Author's Note: The
TRIPS Agreement was the product of negotiations leading up to
creation of the WTO in 1995. TRIPS incorporated intellectual
property into the world trading system for the first time. It
imposed certain obligations regarding Trade-Related Intellectual
Property rights. This dispute was the first time the TRIPS Agreement
was analyzed by the WTO dispute settlement system (see Exhibit
13.3). India did not want to recognize patents registered
there under the "mailbox" system until the end of the
tranisition period for developing nations which ends in 2005.
.....Although not directly addressed in this case, one can appreciate that even after all patentability issues are resolved, and patent protections are in place, a host nation may withdraw patent protection it deems necessary to protect human life/health.
.....The following 1997 WTO Report (opinion) reviews the decision of the lower tribunal--a Dispute Settlement Body (DSB) formed by the WTO Council when needed. The US (appellee) prevailed in the prior DSB panel decision against India (appellant). The paragraph numbers are those of the WTO's Appellate Body. Footnotes have been omitted.
Appellate Body Report:
2. The Panel Report was circulated to the Members of the World Trade Organization (the "WTO") on 5 September 1997. The Panel reached the following conclusions:
The Panel made the following recommendation:
3. ... On 27 October 1997, India filed an appellant's submission. ... At the oral hearing, the participants and third participant presented their arguments and answered questions from the Division of the Appellate Body hearing the appeal.
Arguments of the Participants
4. India appeals certain aspects of the legal findings and conclusions of the Panel ... [and] asserts that it has established, through "administrative instructions", "a means" by which applications for patents for pharmaceutical and agricultural chemical products (often referred to as "mailbox applications") can be filed and filing dates assigned to them. India contends that, as of 15 October 1997, 1924 such applications had been received, of which 531 were by United States' applicants. Upon receipt, the particulars of these applications, including serial number, date, name of applicant, and the title of the invention were published in the Official Gazette of India. None of these applications had been taken up for examination, and none had been rejected. On 2 August 1996, the Government had stated in Parliament: "The Patent Offices have received 893 patent applications in the field of drug or medicine from Indian or foreign companies/institutions until 15 July 1996. The applications for patents will be taken up for examination after 1 January 2005, as per the World Trade Organization (WTO) Agreement which came into force on 1 January 1995".
5. India argues that the function of Article 70.8(a) of the TRIPS Agreement is to ensure that the Member concerned receives patent applications as from 1 January 1995 and maintains a record of them on the basis of which patent protection can be granted as from 2005. India asserts that the Panel ruled that Article 70.8(a) comprises two obligations: first, to establish a mailbox to receive patent applications for pharmaceutical and agricultural chemical products and to allot filing and priority dates to them; and second, to create legal certainty that the patent applications and the patents based on them will not be rejected or invalidated in the future. India maintains that the second obligation is a creation of the Panel.
6. India asserts that the Panel
justified the creation of this second obligation by invoking
the concept of predictability of competitive relationships that
was developed by panels in the context of Articles III and XI
of the GATT 1947. India contends that this concept cannot be
unquestioningly imported into the TRIPS Agreement. Furthermore,
the Panel used this concept to advance the date on which India
must give substantive rights to inventors of pharmaceutical and
agricultural chemical products. Thus, India concludes, the Panel
incorporated into the procedural requirements of Article 70.8(a)
the substantive obligations set out in paragraphs (b) and (c)
of Article 70.8 and turned an obligation to be carried out in
the future into a current obligation.
10. India argues that the text
of Article 70.9 establishes the obligation to provide exclusive
marketing rights to a pharmaceutical or agricultural chemical
product for which a patent application has been made only after
the events specified in the provision have occurred. India maintains
that there is nothing in the text of Article 70.9 that creates
an obligation to make a system for the grant of exclusive marketing
rights system generally available in the domestic law before
the events listed in Article 70.9 have occurred.
