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By Rose A. Hayward

The largest trading bloc in the world today is the EU, with 374 million inhabitants (versus 268 million in the U.S.) and a gross domestic product (GDP) of $8.5 trillion in 1997 (versus $7.7 trillion in the U.S.)

The EU is a true customs union, with supranational (“federalizing”) institutions engaged in the massive undertaking of harmonizing European commercial law. The question is whether the EU will act like the trading bloc it is and have an equivalent influence on world trade. For the Union has continued to be rather enigmatic, pulling apart along national lines politically while integrating quite steadily commercially. Which of these two inapposite forces will win out?\

Global Trade

As said previously, the EU is our most obvious partner. But these two giants don’t necessarily agree about how to achieve a better world trade environment.  Put aside the fact that the two signed a “Declaration on U.S.-EC Relations” in November 1993 and more-ambitious and detailed agreements in 1995 and 1998. All are couched in constitutional language. Since the U.S. departed in a number of ways from the former, there is scant reason to expect the later agendas will be more binding. However, the U.S. and the EU have a great deal in common and can be expected to collaborate, at least when it is to their mutual advantage. One recent example of this is an agreement to cooperate more closely on customs procedures. If they could simplify and harmonize procedures, time and expense would be saved and bilateral trade facilitated. Furthermore, the exchange of customs information is a first step to fighting commercial fraud, which is international today. Finally, these two large trading blocs–when they collaborate–form the nucleus for future international agreements. [1]

The EU has been among Mercosur’s leading trade partners, accounting for 26 percent of its total trade between 1985 and 1992. Since 1990, EU exports to the region have risen sharply. The EU also is one of the largest investors in the region. Mercosur members attract about 70 percent of EU investment in Latin America. The EU did not want to concede the Western Hemispheric market to the U.S. and hasn’t. Mercosur members wanted alternatives to the American market, both to grow their economies and to increase its leverage in trade negotiations with the U.S. After NAFTA, the EU and Japan, Mercosur is the fourth largest trading bloc in the world, but that is by some margin. (Hamel, G., and C. K. Prahalad. 1994. Competing for the Future. Boston: Harvard Business School Press.)

The EU’s influence in world trade circles obviously is improved by a collective approach. It is difficult to imagine any single member state sitting at the table with the United States to hammer out the last details of the Uruguay Round GATT agreement, and yet EU Commissioner Leon Brittan did so on the Community’s behalf–and won! New agreements now being worked out at the global level through the World Trade Organization (WTO) in sectors like information technology, telecommunications, financial services, and marine services will all pose competitive threats to European companies and their markets, threats that can best addressed in a collective way. For it is not just the European economy that is becoming more competitive and better integrated, it is the world economy as well.

These prospects are somewhat in the future, however. In the present, despite the footdragging and skepticism, the Community already has traveled a long way. Consider just a few of the programs in place, as described hereafter.

Competition

Given the single market’s interest in integration and its concern about the protection of national “heroes,” it is no wonder that it wanted to prevent market distortions. The most obvious of these are anti-competitive agreements and monopolistic behavior (treaty articles 85 and 86). But a host of other market-distorting practices, such as “dumping” underpriced goods, state aids, and mergers, also affect competition.

Article 85 of the treaties prohibits a whole range of “agreements between undertakings . . . and concerted practices” that “have as their object or effect the prevention, restriction or distortion of competition within the common market.” This prohibition is very like Section 1 of the U.S. Sherman (Antitrust) Act, which prohibits “contracts,” “combinations” or “conspiracies” in restraint of trade. [2] Arguably, the European version is broader, since it does not require proof of a firm agreement. However, it also allows a “good” anti-competitive practice to continue, if it allows “consumers a fair share of the resulting benefit.” [3]

In theory, the European Commission has to investigate every claim of violation of EU competition laws. In the U.S., it is more common for private litigants (rather than the government) to bring antitrust complaints. After all, the statute enlists their aid by offering treble damages if a violation is found. [4]

Hence, the European Commission is in a much better position than U.S. authorities to exempt parties from the strictures of Article 85. The first form of exemption is called a “negative clearance”; the second, a “block exemption.” Something similar may be gotten from the U.S. government, in the form of a “comfort letter” (stating that the action proposed is not likely to violate the Act). But this doesn’t forestall private suits, and the government is not absolutely bound by its opinion.

Thus, the Commission plays the role you would expect in promoting competition in the Community. It would hardly do for the treaties to forbid the French government to discriminate against German products (Article 30) and yet allow French companies to collude against German companies (in the absence of Article 85).

Article 86 is the other principal EU competition rule. It does not require two-party agreements, for it targets undertakings that, due to their sheer size (“dominant position”), may act in a way that is “incompatible with the common market insofar as it may affect trade between Member States.” It should be evident that almost any act by a firm in a “dominant position” could be such an “abuse.” But a “rule of reason” applies. What is the relevant market? How large a share represents “dominance”? Is the “act” in question truly anti-competitive?

