On 22nd March 2011 Senator Kim Carr, the federal minister for innovation, industry, science and research, and Dr Craig Emerson, the federal minister for trade, issued a joint media release stating that the Australian government intends to introduce legislation to Parliament to empower the Australian courts to grant compulsory licences to manufacture and export patented pharmaceuticals to countries suffering medical epidemics and other health crises.

Under the proposed scheme, applications will be made to the Federal Court of Australia by least-developed and developing countries for a licence to export patented pharmaceuticals manufactured in Australia. While this news represents a potential windfall for the Australian pharmaceutical industry, questions arise as to how the government will ensure that a pharmaceutical exported under the system is not diverted to other markets, thereby undermining the patentee’s rights to the product.

TRIPs and the TRIPs Protocol
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) was one of the major outcomes of the multilateral trade negotiations held in Uruguay in 1994 and led to the establishment of the World Trade Organisation (WTO) in 1995.

TRIPs provides minimum standards for the protection of intellectual property, and contains national treatment provisions under which the nationals of other member states must be given treatment that is no less favourable than that accorded to a member’s own nationals with regard to IP protection. TRIPs also includes provisions for the prevention and settlement of disputes in respect of the implementation of its provisions.

Article 31 of TRIPs provides that products made under compulsory licence must be predominantly for the supply of the domestic market and are not allowed to be exported. Until recently, developing countries that are WTO members and facing health crises were disadvantaged under this section of the agreement. That is, least-developed and developing countries, which generally have insufficient capacity to manufacture and/or purchase pharmaceuticals, were unable to import a patented pharmaceutical produced under a compulsory licence in another member country at the risk of contravening Article 31.

In 2001, a meeting of the WTO’s highest-level decision making body occurred in Doha, Qatar. One of the most important outcomes of the meeting related to the issue of ensuring that patent protection for pharmaceutical products does not prevent people in poor countries from having access to medicines. Ministers at the Doha meeting released a public health declaration (the Doha Declaration) which affirmed the right of member countries to use compulsory licensing (where a third party is allowed to reproduce the patented process or product under licence) and parallel importing.

Further to the Doha Declaration, in 2003 the TRIPs Council approved a decision that offered an interim waiver under Article 31 allowing a member country to export pharmaceutical products made under compulsory licences to least-developed and developing countries.

Having regard to the Doha Declaration and the subsequent 2003 decision, the WTO adopted the Protocol Amending the TRIPs Agreement. The main features of the protocol relating to the export of a pharmaceutical manufactured under a compulsory licence are as follows:

  • Licences may be issued only for products of the pharmaceutical sector needed to address public health concerns.
  • Countries eligible to import pharmaceuticals under the system comprise any least-developed WTO country or any other WTO country that has notified the TRIPs Council.
  • Importing countries are obliged to provide the TRIPs Council with details such as the names and quantities of the products needed and whether they need to issue a compulsory licence in their own country.
  • Exporting countries are obliged to notify the TRIPs Council of a range of details and ensure that importing countries have done the same.
  • Both importers and exporters must have in place anti-diversion measures to ensure that the products produced under the system reach the intended market and are not re-exported.

The protocol will be formally built into the TRIPs Agreement by amendment of Article 31 once two-thirds of the WTO’s 153 members have accepted the change. Currently, only 34 member countries, including Australia, the United States and the European Union have accepted the protocol. The deadline for acceptance is 31st December 2011.

Implementing the TRIPs Protocol
In 2010 the government agency responsible for administering Australia's IP rights system, IP Australia, issued a consultation paper entitled "Implementing the TRIPs Protocol". The paper contains a number of proposals that relate to implementing the TRIPs Protocol, allowing access to medicines in least-developed and developing countries while minimising negative impact on Australia’s treaty obligations and Australian business and innovation.

The media release by the two ministers provides little detail of the possible impact of the changes, any private or public sector submissions in response to the consultation paper or any changes to Australia’s patent legislation. The fact that least-developed and developing countries will need to apply to an Australian court to export patented pharmaceuticals manufactured in Australia under a compulsory licence suggests that the court will also have the power to decide on patent owner remuneration and any challenges to a granted licence.

Historically, the grant of compulsory licences in Australia is rare. Hence, while the Australian court system may be well positioned to handle such matters, the fact that the courts have had little experience in this area raises concerns for owners of pharmaceutical patents. In particular, questions arise as to how the courts will determine reasonable terms for granting and revoking a compulsory licence.

Changes to Australia’s patent legislation to give effect to the protocol must provide strict requirements for a country’s eligibility to import a pharmaceutical product manufactured under a compulsory licence, as well for the manufacturing of the pharmaceutical in Australia and its subsequent distribution. Should the amendment of the legislation be flawed, the Australian government risks the unauthorised parallel exporting of a pharmaceutical manufactured in Australia under a compulsory licence, and/or the distribution of the pharmaceutical through black market trade. This would clearly be detrimental to the patentee’s right to exploit the patented product in the global marketplace.

The Australian government intends to have its proposed scheme in place by the end of 2011. It will be interesting to see further details of the government’s scheme as they emerge.

Useful links
The media release by Senator Carr and Dr Emerson is available at: 
http://minister.innovation.gov.au/Carr/MediaReleases/Pages/BETTERACCESSTOMEDICINESFOR
COUNTRIESINNEED.aspx


IP Australia’s "Implementing the TRIPs Protocol" paper is available at:
www.ipaustralia.gov.au/pdfs/news/TRIPS%20Protocol%20Public%20Consultation%20Paper.pdf.

The Protocol amending the TRIPs Agreement is available at: www.wto.org/english/tratop_e/trips_e/wtl641_e.htm.

Section 133 of the Patents Act 1990, relating to compulsory licences, is available at:
www.austlii.edu.au/au/legis/cth/consol_act/pa1990109/s133.html.