INTERNATIONAL BUSINESS LAW AND TAXATION

A TERM PAPER

ON

“IPRs and its CONTROVERSIES”

Submitted to

Dr. R. Anita Rao

By

Supayan Dasgupta(1226109253)

MBA-IB, section-B

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TABLE OF CONTENT

1. EXECUTIVE SUMMARY------------------------------------------------------------------------3

2. INTELLECTUAL PROPERTY SUMMARY--------------------------------------------------4

3. AGREEMENT ON PHARMACEUTICAL PATENT EXEMPTIONS--------------------4

4. THE DEBATE ON RELAXING IPRS----------------------------------------------------------5

5. OTHER CONTROVERSY SURROUNDING TRIPS---------------------------------------6

6. OBLIGATIONS UNDER TRIPS AGREEMENT---------------------------------------------7

7. THE FUTURE OF IPRS IN THE WTO-------------------------------------------------------11

8. REFERENCES-------------------------------------------------------------------------------------13

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EXECUTIVE SUMMARY

We all know about the significance of intellectual property rights in today’s world.

A country having more number of IPRs is considered to be a developed country and a

country having less IPRs or which doesn’t promote IPRs is said to be a less developed
country, such is the importance of IPRs. In this term paper I have tried to highlight
something about the IPRs with respect to what are the controversies that it faced
because of different reasons. Because understanding IPRs is not a very big tusk but we
have to know some of the exceptions that has been done in some of the agreements
related with IPRs. Just as an example we take the case of Article 27.3(b) of TRIPS
agreement which doesn’t allow protection for plants and animals but it allows protection
for micro-organisms. This was criticized by lot of people and it turned into a controversy,
the details have been covered in the term paper.

Also the debate on relaxing IPRs has been covered where because of its large lobby
power, the pharmaceutical industry has been able to influence the WTO agreement that
relaxed drug IPRs through the US's negotiating stance. What were the effects of these
controversies. Controversy has arisen over perceptions of inconsistency between the
TRIPS Agreement and other international agreements, such as the Convention on
Biological Diversity.

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INTELLECTUAL PROPERTY SUMMARY

Intellectual property (IP) is a term referring to a number of distinct types of creations of

the mind for which property rights are recognized—and the corresponding fields
of law. Under intellectual property law, owners are granted certain exclusive rights to a
variety of intangible assets, such as musical, literary, and artistic works; discoveries and
inventions; and words, phrases, symbols, and designs. Common types of intellectual
property include copyrights, trademarks, patents, industrial design rights and trade
secrets in some jurisdictions.

Intellectual property rights (IPRs) have become synonymous with the debate on generic
drug production and trade. After discussions over patent exemptions reached an
impasse at the end of 2002 WTO members scrambled to come to some agreement in
time for the Cancun Ministerial Meeting. The prospects looked bleak after members
missed their deadline for an agreement on developing countries' access to essential
drugs. By the end of August 2003, trade delegates supported an agreement that
allowed developing countries to import generic drugs for the treatment of diseases that
are public health threats. While the agreement is heralded as a success because it
addresses a major concern of small developing countries, some criticize the agreement
for adding red-tape for developing countries who want to file for a patent exemption.

AGREEMENT ON PHARMACEUTICAL PATENT EXEMPTIONS

The Agreement on Implementation of the Doha Declaration on IPRs enables developing

countries to import a generic drug if they can provide evidence of the public health
concern, demonstrate the inability of the domestic pharmaceutical industry to produce
the drug itself, and prove that it will only use the drug for public, non-commercial
purposes. Developing countries are satisfied that the agreement does not limit them to
emergency situations or designate only a short list of diseases for which generic drugs
can be produced. Instead, it permits them to produce or import drugs to address the
particular diseases that affect their countries.