A great deal of discretion is left with the Commission. Dominance may be defined in terms of turnover in a single state, or the Community, or the world. If a narrow limit is set, then every member state ought to have one or more players in each field of business. But, if this approach is taken, the largest operators in Europe may be too small to compete on a global scale. The common market vision would succeed internally, but fail externally. If, however, European firms are allowed to merge into large multinationals without fear of becoming too dominant, then it is likely that there would be just a few major players in Europe. Not every nation would have businesses in every commercial field. A narrow definition of dominance hurts U.S. multinationals, because they tend to be larger on average than their European counterparts. As the EU has become better integrated and more global, the Commission has had to recalibrate its approach to competition. A recent Commission “green paper” (discussion draft) proposes just such an adjustment. [5]

Encouraging foreign direct investment

When, during the Uruguay Round negotiations, developing countries agreed to accept the TRIPs Agreement it was as part of a package deal whereby protection of intellectual property rights was a trade-off for concessions on agricultural products and textiles (see also Durán and Michalopoulos 1999:861; Grubb 1999:49; Gutowski 1999:756). Developed countries also argued that enhanced global protection of intellectual property rights would stimulate higher levels of investment in developing countries (see also Correa 2000:23; Durán and Michalopoulos 1999:853).

This proposition was supported by the work of Rapp and Rozek (1990), who, in their study of the correlation between a country’s economic development and its level of patent protection, identified benefits for developing countries that were prepared to introduce higher standards of intellectual property protection. Their findings are based on three rationales: first, that a well-developed patent regime encourages economic growth through increased innovation and investment; second, that, conversely, weak patent regimes impede economic development; and, third, that the significance of intellectual property rights increases as economic development occurs because of greater potential for exploitation. With regard to the first of Rapp and Rozek’s rationales, in practice, the degree to which the TRIPs Agreement can be expected to encourage direct investment and technology transfer is likely to vary significantly not only between developing countries (United Nations Conference on Trade and Development 1996), but also between sectors (see also Bronckers 1994:1248), between economic activities and between product type (see also Correa 2000:26).

Correa (2000:270), however, remains generally pessimistic about the prospects for significant flows of foreign (as opposed to domestic) levels of investment, reporting a United Nations (1993) study which concluded that innovative companies in developed countries are likely to sell directly to developing countries rather than transfer technology through FDI and licensing agreements, and concluding that there is no evidence that intellectual property protection will positively influence access to FDI at all (see also Di Pietro 2001:3).

In any case, Primo Braga and Fink (1998:541) observe that FDI flows to developing countries tend to be concentrated in a few countries, with four – China, Mexico, Malaysia and Brazil – accounting for 55 per cent of all FDI flows to developing countries in 1994 and 1995 (see also Primo Braga et al. 2000:18). There is also little evidence that intellectual property protection is a key factor in encouraging research and development (Durán and Michalopoulos 1999:855).

Although it is widely anticipated that the TRIPs Agreement will produce short-term net benefits for multinational companies based in developed countries (see, for instance, McCabe 1998:54; Oddi 1996:458), in the longer term the potential benefits of innovation, joint ventures and investment through greater transfer of technology and inflows of FDI may go some way to redress the balance in favour of developing countries (see also Di Pietro 2001:4; Evans 1994:143; Gutowski 1999:752; Stanback 1989:536). But the reality is that the time frame of this self-correcting effect remains uncertain (see Abbott 1996:392-3) and the prospects for FDI flows to developing countries remain hard to predict.

2.

Intellectual Property Rights

Ministers of GATT met in Marrakesh on 12-15 April 1994 to conclude the Uruguay Round of Multilateral Trade Negotiations that had begun in Punta del Este nearly eight years earlier. At Marrakesh, 114 countries, together with the European Communities, became signatories to the Final Act embodying the results of the Uruguay Round and parties to the Agreement establishing the WTO, which came into effect on 1 January 1995. Signatories (the WTO Members) also became parties to the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPs Agreement), annexed to the WTO Agreement, as well as to thirteen Multilateral Agreements on Trade in Goods, a General Agreement on Trade in Services and a number of other measures, including an Understanding on the Settlement of Disputes.

Impact of the TRIPs Agreement on developing countries

Any future renegotiation of the TRIPs Agreement must to take into account concerns that the costs of complying with its provisions far outweigh the benefits for developing countries. In examining these concerns, this paper pays particular attention to predictions that the effects of the TRIPs Agreement on economic development and health care provision are likely to be adverse, with domestic judicial and administrative arrangements unable to cope with the burden of enforcement. But there is also a need to balance predictions of the costs of the TRIPs Agreement against estimates of the potential benefits that may accrue to developing countries.

