Developing countries face significant medical challenges. They are often unable to manufacture essential medicines themselves and cannot afford to purchase them through normal commercial means.

The Intellectual Property Laws Amendment Bill 2013 (the Bill) that was introduced into Parliament on 30 May 2013 seeks to deliver on the Government's commitment to the Protocol amending the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights, also known as the TRIPS Protocol (the Protocol).

Our related articles on other aspects of the Bill can be found at Review of compulsory licensing in Australia, Proposed changes to Crown use in Australia and One Patent Application, One Examination, One Profession, Two Patents.

Why implement the Protocol?

According to the proposed legislation, significant proportion of the world’s population suffers from treatable diseases (such as malaria and tuberculosis). It has been estimated that, in combination with such diseases, the HIV/AIDS epidemic caused nearly four million deaths from a total of 272 million infected individuals (as at 2009).1 

Many of the countries suffering such epidemics are developing or least-developed countries with limited resources and manufacturing capabilities – according to the United Nations, nearly two billion people lack access to essential medicines.2  A number of these countries are in the Asia-Pacific region, and therefore are our closest neighbours. 

Further, according to the proposed legislation, issues arise where medicines are under patent, as some patent owners have proven unwilling to practice price differentiation (i.e. provide medicines to least developed and developing countries in need at affordable prices) or to issue voluntary licences to generic manufacturers to the extent necessary to allow them to provide affordable medicines to those countries in need.3 The World Health Organization has stated that price is the most important barrier to the poor having access to medicines and that the availability of generic products is a major contributor to reducing the cost of medicines.4 

In September 2007, Australia accepted the Protocol, the aim of which is to encourage Australian patent owners to either practice price differentiation or to issue voluntary licences to generic manufacturers to authorise them to manufacture the patented drugs for the purpose of export to countries in need. If the patent owner is unwilling to do either of these, then the Protocol provides a mechanism to force the patent owner to issue a compulsory licence authorising manufacture and export for this purpose.

It is against this background (and the experience of other countries, such as Canada and India, which have adopted the Protocol into their legislation) that the Australian government seeks to amend our legislation to implement the Protocol in Australia and, in doing so, allow patented pharmaceuticals to be exported under compulsory licence to meet the needs of another country. 

How will the Protocol be implemented?

Four alternative options were explored in considering whether and how to implement the Protocol in Australia:

  1. do nothing (i.e. not implement the Protocol)
  2. amend the Patents Act 1990 (the Act) to enable the Federal Court to grant licences under the Protocol
  3. amend the Act to enable the Commissioner of Patents to grant licences under the Protocol
  4. increase funding for aid programs that involve the delivery of pharmaceuticals to developing countries.

The favoured approach is option 2. It is considered that:

  • the power to grant licences should lie with the courts (rather than a government official, such as the Commissioner of Patents) because it will result in a more streamlined system that builds on existing processes and expertise – in countries such as Canada and India, where the power has been given to a government official, this has not ensured a less onerous and bureaucratic process
  • the authority with the power to grant licences should also have the power to amend existing licences so as to accommodate changing circumstances – jurisdictions that have adopted the approach of issuing licences limited to a maximum duration and set amount of product have been heavily criticised
  • in the case of national emergency or in cases of extreme urgency in the importing country, the requirement to show that prior efforts have been made to seek a voluntary licence from the patent owner on reasonable terms and conditions (and that such efforts have not been successful within a reasonable or specified period) should be waived
  • the eligibility of products and importers should be determined on a case-by-case basis because this approach is better able to adapt to the needs of developing countries – the approach of pre-determining the eligible pharmaceutical products and the countries eligible to import the products, and setting these out in the legislation, is thought to be too inflexible to meet the changing needs of the world’s population.

Other considerations

In considering the implementation of the Protocol, the following were also taken into consideration:

  • ‘public non-commercial use’ (e.g. use of the patented pharmaceutical invention, or PPI, by a government) should not be grounds for waiving the requirement for prior negotiation between the applicant and the patent owner – this requirement should only be waived in urgent circumstances
  • measures to prevent the diversion of pharmaceuticals from the intended recipients need to be put in place and need to be robust
  • the system needs to be kept simple, quick and free from opportunities for delaying tactics by innovator companies
  • vaccines need to be included
  • non-WTO members should not be subject to extra requirements (such as additional anti-diversion measures), as this would be an unfair burden.

In addition, the following associated amendments have been proposed to the Act:

  • provisions to be inserted into ss 70 and 71 of the Act to ensure that obtaining regulatory approval for the export of pharmaceuticals to countries in need does not adversely affect a patent owner’s subsequent application for an extension of the term of the patent (in particular, the first regulatory approval date)
  • the PPI that is to be the subject of the licence will be defined such that it can be a pharmaceutical product (including a vaccine), or a process for producing the pharmaceutical product
  • the eligible importing country will be defined as a foreign country recognised by the United Nations as a least-developed country (i.e. is not required to be WTO member), a foreign country that has notified the Council for TRIPS of its intention to use the Protocol as an importer, or a foreign country included in a list of prescribed countries
  • a provision to be inserted that allows the Commissioner to accept an offer to surrender a patent where a licence granted under the new legislation is in force in relation to the patent – this is different to the current compulsory licence provisions, which do not allow a patent that is the subject of a compulsory licence to be surrendered.

It remains to be seen whether the amendments to ss 70 and 71 of the Act have any real effect, given that it is unlikely that a generic pharmaceutical company would seek to obtain approval of a drug that has not already been taken through the approval process by an innovator.

Additional provisions governing other aspects of the compulsory licence proposal will focus on aspects such as the requirements the court will need to take into consideration when making an order (e.g. that the application is made in good faith, whether the importation is by or on behalf of an eligible importing country, measures against diversion, and the like), the terms of any PPI compulsory licence that will be granted (e.g. quantity of product manufactured and exported, labelling and marking, duration, and the like), as well as provisions governing ancillary compulsory licences and cross-licences (where more than one licence is required to manufacture and export a pharmaceutical). 

What will the process look like?

An outline of the proposed process for obtaining and exercising a compulsory licence under the Protocol is proposed, as follows:

  1. A country identifies that is has a need for a pharmaceutical product and establishes that it has insufficient manufacturing capacity
  2. The country identifies a suitable Australian manufacturer to make the product, and the country and manufacturer identify any relevant patent(s)
  3. The manufacturer makes all reasonable attempts to obtain authorisation from the patentee(s) to manufacture and export the product – this step may be omitted if the public health problem amounts to a national emergency or other circumstances of extreme urgency in the importing country
  4. The importing country notifies the appropriate agency of its intent to use the system
  5. The Australian manufacturer applies to the Federal Court for a compulsory licence – the process will be fast-tracked by the Court where the licence is required because of a national emergency or other circumstances of extreme urgency
  6. The licensee notifies the Commissioner of Patents of the grant of the compulsory licence
  7. Remuneration is determined – this will be either done by agreement between the patentee and the manufacturer, or will be determined by the Federal Court if the parties cannot agree
  8. The patented pharmaceutical is manufactured and exported
  9. The manufacturer provides details of the shipment on a website
  10. The importing country and anyone importing the pharmaceutical product on its behalf must take reasonable measures to prevent re-exportation of the product – the measures must be proportional to the country’s administrative capacity and to the risk of the product being diverted.

Of course, the importing country will also need to ensure that it has taken the required steps to over-ride any patent(s) that may be in force in the country. It is not clear how this will be done but it may be the case that it is achieved by carrying out step 4.

What’s next?

The Intellectual Property Laws Amendment Bill 2013 is currently before the House of Representatives. The Bill must be agreed to by both the House and the Senate and then will be assented to by the Governor-General before it comes into effect.