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NGOs such as Médecins Sans Frontiéres, Oxfam, and Third World Network have
criticized the agreement for adding more bureaucratic burdens to the process of issuing
compulsory licenses. These NGOs argue that the obstacles of proof will fall on
developing countries who scarcely have the time, money, or other resources to present
their case before the WTO. Furthermore, it is unclear how developing countries who
want to import generic drugs could prove that their domestic pharmaceutical industry is
unable to satisfy domestic demand. The primary concern is that the WTO will only
approve import requests from countries that lack domestic industries altogether and
reject requests based on the inefficiency of domestic industry. Lastly, the distinction that
generic drugs may only produced for "public, non-commercial purposes" is vague and
open for contention. Some NGOs argue that it will be impossible to stimulate the
production of affordable generic drugs if there is no economic incentives.

THE DEBATE ON RELAXING IPRS

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs),

formed during the Uruguay Round, gives the WTO limited authority to enforce
intellectual property rights (IPRs) and obligates member nations to enforce private IPRs.
In negotiations to refine the agreement, the US has fought for even more strict
enforcement of IPRs. The US argues that IPRs encourage innovation by protecting
inventors' right to their creation for a limited amount of time and allowing them to reap
the profits that make innovation worthwhile. The US trade representative's firm stance
on IPRs seems largely in line with powerful commercial lobbies, such as the
pharmaceutical industry. Because of its large lobby power, the pharmaceutical industry
has been able to influence the WTO agreement that relaxed drug IPRs through the US's
negotiating stance. The pharmaceutical industry has traditionally resisted these
agreements because it is concerned that vagueness in the language could allow
countries to abuse patent exemptions. While the pharmaceutical lobby is quick to
defend the right of countries to produce generic drugs for public health reasons, it
argues that profitable 'lifestyle' or luxury drugs such as Viagra and weight-loss drugs
could be included under patent exemption via loopholes in the wording of the
agreement. To assuage these fears, the US introduced a 'public, non-commercial' use

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clause that WTO members agreed to add, and many developed nations pledged to
never use patent exemptions unless in the case of an emergency. Other developed
nations with a strong pharmaceutical lobbying force, such as the EU, agree with the
US's concerns, but have been quicker to compromise than the US.

A broad spectrum of players argue in favor of loosening intellectual property rights in the
interest of increasing global access to patented pharmaceuticals. Especially in light of
the African AIDS epidemic, and persisting epidemics of tuberculosis, dengue fever,
malaria, and typhoid in other developing countries, it is vital that these countries have
access to more affordable drugs. Some also add to this argument that patent protection
actually reduces innovation and invention by limiting competition. Many NGOs link the
debate over patent exemption to larger divisions between the rich and poor nations,
arguing that patent protections reinforce inequality in the world.

Some public health analysts have voiced their concern that the debate on intellectual
property rights and public health distracts from more important problems that limit
access to health care in developing countries. They argue that to improve public health,
developing countries need help improving access to health services, increasing health
education, eliminating corruption and inefficiency, and improving sanitation within the
country.

OTHER CONTROVERSY SURROUNDING TRIPS

Pharmaceutical patents aside, many countries complain that the TRIPs Agreement
unfairly restricts technology transfer and privileges the interests of rich nations over the
poor. Some mainstream economists support this view, arguing that the TRIPs
Agreement has the potential to reduce global welfare by hampering competition and
economic efficiency. Still others protest the moral, economic and philosophical
implications of intellectual property rights as they relate to living organisms. Heated
controversy surrounds Article 27.3(b) of the TRIPs Agreement, which exempts "plants
and animals other than micro-organisms" from patent protection. However, Article
27.3(b) requires members to "provide for the protection of plant varieties either by

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patents or by an effective sui generis system or by any combination thereof." Many non-
governmental organizations have sharply criticized the extension of an international IPR
regime into the domain of living organisms, noting that such sensitive political decisions
are more properly made at the national level through democratic processes.

OBLIGATIONS UNDER TRIPS AGREEMENT

The TRIPS agreement outlines several important trade related aspects of intellectual
property. More specifically, it requires signatory countries to adhere to its criteria for
intellectual property monopoly grants of limited duration, along with requiring adherence
to the Paris Convention, Berne Convention and other WTO Conventions. The criteria
are minimum standards for granting a monopoly over any type of IP, as well as duration
limits, enforcement provisions and methods of IP dispute settlements.