Beneficial effects of the TRIPs Agreement  Essentially, four types of benefit for developing countries can be identified as a result of the TRIPs Agreement: first, as multinational companies begin to feel that their intellectual property assets are secure in developing country markets, increased foreign direct investment (FDI) will result (see also United Nations Conference on Trade and Development 1996); second, levels of technology transfer or licensing are more likely to occur against a secure legal background and will ultimately lead to the transfer of know-how and expertise that will contribute to local economic growth; third, the availability of intellectual property protection locally will result in higher levels of domestic innovation (see also Cosbey 2001:18; Lehman 1999); and, fourth, the threat of bilateral trade sanctions from the United States may be less  likely because of the linkage of the TRIPs Agreement to the WTO Dispute Settlement Understanding. Each of these potential benefits is discussed in turn below.

The last major sectors of the world economic map to consider are India, the Mediterranean basin and Africa. Each has very different prospects in our globalization scheme, but since their impact is likely to be difficult to gauge and muted in comparison with the other regions discussed.

India is a very large, poor nation. Its population is around 985 million and expected to exceed that of China by the year 2050. However, its GDP is only $326 billion annually (about one twenty-fourth that of the United States), or about $348 per capita (1.2% that of the United States).

More to the point, India has a relatively closed, state-managed economy, with large subsidy programs for energy and farming, and a tiny tax base. It has a great need for foreign direct investment. Fortunately for India, it has attracted that of late. About five years ago, a severe financial crisis in India forced the government to “deregulate industry, liberalize financial markets, cut and rationalize taxes and tariffs, and open up sectors such as power and telecoms to foreign investments.” Foreign money rushed in: $1.5 billion in 1994-95, $2.1 billion in 1995-96, and an estimated $2.3 in 1996-97. However, the growth rate is flattening, and it remains well below the $10 billion that the Indian government says is needed annually. ( China received $38 billion in FDI in 1996.)

Part of the reason for the slowdown is that the Indian governments’ coalition partners oppose any large-scale privatization. What openings there have been (in insurance and telecommunications) have been too slow or too small to sustain Western investors’ interests. Some early investors (Siemens) have grown disillusioned with the pace of growth and the small size of the Indian consumer market and are downsizing or selling out. Although annual output growth is a solid 7 percent, so is inflation. And a limited and deteriorating Indian infrastructure threatens even this level of growth. Hence, the prospects for a rapid and robust emergence of the Indian economy seems doubtful, but bears watching.

The missing factor seems to be the political will to abandon protectionist measures and subsidies. If it does develop rapidly, then the Indian economy will become a larger factor in the world economic picture. It might join the APEC or ASEAN trading groups, which might increase its liberalization. Or it might try to set up a regional trading block of its own, gathering some neighboring states around it. The former would be more potent than the latter, but either would improve India’s position on the economic map. At present, it would appear to have more potential than clout.

Access to affordable pharmaceutical products

The debate about higher prices for patented products in developing countries has come to be epitomised by concerns that access to affordable drugs will be hindered (see Drahos 1997:207). For many developing countries, the underlying rationale for excluding pharmaceutical products from patent protection in the pre-TRIPs era was to enhance access to medicines and health care (see also Durán and Michalopoulos 1999:856). Under the terms of the TRIPs Agreement, these countries now face the prospect that cheap, patent-free generic pharmaceutical products will be replaced by an increased reliance on patented pharmaceutical products imported by global corporate actors. It

TRIPs Agreement, developing countries may delay product patent protection to areas of technology not previously protectable when the Agreement came into force in that Member. Article 65.4 allows developing countries that did not previously grant patents to pharmaceutical products to delay until 1 January 2005. Once these transitional periods have expired, there is a widespread expectation that the cost of pharmaceutical products is likely to increase as a result of the TRIPs Agreement. Even when these transitional periods have expired there is, of course, nothing to stop developing countries availing themselves of Article 31 of the TRIPs Agreement by issuing compulsory licences on grounds of public health needs (see also Durán and Michalopoulos 1999:862), provided that adequate compensation is paid to the right holder. But, in practice, granting compulsory licences may have its drawbacks. It may be difficult for developing countries to establish a local manufacturing facility capable of exploiting a compulsory licence, foreign companies may be reluctant to invest in developing countries with a propensity to grant compulsory licences and the internal procedures for granting compulsory licences might not have been put in place (Abbott 2001:12).

