelty standard requires a higher pharmaceutical R&D capability, which could prevent patenting with minor changes and encourage the quick entry of cheaper generic medicines to the Chinese market.129 However, when the supply and price of patented medicines go beyond sustainable limits, most countries have recourse to compulsory license.

It is noting that no CL has ever been granted in China even though Chapter VI of the 1984 Patent Law of the PRC had detailed CL provisions. Recognising the importance of CL in the context of public health challenges in China and the available flexibilities in the TRIPS Agreement, China revised its CL provisions during the third amendment to the patent law in 2008. According to Article 48 of the 2008 Patent Law, the SIPO may, upon the request of an entity or individual qualified for exploitation, grant a compulsory license to exploit a patent for an invention or utility model, when the patentee has not or has not sufficiently exploited it, without any justified reason, within three years of the granting of the patent right or four years of the filing for the patent. A compulsory license can also be granted to avoid or eliminate adverse effects on the competition in cases in which it has been legally determined that the enforcement of the patent right by the patentee constitutes a monopolistic act.130 In addition, Article 50 of the 2008 Patent law permits the granting of a compulsory license for exporting medicines to countries with low or no manufacturing capacity with the aim of protecting public health, as per Para. 6 on the implementation mechanism of the Doha Declaration/August 30 Decision.131

128 SIPO, 2008 Patent Law of the PRC, Art. 22.

129 Ibid.

130 Ibid., Art. 48 (1)(2).

131 Ibid., Art. 50.

Articles 50 and 53 of the 2008 Patent Law of the PRC stipulate that for the purpose of promoting public health, in the case of countries without a manufacture capacity, patented medicines can be manufactured and exported with the CL granted by the patent administration department (of the PRC) to the LDCs and other WTO member states, provided they express the need to import the medicines according to the relevant provisions of the international treaties (i.e., the August 30 Decision of the TRIPS Agreement).132 However, the CL mechanism permitted under the 2008 Patent Law of the PRC lacks safeguards with regard to how to regulate parallel importation and exportation to avoid imported medicines being re-imported to other countries, because it would affect the interests of patients that need cheaper medicine in the importing counties. Apart from these weaknesses on exporting medicines, there are other limitations regarding the CL mechanism's ability to meet local public health needs in China.

The SIPO adopted a further amendment to patent law in order to simplify measures on CL on 15 March 2012. The purpose of the adopted measures was to promote compulsory licensing in the pharmaceutical industry and to improve public health by bargaining for cheaper ARV second-line drugs for treating HIV/AIDS, drugs for which the patent rights are held by foreign pharmaceutical companies. Prior to 2012, the circumstances under which a person could apply for a compulsory license were (1) they had been unable to obtain a license after a reasonable period of negotiation based on fair and reasonable terms, if the implementation of an invention or utility model that constitutes a significant progress had to rely on the implementation of a patent previously granted; (2) in situations where public health is concerned; and (3) in a state of emergency.133 The 2012 measures approved two more grounds: first if the patent has not been used for three years from the time of its granting, or four years from the time of application; and second, if the act of claiming the patent right is considered a violation of anti-monopoly law. With respect to public health, the field is thus significantly widened.134 Under previous measures, it was limited to

132 Ibid., art. 50 and 53.

133 Article 4, 'Measures on Compulsory Licensing for Patent Exploitation', Order No. 31 of the SIPO (implemented on 15 July 2003).

134 Ibid., art. 5.

contagious diseases, but under the 2012 measures the contagious disease restriction does not exist.135 Chinese patent law also includes provisions for Bolar exemptions, which is important for generic producers.

Article 69 (5) of the Chinese Patent Law of 2008 includes Bolar exemptions, and states that "Any person [who] produces, uses, or imports patented drugs or patented medical apparatus and instruments, for the purpose of providing information required for administrative examination and approval, or produces or any other person imports patented drugs or patented medical apparatus and instruments especially for that person" is excluded from infringement of the patent rights.136 This provision is also consistent with Article 19 of the 2007 *Drug Registration Regulations* (DRR), which says that:

for a drug patented in China, applicants other than the patentee may submit the application for registration two years prior to the expiry date of the patent. The State Food and Drug Administration (SFDA) shall review the drug application in accordance with the provisions, and after the expiry date of the patent, check and issue the drug approval number, Import Drug License or a Pharmaceutical Product License if the application conforms to the provisions.137

Before the establishment of Bolar exemptions by the 2008 Patent Law, when generic producers were trying to utilise Article 19 of the DRR handling the application, infringement lawsuits were always brought by patent holders. By shortening the application time spent on clinical trial, the provision relating to Bolar exemptions can be seen as encouraging the production of generics to reduce the price of patented medicines and improve accessibility to medicines.138 Chinese patent law also allows parallel imports to ensure better accessibility and affordability of medicines, in case of excessive pricing of medicines in the local market.

135 Zhang Yan, 'New Measures for Compulsory Licensing of Patent', effective since 1 May 2012 (25 June 2012), http://www.lexology.com/library/detail.aspx?g= bef0d960-d8ae-4849-8750-2303eb70d982

136 'Third Revision of China's Patent Law, Legal Texts and Documents on Drafting Process', EU–China IPR2 Project, pp.5–6, http://www.lexisnexis.com/documents/ pdf/20100211022732\_large.pdf

137 Article 19, 'Provisions for Drug Registration', http://eng.sfda.gov.cn/WS03/ CL0768/61645.html

138 Yafei Gao, 'The Conflict and Coordination between Biological Pharmacy's Intellectual Property Protection and Public Health' (in Chinese), October 2011, pp.20–30.

There is little ambiguity regarding parallel import provisions in China. Article 63(1) of the 2000 Patent Law allowed that "after the sale of a patented product that was made or imported by the patentee or the authorization of the patentee, or of a product that was directly obtained by using that patented process, any other person uses, offers to sell or sells the product".139 Nevertheless, this led to different understandings of whether this provision actually adopted international exhaustion or whether "sell" in the provision meant within the country and therefore allowed domestic exhaustion. Thus, the 2000 Patent Law did not provide the specific legal basis for parallel importation. However, Article 69(1) of the 2008 Patent Law clarified the issue by stating that it would not constitute patent infringement after the product first entered the international market with the authorisation or consent of the patent owner. Nevertheless, China provided data exclusivity which may hamper the production of generic pharmaceuticals for the local market.

During its WTO accession process in 2001, China approved a sixyear period of data exclusivity protection for pharmaceutical drugs containing a new chemical entity (NCE) under its *Provisions for Drug Registration*. 140 However, this protection can be excluded in two situations: where the public interest takes precedence, and where steps are taken to ensure the data are protected against unfair commercial use.141

It is estimated that data exclusivity increased China's health expenditure by an average of 45.55% per year from 2007 to 2009, while reducing accessibility to 267 types of medicines by 27.14%—a great negative impact on public health in China.142 The six years of data exclusivity for all drugs, and the related policies, are too simplistic a measure, and some points need to be revised and clarified. Regarding Article 20 of the *Provisions for Drug Regulation* and Article 35 of the *Regulations for Implementation of the Drug Administration Law*, the

139 Article 63(1), Patent Law of The PRC (2000 Revision), adapted at the 17th Session of the Standing Committee of the Ninth National People's Congress on 25 August 2000, and announced by Order No. 36 of the President of the PRC.

140 Article 20, Provisions for Drug Registration (SFDA Order No. 28).

141 Article 35, Regulations for Implementation of the Drug Administration Law of the People's Republic of China, Decree of the State Council of the PRC No. 36.

142 S. Wu, S. Hang, J. Chen and L. Shi, 'Impact of Medical Data Protection on Drug Expenditure and Accessibility in China', *Chinese Journal of New Drugs* 21.20 (2012): 2353–55.

term "NCEs" needs to be defined clearly in the case of diverging opinions between China and developed countries. There should be more detailed requirements for experimental data, otherwise the protection scope of data exclusivity is difficult to understand. Further, the six-year exclusivity is too general: there should be a differential protection period for different kind of drugs, as is the case in Japan.143 The provisions should add corresponding terms separately to NCEs, orphan drugs, paediatric drugs and so on. In this regard, the Indian approach for refusing to provide test data protection and dealing with other TRIPS flexibilities could be more viable for the LDCs, considering the embryonic stage of their industries in comparison to China and their weak financial and technical capacities.

## 3.5 The Experience of India

India's experience contrasts with that of Brazil. India entered the WTO in 1995 and went through a long process of amendments to have a TRIPS-compliant patent regime, which became effective on 1 January 2005.144 The effect of stronger intellectual patent rights created problems for the larger Indian drug firms and greatly damaged smaller local firms' ability to meet the rising costs of remuneration for experienced and efficient pharmacists and other technical persons.145

143 In this regard, Japan could become a model for China. Japan incorporates data exclusivity into its post-marketing surveillance (PMS) process. By using a set of medical insurance and drug pricing mechanisms, the Japanese government has both complied with its obligation under TRIPS and successfully encouraged innovation by pharmaceutical companies. The PMS system practically affects the timing of generic entry. The PMS period is set for most new drug approvals, and until this period is over, generic companies cannot submit their applications for drug approvals. It is primarily intended to monitor efficacy and safety after the commercialisation of patented drugs and not to protect data. During the PMS period, the new drug's applicant can enjoy data exclusivity; thus, data exclusivity is imposed with the responsibility of the drug's applicant to ensure its safety and efficacy. The data exclusivity period varies from four (for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions) to six (for drugs containing a new chemical element or medicinal composition, or requiring a new route of administration) to 10 years (for orphan drugs or new drugs requiring pharmaco-epidemiological study). See for details, 'Japanese Drug Regulations Related to Data Exclusivity (Excerpts)', *Kitamural Law*, http://kitamuralaw.com/publications/J\_data\_exclusivity\_provisions.pdf

144 'India's New "Trips-compliant" Patent Regime'.

145 Ibid.

The Indian pharmaceutical industry, with its 8% share of global pharmaceutical production, "holds [the fourth] position in terms of volume and [the thirteenth] in terms of value of production".146 It also enjoys a 20% share of the global generic market.147 Indian pharmaceutical companies also play an important role globally by providing lifesaving drugs at affordable prices. For instance, 70% of the ARV drugs procured to treat HIV/AIDS under the Global Fund to Fight HIV/AIDS, TB and malaria come from Indian companies and 70% of the UNICEF, International Development Association, and Clinton Foundation procurement is also from Indian companies.148

Drugs produced in India satisfy 95% of domestic demand, and twothirds of the drugs produced in India are exported to the global market.149 The exports of pharmaceuticals by the Indian pharmaceutical industry are around \$5.3 billion.150 Only two MNCs—GSK and Pfizer—figure in the top 10 pharmaceutical companies in India.151 Although domestic companies in India now control 80% of the domestic market, this was not the case prior to patent policy reform in 1970, when Indian companies had only a 20% share.152 Considering this, Indian patent policy reform provides LDCs with important lessons in utilising the transitional period for progress towards local pharmaceutical production and innovation, as well as moving towards TRIPS compliance.

146 See Planning Commission of India, *Report of the Working Group on Drugs and Pharmaceuticals for the Eleventh Five Year Plan (2007–2012)* 21 (2006), http:// planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11\_pharma.pdf

147 Ibid.

148 Ellen t' Hoen, *The Global Politics of Pharmaceutical Monopoly Power* (AMB Publishers, 2009).

149 Based on data from the Directorate General of Foreign Trade, Government of India and Exim Bank, India reported by N. Lalitha, 'Access to Indian Generic Drugs: Emerging Issues', in *Intellectual Property, Pharmaceuticals and Public Health*, ed. by Kenneth C. Shadlen, Samira Guennif, Alenka Guzman and N. Lalitha (Cheltenham: Edward Elgar, 2011), pp.225–52. See Government of India, Directorate General of Foreign Trade, 'India—The Generics Pharma Capital of the World' (Pharmaceutical Exports Report, IDMA, Mumbai, India, 2010), http://dgftcom.nic.in

150 Reji K. Joseph, 'India's Trade in Drugs and Pharmaceuticals: Emerging Trends, Opportunities and Challenges' (Discussion Paper No. 159, Research Information System for Developing Countries, 2009).

151 Rasmus Alex Wendt, 'TRIPs in India' (unpublished PhD thesis, Roskilde University, 2007), pp.160–78.

152 Padmashree Gehl Sampath, *Economic Aspects of Access to Medicine After 2005*  (UNU-MERIT, 2005, 22), p.22, http://www.who.int/intellectualproperty/studies/ PadmashreeSampathFinal.pdf

India became an independent nation in 1947, after more than 100 years of British rule, and initially adopted the British *Patents and Design Act, 1911*. 153 Jawaharlal Nehru, India's first prime minister, was concerned about the influence and control of foreign companies over the Indian economy.154 This concern was validated in two subsequent committee reports.

The 1948 Tek Chand Committee and the 1957 Ayyangar Committee both concluded that foreign interests were exploiting Indian patent protection to monopolise various markets, including the pharmaceutical market.155 At the time of these reports, India was dependent on foreign sources for pharmaceuticals, including bulk chemicals and completed medicines. The great majority—some 90%—of the Indian pharmaceutical market was controlled by foreign companies.156 Indian pharmaceutical prices at that time were among the highest in the world.157 Initially, India sought to solve this problem by instituting high tariffs and price controls on pharmaceuticals.158 India then amended its patent laws to encourage imitation and local pharmaceutical production. The change came with the passage of the *Patents Act, 1970*, eliminating product patents for pharmaceuticals and only allowing process patents, which gave protection for a maximum period of seven years.159

India thus encouraged the mass production of low-cost pharmaceuticals at the expense of innovation. Prime Minister Indira Gandhi, in her statement to the WHO Assembly in 1982, argued that "the idea of a better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death".160 Given this focus, Indian pharmaceutical companies principally engaged themselves in the production of generic versions of name-brand pharmaceuticals through reverse engineering. By applying modified production processes, they successfully avoided conflict with

153 Stephen Barnes, 'Note: Pharmaceutical Patents and TRIPS: A Comparison of India and South Africa', *Kentucky Law Journal* 91 (2002–03).

154 Ibid.; David K. Tomar, 'A Look into the WTO Pharmaceutical Patent Dispute between the United States and India', *Wisconsin International Law Journal* 17 (1999).

155 'Note: Pharmaceutical Patents and TRIPS', p.920.

156 'A Look into the WTO Pharmaceutical Patent Dispute', p.582.

157 Ibid.

158 Ibid.

159 The Patents Act, No. 39 of 1970, § 53(1)(a) (India).

160 This quote comes from Indira Gandhi's message to the WHA at Geneva in 1982.

the original patent or having infringement claims made against them.161 By "free riding" on others' inventions, Indian companies avoided R&D costs.162 By focusing on existing pharmaceuticals, Indian pharmaceutical companies were able to offer generic alternatives at a fraction of the patented name-brand pharmaceutical cost, and thus India entered both the local and global pharmaceutical markets quickly.163

Its policy to exclude product patents for pharmaceuticals allowed the Indian pharmaceutical industry to grow rapidly. However, by joining the WTO, India agreed to adopt the requirements of the TRIPS Agreement. This required India to implement patent protection for pharmaceutical products and processes. After a three-stage amendment process in 1999, 2002 and 2005, India finally entered into a TRIPScompliant patent regime on 1 January 2005, taking advantage of the entire transition period.164

The effect of stronger intellectual patent rights was felt by the larger Indian drug firms and damaged the smaller local firms' ability to meet the rising costs of production and the payment of royalties for patented pharmaceuticals.165 The Indian TRIPS-compliant patent law was criticised by public health groups as being "likely to bring about a legal regime that is less favorable from the point of view of access to drugs for the people of [India]".166 It was also argued that the new patent law in India generally provided stronger protection to patent holders, which implied that the balance of interests between inventors and the general public had shifted in favour of the inventor.167

However, India tried to preserve public health by limiting data protection and by incorporating into the TRIPS flexibilities much stricter patent standards, pre-grant and post-grant opposition procedures,

161 Susan Finston, 'India: A Cautionary Tale on the Critical Importance of Intellectual Property Protection (Essay)', *Fordham Intellectual Property, Media and Entertainment Law Journal* 12 (2002): 888–89.

162 Ibid., 889.

163 Ibid., 889, 894.

164 Janice Mueller, 'The Tiger Awakens: The Tumultuous Transformation of India's Patent System and The Rise of Indian Pharmaceutical Innovation', *University of Pittsburgh Law Review* 68.49 (2007): 491–641.

165 Ibid.

166 See Rajdeep Goswami, *Compliance of TRIPS in Indian Patent Law* (29 April 2012), http://www.legalservicesindia.com/article/article/compliance-of-trips-in-indianpatent-law-1103-1.html

167 Ibid.

compulsory licenses and government use, prior use exceptions, early working or Bolar exemptions, research and experimental use exceptions and parallel imports.168

The Indian patent opposition provision not only contains 11 grounds for pre-grant opposition but also permits post-grant opposition to be raised.169 The Indian grounds for post-grant opposition170 are broad enough to challenge novelty, inventive steps and the process of industrial application, the best method, claims and disclosure of origin, and even the use of indigenous or local knowledge. LDCs could do likewise, following the Indian model and adopting more extensive pregrant grounds for objection and a process for post-grant opposition.

India also tried to set high thresholds with respect to the novelty of patent applications so that MNCs could not extend the life of a patent by "ever-greening".171 In 2006, the Swiss-based pharmaceutical company Novartis AG challenged the constitutional validity of section 3(d) of the Indian *Patent Act, 2005*, which tried to exclude inventions that were not a "significant enhancement of the known efficacy" of the pharmaceutical. Novartis AG challenged the law on the grounds that the provision provided absolute power to the controller of the patent and denied the rights existing under Article 27172 of the TRIPS Agreement that obliged WTO member states to provide patent protection to all fields of technology without discrimination.173 The Indian High Court of Madras held that section 3(d) was not in violation of the Constitution of India and declined to rule on its incompatibility with the TRIPS Agreement.174

168 See generally, 'India's New "Trips-compliant" Patent Regime'.

169 The Patents (Amendment) Act, No. 15 of 2005, § 25 (India).

170 Archana Shanker and Neeti Wilson, *The Patent Opposition System in India* (8 July 2010), http://www.iam-media.com/Intelligence/IP-Value-in-the-Life-Sciences/2008/ Articles/The-patent-opposition-system-in-India

171 The Patents (Amendment) Act, No. 15 of 2005, § 3(a), (d), (e), (p) (India).

172 Article 27(1) of the TRIPS Agreement states that "patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application … patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced".

173 *Novartis A.G. v. Union of India and Others* (2006), 4 Madras L.J. 153 (India), http:// www.scribd.com/doc/456550/High-Court-order-Novartis-Union-of-India

174 Ibid.

Government use is another effective means to curb abuse of patents. A government, or its authorised agent, can use a patent without the authorisation of the patent holder. The *Patent Act, 2005* provides for three types of government use. First, a patent is granted in India with the condition that the government can import the medicines for the distribution of pharmaceuticals in public sector hospitals or any other hospitals by making official notification through the government's *Gazette*. 175 Second, the government or authorised persons can use a patent against a royalty payment.176 Third, the government can acquire a patent after paying compensation.177 The government can exercise these powers at any time.178 The patented article, as produced under government-use flexibility, can only be sold for non-commercial use.179 However, the Act provides room for challenging the government's decision to use or acquire the invention in the High Courts.180 This means that the patentee could delay such government use, because under the legislation the government has to prove its need before the court.181

Like Brazil, India has incorporated options concerning compulsory licenses for use in cases of public interest. India is also using compulsory licensing options to encourage local production in the cases of inadequate supply or excessive pricing, based its measures on the earlier experiences of Brazil, which has effectively and consistently managed to control the costs of several patented drugs by repeatedly threatening the use of the "national emergency" clause provided for under the TRIPS Agreement with regard to compulsory licensing.182

Further, the Indian Controller of Patents, while disposing of an application for a compulsory license in *Natco Pharma Ltd. v. Bayer Corporation*, 183 clarified the issue of the working of the patent in the territory of India. The controller noted that the phrase "worked in the

175 The Patents (Amendment) Act, No. 15 of 2005, § 47 (India).

176 Ibid., §§ 99, 100.

177 Ibid., § 102.

178 Ibid., § 100(1).

179 Ibid., § 100(6).

180 Ibid., §§ 100, 103.

181 The Patents (Amendment) Act, No. 15 of 2005, §§ 100, 103 (India).

182 'Access to Drugs in India', pp.8–9.

183 *Natco Pharma Ltd v. Bayer Corporation*, Compulsory Licensing Application No. 1 of 2011 (decided by the Controller of Patents, Indian Patent Office, 9 March 2012), http://www.cbgnetwork.org/downloads/BackgroundNexavar.pdf

territory of India" had not been defined in the *Patents Act, 2005* and thus needed to be interpreted with regard to "various International Conventions and Agreements in intellectual property", the *Patents Act, 1970* and legislative history.184 The controller, using Article 27(1) of TRIPS and Article 5(1)(A) of the Paris Convention, interpreted it to mean that failure to manufacture in India was reason to grant a compulsory license to Natco, stating that "[p]atents are not granted merely to enable patentees to enjoy a monopoly for importation of the patented article" and that "the grant of a patent right must contribute to the promotion of technological innovation and to the transfer and dissemination of technology".185

Nevertheless, during the period 2005–10, only one application has been filed for the issuance of a compulsory license in India. This is due to the weakness in the compulsory license regime under the *Patents Act, 2005*. 186 For example, there are no clear guidelines with respect to the requirement to pay royalties.187

The Indian patent law amendment of 1999 provided for the early working or Bolar exemption provision to ensure quick entry of generics into the market for competition and hence reduce the price of medicines in India.188 The 1999 amendment also included a provision on parallel importation by incorporating section 107(A) (b) into the existing Act. Under this provision, parallel importation is permitted for the "importation of patented products by any person from a person who was duly authorised by the patentee to sell or distribute the product".189 However, this required authorisation from the patentee. The result was that a product could not be imported where it was produced under a compulsory license. This was resolved by a 2005 amendment to enable India to import pharmaceuticals even if the drugs were produced under a compulsory license.190

Indian patent law also contains a provision on research and experimental use that allows for the use of patented products for R&D

184 Ibid.

185 *Natco Pharma Ltd v. Bayer Corporation*.

186 'Product Patents and Access to Medicines in India', p.341.

187 Ibid.

188 The Patents (Amendment) Act, No. 17 of 2005, § 107(A) (India).

189 Ibid., § 107(A)(b).

190 The Patents (Amendment) Act, No. 17 of 2005, § 107(A) (India).

purposes.191 Another feature of the Indian law is the provision under prior use exceptions, or the grandfather clause, that allows generic producers to continue the production and marketing of the generic product if they invested in it before the introduction of the product patent in India.192 This means that if a generic producer can show that it has invested significantly in the production and marketing of a particular product before 1 January 2005, it can continue to operate in the same way even after the introduction of the product patent. However, if any prior use is approved, then the company is required to pay the patent holder a reasonable royalty.193

Further, India maintains a price control mechanism to ensure access to affordable medicines.194 However, the taskforce formed by the Government of India to evaluate drug control mechanisms in India, popularly known as the "Dr Pronab Sen Taskforce", argued that drug control mechanisms in India are not effective. The taskforce claimed that "no price regulatory mechanism can be effective unless there is a credible threat of price controls being imposed and enforced. However, it is also felt that the present price control system is dysfunctional and its legislative authority inappropriate".195

The taskforce further recommended that price controls be imposed not on the basis of turnover, but on the "essentiality" of the drug and on strategic considerations regarding the effect of price control on the therapeutic class. The ceiling prices of controlled drugs should normally not be based on cost of production, but on benchmarks that can be readily monitored.196 The taskforce also recommended that a process of active promotion of generic drugs be put in place, including mandatory de-branding for selected drugs, and that all public health facilities be required to prescribe and dispense only generic drugs, except in cases where no generic alternative exists.197 It further recommended that in

191 The Patents Act, No. 39 of 1970, § 47 (India) (retained as it is in the TRIPS-compliant Indian Patent Law of 1999).

192 The Patents (Amendment) Act, No. 17 of 2005, § 11(A)(7) (India).

193 Ibid.

194 See 'Product Patents and Access to Medicines in India', p.341.

195 Ibid.

196 Ibid.

197 Pronob Sen, *Taskforce to Explore Options other than Price Control for Achieving the Objective of Making Available Life-saving Drugs at Reasonable Prices* (Department of Chemicals and Petrochemicals, India, 2005), pp.4*–*53.

the case of proprietary drugs—particularly anti-HIV/AIDS and cancer drugs—the government should actively pursue access programs in collaboration with drug companies with differential pricing and alternative packaging, if necessary.198

India also utilises the country's traditional medicinal knowledge to ensure access to affordable medicines. It has begun documenting traditional knowledge to prevent the misappropriation of that knowledge by MNCs.199 MNCs have put pressure on India for the introduction of test data protection, which is submitted to obtain marketing approval; thus, these corporations have attempted to extend their monopoly pricing beyond the patent term. One study suggested that:

an analysis of article 39 of TRIPS and its legislative history indicates that TRIPS speaks of data protection in a flexible manner, and does not mandate data protection to be implemented by bringing in a data exclusivity regime. Thus, the argument that data exclusivity must be provided for in Indian law for India to be in compliance with TRIPS is fallacious. Protection against "unfair commercial use" under TRIPS must be interpreted to mean protection through non-disclosure and prohibiting others from accessing test data for unfair commercial use. TRIPS gives member states the freedom to choose the nature and extent of protection they want to offer.200