13. In India's view, the Panel
did not base its interpretation on the terms of Article 70.9,
nor did it take into account the context and the transitional
object and purpose of this provision; instead, the Panel justified
its expansive approach with the need to establish predictable
conditions of competition. India contends that this notion turns
an obligation to take actions in the future into an obligation
to take action immediately. India notes that there are numerous
transitional provisions in the Marrakesh Agreement Establishing
the World Trade Organization (the "WTO Agreement")
that require action at some point in the future, either when
a date has arrived or an event has occurred. These are all obligations
that are, just like those under Article 70.8 and 70.9 of the
TRIPS Agreement, contingent upon a date or event. While it would
be desirable if all Members were immediately to enable their
executive authorities to take the required actions even before
the dates or events requiring those actions have occurred, India
asserts that these provisions cannot reasonably be interpreted
to imply the obligation to provide for such conditions in the
domestic law in advance of that date or event.
15. The United States . . . asserts that the Panel correctly analyzed the text and context of Article 70.8, and focused on the failure of the system described by India to achieve the object and purpose of this provision. The United States contends that the concept of the importance of creating the predictability needed to plan future trade was developed in the context of Articles III and XI of the GATT 1947, as the Panel observed. However, it does not follow that the objectives of ensuring minimum standards of treatment and regulating competitive relationships are mutually exclusive. Protecting legitimate expectations of WTO Members regarding conditions of competition is as central to trade relating to intellectual property as it is to trade in goods that do not relate to intellectual property.
16. According to the United States, under Article 70.8, reasonable assurances of treatment must be provided for mailbox applications. ... The United States insists that the administrative system described by India does not provide a sound legal basis for filing mailbox applications. According to the United States, the Panel correctly placed the burden of proof on the United States, consistent with the Appellate Body Report in United States - Measure Affecting Woven Wool Shirts and Blouses from India ("United States - Shirts and Blouses"). The United States argues that nothing in the Panel's analysis had the effect of shifting the burden of proof from the United States to India, and that the Panel applied the correct standard of proof. ...
18. The United States contends
that the Panel correctly found that India has failed to comply
with Article 70.9. According to the United States, the text of
Article 70.9 indicates that the obligation to establish exclusive
marketing rights became effective upon the entry into force of
the WTO Agreement. ... Moreover, the terms used in other Articles
of the TRIPS Agreement reflect the context of each Article,
and do not support the conclusion that there is no obligation
under Article 70.9 to provide a system for granting exclusive
marketing rights before a particular case arises.
20. The United States argues that the consequence of India's view of Article 70.9 is that a national of another WTO Member would have to apply for exclusive marketing rights that did not exist under Indian law, and only at that time would India be obligated to enact legislation providing such rights. There would be at least a temporary violation of a Member's rights because that Member's national would have to wait for India to enact legislation making these [patent protection] rights available. According to the United States, such a result is inconsistent with the principle of fostering predictable conditions of competition and does not protect the legitimate expectations of Members under Article 70.9.
21. In the view of the United
States, the Panel's finding on Article 70.9 does not imply that
all future obligations under the WTO Agreement should
be implemented immediately in Members' domestic law. Requiring
a system for granting exclusive marketing rights protects the
core balance of the TRIPS Agreement with respect to pharmaceutical
and agricultural chemical product patents. Under the TRIPS
Agreement, the quid pro quo for taking advantage of
the extended transition period for granting product patents for
pharmaceutical and agricultural chemical inventions was the grant
of exclusive marketing rights.
23. The European Communities endorses the Panel's findings concerning the failure by India to take the action necessary to implement its obligations under Article 70.8 of the TRIPS Agreement and agrees with the Panel's interpretation of Article 70.9 of the TRIPS Agreement. ...
24. ... The European Communities
asserts that the setting up of such a mailbox mechanism is clearly
not an end in itself. The objective of the mechanism cannot simply
be to permit the filing of applications: such a mechanism would
serve no useful purpose. The objective is rather to ensure that
the novelty and priority of such applications is preserved and
made available as from the date of application of the Agreement
for developing countries.