As a result, Henderson (1997:662) and Adelman and Baldia (1996:531) report that, although medicines sold in India are at present up to 3,010 per cent cheaper than the same pharmaceutical product sold in developed countries, prices are likely to rise rapidly in the former market once patent protection for pharmaceutical products becomes fully applicable from 1 January 2005 onwards. In response to these concerns, the Health and Pharmaceuticals Programme of Consumers International Regional Office for Asia and the Pacific (CIROAP) has been set up to campaign for national health care policies in developing countries and ensure access to affordable medicinal products (see Balasubramaniam 2000). In practice, however, the actual price increases of proprietary pharmaceutical products in developing countries are likely to vary depending on whether new products dominate the market or whether off-patent alternative treatments are also available (Primo Braga et al. 2000:33).

The potential impact of the TRIPs Agreement on access to affordable medicines in developing countries was demonstrated most graphically in March 2001 by the threatened action of forty-two global pharmaceutical companies in South Africa. The companies, represented by the Pharmaceutical Manufacturers Association of South Africa, complained to that country’s Constitutional Court, objecting that the South African medicines Act would have given the Health Minister the power to grant compulsory licences for patented pharmaceutical products when public health was at stake. The threatened legal action concerned Article 10 of the South African medicines and Related Substances Control Amendment Act 1997, which adds Section 15c to the 1965 medicines and Related Substances Control Act by allowing the Health Minister to abrogate patent rights, issue compulsory licences and allow parallel importation of pharmaceuticals in order to reduce the price of medicinal products (see also Ostergard 1999:875; Watal 1999:18). These powers were, it was claimed by the Pharmaceutical Manufacturers Association of South Africa, contrary to Article 31 of the TRIPs Agreement, particularly the requirement that compulsory licensing be granted only on a non-exclusive and non-assignable basis, with the possibility of judicial review and with adequate remuneration for the patent holder. The case proved particularly emotive because access to anti-retroviral medicines for the treatment of HIV/AIDS, such as AZT (Zidovudine), was constrained in South Africa by the prohibitively high price of the drugs (see Tickell 2001:3).

Notably, despite complaints by the US Government that the amended Section 15c of the 1965 Act would be contrary to Articles 6, 27, 28 and 31 of the TRIPs Agreement, the United States itself did not choose to bring the matter before the WTO Dispute Settlement Body (see also Wooldridge 2000:109). It can be surmised that, on political and public relations grounds, the United States had stepped back from upholding the intellectual property rights of US companies abroad on wider grounds of security and international diplomacy. In short, the US State Department appeared to have ruled out action against South Africa because of the political significance of the post-apartheid regime in that country.

The trend for lower prices for patented drugs in developing countries continued in August 2001 when Roche, the Swiss pharmaceutical manufacturer, agreed to a substantial price cut for its patented AIDS drug, Nelfinavir, in Brazil. Although Roche had initially offered a price reduction of 30 per cent, the Brazilian government argued that this was insufficient and threatened to issue a compulsory licence on public health grounds. As a result of further price cuts, the issue was resolved with the local manufacture of Nelfinavir also secured, because Roche was able to announce the commercial viability of producing the drug locally in the light of Brazil’s large order.

The price of patented drugs may also have an adverse effect on public health if the medicinal product is marketed at such a prohibitively high price that it excludes consumer access for large sections of the local population (see also Acharya 1996:160). One possibility for developing countries would be to seek recourse to Article 27.2 of the TRIPs Agreement, which allows

WTO Members to exclude inventions from patentability where there are legitimate reasons on grounds of ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment. But the scope of the public health exception remains limited. It denies local manufacturers the right to commercially exploit products locally where a patent application from a foreign-based multinational company has been refused.

But the picture of unreasonably high drug prices in developing countries is not one that is uniformly accepted. Adelman and Baldia (1996:531) and Grubb (1999:48), for instance, counter that newly introduced patent laws will have no effect on products that are already on the market, particularly since the great majority of products on the Essential Drugs List of the WTO are no longer patented in any country. Grubb highlights a report by Redwood (1994) which found that in 1993 proprietary pharmaceutical products operating under developed country standards of patent protection would have accounted for only 10 per cent of the drug market in India. Even when proprietary medicines are prohibitively expensive in developing countries, Grubb 10 suggests that alternative therapies are normally available if the patented drug is priced too highly. The global proprietary pharmaceutical industry also claims that it reinvests 14 per cent of total sales income on R&D, with only one in every 10,000 substances undergoing R&D proving a success in terms of beneficial medical results; even many of these fail at the clinical trial stage and never reach the market (see also Nogués 1990:87).

The Indian Intellectual Property Rights Regime and the TRIPs Agreement

The issue of intellectual property rights protection has taken on added importance since the conclusion of the Uruguay Round and the formation of the World Trade Organization (WTO) in 1995. The three pillars of the WTO consist of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), which lays down substantive guidelines for the implementation and enforcement of stronger intellectual property rights; the General Agreement on Trade in Services (GATS), which deals with rules on international trade in services; and the General Agreement on Tariffs and Trade (GATT), which contains rules for trade in goods.

