Analysing the AFTI’s Report for the Special 301 Investigation

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The Alliance for Fair Trade with India (AFTI) submitted a report to the Office of the Trade Representative of the United States as a part of the ongoing Special 301 investigation into India’s IP policies, that they perceive as prejudicial to US nationals. They recommended that India be listed as a Priority Foreign Country (PFC) in the investigation.

 A Special 301 report issued under S.301 of the Trade Act of 1974 attempts to identify countries that, “that (a) deny adequate and effective protection of intellectual property rights, or (b) deny fair and equitable markets access to United States persons that rely upon intellectual property protection” and categorises these countries as PFCs. Often a classification as a PFC country can lead to the imposition of trade sanctions.

We had carried a post recently about how the GIPC IP Index is more focused on perceptions and does not deal with actual fact. The AFTI’s report as well is largely composed of perceptions that the AFTI subscribes to, and largely ignores alternative interpretations to the TRIPS agreement. I intend in this post to touch upon claims made in this report (which can be found here) that I find require a careful examination. The report lists out a number of areas in which the AFTI considers India’s IP policies to be prejudicial to US interests. The foremost among these are India’s pharmaceutical patent regime [the oft raised “issues” regarding compulsory licensing and S.3(d)], music and film piracy and forced technology transfers among other concerns like the example we set for other countries at various multilateral forums with regards to our IP policies.

Compulsory Licensing

The report cites the compulsory license granted (read here for our post on the IPAB order) for the drug Nexavar and uses that as the basis for stating that Indian IP is effectively imposing an interpretation of the local working requirement that requires the manufacture of a patented product within the country to avoid a compulsory license. This, the AFTI believes is in violation of India’s obligations under TRIPS arts. 27.1 and 31. Art.27.1 of the TRIPS agreement states that patent rights ought to be enjoyable whether products are imported or locally produced and 31 is the provision regarding compulsory licenses. What is important to note here is in Bayer v. Union of India and Others it was not merely the question of a local manufacturing requirement itself that decided the issue, but a combination of factors including insufficient supply of the drug, excessive pricing and scale of commercial working. This implies that the decision did not actually create a local working requirement which was not satisfied by import. In any case, the TRIPS agreement is viewed by many as a minimum standards agreement, and countries are free to choose the modalities of the implementation of a compulsory licensing regime in their respective countries. In fact, a combined reading of arts. 7, 8 and the preamble of the agreement would suggest that the governments were at liberty to tailor their respective policies to meet the demands of vital domestic sectors and policy considerations. The large cancer patient base (in fact, just about 200 of the 15,000 odd patients in India had access to Nexavar) in India that would be left without a drug if the license was not granted would be one such domestic policy consideration (For a detailed treatment of this, read here). Numerous developing countries have also adopted similar policies and in fact even the United States has threatened to compulsorily license the drug ciprofloxacin when its production had not met certain required standards to combat the anthrax scare (read here and here). Another very important factor in the entire mix that the report seems to have ignored is the Doha Declaration on TRIPS and Public Health that gives the freedom to countries to implement their own standards.

Section 3(d)

With regards to S. 3(d) of the Patents Act (read some of our posts here, here and here), the report argues that it imposes a condition for patentability that is not consistent with TRIPS obligations. There is a strong argument that S. 3(d) is in effect a threshold test for obviousness, rather than a fourth criterion for patentability. This means that a new substance would have to surmount this threshold in order for it to be even considered an invention upon which the conditions of patentability are to be tested (read here). This coupled with the fact that the TRIPS agreement, still allows flexibility for countries to legislate with regards to their IP policies makes 3(d) perfectly TRIPS compliant.  What is further troubling is that the report makes references to trends that these two aspects generate in the industry which it claims will extend to other sectors in the future if unchecked now with little or no substantiation at all (interestingly, read here and here).

Copyright “worries”

References are also made in the report to the “rampant” transfer of pirated music and files and the recording of “cam copies” of movies in India, soon after they are released. This problem is rampant across various jurisdictions (even in the United States) and is not specific or even largely substantially linked to India as a country. The large debate surrounding the DU photocopying case also finds mention in the report. What it misses however, is that the dispute with regards photocopying of academic material is sub judice and it is not an inability to form law that has caused the dispute. Despite having said that, fair use defences have been (aptly) raised (we have blogged quite regularly about this issue, see here and here) and various jurisdictions have interpreted the amounts that can be copied from a book for academic purposes differently (see here and here). This is strictly a jurisdiction specific exercise (see art.13 of the TRIPS) that India is entitled to make and in the interim, Indian policy as such cannot be blamed for losses (if any) that accrue due to legitimate academic use of this work.

To sum up, there are a lot of aspects that the report has not considered or has chosen to view with a rather myopic perspective and this is very troubling, particularly for the consequences that this report could bring about. Here’s hoping that these views are also considered.

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