When the TRIPS Agreement took effect on January 1, 1995, all developed countries
were given twelve months from the date of signing the agreement to implement its
provisions. Developing countries and transition economies (under certain conditions)
were given five years, until 2000. Least developed countries (LDCs) were given 11
years, until 2006, to comply.  Some countries have indicated that a longer period should
obtain.  For pharmaceutical patents in these LDCs, the term for compliance has been
extended to 2016. There are currently 30 LDCs within the WTO organization bound by
TRIPS and another 10 LDCs are waiting accession.

Some of the most important (and controversial) provisions in the TRIPS agreement
concern patent protection. TRIPS signatories are obliged to make patents available for
all inventions, whether products or processes, in all fields of technology without
discrimination (Article 27.1). Interestingly, TRIPS does not define the term "invention".
The agreement states three exceptions that countries may rely on to exclude otherwise
patentable subject matter. These include:

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 1. inventions which are contrary to order public or morality, i.e. inventions which are
dangerous to human, animal or plant life or health or seriously prejudicial to the
environment. (Article 27.2)

2. diagnostic, therapeutic and surgical methods for the treatment of humans or

animals (Article 27.3(a)).

3. plants and animals other than microorganisms and essentially biological

processes for the production of plants or animals other than non-biological and
microbiological processes. Any country excluding plant varieties from patent
protection must provide an effective sui generis system of protection (Article 27.3
(b)).

The interpretation of this last clause has been extremely contentious. The term sui
generis (Latin for 'of its own gender/genus') is not defined in the agreement, but it is
generally believed that it enables member countries to fashion their own protection
scheme for plants. Possible protection mechanisms include the Plant Breeder's Rights
system offered by UPOV Convention, plant patents or a licensing regime. More than
one form of plant protection can be implemented in a given member country.

Controversy surrounding Article 27.3

One of the controversies of Article 27.3 focuses on the meaning of 'sui generis' and
exactly what is considered an 'effective' form of plant variety monopoly right. In part
because of the difficulties with this provision, Article 27.3 was to be reviewed in 1999,
four years after the entry into force of the agreement. The review has never been
completed, and this Article remains a hot issue. To date, some 30 countries are calling
for further discussion on Article 27.3, and some have proposed:

1. rewriting the Article to exclude patents for any organisms or genetic material
(although ostensibly countries could achieve this by defining these subject
matters as "discoveries" and not "inventions");

2. defining in detail what an effective plant variety development right system is;

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 3. extending exclusionary rights of some sort to traditional or indigenous
knowledge; and

4. making explicit linkages with obligations for the conservation and use of
biodiversity, including mandatory disclosure of the source of genetic materials
used in a patented invention, and creating obligations to record arrangements for
access to genetic resources as evidence of prior informed consent.

It remains to be seen whether any of these proposals will be adopted.

Patentee Rights, Term of Protection and Enforcement Rights

The rights obtainable by patentees are clearly outlined in Article 28. The Article also
provides that rights are conferred for products which are directly obtained by a patented
process or method.

EXAMPLE: If a patent is issued for a novel method of manufacturing snow skis, the skis
produced will also be protected by the patent.

The TRIPS agreement provides that inventions must be disclosed by publication (Article
29) and sets out a minimum term of 20 years for patent protection. The 20 year term is
calculated from the filing date (Article 33). Although a patent term begins at filing,
enforcement rights only ensue from the date of patent grant.

TRIPS also provides rules regarding domestic procedures and remedies for the
enforcement of intellectual property rights. The rules are general principles applicable to
all enforcement procedures, i.e. they contain provisions on civil and administrative
procedures and appropriate remedies so that right holders, be they patentees, copyright
owners or other intellectual property owners, can effectively enforce their rights.