India has not been left unaffected by these changes in the rules of international trade.

The TRIPs Agreement and Indian Intellectual Property Legislation

The TRIPs Agreement has been described as one of the most comprehensive, and probably the hardest-fought, components of the Uruguay Round of GATT negotiations. Although TRIPs is binding on all signatories, it makes exceptions for developing countries and least-developed countries. Developed countries were required to implement the provisions of TRIPs within one year of signing. That is to say, developed countries had until 1996 to implement and enforce the agreement. As a developing country, India was granted a transition period of up to ten years, until the year 2005, to implement and enforce TRIPs. [6] The country has not yet changed all its laws in accordance with the TRIPs Agreement, exercising its right not to do so.

Below, I explain the TRIPs Agreement as it stands today and compare its standards with existing Indian law. I review only those areas of the TRIPs Agreement with which Indian intellectual property legislation is at odds. I first discuss the structure and basic principles of the TRIPs Agreement.

The Structure of the TRIPs Agreement. The agreement on TRIPs is set out in Annex 1C of the Final Uruguay Round text. There are seventy-three articles in the text, divided into seven different parts. Part I covers general provisions and basic principles. Part II pertains to standards for specific intellectual property rights and covers copyrights and related rights (also known as neighboring rights), trademarks, geographical indications, industrial designs, patents, the layout designs of integrated circuits (mask works), and the protection of undisclosed information (trade secrets). There is also a section on the control of anticompetitive practices in contractual licenses. Part III addresses the enforcement of intellectual property rights, part IV deals with the acquisition and maintenance of intellectual property rights, and part V covers dispute prevention and settlement.

Basic Principles and Obligations of the TRIPs Agreement. Article 3 of the TRIPs Agreement states that each “Member shall accord to the nationals of other Members treatment no less favorable than that it accords to its own nationals” with respect to the protection of intellectual property, a condition known as national treatment.” The TRIPs Agreement also requires that every member be given most-favored-nation (MFN) treatment with regard to intellectual property. It establishes that “any advantage, favor, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members” (Article 4). There are, however, exceptions to these obligations. With respect to national treatment, exceptions identified in international conventions — such as the Paris Convention, 3 the Berne Convention, 4 the Rome Convention, 5 and the Washington Treaty 6 — are recognized by the TRIPs Agreement. These exceptions include the suspension of privileges to rightsholders in the event of a national emergency. Each member country has to implement and enforce standards pertaining to all seven areas of intellectual property.

Standards. This section encompasses copyrights, trademarks, other standards, and patents.

Copyrights. Copyright law protects a work of authorship from the time that it is created. It covers the original expression of an idea rather than the idea itself. Related rights (or neighboring rights, as they are sometimes called) in turn protect the work of performers, phonogram (sound recording) producers, and broadcasters ( Primo Braga 1995, 389 ).

Article 9 of the TRIPs Agreement states that copyrights will protect works covered by Articles 1-21 of the Berne Convention. That excludes Article 6bis of the Berne Convention, which deals with “moral rights” — an author’s inalienable right to protect the integrity of his or her work and to object to changes that would be prejudicial to his or her honor or reputation ( Primo Braga 1995, 389 ). Even though the TRIPs Agreement does not require the recognition of moral rights, India’s Copyright Act of 1957 recognized moral rights after it was amended in 1994. [7]

7 Prior to this round of amendments, the Copyright Act did not recognize Article 6bis of the Berne Convention, despite the fact that India was a member of the Berne Convention. The 1994 amendment to India’s Copyright Act establishes standards exceeding those laid down by the TRIPs Agreement. 8 A few remaining areas have yet to be amended, but they will require only minor changes.

Article 9 of the TRIPs Agreement also requires members to recognize that “copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such.” Thus, copyright protection can be given only to the articulation and exposition of ideas, and not to the ideas themselves. For example, a mathematical formula cannot be copyrighted, though a product that results from that formula can be. Indian legislation is not explicit in that respect, although established case law sets precedents in that direction. Indian courts have shown by their judgments that originality does not necessarily mean a new idea. Originality could imply a different form or a unique method of presentation. What is protected by the legislation is the form in which the ideas are expressed, not the idea itself. [8]

Computer programs and compilations of data are protected as literary works in Article 10 of the TRIPs Agreement. In that area, the Indian Copyright Act is satisfactory and protects computer software and compilations of data. Further, TRIPs stipulates that the term of protection extends for the life of the author of a work plus fifty years. Indian legislation goes a step further and protects the work for the author’s lifetime plus sixty years. [9]

Article 14 of the TRIPs Agreement relates to the protection of the rights of performers, producers of phonograms, and broadcasting organizations. The TRIPs Agreement states that performers have the authority to prevent the “fixation of their unfixed performance and the reproduction of such fixation.” Performers also have the authority to prohibit public broadcasts of their live performances without due authorization from them. Producers of phonograms are awarded the right to “authorize or prohibit the direct or indirect reproduction of their phonograms.” Broadcasters have the same rights as performers regarding the fixation of performances and the reproduction and broadcast of these performances. The term of protection for performers and producers of phonograms is fifty years from the date of the performance or the creation of the phonogram. Broadcasters are given protection for up to twenty years from the end of the calendar year in which the broadcast took place.