27. The European Communities contends that India's attempt to deny the need for a mechanism for the grant of exclusive marketing rights cannot be considered as a good faith interpretation of Article 70.9. According to the European Communities, India's reference to the sensitivity of the question of exclusive rights for the marketing of pharmaceuticals and agricultural chemical products in developing countries is not relevant. The European Communities contends that the basic rule of international treaty law is "pacta sunt servanda", that is, that treaties must be observed. Moreover, treaty provisions must be read in context and treaty interpretation must be carried out in good faith. In the view of the European Communities, the TRIPS Agreement contains many provisions concerning the rights of applicants and right holders with regard to third parties; the context of the TRIPS Agreement requires developing country Members that invoke the transitional period to allow, in advance, the grant of exclusive marketing rights under Article 70.9 and to provide the relevant mechanism for the grant of such exclusive marketing rights in order to define the position of applicants and right holders with regard to other persons. According to the European Communities, India's argument that this reading of Article 70.9 is not consistent with the general understanding of the kind of action that is required by Members during transitional periods, provided for in a number of other multilateral trade agreements, is misleading: it neglects that Article 70.9 deals with an obligation arising during the transitional period, not after its expiry.
Issues Raised In This Appeal
The TRIPS Agreement
30. Among the many provisions of the TRIPS Agreement are certain specific obligations relating to patent protection for pharmaceutical and agricultural chemical products. With respect to patentable subject matter, Article 27.1 of the TRIPS Agreement provides generally:
31. However, Article 65 of the TRIPS Agreement provides, in pertinent part:
32. With respect to patent protection
for pharmaceutical and agricultural chemical products, certain
specific obligations are found in Articles 70.8 and 70.9 of the
TRIPS Agreement. The interpretation of these specific
obligations is the subject of this dispute. Our task is to address
the legal issues arising from this dispute that are raised in
.....Where a Member does not make available as of the date of entry into force of the WTO Agreement patent protection for pharmaceutical and agricultural chemical products commensurate with its obligations under Article 27, that Member shall:
......(a) notwithstanding the
provisions of Part VI, provide as from the date of entry
into force of the WTO Agreement a means by which applications
for patents for such inventions can be filed;
50. With respect to Article 70.8(a), the Panel found that:
51. In India's view, the obligations in Article 70.8(a) are met by a developing country Member where it establishes a mailbox for receiving, dating and storing patent applications for pharmaceutical and agricultural chemical products in a manner that properly allots filing and priority dates to those applications in accordance with paragraphs (b) and (c) of Article 70.8. India asserts that the Panel established an additional obligation "to create legal certainty that the patent applications and the eventual patents based on them will not be rejected or invalidated in the future". This, India argues, is a legal error by the Panel [bolding added].
52. The introductory clause to Article 70.8 provides that it applies "[w]here a Member does not make available as of the date of entry into force of the WTO Agreement patent protection for pharmaceutical and agricultural chemical products commensurate with its obligations under Article 27 ..." of the TRIPS Agreement. Article 27 requires that patents be made available "for any inventions, whether products or processes, in all fields of technology", subject to certain exceptions. However, pursuant to paragraphs 1, 2 and 4 of Article 65, a developing country Member may delay providing product patent protection in areas of technology not protectable in its territory on the general date of application of the TRIPS Agreement for that Member until 1 January 2005. Article 70.8 relates specifically and exclusively to situations where a Member does not provide, as of 1 January 1995, patent protection for pharmaceutical and agricultural chemical products.
53. By its terms, Article 70.8(a) applies "notwithstanding the provisions of Part VI" of the TRIPS Agreement. Part VI of the TRIPS Agreement, consisting of Articles 65, 66 and 67, allows for certain "transitional arrangements" in the application of certain provisions of the TRIPS Agreement. These "transitional arrangements", which allow a Member to delay the application of some of the obligations in the TRIPS Agreement for certain specified periods, do not apply to Article 70.8. Thus, although there are "transitional arrangements" which allow developing country Members, in particular, more time to implement certain of their obligations under the TRIPS Agreement, no such "transitional arrangements" exist for the obligations in Article 70.8.
