TRIPping Again: India’s D’oh(a) Moment at the 2011 TRIPS Council

Image result for dohIn my previous post, I examined the eBay v. MercExchange injunction regime against the TRIPS standards for a compulsory licence. I continue that exercise here, analysing a statement made by the Indian delegation at the 2011 annual review of the Paragraph 6 system in the TRIPS Council. The Paragraph 6 system refers to the General Council’s 2003 resolution on paragraph 6 of the Doha Declaration (not to be confused with the Doha Dream), which essentially consisted of a waiver of the Article 31.f requirement for CLs issued for the export of patented pharmaceuticals to countries that do not have the capacity to produce them locally, subject to certain conditions being fulfilled. The Paragraph 6 solution has been derided as placing onerous obligations on all the parties involved, and therefore choking the flow of much-needed drugs to countries in desperate need.

The Indian delegation pointed to the eBay regime’s effect on the sale of infringing drugs and medical devices, particularly in the export market. Specifically, the statement pointed out to Edwards Lifesciences v. CoreValve, a judgement that had recently issued from a Delaware district court.

The delegation’s understanding of Edwards appears to be suspect, with the statement reading:

Secondly we note that in the case of Edwards Lifesciences vs CoreValve, a compulsory licence was granted for manufacturing a medical device for manufacture in the United States and meant exclusively for the export market.

This is simply not backed by any reading of the judgement in question. It’s true that an eBay injunction denial did occur in Edwards, but this happened for a variety of reasons, including the plaintiff’s inability to show irreparable harm in the absence of injunctive relief. More importantly, the judgement refuses to enjoin the defendant from exporting the product, but only because infringement under 35 USC 271(f) [which prohibits the export of infringing goods] was never argued in trial!

Edwards requests that the court issue a far wider injunction covering “all modes of infringement,” apparently including infringement under § 271(f), even though the jury only decided the issue of infringement under § 271(a). Indeed, the court specifically ruled that Edwards could not raise § 271(f) infringement at trial in this case due to lack of notice. (See D.I. 280.) Moreover, infringement of the `552 Patent, including § 271(f) infringement, as a result of MedTronic’s activities in Mexico is currently the subject of a separate infringement suit between the same parties in this court, Edwards Lifesciences AG v. Medtronic, Inc., 09-873-GMS. The court will not issue an injunction covering potential modes of infringement that it has not yet adjudicated, and that have not yet had an opportunity for a full hearing.

Absent a finding of infringement with respect to the export of the patented product, it is clear that this case would not even qualify as an eBay-style export CL. The apparently pithy US response (as recorded in the Council’s minutes) to the Indian statement is telling, though it somewhat misses the point:

As regards the two judicial decisions referred to by the delegation of India, the representative of the United States clarified that those decisions had specifically addressed procedural aspects of the provision on injunctive relief.  The findings in those cases were therefore limited and the analysis which the delegation of India had made of them was not necessarily within the scope of the matters before the courts.

The very motivation behind the statement is puzzling, since it seeks to assess US state practice under the eBay regime as a less onerous alternative to the Paragraph 6 system. I’m not sure how US state practice would affect the operation of a treaty obligation on India – the only logical way seems to be an argument rooted in Article 31.3.b of the Vienna Convention on the Law of Treaties, which requires subsequent state practice to be taken into account when interpreting treaty obligations. However (this is only my understanding, readers are free to correct me), Article 31.3.b only allows subsequent practice to mediate the scope of the obligation vis-à-vis the concerned state. Simply put, even assuming that Article 31.3.b could be invoked to justify an export-oriented eBay CL, such an argument would only work against the US, since no other party to TRIPS (eg. the European Communities) can be forced to agree with the American interpretation of the TRIPS obligation. In summary, the limited benefit (if any) of this argument would be in precluding America-initiated DSB proceedings, while leaving a hypothetical eBay-style export CL vulnerable to retaliatory trade restrictions from every other WTO member.

Bottom-line on the eBay guilt TRIP

All this leaves us with the question: does the eBay regime deviate from the obligations apparent on the face of TRIPS? There has clearly been no derogation with respect to Article 31.f of the Agreement. Would the eBay regime derogate from Article 31.c (scope and duration limitation)? Article 31.c requires that CLs only be issued for clearly identified purposes, and that their duration extend no further than necessary to accomplish this purpose. A traditional CL (such as one issued under Section 84 or 91 of the Indian Patents Act) has a clear purpose, one that is evidenced by the grounds pleaded in a CL application. An eBay-style injunction denial, however, requires no such ground – in fact, the mere fact that the harm caused by the infringer is entirely quantifiable and compensable through damages would suffice to result in a denial. In my opinion, this could be one way to argue that the eBay regime is inconsistent with TRIPS and has the effect of lowering the Agreement’s standards, at least vis-à-vis the US.

However, I believe that even this would be a bit of a stretch, since injunctions (or the lack thereof) would have to be assessed relative to the standard laid down in Article 44 of the agreement, rather than Article 31. Article 31 is a general provision covering measures that members may take, which must yield to Article 44, which specifically covers remedies for infringement. Article 44.2, in pertinent part, states that “where these remedies [injunctions] are inconsistent with a Member’s law, declaratory judgments and adequate compensation shall be available.”

It is clear that automatic injunctive relief for infringement is inconsistent with American law after eBay, and Article 44.2 appears to give it the flexibility to substitute injunctions with a royalty regime, despite the fact that doing so would effectively result in a de facto CL system. This is an argument that Prof. Basheer has made in a forthcoming paper on the “compensatory commons”, which I had the privilege of looking at a few months ago.

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