Indian legislation covering “neighboring rights” is similar in all but a few areas. Section 37 of the Indian Copyright Act gives broadcasters a twenty-five-year term of protection, as opposed to the twenty years stipulated by the TRIPs Agreement. For performers’ rights, also, the Copyright Act provides twenty-five years of protection, in contrast with the fifty years stipulated by TRIPs.

Rental rights are also covered by the disciplines of the TRIPs Agreement. They provide that, “at least” for computer programs and cinematographic works, the title-holder should be allowed “to authorize or prohibit the commercial rental to the public of originals or copies of their copyright works” (Articles 11 and 12). That obligation, however, applies to cinematographic works only when widespread copying linked to rental of these works is impairing the economic rights of the title-holder. No parallel to rental rights exists in Indian legislation. Since there is no intrinsic opposition to that clause in the agreement, future amendments to the law will probably be made to accommodate the stipulations of the TRIPs Agreement.

The discussion above indicates that Indian legislation with regard to copyrights is relatively uncontroversial. In some areas, the standards are more stringent and explicit than in the TRIPs Agreement. Since the amendment of the Copyright Act in 1994, Indian legislation is almost in line with the provisions of the TRIPs Agreement. The strength of copyright legislation reflects the interests of domestic industries affected by the lack of strong intellectual property rights. For many years the domestic film industry, one of the largest and most influential industries in the country, has been clamoring for stronger protection of its intellectual property. Rampant piracy has taken a toll on the profitability of that industry.

Patents. The area of patents has been the most controversial element of the TRIPs Agreement. Until a few years ago, few lay people knew much about patents. The subject of patents and patent protection belonged to the arcane world of intellectual property lawyers. But the issue has caused diverse people, from industry barons to university students to farmers to activists, to stream onto the streets to protest against the patent provisions of TRIPs. What does TRIPs stipulate and how does it differ from Indian legislation in this area?

Patents protect inventions that are novel, nonobvious, and useful. A patentee has the right to exclude others from using, making, or selling the patented invention for a limited period of time. Article 27 of the TRIPs Agreement requires that all signatory countries put in place an effective patent system for essentially all branches of technology. [10] The TRIPs Agreement also requires that patents run for twenty years from the date the patent application is filed (Article 33). Patent rights are clearly presented and include the right to prevent third parties from making, using, offering for sale, selling, or importing the product without prior consent from the patent holder (Article 28). Remedies for infringement include the availability of damages (Article 45) and injunctive relief (Article 44). TRIPs shifts the burden of proof, thus making process patents easier to enforce than they would be under a regime following the ordinary rules about burden of proof.

The TRIPs Agreement affords protection to all fields of technology. But a controversial aspect of Article 27 is paragraph 3 and especially sub-paragraph 3(b). [11]

Article 27 excludes the granting of patents for “diagnostic, therapeutic and surgical methods for the treatment of humans or animals . . . and plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes.” The method of protection is left up to the members, but it must be “effective.” Article 27 makes clear that plant varieties must be protected. Indian legislation, however, does not provide for the patenting of life forms of any kind — not even plant varieties. The issue of protecting plant varieties and, generally, the patenting of life forms has been an emotional one. Some people argue that if plant varieties are protected, the large multina tional firms that usually hold these patents will raise the price of seeds, making them unaffordable for farmers. The issue of plant varieties, a highly contentious one, has not been dealt with in this chapter. It is properly the subject of an entire chapter. My focus will be on patents as they relate to pharmaceuticals.

There are five main differences between existing Indian patent legislation and the TRIPs Agreement. The first difference concerns the coverage of patents. Section 5 of the Indian Patents Act of 1970 states the following:

In the case of invention, (a) claiming substances intended for use, or capable of being used, as food or as medicine or drug, or (b) relating to substances prepared or produced by chemical processes (including alloys, optical glass, semi-conductors and inter-metallic compounds), no patent shall be granted in respect of claims for the substances themselves, but claims for the methods or processes of manufacture shall be patentable.

Thus, the Indian Patents Act of 1970 did not allow product patents in the areas of food, medicines, drugs, and chemicals. Only processes could be patented. That notion conflicts with TRIPs, which clearly stipulates that members must provide patents, whether product or process, for all fields of technology. I discuss the implications of that law in greater detail in the next part of this chapter.