Effects of TRIPS and the Resulting Controversies

One of the effects of the TRIPS agreement has been to tie trade and intellectual
property together. Traditionally, developing countries have opposed the range of

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nontariff barriers, such as the protection of inventions, which they see as preventing
them from trading competitively throughout the rest of the world. Controversy has arisen
over perceptions of inconsistency between the TRIPS Agreement and other
international agreements, such as the Convention on Biological Diversity. There have
also been suggestions, for example, that patenting restricts the availability of the latest
chemicals, pharmaceuticals and fertilizers, thereby necessitating the use of older, less-
safe and more toxic products. There have been reports that intellectual property rights
on plant varieties erode biological diversity, especially in agriculture. Some countries are
also demanding that the existing intellectual property system should accommodate
concepts traditionally outside of the scope of intellectual property, for example
indigenous and traditional knowledge.

The examples above highlight some of the issues surrounding the TRIPS agreement
which are the subject of much international debate. 

Some nine years after TRIPS was first implemented, its provisions are still in a state of
review and alteration. For individual country positions on TRIPS.Grain is an international
non-governmental organisation which promotes the sustainable management and use
of agricultural biodiversity based on people's control over genetic resources and local
knowledge.

Article 27 Patentable Subject Matter

3. Members may also exclude from patentability:

(b) plants and animals other than microorganisms, and essentially biological processes
for the production of plants or animals other than non-biological and microbiological
processes. However, Members shall provide for the protection of plant varieties either
by patents or by an effective sui generis system or by any combination thereof. The
provisions of this subparagraph shall be reviewed four years after the date of entry into
force of the WTO Agreement.

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Article 28 Rights Conferred

1. A patent shall confer on its owner the following exclusive rights:

(a) where the subject matter of a patent is a product, to prevent third parties not having
the owner's consent from the acts of: making, using, offering for sale, selling, or
importing for these purposes that product;
(b) where the subject matter of a patent is a process, to prevent third parties not having
the owner's consent from the act of using the process, and from the acts of: using,
offering for sale, selling, or importing for these purposes at least the product obtained
directly by that process.

2. Patent owners shall also have the right to assign, or transfer by succession, the
patent and to conclude licensing contracts.

THE FUTURE OF IPRS IN THE WTO

WTO members are on schedule as far as meeting deadlines set by the TRIPs
agreement. Developed countries met their 1996 deadline, and almost all the developing
nations completed implementation by their deadline, January 1, 2000. As part of
implementation, WTO members have established laws protecting various forms of
intellectual property, including copyrights, geographical indications, integrated circuit
layouts and patents. They also have established formal judicial channels to enforce
IPRs and legislated penalties to deter potential violations. WTO members have also
created national intellectual property regimes that are controversial in that they involve
substantial administrative changes and costs. Least-developed countries, have been
granted an extended deadline; they must implement the agreement by 2005, but are
exempt from applying patent protection to some pharmaceuticals until 2016.

With the recent agreement on pharmaceutical patents, WTO members have gotten
TRIPs negotiations back on schedule, even though the Cancun talks ended

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prematurely. Technically, the agreement is considered to be an interim solution until
WTO members modify the TRIPs agreements and successfully complete the Doha
Round. Critics of the agreement will have a chance to improve the terms of the
agreement as negotiations continue in Geneva.

IPRs also affect negotiations in agriculture and dispute settlement. The controversy over
genetically modified foods and patents on life forms may become a divisive issue as
agriculture negotiations progress. Also, recent regional trade agreements have begun
formulating their own IPR enforcement rules, making dispute settlement more
complicated as the WTO wades through the conflicting, and often vague, IPR regimes.
General council meetings are scheduled throughout the first half of 2004 to try to
accomplish what WTO members expected to achieve in Cancun. The outcome of those
meetings will be a good indicator of how the Doha Round will proceed, and if WTO
members will be able to conclude the round by its deadline in 2005.

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REFERENCES

1. www.cid.harvard.edu
2. www.druid.dk
3. www.informaworld.com
4. www.stockholm-network.org
5. www.gbv.de
6. www.cbd.int

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