This is why most Indian pharmaceutical companies claim that protection need not be in the form of data exclusivity, and why the Government of India provides no data exclusivity protection.201 In 2002, the Indian government also introduced the *Competition Act, 2002*, which can be

198 Ibid., p.54.

199 V.K. Gupta, *Intellectual Property and Sustainable Development: Documentation and Registration of TK and Traditional Cultural Expressions* (12 December 2011), http:// www.wipo.int/edocs/mdocs/tk/en/wipo\_tk\_mct\_11/wipo\_tk\_mct\_11\_ref\_t\_5\_1.pdf

200 Quoted in Animesh Sharma, 'Data Exclusivity with Regard to Clinical Data', *The Indian Journal of Law and Technology* 3 (2007): 82–104, http://ijlt.in/wp-content/ uploads/2015/08/Sharma-Data-Exclusivity-with-regard-to-Clinical-Data-3-Indian-J.-L.-Tech.-82.pdf

201 Ibid. Shamnad Basheer reported that "After multiple deliberations spanning more than 3 years, a government committee has finally submitted its report on regulatory data protection and Article 39.3 of TRIPS. It finds that Article 39.3 does not require 'data exclusivity' and that, at the present moment, it may not be in India's national interest to grant 'data exclusivity' to pharmaceutical drug data. It relies heavily on the Doha Declaration to support this interpretation"; see Shamnad Basheer, 'Indian Government Committee Says "No" to Data Exclusivity' (6 June 2007), http://spicyip.com/2007/06/indian-government-committee-says-no-to.html

utilised to prevent excessive pricing as well as abuse of patents and of dominant market positions.202

The Indian experience of utilising TRIPS flexibilities and other government intervention options, such as price controls, could be utilised by LDCs like Bangladesh while still adopting TRIPS-compliant patent law. However, the South African struggle for access to medicines in the context of the TRIPS Agreement and pressure from the MNCs could also be an important consideration for LDCs, especially with respect to the issues of competition law.

## 3.6 The Experience of South Africa

Compared to India and Brazil, South Africa has a greater health crisis to deal with, including a large number of HIV/AIDS patients and severe problems of access to medicines. Hence, "the case of South Africa (economically the strongest African country) is particularly illustrative of [the] public health crisis and showcases the role domestic and international patent laws and policies may play in this context".203

South Africa has a large and highly developed pharmaceutical system, including considerable local production capacity. The South African Medicines Control Council (MCC) licensed 221 entities until 2009 in at least one of the categories of manufacturer, importer and exporter of medicines. Of these, 45 were locally registered subsidiaries or offices of MNPCs, including the major US and European innovators in this field. Africa imports 70% of the medicines it uses, including 80% of its ARV drugs used to treat HIV/AIDS.204

202 See Abhilash Chaudhary, 'Compulsory Licensing of IPRS and Its Effect on Competition', http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=3951F6A DF6A3C9DF40C1392A8DD2F8B7?doi=<IP_ADDRESS>6.5309&rep=rep1&type=pdf. However, until now no successful attempt has been made to use competition law in the pharmaceutical sector. Having a national competition law, India may well embrace the South African experience and apply competition law to the pharmaceutical sector to prevent excessive pricing, if it were to arise in India. See Anand Grover, *Anti-competitive Practices in Patent Licensing Arrangements and the Scope of Competition Law/Policy in Dealing with them* (AMTC, National Workshop on Patent and Public Health, Ministry of Health, India, 11 April 2005).

203 'The South Africa AIDS Controversy', p.2.

204 African Leaders Call for Greater Industrialization of an Emerging Africa, UNAIDS (26 March 2013), http://www.unaids.org/en/resources/presscentre/ featurestories/2013/march/20130326cotedivoire/

South Africa has had patent legislation since at least 1916, and the existing law was promulgated in 1978.205 South Africa undertook to become TRIPS-compliant in 1997 with the passage of the *Intellectual Property Laws Amendment Act, 1997*. 206 South Africa also became bound by the *Patent Cooperation Treaty* (PCT) in 1999. Further amendments to patent law were made in 2002 and 2005.207 Although in principle "South Africa adopted TRIPS-compliant patent law, it was increasingly being contended that medicines already subject to a significant degree of regulation must be construed as public goods because of their critical public health and public interest impacts, and therefore TRIPS flexibilities should be used to ensure that patent law would not jeopardize public health concerns".208 Countries such as South Africa and Brazil attracted the wrath of the US when they adopted TRIPS-compliant laws which used flexibilities in the TRIPS Agreement more broadly than the US wanted.209

The significance of the South African experience in dealing with pharmaceutical patent issues under the TRIPS Agreement, considering its national public health crisis, goes beyond doctrinal issues. South Africa used not only legislative approaches under its patent law but also competition law and other government interventions for price bargaining to encourage local generic production and R&D-based pharmaceutical industries. It has been stated that "it touches upon the more fundamental question of to what extent WTO member states in general and particularly, developing countries—should be free to take legislative measures to deal with public health crises and to what extent the patent protection of pharmaceuticals required under TRIPS should limit the range of options available".210 The South African

205 *Patents Act* 9 of 1916 (S. Afr.); Patents Act 57 of 1978 (S. Afr.).

206 *Patents Amendment Act* 38 of 1997 (S. Afr.).

207 *Patents Amendment Act* 20 of 2005 (S. Afr.); Patents Amendment Act 58 of 2002 (S. Afr.).

208 In Patrick Bond, 'Globalization, Pharmaceutical Pricing, and South African Health Policy: Managing Confrontation with U.S. Firms and Politicians', *International Journal of Health Services* 29 (1999): 765. See also Frederick M. Abbott, 'The Doha Declaration on the TRIPS Agreement and Public Health: Lighting a Dark Corner at the WTO', *Journal of International Economic Law* 5 (2002): 469–505.

209 See 'Globalization, Pharmaceutical Pricing, and South African Health Policy'; see also Abbott, 'The Doha Declaration on the TRIPS Agreement and Public Health'.

210 In 'The South Africa AIDS Controversy'.

experience brought the potential tension between patent protection for pharmaceuticals and public health concerns to the forefront of public awareness and triggered "a global debate about what should be allowed and what should be prohibited under TRIPS in order to preserve the incentives for investments in R&D of pharmaceuticals, while still allowing countries the flexibility to respond to public health crises as they deem fit".211

After apartheid, the vast majority of South Africans did not have access to healthcare at all, making healthcare reform one of the prime concerns for the post-apartheid government. This was in line with the mandate articulated within South Africa's newly adopted constitution to undertake substantial policy measures to ensure access to affordable healthcare for everyone.212 To this end, the post-apartheid government appointed a National Drug Policy Committee to revamp South Africa's healthcare system.213 After a series of investigations and consultations with relevant stakeholders, the committee found that among the most notable deficiencies were the lack of equity in access to essential drugs, the comparatively high prices for pharmaceuticals in the private sector and the loss of drugs through poor security in the public sector.214

The pharmaceutical companies in South Africa disapproved of the finding and argued that even lowering drug prices would not solve the access problem, as South Africa did not have adequate infrastructure for the distribution of drugs. The South African companies referred to India as an example of a country where access remains an issue despite the availability of generic versions of AIDS drugs.215

However, considering the excessive pricing of medicines by the MNCs in South Africa, the government inserted a new section 15C into the South African MRSCA.216 The primary purpose of this amendment was to enable South Africa to benefit from lower prices abroad for the same drugs. The enactment of the MRSCA, with its provisions for parallel importation, attracted serious criticism from supporters of

211 Ibid.

212 Fisher and Rigamonti, pp.2–3, citing the 1996 South African Constitution.

213 'The South Africa AIDS Controversy', pp.2–3.

214 Ibid., citing 'National Drug Policy for South Africa', pp.9–10 (1996) (these page deals with drug pricing).

215 'New Crusade to Lower AIDS Drug Costs'.

216 *Medicines and Related Substances Control Amendment Act.*

patent protection for the pharmaceutical industry (as they considered it among the options for issuing compulsory licensing), whereas it received strong support from public health groups.217 Regardless, the planned modifications, including section 15C, were signed into law by President Nelson Mandela on 12 December 1997.218

In an attempt to delay or halt the implementation of the amendments, the pharmaceutical companies took the matter to court and challenged the constitutionality of the amended MRSCA before the High Court of South Africa in February 1998.219 While challenging section 15C, the plaintiffs argued (i) that the amended provision entailed an inappropriate delegation of powers to the executive branch of government, as the Minister of Health would be authorised to determine both the application of patent rights irrespective of the South African Patents Act and the conditions for the supply of more affordable medicines without any limiting guidelines; (ii) that it would empower the Minister of Health to deprive IP owners of their property without compensation in violation of Article 25 of the South African Constitution (which provides for the protection of property rights); and (iii) that it would violate obligations under Articles 44(4), 231(2) and 231 (3) of the South African Constitution and under Article 27 of the TRIPS Agreement, as South Africa had committed itself to meeting TRIPS obligations.220

However, the South African government defended its amended legislation, stating that section 15C was constitutional as it granted the Minister of Health only limited powers to abrogate patent rights, and under the South African Constitution the government had an obligation to protect its citizens' right to health.221 Further, it claimed that section 15C was consistent with TRIPS, arguing that TRIPS allowed parallel

217 The planned modifications, including Section 15C, were signed into law by President Nelson Mandela on 12 December 1997. See ibid.

218 Ibid.

219 See 'Notice of Motion in the High Court of South Africa'.

220 Paragraphs 2.1, 2.3 and 2.4 of the 'Notice of Motion in the High Court of South Africa'; see also T. Kongolo, 'Public Interest Versus the Pharmaceutical Industry's Monopoly in South Africa', *Journal of World Intellectual Property* 4 (2001): 605–16.

221 See Holger Hestermeyer, 'Human Rights and the WTO: The Case of Patents and Access to Medicines' (Oxford Scholarship Online), http://dx.doi.org/10.1093/acpro f:oso/9780199552177.001.0001

imports and that section 15C did not address issues of compulsory licensing.222

The South African government alleged that it was being held to a "TRIPS-plus" standard, and therefore a higher level of patent protection beyond the requirements of the TRIPS Agreement, both by the US Government and the private plaintiffs in the lawsuit.223 The constitutional challenge over the amended MRSCA had the effect of temporarily staying its implementation.

The contentious positions taken by public health activists and pharmaceutical companies regarding the MRSCA was explained in a study:

while AIDS activists such as the South African Treatment Access Campaign (TAC) called for international protests against "drug profiteering" and claimed that delaying the implementation of the amended MRSCA would only cost additional lives, the pharmaceutical companies defended the court action on the grounds that "parallel importation of drugs would undermine the ability of pharmaceutical companies to charge different prices in different parts of the world" and that a "tiered pricing strategy allows wealthier countries to subsidize poorer ones, and the drug companies still get profits they need for research".224

Supporting the position of the South African government, the then Health Minister stated that "[w]e are not intending to bust any patents. We [are] not intending to break any treaties. All we want to do is to give health services to the people who are poor in this country, and to the people who have been denied those health services for centuries".225

But the pharmaceutical companies viewed section 15C as a threat to their business, and they feared that the explicit authorisation of parallel imports could turn into an example for other countries. The MNCs, mostly led by the US pharmaceutical industry, strongly opposed the

222 See Joint study by the WHO and the WTO Secretariats on 'WTO Agreements and Public Health' (2002), p.106, https://www.wto.org/english/res\_e/booksp\_e/who\_ wto\_e.pdf

223 Fisher and Rigamonti (citing Statement by the South African Delegation, Minutes of the Council for TRIPS Special Discussions on Intellectual Property and Access to Medicines, IP/C/M/31 (10 July 2001)), p.27.

224 Quoted in 'The South Africa AIDS Controversy'. See also Steve Sternberg, 'Victims Lost in Battle Over Drug Patents', *USA Today* (May 24, 1999), 2D.