The second discrepancy between the Indian Patents Law and that of the TRIPs Agreement concerns the duration of protection for patents. Section 53(1) of the Patents Act establishes that process patents in the areas of food, medicines, and drugs have a term of five to seven years, and any other patent has a fourteen-year term. [12]

TRIPs, however, states that patent duration uniformly must be for twenty years (Article 33).

Working a patent, or commercially producing the subject matter of the patent, is the third main difference between Indian law and the TRIPs Agreement. Under existing Indian legislation, importing a product is not regarded as equivalent to working a patent. Indian law makes clear that patents are granted to encourage production of inventions in India, not merely to act as vehicles of monopoly power for the patent holders importing the product. [13]

TRIPs, however, mandates that importation of a patented product is tantamount to working the patent: importing a patented product entitles the patent holder to the same privileges and protection as would producing the product in the country. [14] In short, there can be no distinction between imported and domestic products with regard to patent protection.

The fourth and probably most contentious area for India is the issue of compulsory licensing. To prevent the patent holder from misusing or abusing the temporary monopoly awarded, Indian law allows compulsory licenses to be awarded to third parties. I discuss compulsory licensing in more detail in the next section of this chapter, but suffice it to say that Article 31 of the TRIPs Agreement makes compulsory licensing far more difficult. [15]

Except in cases of national emergency, like war, TRIPs makes the grant of a compulsory license subject to a number of conditions.[16]

While TRIPs does not rule out compulsory licensing altogether, it does make such a practice difficult.

The fifth problematic issue is the reversal of the burden of proof. Ironically, while other portions of the TRIPs patent regime have attracted a great deal of negative publicity, reversing the burden of proof has been ignored. Article 34 states:

If the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process. Therefore, Members shall provide, in at least one of the following circumstances, that any identical product when produced without the consent of the patent owner shall, in the absence of proof to the contrary, be deemed to have been obtained by the patented process: (a) if the product obtained by the patented process is new; (b) if there is a substantial likelihood that the identical product was made by the process and the owner of the patent has been unable through reasonable efforts to determine the process actually used. Any Member shall be free to provide that the burden of proof indicated in paragraph I shall be on the alleged infringer only if the condition referred to in subparagraph (a) is fulfilled or only if the condition referred to in subparagraph (b) is fulfilled. [Emphasis added.]

TRIPs stipulates, pursuant to clause (b), that when a plaintiff holding a process patent believes the patent is being infringed and has made “reasonable” but unsuccessful efforts to determine the process used by the alleged infringer, the burden of proof will be shifted to the defendant. The rationale behind this provision is that, when a plaintiff holding a process patent discovers a product that he thinks has been produced using his patented process, it may not be possible to prove infringement because the plaintiff would not have access to the technology used by the alleged infringer. Under such circumstances, only the alleged infringer has access to proof of whether or not infringement is occurring. The alleged infringer must thus prove that the product is noninfringing, that is, that it has been produced using a different process. That provision of the agreement has obvious applications to the pharmaceutical industry and, in particular, to biotechnological processes. Clause (a), however, implies that even when a totally new product is produced, the defendant must prove that an alternative and unique process has been used. Governments are bound to implement either clause (a) or clause (b), but not necessarily both. It is likely that the Indian government will choose clause (b) over clause (a).

Although India has no explicit law regarding reversal of the burden of proof, there are precedents to indicate that the idea is not totally alien to Indian law. For example, section 78 of the Trade and Merchandise Marks Act of 1958 states, “Any person who . . . (c) makes, disposes of, or has in his possession, any die, bloc, machine, plate or other instrument for the purpose of falsifying, or being used for falsifying, a trade mark . . . shall, unless he proves that he acted without intent to defraud, be punishable” (emphasis added). That example does not relate to patents in particular, although the principle is similar. India has not implemented that aspect of TRIPs and will have to bring the provision explicitly within the purview of patents, particularly process patents.

Though Indian legislation with regard to patents is not in compliance with the TRIPs Agreement at present, that is not for lack of trying. After the conclusion of the Uruguay Round, there were very few stipulations in the Marrakech Agreement that required immediate action by developing countries. But two articles in the TRIPs Agreement, Articles 70.8 and 70.9, did require immediate action.

Eventually, India decided to invoke the more formal method of arbitration to gain time. In effect, Indian legislation with regard to patents is now exactly where it was before TRIPs. It has become increasingly difficult to get new patent legislation passed in the current climate of political uncertainty. [17]

So far I have discussed the TRIPs Agreement and how Indian legislation differs with respect to intellectual property rights. Most of the provisions of TRIPs have parallels in Indian legislation, but the most contentious area remains the issue of patents. There is much disagreement on the subject within the country, and opposition still remains strong against the patent component of the TRIPs Agreement. But the opposition to stronger patent laws is nothing new. For a variety of reasons that I discuss below, India weakened its patent regime several decades ago.