54. Article 70.8(a) imposes an obligation on Members to provide "a means" by which mailbox applications can be filed "from the date of entry into force of the WTO Agreement". Thus, this obligation has been in force since 1 January 1995. The issue before us in this appeal is not whether this obligation exists or whether this obligation is now in force. Clearly, it exists, and, equally clearly, it is in force now. The issue before us in this appeal is: what precisely is the "means" for filing mailbox applications that is contemplated and required by Article 70.8(a)? To answer this question, we must interpret the terms of Article 70.8(a).
55. We agree with the Panel that "[t]he analysis of the ordinary meaning of these terms alone does not lead to a definitive interpretation as to what sort of means' is required by this subparagraph". Therefore, in accordance with the general rules of treaty interpretation set out in Article 31 of the Vienna Convention [on the Law of Treaties--textbook §8.2], to discern the meaning of the terms in Article 70.8(a), we must also read this provision in its context, and in light of the object and purpose of the TRIPS Agreement.
56. Paragraphs (b) and (c) of Article 70.8 constitute part of the context for interpreting Article 70.8(a). Paragraphs (b) and (c) of Article 70.8 require that the "means" provided by a Member under Article 70.8(a) must allow the filing of applications for patents for pharmaceutical and agricultural chemical products from 1 January 1995 and preserve the dates of filing and priority of those applications, so that the criteria for patentability may be applied as of those dates, and so that the patent protection eventually granted is dated back to the filing date. In this respect, we agree with the Panel that,
57.On this, the Panel is clearly correct. The Panel's interpretation here is consistent also with the object and purpose of the TRIPS Agreement. The Agreement takes into account, inter alia, "the need to promote effective and adequate protection of intellectual property rights". We believe the Panel was correct in finding that the "means" that the Member concerned is obliged to provide under Article 70.8(a) must allow for "the entitlement to file mailbox applications and the allocation of filing and priority dates to them". Furthermore, the Panel was correct in finding that the "means" established under Article 70.8(a) must also provide "a sound legal basis to preserve novelty and priority as of those dates". These findings flow inescapably from the necessary operation of paragraphs (b) and (c) of Article 70.8.
58. However, we do not agree with the Panel that Article 70.8(a) requires a Member to establish a means "so as to eliminate any reasonable doubts regarding whether mailbox applications and eventual patents based on them could be rejected or invalidated because, at the filing or priority date, the matter for which protection was sought was unpatentable in the country in question". India is entitled, by the "transitional arrangements" in paragraphs 1, 2 and 4 of Article 65, to delay application of Article 27 for patents for pharmaceutical and agricultural chemical products until 1 January 2005. In our view, India is obliged, by Article 70.8(a), to provide a legal mechanism for the filing of mailbox applications that provides a sound legal basis to preserve both the novelty of the inventions and the priority of the applications as of the relevant filing and priority dates. No more.
59. But what constitutes such a sound legal basis in Indian law? To answer this question, we must recall first an important general rule in the TRIPS Agreement. Article 1.1 of the TRIPS Agreement states, in pertinent part:
Members, therefore, are free to determine how best to meet their obligations under the TRIPS Agreement within the context of their own legal systems. And, as a Member, India is "free to determine the appropriate method of implementing" its obligations under the TRIPS Agreement within the context of its own legal system.
60. India insists that it has done that. India contends that it has established, through "administrative instructions", a "means" consistent with Article 70.8(a) of the TRIPS Agreement. According to India, these "administrative instructions" establish a mechanism that provides a sound legal basis to preserve the novelty of the inventions and the priority of the applications as of the relevant filing and priority dates consistent with Article 70.8(a) of the TRIPS Agreement. According to India, pursuant to these "administrative instructions", the Patent Office has been directed to store applications for patents for pharmaceutical and agricultural chemical products separately for future action pursuant to Article 70.8, and the Controller General of Patents Designs and Trademarks ("the Controller") has been instructed not to refer them to an examiner until 1 January 2005. According to India, these "administrative instructions" are legally valid in Indian law, as they are reflected in the Minister's Statement to Parliament of 2 August 1996. And, according to India:
61. India has not provided any
text of these "administrative instructions" either
to the Panel or to us.