225 'The South Africa AIDS Controversy', p.7.

enactment of section 15C and argued that it was tantamount to a complete abrogation of patent rights and a violation of South Africa's obligations under the TRIPS Agreement.226 As a representative of Bristol-Myers Squibb put it, "[p]atents are the lifeblood of our industry. Compulsory licensing and parallel imports expropriate our patent rights", adding that the only beneficiary of the erosion of patents would be the generic drug industry.227

The Pharmaceutical Research and Manufacturers of America, a trade group representing the US pharmaceutical industry, lobbied the US government and claimed the issue was sufficiently important to warrant putting pressure on South Africa to repeal the contested legislative measures. James Joseph, at that time the US ambassador to South Africa, wrote a letter to representatives of the South African government, strongly urging South Africa to alter section 15C and stating that "my Government opposes the notion of parallel imports of patented products anywhere in the world".228 South Africa was also put on the *Special 301 Watch List*229 in both 1998230 and 1999231 after the US Trade Representative determined that South Africa lacked adequate IP protection to an extent that merited bilateral attention. Being on the watch list meant it was possible for South Africa to have unilateral trade sanctions imposed on it by the US. However, the US did not bring a WTO case against South Africa due to a huge public health campaign both inside the US and beyond; the possible negative publicity was too great. The role of the-then Democratic presidential candidate Al Gore was also important, as he was co-chairman of the US/South Africa Binational Commission and had been actively involved in pressuring South Africa to give in to the demands of the pharmaceutical industry.

226 US subsidiaries accounted for 27% of the pharmaceutical market in South Africa, which was a higher share of the market than was accounted for by South Africa's local pharmaceutical industry. See 'Nkosazana Zuma'.

227 'The South Africa AIDS Controversy', p.5.

228 'South Africa's Health Committee Rejects MRSCA Bill Change', *Pharma Marketletter* (21 October 1997).

229 For details on this, see 19 USC. § 2411.

230 10 No. 6 J. Proprietary Rts. 19 (June 1998).

231 1999 US Trade Representative Special 301 Report (also stating that "South Africa's *Medicines Act* appears to grant the Health Minister ill-defined authority to issue compulsory licenses, authorize parallel imports, and potentially otherwise abrogate patent rights").

He consequently became one of the main targets of AIDS activists who had long urged the US government to change its policy towards South Africa.232

In April 2001, the pharmaceutical companies dropped their court challenge regarding section 15C and agreed to cover the South African government's legal expenses in the face of what has been described as a public relations nightmare.233

The situation leading to compromises between the South African government and the pharmaceutical companies was well stated by William W Fisher III and Cyrill P Rigamonti:

the talks behind the scenes leading to the withdrawal involved Kofi Annan, the Secretary General of the United Nations, who was contacted by Jean-Pierre Garnier, the CEO of GlaxoSmithKline, on behalf of the largest pharmaceutical companies to broker a deal with Thabo Mbeki, the then President of South Africa. The EU and the WHO supported South Africa's position. As part of the deal, South Africa reiterated its pledge to comply with TRIPS when implementing the amendments to the MRSCA and invited the pharmaceutical industry to help draft future regulations.234

The position taken by South Africa was not only a reflection of the struggle between excessive pricing of patented medicines by the pharmaceutical companies and the government's societal and constitutional obligations to ensure access to medicines and the right to healthcare. It was also representative of the broader international struggle over the meaning of TRIPS, especially over the scope of and exceptions to internationally recognised IPRs.235

232 See for details, 'The South Africa AIDS Controversy'.

233 As one journalist put it, "Can the pharmaceuticals industry inflict any more damage upon its ailing public image? Well, how about suing Nelson Mandela?" Helene Cooper, Rachel Zimmerman and Laurie Mcginley., 'AIDS Epidemic Puts Drug Firms in a Vise: Treatment vs. Profits', *Wall Street Journal* (March 2, 2001). See also Rachel L. Swarns, 'Drug Makers Drop South Africa Suit over AIDS Medicine', *The New York Times* (20 April 2001), A1.

234 'The South Africa AIDS Controversy'. See also 'Drug Makers Drop South Africa Suit', and Ann M. Simmons, 'Firms Clear Way for Cheaper AIDS Drugs', *Chicago Tribune* (20 April 2001), 4.

235 'Pharmaceutical Production and Access to Essential Medicines in South Africa', p.29.

This South African case illustrates the fact that the issue of parallel imports is left to individual WTO member states to decide. Although the MRSCA provided an option for parallel imports, the South African patent law did not make explicit provisions for it.236 Section 45(1) of the *Patents Act* states that the patent owner has the right to exclude others from importing the invention to which the patent relates during the duration of the patent.237

However, an amendment in 2002 added Section 45(2), which provides for the exhaustion of rights, although it does not contain any wording that would indicate that international exhaustion would apply—in other words, that parallel importation would be permitted.238 Hence, South Africa issued a draft national IP policy on 4 September 2013, which proposed changing South Africa's IP laws to adopt a number of health safeguards, including a user-friendly parallel importation mechanism.239 The non-existence of international exhaustion for parallel imports was confirmed by an announcement on 5 November 2013 by the Department of Trade and Industry of South Africa, which stated that "the *Patents Act* as it stands does not address issues of pricing of medicines, despite the fact that the National Policy on Intellectual Property seeks to address such matters".240 It further stated that "South Africa will amend its legislation to address issues of parallel importation and compulsory licensing in line with the Doha Decision of the *WTO* on Intellectual Property and public health".241

236 This aspect was considered by the High Court in the case of *Stauffer Chemical Company v. Agricura Ltd* (1979) BP 168. The Judge confirmed that only national exhaustion was intended and found nothing that would induce (him) to depart from this principle.

237 Substituted by section 40 of Act no. 38 of 1997 (South Africa).

238 Section 45(2) provides as follows: "The disposal of a patented article by or on behalf of a patentee or his licensee shall, subject to other patent rights, give the purchaser the right to use, offer to dispose of and dispose of that article". See section 45(2), *Patent Act* no. 57 of 1978 (Sub-s(2) substituted by section 7 of Act No. 58 of 2002). For details, see http://www.wipo.int/wipolex/en/text.jsp?file\_id=181330

239 See 'Draft National Policy on Intellectual Property 2013' (South Africa), http:// ipasa.co.za/wp-content/uploads/2013/07/IPASA-Extracts-from-Submission-madeon-the-DRAFT-NATIONAL-POLICY-ON-IP....pdf

240 Quoted in 'South Africa "Seeks Balance" Between Intellectual Property, Public Health', http://www.bdlive.co.za/national/health/2013/11/06/south-africa-seeks-balancebetween-intellectual-property-public-health

241 Ibid.

Most countries and commentators agree with South Africa that Article 6 of the TRIPS Agreement is based on a country-by-country approach to the exhaustion of IPRs and parallel imports.242 This view is based on a plain reading of the TRIPS Agreement as well as on its drafting history. Although the issue of parallel imports was discussed by the TRIPS negotiators, they failed to reach a consensus on the subject. This is precisely because developing countries favoured international exhaustion, whereas the US advocated national exhaustion (and the EU tried to preserve the principle of EU-wide exhaustion).243

The South African controversy also centred on the question of whether it would be compatible with Articles 30 and 31 in the TRIPS Agreement for a WTO member state to grant compulsory licenses to lower drug prices to combat AIDS.

Articles 30 and 31 in the TRIPS Agreement set forth the conditions for the validity of a domestic compulsory licensing scheme.244 To the extent that such a scheme does not "unreasonably conflict with the normal exploitation of the patent" and does not "unreasonably prejudice the legitimate interests of the patent owner", it is legal under Article 30 of the TRIPS Agreement.245 If these general requirements are not met, however, the compulsory licensing mechanism is only permissible if it complies with the detailed prerequisites listed in Article 31 of the TRIPS Agreement. In the context of South Africa, the pharmaceutical companies feared that the Minister for Health could use the amended MRSCA to bypass these provisions to their detriment and to the benefit of South African manufacturers of generic drugs.

But in reality, this has rarely happened—despite the fact that, in addition to the MRSCA, the *South African Patents Act* of 1978 provides an avenue for the government and the courts to enforce compulsory

242 See 'Resource Book on TRIPS and Development' (portion on the drafting history of TRIPS, including parallel imports).

243 Ibid.

244 See TRIPS Agreement, art. 30, 31.

245 For example, in a case brought by the EU against Canada, the WTO Panel decided that Canada's "pre-expiration testing" exemption was consistent with Article 30 of TRIPS, while its "stockpiling" exemption was not. See *Canada—Patent Protection of Pharmaceutical Products*.

licenses.246 Thus, despite having a huge health crisis and access problems, South Africa has never used compulsory licenses.247

However, the South African government has yet to make use of a statutory power that entitles it to "use an invention for public purposes".248 The government must approach the court for assistance if the terms and conditions of government use—which include the licensing of generic companies as a mechanism for reducing drug prices—cannot be agreed upon.249 There is little or no guidance on the terms and conditions associated with such compulsory licences in any reported judgements in South Africa. This almost certainly indicates that none have ever been granted.250 The application for a compulsory license by local pharmaceutical companies requires huge legal and technical capacity as they will face legal battles with the larger competitors in the market. Vaver stated that "it is true that the risk that a licensee may

246 Sections 56(1) and 56(2), *Patents Act, 1978* (Act No. 57 of 1978, as last amended by *Patents Amendment Act, 2002*), South Africa.

247 See *Bayer's Attempt to Block Generic Production of Sorafenib Rejected; Case on India's First Compulsory License Still to be Heard in Court*, FIX THE PATENT LAWS (19 September 2012), http://www.fixthepatentlaws.org/?p=420

248 Section 4 Act 57 of 1978 (South Africa): "**State bound by patent**: A patent shall in all respects have the like effect against the State as it has against a person: Provided that a Minister of State may use an invention for public purposes on such conditions as may be agreed upon with the patentee, or in default of agreement on such conditions as are determined by the commissioner on application by or on behalf of such Minister and after hearing the patentee".

249 Section 56 Act 57 of 1978 (South Africa): "**Compulsory licence in case of abuse of patent rights** (1) Any interested person who can show that the rights in a patent are being abused may apply to the commissioner [a High Court judge] in the prescribed manner for a compulsory licence under the patent". In terms of section 56(2), the rights in a patent are deemed to be abused—if within a stated period of years there is without satisfactory reason inadequate or no commercial exploitation; if demand is not being met adequately and on reasonable terms; and if "by reason of the refusal of the patentee to grant a licence or licences upon reasonable terms, the trade or industry or agriculture of the Republic or the trade of any person or class of persons trading in the Republic, or the establishment of any new trade or industry in the Republic, is being prejudiced, and it is in the public interest that a licence or licences should be granted".

250 However, there are few reported decisions on court-granted compulsory licenses under section 56 of the South African Patent Act. Three cited cases in this regard are *Syntheta (Pty) Ltd (formerly Delta G Scientific (Pty) Ltd v. Janssen Pharmaceutica NV and Another* 1999 (1) SA 85 (SCA) at 88I, per Plewman JA; *Sanachem (Pty) Ltd v. British Technology Group plc* 1992 BP 276; and *Afitra (Pty) Ltd and Another v. Carlton Paper of SA (Pty) Ltd* 1992 BP 331. The court challenge under this provision has been used successfully in at least one matter to induce a major pharmaceutical company to grant a voluntary licence.

itself become the target of litigation may be an inhibition therefore non issuance of a compulsory license is primarily reluctance to antagonise large competitors. But if the regulatory framework was easier (and less risky) to use, there seems little doubt that such licenses will more readily be sought".251

Unlike Brazil and India, the South African Patent Office does not conduct a substantial patent examination=; therefore, it does not check novelty and non-obviousness of the invention.252 It merely registers patents that fulfil the formalities set out for registration.

The absence of a local patent examination system means that patents are granted without substantive review or verification of whether they meet the patentability requirements provided for in the South African *Patents Act*. The Patent Office has no filter to ensure that patents are granted only when they are deserved. This undermines the country's ambition to provide free access to medicines and boost local production by its own generic industry.253 This has been noted as a major drawback to the patent application system in South Africa, because setting high thresholds and requiring strict examination of novelty character could open up policy spaces for local generic producers to oppose patent applications for pharmaceuticals.254 It is generally believed that the multinational pharmaceutical industry is fully exploiting this weakness in South Africa's legal and patent system to extend market exclusivity on key medicines that are nearing patent expiry.255 According to one study, 2,442 pharmaceutical patents were registered in South Africa in a single year, 2008.256

Another loophole in the South African patent system is that South African legislation makes no provision for pre-opposition procedures and there appears to be a complete lack of transparency in the patent application process. The statute merely requires the registrar to conduct

251 See David Vaver, 'Intellectual Property Today: Of Myths and Paradoxes', *Canadian Bar Review* 69 (1990): 98–126.

252 'Why South Africa should Examine Pharmaceutical Patents' (TAC, MSF and RIS January 2013), http://donttradeourlivesaway.wordpress.com/2013/01/10/ why-south-africa-should-examine-pharmaceutical-patents

253 Ibid.

254 Ethel Teljeur, *Intellectual Property Rights in South Africa: An Economic Review of Policy and Impact* (The Edge Institute, South Africa, 2003).