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[1] Neil Buckley, “EU north and south split on spending freeze,” FINANCIAL TIMES, December 7, 1998, p. 3; “Eye on the EU,” EUROPE, October 1998, p. 6; “The EU’s coming wrangle for reform and spoils,” THE ECONOMIST, January 2, 1999, p. 45; Peter Norman, “Bonn keen to rein in EU farm spending,” FINANCIAL TIMES, December 9, 1998, p. 4; “Vienna Waltz: EU Summit Defers Tough Decisions,” EURECOM, December 1998, p. 2; Peter Norman, “Leaders take first step in jobs pact,” FINANCIAL TIMES, December 12-13, 1998, p. 2; Peter Norman, “Germany puts jobs at top of agenda,” FINANCIAL TIMES, January 19, 1999, p. 3; “Restructuring corporate Germany,” THE ECONOMIST, November 21, 1998, p. 63; “The changing face of German unions,” THE ECONOMIST, December 5, 1998, p. 69; Neil Buckley, “EU mismanagement under fire,” FINANCIAL TIMES, November 14-15, 1998, p. 2; “Parliament versus Commission,” THE ECONOMIST, January 16, 1999, p. 45; “We will always have Paris,” THE ECONOMIST, November 21, 1998

[2] 15 U.S. Code §1, et seq. ( 1988), as amended.

[3] Article 85(3) provides the exception to 85(1) and (2); notably, beneficial restraints “which [contribute] to improving the production or distribution of goods or . . . promoting technical or economic progress.”

[4] 15 U.S. Code §15 ( 1988).

[5] “EU Launches Review of Vertical Restraints,” EURECOM, February 1997, p. 2.

[6] In essence, developing countries have only had until the year 2000 to implement the TRIPs Agreement (Article 65.2), except with regard to pharmaceuticals and agricultural chemical products (Articles 65.4 and 70.8), for which developing countries have to provide for “Exclusive Marketing Rights” (Article 70.9) and provide a “mailbox” provision (Article 70.8) until the year 2005.

[7] The Indian Copyright Act of 1957 was last amended in 1994. When referring to Indian legislation, I refer to the Indian Copyright Act of 1957, as amended in 1994, unless otherwise specified.

[8] Section 13(1) of the Indian Copyright Act extends coverage of protection to “(a) original literary, dramatic, musical and artistic works; (b) cinematographic films; and (c) records.”

[9] Section 22 of the Indian Copyright Act states that “copyright shall subsist in any literary, dramatic, musical or artistic work . . . published within the lifetime of the author until 60 years from the beginning of the calendar year next following the year in which the author dies.”

[10] Article 27 of the TRIPs Agreement reads as follows: 1.           Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination

[11] Article 27 of the TRIPs Agreement reads:

3. Members may also exclude from patentability:

a. diagnostic, therapeutic and surgical methods for the treatment of humans or animals;

b. plants and animals other than micro-organisms, 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.

[12] Section 53(1) of the Indian Patents Act ( 1970) states: “Subject to the provisions of this Act, the term of every patent granted under this Act shall (a) in respect of an invention claiming the method or process of manufacture of a substance, where the substance is intended for use, or is capable of being used, as food or a medicine or drug, be five years from the date of sealing of the patent, or seven years from the date of the patent, whichever period is shorter; and (b) in respect of any other invention, be fourteen years from the date of the patent.”

[13] Section 83 of the Indian Patents Act ( 1970) states: “Regard shall be had to the following general consideration, namely: (a) that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay; and (b) that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article.”

[14] Article 27(1) of the TRIPs Agreement states: “Patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced” (emphasis added).

[15] TRIPs Agreement, Article 31, states:

(a)     The party requesting the license must have used its best efforts to obtain a voluntary license on reasonable commercial

(b)     terms; (b) The compulsory license must be terminated if the circumstances leading to its grant have ceased and are unlikely to recur; (c) The holder of the compulsory license must pay adequate compensation for the right to use the invention; (d) The determination of the amount of adequate compensation must be subject to independent review; (e) Where such a license is granted in order to enable use of a subsequent patented invention, a license shall only be granted if the later invention is an “important technical advance of considerable economic significance” relative to the dominant patent and the owner of the dominant patent is entitled to a cross license under the secured patent.

[16] TRIPs Agreement, Article 8(1) states: “Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socioeconomic and technological development, provided that such measures are consistent with the provisions of this Agreement.”

[17] Article 27 of the TRIPs Agreement reads as follows: 1.           Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination