ACTA and Access to Medicines

Sean Flynn
Program on Information Justice and Intellectual Property
American University Washington College of Law
April 28, 2010

I was asked to provide some comments on the impact of ACTA on access to medicines for the April 28 meeting of the Trans Atlantic Consumer Dialogue. This is an extended version of my remarks.

My ultimate concern is that his agreement extends incredibly far beyond the core subject of true counterfeiting, which is the intentional deception of consumers through spurious marks that are substantially identical to registered trademarks. The agreement as it is written now applies a wide range of counterfeiting remedies -- from border seizures to destruction of goods and criminal sanctions -- to goods that are suspected merely of infringing trademarks by being similar, albeit not intentionally identical. It also continues to have language extending the agreement's scope to all intellectual property rights, including patents, and proposes requiring in-transit border measures that would make the "Dutch Seizure" problem of confiscating medicines in transit between developing countries much more common.    

GENERAL COMMENTS

The draft is a fairly clear product of close consultation with rights holders with little concern for or representation of the interests of competitors. Increased enforcement procedures are always specific and mandatory; mention of intellectual property limitations and exceptions is always proposed as permissive. There is a large deal of language mandating that procedural requirements for initiating enforcement procedures should not “deter” their use by rights holders. But there is very little inclusion of measures, including basic norms like notice and rights of reply and punishment of frivolous and bad faith use of procedures, that seek to avoid the overuse of enforcement procedures deter and create barriers to entry by legitimate competitors. The text is a foreseeable product of a consultation process that has been focused the concerns of a small number of large content owning industries.

CHAPTER 1

SECTION A

ARTICLE 1.1: NATURE AND SCOPE

ACTA states that nothing in the agreement “shall derogate from any international obligation” with respect to any parties obligations to another. Do the parties consider human rights treaties and the Doha Declaration to be such agreements? This provision should explicitly reference the Doha Declaration and human rights obligations to promote access to medicines through use of all TRIPS flexibilities. But such references would be a bit meaningless if the agreement continues to include TRIPS plus provisions on patent enforcement measures without adequate exceptions and limitations.

SECTION B: GENERAL DEFINITIONS

There is no definition of counterfeiting in the definitions section. That is a bit remarkable in an agreement with the word “counterfeiting” in its title. Instead, it defines “intellectual property” as all rights in TRIPS. And thereby expands the scope of the agreement to trademarks, patents, copyrights, data protection, integrated circuit protections, trade secrets, and other laws.   

There needs to be definitions of trademark “counterfeit” versus “infringement.” The agreement often uses the words interchangeably. But they are not the same in most trademark laws. In the US, something can be infringing by being merely confusingly similar, regardless of criminal intent. A counterfeit is a narrower class of spurious marks that are intentionally identical to a protected mark with the purpose to deceive consumers. This agreement should be limited to counterfeits, as the title implies.

INJUNCTIONS

In Article 2, there is bracketed text stating that there must be either [judicial] or [administrative] procedures for enforcing any [intellectual property right]. Art. 2.x para 1 states that each country shall authorizes judicial injunctions for the enforcement of all [intellectual property rights]. In brackets, the language is made subject to statutory limitations. Read together, and depending on which way the bracketed text comes out in the final negotiation, these provisions could make it impossible for a country to adopt an administrative liability rule system in which the only remedy for certain infringements (e.g. where access to essential goods and services is at issue) would be an administrative just compensation determination scaled to promote access and affordability. Such a system is one potential best practice for taking advantage of TRIPS Art. 31 in developing countries.

Art. 2X para 2 (bracketed, EU proposal) proposes injunctions against third parties “whose services are used . . . to infringe an intellectual property right.” It is a US proposal to expand this provision to all intellectual property rights, which would include patents. As written, this would appear to allow injunctions against active pharmaceutical ingredient providers whose products are used by generic companies who are found to “infringe” a trademark or patent law, even in unintentionally. This is a pretty draconian remedy for a wide range of infringements and would likely alter US law dramatically.  

Art. 2.2. DAMAGES

Para 1(b) states that judicial authorities shall consider a range of factors for damage determinations, including “the value of the infringed good or service, measured by . . . the suggested retail price.” The use of suggested retail price for a lost profit calculation applied to patents may thwart the use of a liability rule system based on reasonable royalties to promote access to medicines. Imagine the very real case of an AIDS drug sold at a suggested retail price of $12,000 /year and a generic price of $85. The reasonable royalty from the infringer in a liability rule system committed to promoting access to medicines may be 4-10% of sales (to take UNDP suggestion). Under a retail price model, it would be a thousand fold royalty per sale. That would defeat the purpose of the Doha declaration in permitting the use of TRIPS flexibilities to promote access to medicine.