255 Ibid.

256 Ibid.

a formal tick-box approach to an application.257 Based on simple tickbox examination of applications and specifications, the Registrar of Patents could grant patents if the applications merely comply with the requirements of the Act (Section 34). Due to a lack of pre-grant opposition and effective post-grant procedures, the South African opposition procedure may not be helpful for local generic producers.

The South African Patent Law of 1978 (Act No. 57 of 1978, as last amended by the *Patents Amendment Act, 2002*) covers the exclusions envisaged by TRIPS Article 27. These are exclusions of patents on inventions that encourage offensive or immoral behaviour as per Section 25(4) (a); on any variety of animal or plant or any essentially biological process for the production of animals or plants, not being a microbiological process or the product of such a process as per Section 25(4)(b); and on any surgical, therapeutic or diagnostic method of treatment of humans or animals as per Section 25(11). Further, it empowers the Registrar of Patents to refuse any application that is frivolous, or whose use encourages illegal, immoral and offensive behaviour, including publication or exploitation.258 It is unclear how this provision is to be applied considering that the concepts of morality and offensive behaviour are relative, particularly in a diverse and evolving society such as South Africa.

South African patent law does not make explicit provision for educational, experimental or research exceptions.259 One report stated that "the only indication in the Patents Act that the legislature may have intended to exclude non-commercial use from the definition of infringement is to be found in section 45(1) of the Act"260 and:

257 Section 34 of the *Patent Act* (South Africa).

258 Ibid., § 36.

259 Esmé du Plessis, Report Q.202 (South Africa), AIPPI, https://www.aippi.org/ download/commitees/202/GR202south\_africa.pdf

260 Ibid., § 45(1) provides as follows: "45.(1) The effect of a patent shall be to grant to the patentee in the Republic, subject to the provisions of this Act, for the duration of the patent, the right to exclude other persons from making, using, exercising, disposing or offering to dispose of, or importing the invention, so that he or she shall have and enjoy the whole profit and advantage accruing by reason of the invention".

it could be argued that the reference to "the whole profit and advantage" in this provision could be indicative of an intention by the legislature to exclude other persons from carrying out the prohibited acts only insofar as those acts would have prejudicial commercial implications for the patent owner. However, South Africa courts have not yet considered this aspect to pronounce a clear principle (on the basis of section 45(1) or any other consideration) to the effect that non-commercial use of a patented invention (e.g. for research or experiment) would avoid infringement.261

Nevertheless, section 69A of the *Patents Act* was introduced by a legislative amendment in 2002 and provided for a Bolar-type exemption's.262 As the definitions of experimental use exceptions and *Bolar*-type exemptions were not clear enough, the varied interpretations prevented the exemptions from being used by generic producers effectively and led to court cases for delaying generic entry in the market. It is also noted that stockpiling of products made or imported under section 69A (1) is prohibited by section 69A (2).263

On the other hand, there is no reference to test data protection in the *Patents Act*: protection of clinical trial data in South Africa predates its inclusion in the TRIPS Agreement.264 In line with the practice of regulatory authorities worldwide, the MCC does not publicly disclose or share data submitted for registration purposes. However, when

261 Ibid.

262 Section 69A provides as follows: "69A (1) It shall not be an act of infringement of a patent to make, use, exercise, offer to dispose of, dispose of or import the patented invention on a non-commercial scale and solely for the purposes reasonably related to the obtaining, development and submission of information required under any law that regulates the manufacture, production, distribution, use or sale of any product. (2) It shall not be permitted to possess the patented invention made, used, imported or acquired in terms of subsection (1) for any purpose other than for the obtaining, development or submission of information as contemplated in that subsection".

263 Ibid.

264 The *Medicines and Related Substances Control Act, No 101 of 1965* controls the regulation of medicines in South Africa and does contain general confidentiality provisions related to medicines. Sections 22B and 34, read together, would suggest that there is general protection of information submitted with respect to the regulation of medicines against unfair commercial use. Again, section 22B permits the Director General of Health to disclose information relating to medicines where it is deemed "expedient and in the public interest". See http://www.wipo.int/ edocs/lexdocs/laws/en/na/na018en.pdf

considering an application for the registration of a generic equivalent, the MCC does not require the applicant to furnish any new data on the safety and efficacy of the drug, but merely on the quality of the generic.265

Reviewing the basis of existing South African patent law reveals that competition law provides a more effective sanction than existing patent law against patent abuse in the form of an anti-competitive compulsory license, which is consistent with Article 31(k) of TRIPS.266 The South African Competition Commission has already applied competition law successfully in the pharmaceutical sector to deal with restrictive practices and abuse of a dominant position.

In *Hazel Tau and Others v. GlaxoSmithKline and Boehringer Ingelheim*, 267 the prices set by the two litigating companies were considered to be an obstacle in accessing ARV medicines.268 The Competition Commission ruled that the companies had violated the *Competition Act, 1998* in denying "a competitor access to an essential facility, [setting] excessive pric[es] and engag[ing] in an exclusionary act", whereas the pharmaceutical companies argued they were merely exercising the exclusive right they were granted through their patent, as they did in many other countries.269 Nonetheless, the commissioner stated that:

[o]ur investigation revealed that each of the firms has refused to license their patents to generic manufacturers in return for a reasonable royalty.

265 Ibid.

266 Ibid.

267 Dani Cohen and Jennifer Cohen, *Competition Commission Finds Pharmaceutical Firms in Contravention of the Competition Act* (Competition Commission, 2003), http:// www.cptech.org/ip/health/sa/cc10162003.html

268 In brief, the fact is that the pharmaceutical companies GlaxoSmithKlein and Boehringer, patent owners of ARV (HIV/AIDS) drugs, set unjustifiably high prices for these drugs in South African markets. AZT (300 mg) is sold at US\$0.92 as compared to the WHO generic price of US\$0.25. Compulsory licensing negotiation under the *South African Patent Act* proved futile as the companies demanded a 25% royalty on sales, compared with the international rate of 4–5%. The Competition Commission took action under Section Eight of the South African Competition Act, which prohibits "a dominant firm to charge an excessive price to the detriment of the consumers", ordering the issuance of licenses to market generic versions of the patented ARV drugs in return for the payment of a reasonable royalty to be decided by the Competition Tribunal.

269 Ibid.

We believe that this is feasible and that consumers will benefit from cheaper generic versions of the drugs concerned. We further believe that granting licenses would provide for competition between firms and their generic competitors. We will request the Tribunal to make an order authorizing any person to exploit the patents to market generic versions of the respondent's patented medicines or fixed dose combinations that require these patents, in return for the payment of a reasonable royalty.270

Even though GlaxoSmithKline and Boehringer Ingelheim denounced the complaint as unfounded, they sided with the commission and granted voluntary licenses to produce a generic version of their patented pharmaceuticals. Since this case was decided, there has been huge progress in South Africa towards providing access to anti-HIV and AIDS pharmaceuticals. 271

The South African model of competition law could be utilised by developing countries and LDCs including Bangladesh to prevent excessive pricing of medicines.

## 3.7 Comparative Review and Lessons for the LDCs, including Bangladesh

This analysis highlights that India, Brazil and South Africa have used different options in their transition to a pharmaceutical patent regime and TRIPS-compliant patent law. India and Brazil substantially revised their national patent laws using the flexibilities present in the TRIPS Agreement. These flexibilities are also available to LDCs as they move towards TRIPS compliance. The issues for LDCs are which flexibilities to adopt and at what stages during the transition process to use them. The different policy options taken by these countries are represented diagrammatically in Table 3.1.

270 Rachel Roumet, 'Access to Patented Anti-HIV/AIDS Medicine: The South African Experience', *European Intellectual Property Review* 3 (2010): 137, 140, citing 'South African Competition Finds GSK and BI Responsible for "Excessive Pricing" and "Abuse of Market Position"', in *HIV Treatment Bulletin* (December 2003/January 2004), http://i-base.info/htb/12424

271 'Access to Patented Anti-HIV/AIDS Medicine'.

Table 3.1: Policy options used by Brazil, India and South Africa

The requirement to move towards TRIPS has created apprehension within Bangladesh, where the fear is that the price of pharmaceuticals in the local market will increase and local pharmaceutical companies may not survive, due to the high cost of royalties for patented medicines and the need to compete with MNCs.272 In this regard, the experiences of Brazil, India and South Africa, in their utilisation of the TRIPS flexibilities and other alternative measures to balance innovation and access to pharmaceuticals, should be considered by LDCs including Bangladesh.

The present patent regime in Bangladesh has no effective provisions for utilising the TRIPS flexibilities in the way that India, Brazil and South Africa have done. Importantly, to utilise the flexibilities, it is necessary to amend Bangladesh's *Patents and Designs Act, 1911*. 273 In addition to utilising TRIPS flexibilities, the Government of Bangladesh could adopt a competition law based on the experience of South Africa and could also revise its price control mechanisms based on the experiences of India and Brazil.

The Government of Bangladesh enacted its *Competition Act, 2012* in June 2012.274 According to one study, "A draft bill for such a law was first proposed in 1996; however, it took 16 years to finally come to fruition".275

The progress of the bill was delayed because "the political will to implement a competition law is limited, and there is some opposition from business groups".276 "Indeed, competition problems are potentially more serious in a country [such as Bangladesh] with a weaker private sector, where one or a few dominant firms can take control" and abuse their dominant position.277 "The media coverage … suggests [that] Bangladesh may suffer from significant competition problems, with

272 'Pharmaceutical Patent Protection', pp.1*–*4.

273 For details, See, *History of Indian Patent System*. For details about required patent law reform options for Bangladesh, see Mohammad Monirul Azam, 'Globalising Standard of Patent Protection in WTO and Policy Options for the LDCs', *Chicago-Kent Journal of Intellectual Property*, 13.2 (2014), pp.402–88.

274 Rafia Afrin with Daniel Sabet, 'Will Bangladesh's New Competition Law Prove Effective?' (1 July 2012), http://ces.ulab.edu.bd/wp-content/uploads/ sites/18/2015/07/Competition\_law\_07-12.pdf

275 Ibid.

276 Ibid.

277 Ibid., p.2.

substantial costs to consumers"278 and to the public health sector of Bangladesh, more specifically.

However, it is suggested that taking lessons from South African competition law, the Competition Commission of Bangladesh should rectify the weakness by empowering the Competition Commission to issue compulsory licenses, to recommend fixed royalty rates, and to expressly allow for the export of products produced under compulsory licenses to maintain sustainable investment.279 In addition, LDCs like Bangladesh may also stipulate in national competition law that compulsory licensing could be granted in cases of anti-competitive behaviour, such as in the case of the patent holder's unilateral refusal to grant a license (refusal to deal).280 Competition law could also be applied in the case of obtaining pharmaceutical patents in an unjustified and fraudulent manner.281 Again, the issues of "poor quality" and "frivolous" patents and regulatory practices, such as marketing approval and data exclusivity, can be controlled under competition law.282

Further, research has shown that despite having an impressive sales and export growth, the local pharmaceutical industry in Bangladesh, particularly after the introduction of the DCO 1982, helped Bangladesh ensure the supply of generic medicines at a lower price, but limited the local industrial development of innovative capacity for basic research and patenting of new medicines.283 On the other hand, lack of proper monitoring by the DGDA in Bangladesh raises the question of quality

278 Ibid.

279 See 'Globalising Standard of Patent Protection', p.462; see also T. Avafia, J. Berger and T. Hartzenberg, 'The Ability of Select Sub-Saharan Africa Countries to Utilize TRIPS Flexibilities and Competition Law to Ensure a Sustainable Supply of Essential Medicines: A Study of Producing and Importing Countries' (tralac Working Paper, No. 12/2006, August 2006), pp.4–5, http://www.section27.org.za/ wp-content/uploads/2010/10/Avafia-Berger-and-Hartzenberg.pdf

280 See Carlos M. Correa, *Intellectual Property and Competition Law: Exploration of Some Issues of Relevance to Developing Countries* (International Centre for Trade and Sustainable Development, 2007), p.20, http://www.iprsonline.org/resources/docs/ corea\_Oct07.pdf

281 In fact, these patents should never be granted in the first place. However, lack of proper resources, expertise and proper examination in LDCs may allow for such fraudulent registrations. In these situations, competition law could play an important role.

