Turkey has amended regulations on compulsory licenses with regard to generic medicine in an effort to promote economic and social welfare.
COMPULSORY licensing is the sovereign power to exploit a patent without the permission of the rights holder. Governments may issue compulsory licenses to authorize private companies to produce generic medicine without the consent of the patent owner. Article 31(f) of the TRIPS Agreement states that compulsory licenses shall be authorized “predominantly for the supply of the domestic market.” Therefore, in principle compulsory licenses may only be granted to satisfy domestic need.
As emphasized in paragraph 6 of the Doha Declaration, very few developing countries have manufacturing capacity in the pharmaceutical industry. In this context, the World Trade Organization (“WTO”) General Council issued Decision 2003 which enables Member States to opt for a permanent waiver from the above-stated principle laid out in Article 31(f). In order to benefit from this waiver, the importing country must establish that it has no manufacturing capacity in the pharmaceutical industry or has insufficient capacity in terms of meeting its needs. For this purpose, the least developed countries are deemed to have insufficient or no manufacturing capacity.
In two years’ time, the Protocol Amending the TRIPS Agreement (“Decision 2005”) was introduced in an attempt to convert the waiver into a permanent amendment. The objective was to allow Member States to produce generic medicine under compulsory licenses and export them to third countries facing public health-related problems. The amendment has recently become an integral part of the TRIPS Agreement after being ratified by two-thirds of the WTO Member States.
Legal Developments in Turkey
The Republic of Turkey has officially expressed its intention to ratify the amendment on April 30, 2013 by virtue of the Code numbered 6471 whose preamble reads: “… it is quite probable that our country, with a significant manufacturing capacity, will make use of the Paragraph 6 system as an exporter country.” Joint approval by the Council of Ministers and the President was published in the Official Gazette on March 15, 2014, which corresponds to an official acceptance of Decision 2005.
As per the repealed Decree-Code which was in force at the time of approval, the scope of compulsory licenses was predominantly limited to the supply of the domestic market. On January 10, 2017, the Code on Industrial Property (“Code on Industrial Property”) adjusting many aspects of Turkish Intellectual Property Law entered into force and introduced further grounds for compulsory licenses including but not limited to “exportation of pharmaceutical products to third countries facing public health-related problems.” This legislation also accounts for actual implementation of Decision 2005 into domestic law.
Compulsory licenses on the grounds of “exportation of pharmaceutical goods to third countries facing public-health related problems” are granted through court order. The applicant seeking a compulsory license shall demonstrate that a contractual license on reasonable terms could not be obtained from the rights holder within a reasonable time. An exception is provided in terms of national emergencies since prior negotiations may cause delays in making drugs accessible. This procedure may also raise difficulties for generic manufacturers with no prior contacts or experience in the relevant region.
As for the legal proceedings, the Court shall notify the rights holder of the application and grant one month from the date of receipt for the rights holder to submit counter-evidence. The Court will then notify the applicant of any counter-evidence submitted. Within one month, the Court shall either dismiss the application or render a decision granting a compulsory license. The latter shall contain information pertaining to the scope of the license, license fee, license terms, a guarantee pledged by the licensee, the commencement date of the license, and measures to safeguard the significant and efficient use of the patent.
The license fee is calculated by taking into consideration the economic value of the patented invention. However, non-commercial and humanitarian purposes are considered essential factors in cases where the “exportation to third countries facing health-related problems” is involved.
The licensee is prohibited from sublicensing and importing the patented invention unless the licensee is specifically authorized to do so due to public interest. This type of importation permit is conferred temporarily and limited to the scope of public need in question.
In cases where special circumstances arise after granting the license, i.e. the same invention being made subject to a license on more convenient terms, the licensee or the licensor may request the courts to revise the terms and conditions applicable to the compulsory license. In the event that the licensee severely breaches or consistently neglects its obligations, the rights holder may request that the courts revoke the license without prejudice to the rights holder’s compensation rights.
It has long been argued that compulsory licenses might be a drawback given that they may reduce incentives to innovation. Lack of innovation would eventually result in fewer drugs to supply patients in need. However, some scholars assert that compulsory licensing may lead to follow-on innovation. Either way, states vested with innovative industries believe that their essential values are in danger; whereas states with “pharmerging” markets seek an opportunity to expand their domestic industries to new fields.
In this respect, Article 7 of the TRIPS Agreement states that the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and the transfer and dissemination of technology for the mutual advantage of producers and users of technological knowledge in a manner conducive to social and economic welfare, and to a balance of rights and obligations. Such wording reveals that the TRIPS Agreement is a “balancing act” serving for both individual goals and economic development.