ARTICLE 2.3: OTHER REMEDIES

Para 1 contains bracketed text requiring that in any case of “[infringing an intellectual property right],” the good shall be destroyed. This an extremely broad proposal that would require destruction of unintentionally “similar” marks and technical violations of patents. US law only requires the destruction of counterfeit goods, not goods that merely infringe a trademark by being “confusingly similar.”

Para 2 proposes also requiring the destruction of materials and implements used to infringe, and proposes expanding this to all infringements of intellectual property rights. As proposed, this could mean that courts would order the destruction of active pharmaceutical ingredient plants if their products are used in generic drugs found to violate a patent or a trademark, even if unintentional. This is extreme on its face, and would surely require changes in US law.  

SECTION 2: BORDER MEASURES

ART 2X SCOPE OF BORDER MEASURES

The border chapter does not exclude patents as some of the negotiators claimed in press releases. Paras 1, 2 and 3 all have bracketed language requiring or permitting the border measures chapter to be applied to all “intellectual property rights.” That is an incredibly broad proposal which would require extending border seizures for alleged violations of date protection rules, trade secrets, patents and everything else covered by by TRIPS.

The chapter also explicitly – at the US suggestion – proposes to apply to”in-transit” shipments. This raises major concerns about how the agreement will promote, legitimate and expand the problem of in-transit seizures of goods exemplified by the so-called “Dutch seizure” cases.

The Dutch seizures occurred when Netherlands and some other European countries began suspending the release of drugs that were lawfully produced in India and would be lawfully consumed in the receiving countries but would violate patent laws if released in the EU. Applying the EU law to the products in EU airports and ports on their way to other countries, the drugs were seized and denied to the ultimate consumers.  

Art. 2.x, paragraph 2 and fn 22 proposes applying border measures to “confusingly similar” and “infringing” marks, not just suspected counterfeits.

It looks like it is Australia, Canada and Singapore are pushing for this expansion beyond criminal counterfeiting.

Art. 2.6 requires border suspensions upon applications by rights holders. The text is highly bracketed. Read with fn 22 – which says you should apply the local law of the border country in which an application is brought – the Article can be read to require Dutch seizure problems in all ACTA members. One version of the article would require seizures of a good in-transit between other countries if the good is suspected of infringing the transit country’s law (which includes all intellectual property law in one bracketed suggestion), even if the good does not infringe the producing or ultimate destination country. This is the basic fact pattern of the Dutch seizure debacle.

As discussed above, Art. 2.11 echoes the remedies chapter in proposing in bracketed text to authorize the destruction of goods found to “infringe” a trademark, even if not a counterfeit. Bracketed text also proposes to require destruction of a product that infringes any IP right, an incredibly broad proposal that one assumes will be narrowed.

The section is likely to be narrowed to the US standard, which is that infringing goods can be suspended but only counterfeits (intentionally and fraudulently labeled with identical marks) destroyed. But the globalization of this standard, which extends significantly beyond the problem of true counterfeits, should worry access to medicines advocates. The agreement would (and likely will) authorize suspension of goods upon a “prima facie” finding by a border guard that are grounds to “suspect” the product of “infringing” a trademark by being “confusingly similar.” This is a detailed fact-specific determination that is prone to mistaken conclusions and strategic misuse by rights holders to thwart competition. In the case of access to medicines, wrongful detentions can cost lives dependent on access to affordable drugs. All the border measures provisions in the agreement should be limited to true criminal counterfeiting, not mere infringements.

The problem with trademark infringements is particularly complex and worrying for generic medicines. Generic labels are required to be similar to the brands. They must use the same words identifying active ingredients, the same warnings and indications and other information. In addition, they often desire to have similar packaging and presentation as the brand drugs to help patients switch between brand and generic with comfort. Requiring border officials to identify which medicine labels are too “similar” to allow into the market is bound to lead to many more supply interruptions than if the measures were limited to criminally counterfeit products that intentionally use identical marks.

Another concern is that there is no process required for a reply where the TM owner makes a complaint to customs alleging suspected infringement. At minimum, public interest concerns, especially for medicines, demand more protections to thwart wrongful suspensions of legitimate competing products.

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