282 See Correa (2007).

283 Azam and Richardson (2010a), p.6.

medicines.284 Also, a lack of expertise and required resources in the Patent Office of Bangladesh raises doubts over its capability to deal with pharmaceutical patents and TRIPS-compliant patent law. 285

## 3.8 Concluding Remarks

This chapter has identified options used by Brazil, India and South Africa during their transitions to a TRIPS-compliant patent regime. These options enabled them not only to promote the local pharmaceutical industry but also to maintain access to medicines. The experiences of India, Brazil, China and South Africa will have important lessons for LDCs like Bangladesh. Brazil, India, China and South Africa utilised TRIPS flexibilities in their process of transition to TRIPS-compliant patent law. This study revealed how these countries utilised these options in order to locate the right balance between the interests of the pharmaceutical industry and the increased demand by the public for affordable medicines. On this basis, the author's current position is that LDCs will need to utilise the benefit of the transition period of the TRIPS Agreement, consider their technological and infrastructural limitations, and together to lobby for further extension of the transition period for the introduction of pharmaceutical patents.286 The future of the pharmaceutical industry in the LDCs follows from the legislative and policy intervention options taken by the Bangladeshi government to implement TRIPS-compliant patent legislation, and the extent to which local industry can utilise the TRIPS waiver to develop technological and innovative skills for transitioning from a copycat into an innovative nation.287

284 Ibid., pp.11–14.

285 Ibid., p.10.

286 Ibid., pp.1–2.

287 Ibid.

## 4. The Globalising Standard of Patent Protection in WTO Law and Policy Options for the LDCs: The Context of Bangladesh

## 4.1 Introduction

This chapter analyses the globalising standard of patent protection as adopted under the TRIPS Agreement of the WTO and measures it against the experiences of Brazil, India and South Africa in order to identify possible options for the LDCs,1 with special reference to pharmaceutical patent issues. The developed member states of the WTO negotiated mandatory protection for pharmaceutical products and processes in the TRIPS Agreement, on the basis that such mandatory protection would provide the incentive for continued pharmaceutical innovation. In contrast, the developing countries and LDCs argued that enacting patent laws that comply with the TRIPS Agreement would restrict production and supply of low-cost generic medicines by their local pharmaceutical industries or by the pharmaceutical industries in other developing countries, and hence could increase the price of pharmaceuticals to the point that they become inaccessible to their populations.

During the TRIPS negotiations, it was argued that the principle of a balance of rights and obligations was required because IP owners needed to undertake certain obligations in return for the exclusive rights conferred on them, and also to allow governments to take remedial

1 See for details, *Criteria for Identification and Graduation of LDCs*, UN-OHRLLS, http:// unohrlls.org/about-ldcs/criteria-for-ldcs

measures in the case of non-fulfilment of these obligations so that IPRs could promote industrial creativity to benefit society in general.2 This principle was generally recognised in pre-existing IP conventions and in the national laws of many countries:3 "The acceptance of this principle was aimed at assuring the access of developing countries to modern technology, eliminating non-use, misuse or abusive use of IPRs, especially with a view to avoiding trade distortions, and allowing the flexibility in the intellectual property protection for the public interest and the developmental and technological needs of developing countries" and LDCs.4

Therefore, the principle of balance of rights and obligations could be used while also employing other flexibilities of the TRIPS Agreement. It was further suggested that the TRIPS Agreement should take into account the application of the GATT principle of securing a balance of rights and obligations among parties.5 However, as in the case of the principle of public interest, the application of the principle of balance of rights and obligations was adopted with the lock of the consistency test. As worded in TRIPS Article 8.2, any measure taken under the umbrella of this article must be "consistent with" the provisions of the TRIPS Agreement.6 Moreover, the extents to which a practice is regarded as "unreasonably" restraining trade or "adversely" affecting the international transfer of technology and to which a national response against such practices is regarded as an appropriate measure are ambiguous under article 8.2. These unclear conditions leave room for interpretation, and create difficulties in applying the principle of balance of rights and obligations. Considering the room for interpretation of TRIPS flexibilities and practices for countries like India, Brazil and

2 GATT, Negotiating Group on TRIPs, 'Including Trade in Counterfeit Goods', *Meeting of Negotiating Group of 11–13 September 1989*, GATT Doc. MTN.GNG/ NG11/15 (26 October 1989), p.20, https://www.wto.org/gatt\_docs/English/ SULPDF/92080131.pdf

3 See Michael Blakeney, *Trade Related Aspects of Intellectual Property Rights: A Concise Guide to the TRIPS Agreement* (Intellectual Property in Practice) (1998).

4 'How to Comply with the TRIPS and WTO Law', p.42.

5 See Negotiating Group on TRIPs, 'Including Trade in Counterfeit Goods', *Meeting of Negotiating Group of 10–21 September 1990*, MTN.GNG.NG11/25, p.8, http://www. wto.org/gatt\_docs/English/SULPDF/92110158.pdf

6 TRIPS Agreement, art. 8.2.

South Africa, this chapter explores possible options for Bangladesh while it complies with patent provisions under the TRIPS Agreement.

Brazil, India and South Africa used TRIPS flexibilities in different ways to modify their national patent regimes to become TRIPScompliant,7 though they experienced some difficulties with respect to the legislative measures they enacted.8 However, the legislative provisions were found to be within the scope of the flexibilities of the TRIPS Agreement. Bangladesh, as an LDC, faces similar public health challenges but also has the potential to become a substantial (global) producer of generic medicines. The need to balance these competing interests (pharmaceutical innovation and access to pharmaceuticals) means that there are good grounds for Bangladesh to use the Indian, Chinese, Brazilian and South African experiences as a way to guide

7 For example, Brazil implemented a system of compulsory licensing. See 'The Politics of Patents and Drugs in Brazil and Mexico', p.41. India's experience was very different. It entered the WTO in 1995 and went through a long amendment process to institute a TRIPS-compliant patent regime, which became effective on 1 January 2005. See 'India's New "Trips-compliant" Patent Regime', p.95. The effect of stronger intellectual patent rights created problems for the larger Indian drug firms and greatly damaged the ability of smaller local firms to meet the rising costs of royalties and remuneration of experienced and efficient pharmacists and other technical people. See 'Note: Pharmaceutical Patents and TRIPS', pp.911, 924–25.

8 For example, the DSB of the WTO established a panel, as requested by the US, to look into the complaint about the patent laws of Brazil in 2001, which the US claimed illegally required the local working of patents and enabled compulsory licensing of the patent, or the authorisation of imports of the patented product (parallel imports), without the authorisation of the patent holder. See WTO, *Brazil: Measures Affecting Patent Protection*, Dispute Settlement: Dispute DS199, http://www. wto.org/english/tratop\_e/dispu\_e/cases\_e/ds199\_e.htm. However, due to massive public pressure and campaigns by public health groups, both parties negotiated it outside the DSB. See ibid. In contrast, Indian patent law was challenged even in the Indian courts by an MNPC, Novartis, claiming that it was inconsistent with some of the provisions of the TRIPS Agreement. Rajshree Chandra, 'The Role of National Laws in Reconciling Constitutional Right to Health with TRIPS Obligations: An Examination of the Glivec Patent Case in India', in *Incentives for Global Public Health—Patent Law and Access to Essential Medicines*, ed. by Thomas Pogge, Mathew Rimmer, and Kim Rubenstein (Yale University, 2010). Another major concern is the confiscation of generic Indian medicines used to treat illnesses such as AIDS and hypertension in several European countries, regarding which India and Brazil complained to the WTO, saying that the European Union (EU) had wrongfully confiscated generic medicines. See Jennifer M. Freedman, 'India, Brazil Complain at WTO over EU Drug Seizures', *Business Week* (12 May 2010), http://web.archive. org/web/20100515054911/http://www.businessweek.com/news/2010-05-12/ india-brazil-complain-at-wto-over-eu-drug-seizures-update3-.html (accessed by searching the Internet Archive index).

Bangladesh's legislative transition to a TRIPS-compliant patent regime. It is crucial for Bangladesh to use these experiences to develop IPR policies that preserve the full complement of TRIPS flexibilities. In this regard, a comment by Rochelle Cooper Dreyfuss is worth noting: "These practices [of India, Brazil, South Africa, and other developing countries] achieve international recognition as they are defended in international courts and put on the agendas of international organizations".9 Therefore, "domestic actors then may interpret the law in a particular way that allows them to offer a new approach that others may choose to emulate".10 While evaluating the possible policy options for LDCs to balance pharmaceutical innovation and access to medicines against the experiences of Brazil, India and South Africa in complying with the TRIPS-compliant patent law, relevant discussions, policies and recommendations as formulated in the WHO will also be indicated. The discussions here do not use the experience of China, because China has a very strong technological base, critical bargaining capacity and substantial market power; therefore the Chinese perspective is not relevant for the LDCs.

This chapter explores possible legislative and government intervention options for Bangladesh, utilising the experiences of Brazil, India and, to some extent, South Africa (as the South African patent law has yet to introduce a substantive patent examination process, some of the important policy options such as disclosure, high threshold, novelty, pre-grant and post-grant requirements have not been well tested in South Africa). It also reflects on the relevant policy issues and recommendations from the WHO. This chapter uses legal doctrinal analysis, comparative review and field research in Bangladesh, by way of surveys and interviews aimed at understanding stakeholders' perceptions of the various policy options available under the TRIPS Agreement. The field research in Bangladesh analysed in depth the

9 Rochelle C. Dreyfuss, 'The Role of India, China, Brazil and Other Emerging Economies in Establishing Access Norms and Intellectual Property and Intellectual Property Law Making' (IICJ Working Paper, 2009), http://papers.ssrn.com/sol3/ papers.cfm?abstract\_id=1442785

10 Susan K. Sell, 'TRIPS Was Never Enough: Vertical Forum Shifting, FTAS, ACTA and TPP', *Journal of Intellectual Property Law* 18 (2011): 447, 476. http://infojustice. org/download/tpp/tpp-academic/Sell - TRIPS Was Never Enough - June 2011.pdf

situation at the DPDT11 and the DGDA12 to understand the ongoing roles of these two important regulatory bodies during the TRIPS waiver period and their possible roles in a post-TRIPS setting.

## 4.2 Legislative Options for Bangladesh

Drawing on the Brazilian, Indian and South African experiences, a number of legislative options should be considered by Bangladesh in introducing TRIPS-compliant patent law to help preserve its local pharmaceutical industry and to promote innovation and access to medicine. For the purposes of this chapter, the legislative options include (i) having a high threshold for patentability and exclusion from patentability provisions, (ii) having a best mode patent disclosure and disclosure of origin, (iv) narrowing the scope of patent claims, (iv) providing exceptions to product patent rights such as early working, parallel imports, and research and experimental use exceptions, (v) having a strong compulsory licensing mechanism, (vi) having prior use exceptions, (vii) having pre-grant and post-grant oppositions, (viii) making the duration of patent protection subject to exceptions and (ix) not adopting overprotective enforcement provisions. Each of these options will be examined in turn.

#### 4.2.1 A High Threshold and Exclusion Clause

Under the TRIPS Agreement, patent protection must be granted for products and processes that are *new*, involve an *inventive step* and are *industrially applicable*. 13 The definition of an *invention* itself constitutes a key aspect of any patent policy with implications in other areas, such as industrial and public health policies. Therefore, with countries that are net importers of technologies, their priority should be to focus on narrowing the scope of patentability and incorporating as many exceptions as possible under the national patent law to facilitate

11 See DPDT, http://www.dpdt.gov.bd

12 See *Assessment of the Regulatory System*s (2012).

13 TRIPS Agreement, art. 27.1 (providing that "patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application").

development of a viable technological base. This also applies in the case of pharmaceutical products.

The TRIPS Agreement did not define the criteria for patent protection; therefore, these criteria can be interpreted and applied by member states in accordance with their national priorities and developmental goals.14 For example, the TRIPS Agreement "does not specify the patenting of new uses of known products, including pharmaceutical drugs, thus allowing member countries the possibility of rejecting these new uses for lack of novelty, inventive step or industrial applicability".15

The TRIPS Agreement considers novelty to mean that the invention is not already part of an existing invention and involves an inventive step.16 Considering the importance of having a high threshold for patentability in countries like Bangladesh, Tony VanDuzer states:

It is a common practice of patent owners in the pharmaceutical sector to seek to extend the effective duration of patent protection by obtaining a second later patent on a new mode of delivery of a patented drug (such as capsules instead of tablets) or some other small change in a patented product. Setting high standards for novelty and inventive step would help to ensure that a patent on a product was not, in effect, extended by a subsequent patent on a trivial improvement.17

Justifying the non-granting of patents for new uses or second uses, Correa remarks:

14 See Mohammed El Said, 'The Implementation Paradox: Intellectual Property Regulation in the Arab World', *Journal of International Trade Law and Policy* 9 (2010): 221, 228.

15 Ibid., 229.

16 See ibid., Article 27.1, which reads:

Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.

17 Tony VanDuzer, 'TRIPS and Pharmaceutical Industry in Bangladesh: Towards a National Strategy' (Paper No. 24, CPD, April 2003), http://www.bdresearch. org/home/attachments/article/nArt/TRIPS\_and\_the\_Pharmaceutical\_Industry\_ in\_Bangladesh.pdf. See generally Rajnish Kumar Rai, 'Patentable Subject Matter Requirements: An Evaluation of Proposed Exclusions to India's Patent Law in Light of India's Obligations under the TRIPS Agreement and Options for India', *Chicago-Kent Journal of Intellectual Property* 8 (2008).