70. We are not persuaded by India's explanation of these seeming contradictions. Accordingly, we are not persuaded that India's "administrative instructions" would survive a legal challenge under the Patents Act. And, consequently, we are not persuaded that India's "administrative instructions" provide a sound legal basis to preserve novelty of inventions and priority of applications as of the relevant filing and priority dates.
71. For these reasons, we agree
with the Panel's conclusion that India's "administrative
instructions" for receiving mailbox applications are inconsistent
with Article 70.8(a) of the TRIPS Agreement.
77. With respect to Article 70.9, the Panel found:
78. India argues that Article 70.9 establishes an obligation to grant exclusive marketing rights for a product that is the subject of a patent application under Article 70.8(a) after all the other conditions specified in Article 70.9 have been fulfilled. India asserts that there are many provisions in the TRIPS Agreement that, unlike Article 70.9, explicitly oblige Members to change their domestic laws to authorize their domestic authorities to take certain action before the need to take such action actually arises. India maintains that the Panel's interpretation of Article 70.9 has the consequence that the transitional arrangements in Article 65 allow developing country Members to postpone legislative changes in all fields of technology except the most "sensitive" ones, pharmaceutical and agricultural chemical products. India claims that the Panel turned an obligation to take action in the future into an obligation to take action immediately.
79. India's arguments must be examined in the light of Article XVI:4 of the WTO Agreement, which requires that:
80. Moreover, India acknowledged before the Panel and in this appeal that, under Indian law, it is necessary to enact legislation in order to grant exclusive marketing rights in compliance with the provisions of Article 70.9. This was already implied in the Ordinance, which contained detailed provisions for the grant of exclusive marketing rights in India effective 1 January 1995. However, with the expiry of the Ordinance on 26 March 1995, no legal basis remained, and with the failure to enact the Patents (Amendment) Bill 1995 due to the dissolution of Parliament on 10 May 1996, no legal basis currently exists, for the grant of exclusive marketing rights in India. India notified the Council for TRIPS of the promulgation of the Ordinance pursuant to Article 63.2 of the TRIPS Agreement, but has failed as yet to notify the Council for TRIPS that the Ordinance has expired.
81. Given India's admissions that legislation is necessary in order to grant exclusive marketing rights in compliance with Article 70.9 and that it does not currently have such legislation, the issue for us to consider in this appeal is whether a failure to have in place a mechanism ready for the grant of exclusive marketing rights, effective as from the date of entry into force of the WTO Agreement, constitutes a violation of India's obligations under Article 70.9 of the TRIPS Agreement.
82. By its terms, Article 70.9 applies only in situations where a product patent application is filed under Article 70.8(a). Like Article 70.8(a), Article 70.9 applies "notwithstanding the provisions of Part VI". Article 70.9 specifically refers to Article 70.8(a), and they operate in tandem to provide a package of rights and obligations that apply during the transitional periods contemplated in Article 65. It is obvious, therefore, that both Article 70.8(a) and Article 70.9 are intended to apply as from the date of entry into force of the WTO Agreement.
83. India has an obligation to implement the provisions of Article 70.9 of the TRIPS Agreement effective as from the date of entry into force of the WTO Agreement, that is, 1 January 1995. India concedes that legislation is needed to implement this obligation. India has not enacted such legislation. To give meaning and effect to the rights and obligations under Article 70.9 of the TRIPS Agreement, such legislation should have been in effect since 1 January 1995.
84. For these reasons, we agree
with the Panel that India should have had a mechanism in place
to provide for the grant of exclusive marketing rights effective
as from the date of entry into force of the WTO Agreement,
and, therefore, we agree with the Panel that India is in violation
of Article 70.9 of the TRIPS Agreement.
Signed in the original at Geneva this 4th day of December 1997 by:
Notes & Questions
2. Further resources: T. Stewart, AFTER DOHA: THE CHANGING ATTITUDES AND IDEAS OF THE NEW WTO ROUND (Irvington-on-Hudson, NY: Transnational, 2002).
3. On August 29, 2003, the WTO General Council delayed
its decision regarding a proposal whereby poorer nations could
import generic drugs to fight diseases like AIDS. The US reversed
its earlier opposition