Such an invention relating to the use of a product may be deemed as nonpatentable because it consists of the discovery of an existing property rather than a new development, or because it falls under the exclusion from patentability (allowed by the [TRIPS] Agreement and most national laws) of therapeutical methods.18

It is feared that awarding protection to new uses of medicines will stifle innovation and restrict the ability of pharmaceutical companies in developing countries and LDCs to produce advanced medications needed for eradicating local disease.19 This requirement could also block the introduction of generics, particularly in those countries where pharmacy laws do not permit generic substitution and/or generic prescribing.20 This will have anti-competitive consequences and result in higher prices for medications.

In this regard, the CIPIH Report provides that:

Governments should take action to avoid barriers to legitimate competition by considering developing guidelines for patent examiners on how properly to implement patentability criteria and, if appropriate, consider changes to national patent legislation.21

Again, the UK IPR Commission recommends that:

Most developing countries, particularly those without research capabilities, should strictly exclude diagnostic, therapeutic and surgical methods from patentability, including new uses of known products.22

On the one hand, "there is no agreed international standard of absolute novelty, and, within limits, the developing countries may pick and choose from among the different approaches recognized in the domestic

18 *Intellectual Property Rights, The WTO and Developing Countries*, p.56.

19 See Carlos Correa, 'Guidelines for the Examination of Pharmaceutical Patents: Developing a Public Health Perspective—A Working Paper' (2006), pp. iv–v, http:// ictsd.net/downloads/2008/04/correa\_pharmaceutical-patents-guidelines.pdf

20 See Ibid*.*, p.1.

21 WHO, 'Public Health, Innovation, and Intellectual Property Rights: Report of the Commission on Intellectual Property Rights, Innovation and Public Health' (2006) (the "CIPIH Report"), p.133, http://www.who.int/intellectualproperty/documents/ thereport/ENPublicHealthReport.pdf

22 Commission on Intellectual Property Rights, 'Integrating Intellectual Property Rights and Development Policy' (2002), p.50, http://www.iprcommission.org/ papers/pdfs/final\_report/CIPRfullfinal.pdf. Clare Short, the then British Secretary of State for International Development, established the Commission on Intellectual Property Rights in May 2001.

patent laws",23 but on the other, the manner of dealing with the issue of the scope of patentability differs from one country to another because this issue relies heavily on each country's level of progress, development and technological capability.

Further, in addition to the flexibility awarded in drafting its patentability criteria, the TRIPS Agreement provides for a number of exemptions that may be excluded from patentability. Article 27.2 of TRIPS states:

Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect *ordre public* or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.24

The fact that the TRIPS Agreement does not define "protect *ordre public*  or morality" gives member states additional room for flexibility.

The existing patent law of Bangladesh, the PDA, contains no legislative provision regarding the patentability of a pharmaceutical product and no provision detailing excluded categories of inventions. By defining thresholds to impose a significant requirement for novelty, Bangladesh could ensure that trivial improvements in technology do not receive patent protection. India adopted such an approach in its amended *Patent Act, 2005*. 25 The *Patent Act, 2005* restricts the scope for granting patents based on frivolous claims26 and clarifies that an "inventive step" means a feature of an invention that "involves technical advances as compared to the existing knowledge or having economic significance or both".27 It also provides a definition for "pharmaceutical substance" as being "a new entity involving one or more inventive steps",28 and that "the mere

23 J.H. Reichman, 'From Free Riders to Fair Followers: Global Competition under the TRIPS Agreement', *New York University Journal of International Law and Politics* 29 (1997): 11, 30.

24 TRIPS Agreement, art. 27.2.

25 See Reichman (1997), p.93.

26 'Product Patents and Access to Medicines in India', pp.326, 334.

27 The *Patents Act, 1970*, § 2(ja), No. 39, Acts of Parliament, 1970 (India).

28 Ibid., § 2(ta).

discovery of a new form of a known substance which does not result in the enhancement of the known efficacy" is not patentable.29

In an attempt to ensure access to medicine, section 3(b) of the Indian *Patent Act, 2005* excludes from patentability "an invention the primary or intended use or commercial exploitation of which could be contrary to public order or morality or which causes serious prejudice to human, animal or plant life or health or to the environment".30 Section 3(p) excludes patenting of "an invention which, in effect, is traditional knowledge or which is an aggregation or duplication of known properties of traditionally known component or components".31 This provision is an attempt to avoid bio-piracy and ensure that traditional knowledge, whether handed down or developed, is incapable of being captured by patents. One interview participant commented that Section 3 of the *Patent Act, 2005* is a powerful instrument to prevent frivolous patents and the abuse of traditional knowledge and resources in India.32

Given the absence of patentability and exclusion clauses in the existing patent law of Bangladesh, such legislative provisions should be considered by Bangladesh as it moves towards TRIPS compliance. These provisions comply with the TRIPS Agreement, and are justified on the basis that limiting the availability of patents should promote competition in the local market.33 However, the *Draft Patents and Designs Act, 2010*  of Bangladesh (the Draft PDA)34 includes provisions on patentable

29 Ibid., § 3(d).

30 The *Patents (Amendment) Act, 2005*, § 3(b), No. 15, Acts of Parliament, 2005 (India).

31 Ibid., § 3(p).

32 Email Interview with a patent law academic in Delhi, India, 10 March 2012.

33 See generally 'Trips Compliant Patent Law', p.141.

34 In 2001, a draft patent law was prepared by the Law Commission of Bangladesh in consultation with the WIPO. It was not considered until 2007. Meanwhile, for LDCs, the transition period for the introduction of TRIPS-compliant intellectual property law, including patent law, was extended until July 2013, and the obligation to introduce pharmaceutical patents was extended until 1 January 2016. See WTO, *Developing Countries' Transition Periods*, 'Fact Sheet: TRIPS and Pharmaceutical Patents', http://www.wto.org/english/tratop\_e/trips\_e/factsheet\_pharm04\_e.htm. This draft was reviewed lightly in 2007, and was under consideration by the Ministry of Law and Parliamentary Affairs of Bangladesh as the *Draft Patents and Designs Act, 2010*. It was translated by the Law Commission and Ministry of Law into the national language "Bangla" with little revision and adopted as a separate draft Act in "Bangla" for patents only, as *Bangladesh Patent Ain, 2012* (*Bangladesh Patent Act, 2012*). Unless this draft is approved by the Parliament of Bangladesh, the existing PDA, 1911 will remain in force.

inventions35 and exclusion from patentability.36 Unlike the Indian patent law provisions, these provisions fail to utilise the high threshold of patentability options effectively because they lack a provision covering pharmaceutical substances, an exclusion clause pertaining to mere improvement and protection from abuse of traditional knowledge. The Draft PDA tries to extend the ambit of prior art under the definition of novelty:

prior art in the case of an invention shall be taken to comprise-(a) all matter, whether a product, a process, information about either, or anything else, made available to the public anywhere in the world, by written or oral description, by use or in any other way, at any time prior to the filing or, as the case may be, the priority date, of the application for patent claiming the invention.37

However, this provision may not be effective without a specific exclusion clause; therefore, these provisions should be revised in light of the Indian *Patent Act, 2005*.

Local pharmaceutical companies in Bangladesh view this provision as very important for generic producers and consumers because it will increase competition in the local market.38 However, MNPCs argue that a high threshold for patentability will exclude local inventions, which would not benefit society.39 The middle ground would suggest that such a provision will balance the need to maintain and support innovation with the need for access to pharmaceuticals.

## 4.2.2 Best Mode Disclosure and Disclosure of the Source of Genetic Resources and Traditional Knowledge

As the aim of the patent regime is the disclosure of information and spread of knowledge, a "[l]ack of sufficient disclosure may be a reason for refusal result in the rejection of an application or invalidation of

35 *Draft Patents and Designs Act, 2010* § 3, 2010 (Bangl.).

36 Ibid., § 4.

37 Ibid., § 5(2).

38 Based on the survey data, this position has been supported by the majority of large, medium and small local pharmaceutical companies in Bangladesh.

39 This has been remarked on by the CEO of an MNPC operating in Bangladesh.

a patent".40 Correa stresses that "[t]his requirement has particular importance in the chemical and pharmaceutical fields to enable the reproduction of the invention during the patent term (for instance, in the case of a compulsory license) or after patent's expiry".41

Article 29 of the TRIPS Agreement requires that an applicant for a patent disclose the invention "in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art",42 which "may also require the applicant to indicate the best mode for carrying out the invention known to the inventor at the filing date".43

The absence of strong disclosure requirements will have long-term negative implications for innovation, technology transfer and the dissemination of technology in the pharmaceutical sector in developing countries.44 It will likely strengthen the monopolistic position of MNPCs by preventing local pharmaceutical companies from benefiting from the disclosed technical information and by precluding efforts in R&D based on that information.45

Section 4(2) of Bangladesh's PDA simply states that "a complete specification must particularly describe and ascertain the nature of the invention and the manner in which the same is to be performed".46 Bangladesh should take advantage of Article 29 of the TRIPS Agreement by requiring disclosure of the best known mode for carrying out the invention and also stipulating that the disclosure enable the execution of all embodiments of the invention.

During an interview, one participant argued that given the weakness of the existing provisions, patent applications in Bangladesh are typically ambiguous. Often it is difficult to ascertain a precise description of the invention, which ultimately frustrates the objective of granting a patent

40 Correa (2006), p.4.

41 Ibid.

42 TRIPS Agreement, art. 29.

43 Ibid.

44 Ibid.

45 See generally Bingbin Lu, 'Best Mode Disclosure for Patent Applications: An International and Comparative Perspective', *Journal of Intellectual Property Rights* 16 (2011): 409, http://papers.ssrn.com/sol3/papers.cfm?abstract\_id=1938859

46 PDA, § 4, effective 26 March 1971 by virtue of the Laws Continuation and Enforcement Order of 25 March 1971, and adaptation of Existing Bangladesh Law Order of 1972. The PDA is the same as the Indian PDA (No. II of 1911 (10 Pat. & T.M. Rev. 3697)).

in exchange for sufficiently disclosing the invention to contribute to technical learning and teaching.47 One participant argued that the ultimate benefit of disclosing an invention is the further development of that particular invention, which leads to increased competition in the marketplace; thus, after the expiry of the patent term, competitors can enter the market with more viable options.48

Both India and Brazil have adopted the best mode disclosure approach. Section II, Article 24 of the Brazilian *Industrial Property Law* provides that the "specifications shall clearly and sufficiently describe the object, so as to permit its reproduction by a technician versed in the subject, and shall indicate, when applicable, the best way of doing it".49 On the other hand, section 10(4) of the Indian *Patent Law, 1970* requires that every complete specification shall:

Therefore, Bangladesh should adopt a similar requirement to facilitate innovation and the development of competing products. It is worth noting that section 11 of the Draft PDA of Bangladesh includes a provision demanding that every complete specification shall:

Adoption of this provision would help the DPDT of Bangladesh to reject patent applications if the inventions are not sufficiently disclosed.

47 Interview with a pharmacist from a leading local pharmaceutical company, in Dhaka, Bangladesh, 3 March 2009.

48 Interview with an examiner at the DPDT, in Dhaka, Bangladesh, 1 March 2009.

49 Lei No. 9.279 art. 24, de 14 de maio de 1996, Diario Oficial Da Uniao [DOU] de 15.05.1996. (Braz.), translated in Brazil: *Industrial Property Law*, 14/05/1996, No. 9.279, http://www.wipo.int/wipolex/en/details.jsp?id=515

50 The *Patents Act, 1970*, § 10(4), No. 39, Acts of Parliament, 1970 (India), http://ipindia. nic.in/ipr/patent/patent\_2005.pdf

51 *Draft Patents and Designs Act, 2010* § 11, 2010 (Bangl.).

However, best mode disclosure does not necessarily require disclosure of origin, and hence may not prevent abuse of genetic resources and traditional knowledge. This has led a number of developing countries, including Brazil and India,52 to debate in the WTO the question of "whether and how patent applicants should be obliged to disclose the origin or source of the genetic resource and traditional knowledge used in an invention and provide evidence of prior informed consent and benefit sharing".53 As TRIPS Article 29 does not specifically require disclosure of origin, developing countries are requesting amendments to the TRIPS Agreement to ensure that the necessary requirements are incorporated into patent application procedures.54

Switzerland also made proposals relating to disclosure of origin to the WTO/TRIPS Council,55 to the WIPO Working Group on Reform of the *Patent Cooperation Treaty, 1970* (PCT 1970)56 and to the WIPO Intergovernmental Committee on Intellectual Property and Genetic

52 See WTO Council for TRIPS, 'Elements of the Obligation to Disclose the Source and Country of Origin of Biological Resource and/or Traditional Knowledge Used in an Invention' (IP/C/W/429) 2 (21 September 2004), http://docsonline.wto.org/imrd/ directdoc.asp?DDFDocuments/t/IP/C/W429.doc

53 See WTO Public Symposium, 'Disclosure Requirements: Incorporating the CBD Principles in the TRIPS Agreement on the Road to Hong Kong' (21 April 2005), p.1, http://ictsd.org/downloads/2008/12/meeting-report.pdf

54 Tove Iren S. Gerhardsen, 'Developing Countries Propose TRIPS Amendment on Disclosure', *Intellectual Property Watch* (1 June 2006): 1344, http://www.ip-watch. org/2006/06/01/developing-countries-propose-trips-amendment-on-disclosure

55 See WTO Council for TRIPS, Article 27.3(b), 'Relationship Between the TRIPS Agreement and the CBD, and the Protection of Traditional Knowledge' (IP/C/W/400/Rev.1), 18 June 2003, http://docsonline.wto.org/imrd/directdoc. asp?DDFDocuments/t/IP/C/W400R1.doc; see also WTO Council for TRIPS, 'Further Observations by Switzerland on its Proposals Regarding the Declaration of the Source of Genetic Resources and Traditional Knowledge in Patent Applications' (IP/C/W/433) (25 November 2004), http://docsonline.wto.org/imrd/directdoc. asp?DDFDocuments/t/IP/C/W433.doc

56 Working Group on Reform of the Patent Cooperation Treaty (PCT), WIPO, International Patent Cooperation Union, Proposals by Switzerland Regarding the Declaration of the Source of Genetic Resources and Traditional Knowledge in Patent Applications (PCT/R/WG/4/13) (5 May 2003), http://www.wipo.int/edocs/ mdocs/pct/en/pct\_r\_wg\_4/pct\_r\_wg\_4\_13.pdf; Working Group on Reform of the Patent Cooperation Treaty (PCT), WIPO, International Patent Cooperation Union, Proposals by Switzerland Regarding the Declaration of the Source of Genetic Resources and Traditional Knowledge in Patent Applications (Doc PCT/R/WG/5/11 Rev.), 19 November 2003, http://www.wipo.int/edocs/mdocs/pct/en/pct\_r\_wg\_5/ pct\_r\_wg\_5\_11\_rev.pdf

Resources, Traditional Knowledge and Folklore.57 In Switzerland's opinion, "the provisions of the TRIPS Agreement provide for adequate flexibility with regard to a formal requirement to disclose the source. Accordingly, Switzerland does not consider it necessary to amend the TRIPS Agreement".58 Consequently, it can be said that TRIPS Article 29 does not prevent the introduction of the requirement to disclose the source within the national legislation.59 In the context of Bangladesh, one interviewee argued that "in the absence of qualified and experienced examiners, best mode disclosure and disclosure of origin provisions would have little effect".60

In Bangladesh, neither the existing PDA nor the Draft PDA includes any provision on the disclosure of origin. However, the *Draft Patent Law, 2012* states under section 15 that patents on genetic resources or traditional knowledge could be granted provided that the procedure of "relevant authority and related rules" is followed, and, before such patents are granted, due consideration must be given to the issues of public order and morality.61 There is no explanation or indication in the draft law regarding "relevant authority and rules", nor is there an

57 See WIPO Intergovernmental Committee on Intellectual Property, and Genetic Resources, Traditional Knowledge, and Folklore, Further Observations by Switzerland on Its Proposals Regarding the Declaration of the Source of Genetic Resources and Traditional Knowledge in Patent Applications (WIPO/GRTKF/IC/7/ INF/5) (18 October 2004), http://www.wipo.int/edocs/mdocs/tk/en/wipo\_grtkf\_ ic\_7/wipo\_grtkf\_ic\_7\_inf\_5.pdf

58 Felix Addor, WTO Public Symposium, ICTSD/CIEL/IDDRI/IUCN/QUNO, 'Dialogue on Disclosure Requirements: Incorporating the CBD Principles in the TRIPS Agreement On the Road to Hong Kong: Switzerland's Proposals Regarding the Declaration of the Source of Genetic Resources and Traditional Knowledge in Patent Applications and Switzerland's views on the Declaration of Evidence of Prior Informed Consent and Benefit Sharing in Patent Applications' (21 April 2005), p.5, http://www.iprsonline.org/ictsd/docs/DOO6\_Addor.pdf

59 "A number of countries … have already [incorporated] disclosure of origin requirements (in different forms and conditions) in their domestic legislation, including in the Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela), Brazil, Costa Rica, Denmark, India, Nepal, Norway and the African Union (53 African countries)". *Disclosure Requirements: Ensuring Mutual Supportiveness Between the WTO TRIPS Agreement and the CBD*, ed. by Martha Chouchena-Rojas, Manuel Ruiz Muller, David Vivas, and Sebastian Winkler (IUCN: Gland and Cambridge; International Centre for Trade and Sustainable Development [ICTSD], Geneva, 2005).

60 Interview with an IP lawyer working as a legal adviser and practitioner at the Supreme Court, in Dhaka, Bangladesh, 27 December 2009.

61 See *Draft Patent Ain (Law), 2012* § 15, 2012 (Bangl.).

existing authority in Bangladesh that deals with the issues of genetic resources or traditional knowledge. Therefore, Bangladesh should amend the proposed law, preferably to include disclosure of origin as part of patent application requirements rather than in a separate provision.

In addition to high-level disclosure, limiting the scope of patent claims may also be useful for Bangladesh.

#### 4.2.3 Narrowing the Scope of Patent Claims

In a 2003 report, VanDuzer states:

The broader the claims that an inventor can make under [a patent] law, the wider the monopoly the inventor can obtain. Broad claims reduce the scope for competing products in the market, whereas narrow claims create greater opportunities for innovation and competition. National laws vary in the nature and breadth of claims permitted. In relation to pharmaceutical products claims can be restricted to the chemical structure or composition of a new product … The TRIPS Agreement is silent on the form of and limits on allowable claims and so Bangladesh would be free to adopt a patent law that requires that pharmaceutical patent claims be limited to the precise chemical composition of the product.62

Section 4(3) of the PDA of Bangladesh provides that a specification, whether provisional or complete, must commence with the title, and in the case of a complete specification must end with a distinct statement of the invention claimed.63 Based on this provision, the law is not able to facilitate the narrowing of coverage of pharmaceutical patents, but rather encourages applications for broad patents. By way of comparison, Brazilian legislation provides that "[t]he claims shall be substantiated in the specifications, characterizing the particulars of the application, and clearly and precisely defining the subject matter that is the object of the protection".64 During an interview, one participant argued that most of the pharmaceutical patents granted in Bangladesh

62 'TRIPS and Pharmaceutical Industry in Bangladesh', p.33.

63 PDA § 4(3), 1911 (Bangl.).

64 Lei No. 9.279 art. 25, de 14 de maio de 1996, Diario Oficial Da Uniao [DOU] de 15.05.1996. (Braz.), translated in Brazil: *Industrial Property Law*, 14/05/1996, No. 9.279, http://www.wipo.int/wipolex/en/details.jsp?id=515

prior to the suspension of pharmaceutical patents in 2008 were based on broad claims, which in the future may restrict the production of generic pharmaceuticals.65 Therefore, Bangladesh should adopt provisions similar to those of Brazil that narrow the ability to claim a pharmaceutical patent on broad claims. However, to encourage further development and innovation on any patented product, additional exceptions are necessary to facilitate generic competition and cheaper products for consumers. Such exceptions include early working, a research and experimental use exception, and parallel imports.

#### 4.2.4 Exceptions to Product Patent Rights

Patent rights are not absolute but are subject to certain limitations and exceptions. These limitations and exceptions are often designed to foster and promote technology transfer, to prevent the abuse of IP, to foster research and innovation, and to protect public policy priorities including public health.

Article 30 of the TRIPS Agreement permits member countries to "provide limited exceptions to the exclusive rights conferred by a patent".66 That article does not list the specific acts for which exceptions can be provided. What it says is that such exceptions should satisfy certain conditions that do not "unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties".67 The TRIPS Agreement does not contain any explanation of the terms "limited exceptions", "unreasonably conflict", "legitimate interests" and "hence the use of this provision depends on the interpretation of these conditions".68 There are two exceptions used by India and Brazil

65 Interview with a pharmaceutical researcher at the University of Dhaka, in Dhaka, Bangladesh, 12 March 2009.

66 TRIPS Agreement, art. 30.

67 Ibid.

68 Mohammad Monirul Azam and Yacouba Sabere Mounkoro, *Intellectual Property Protection for the Pharmaceuticals: An Economic and Legal Impacts Study with Special Reference to Bangladesh and Mali*, LE GRIOT DU DEVELOPPEMENT § 7.1.2 , June 1, 2012, http://legriotdudeveloppement.blogspot.co.uk/2012/06/intellectual-propertyprotection-for.html

in their legislative framework: (i) early working (Bolar exemptions), and research and experimental use; and (ii) parallel importing.

## 4.2.5 Early Working (or Bolar Exceptions), Research and Experimental Use

The early working exemption is commonly referred to as the "Bolar" provision or exception, as it derives from *Roche Products, Inc. v. Bolar Pharmaceutical Co.*, 69 which concerned the manufacturing of generic pharmaceuticals. Bolar Pharmaceutical was the generic drug manufacturer and Roche Products was the pharmaceutical company that made and sold Valium, the active ingredient of which was patented.70 Before the patent expired, Bolar used the patented chemical in experiments to determine if its generic product was the bioequivalent to Valium, and thus could be given US Food and Drug Administration (FDA) approval for its generic version.71 Bolar argued that its use of the patented product was not an infringement based on the experimental use exception and that public policy favoured the availability of generic drugs immediately following a patent's expiration.72

The Court of Appeals for the Federal Circuit "rejected Bolar's contention holding that the experimental use exception did not apply because Bolar intended to sell its generic product in competition with Roche's Valium after patent expiration and, therefore, Bolar's experiments had a business purpose", and did not qualify for the statutory exception.73 The court recognised that any change to the patent law needed to be made by Congress.74

Shortly after the Bolar Pharmaceutical case was decided, Congress passed a law permitting the use of patented products in experiments

69 *Roche Prods., Inc. v. Bolar Pharm. Co.*, 733 F. 2d 858 (Fed. Cir. 2006); see Anshull Mittal, 'Patent Linkage in India: Current Scenario and Need for Deliberation', *Journal of Intellectual Property Rights* 15 (2010).

70 *Bolar Pharm.*, 733 F.2d at 861.

71 Ibid., 861–62.

72 Ibid., 862.

73 'Patent Linkage in India', p.193.

74 See ibid.

for the purpose of obtaining US FDA approval.75 As a result of this change, exceptions for early working gained momentum and now Bolar exceptions have been enacted in most jurisdictions.76

Importantly, the WTO Dispute Panel upheld the use of the Bolar exception as conforming to the requirements of the TRIPS Agreement in the Canada–EU dispute.77 Supporting the inclusion of an early use exception, the CIPIH Report recommended that "Countries should provide in national legislation for measures to encourage generic entry on patent expiry, such as the 'early working' exception, and more generally policies that support greater competition between generics,

*Research Exemption*, Wikipedia, http://en.wikipedia.org/wiki/Research\_exemption

Article 30 of the TRIPS Agreement authorizes limited exceptions to patent rights for such things as research, prior user rights, and pre-expiration testing. Often called the 'research exception', the provision is commonly used by countries to advance science and technology by allowing researchers to use a patented invention to gain a better understanding of the technology. In addition, countries also use the provision to allow manufacturers of generic drugs to apply for marketing and safety approval without the patent owner's permission and before the patent protection expires. The generic producers can then market the drug. This practice, often called the 'regulatory exception' or 'Bolar' provision, has been upheld as conforming to the TRIPS Agreement. … [The Panel also found] that manufacturing and stockpiling patented drugs prior to the exhaustion of patent protection is not a 'limited exception' which can be exempted under Article 30.

Bryan Mercurio, 'The Impact of the Australia–United States Free Trade Agreement on the Provision of Health Services in Australia', *Whittier Law Review* 26 (2005): 1051, 1065 (footnote and citation omitted).

75 *Drug Price Competition and Patent Term Restoration Act of 1984*, Pub. L. No. 98–417, 98 Stat. 1585 (codified as amended at 15 USC §§ 68(b)–(c), 70(b) (1994); 21 USC §§ 301, 355, 360cc (1994); 28 USC § 2201 (1994); 35 USC §§ 156, 271, 282 (1994)).