EU Supports Flexible Compulsory Licenses for Healthcare, But None for Entertainment or Information Technologies; Is This a TRIPS Double Standard?

http://www.ip-watch.org/weblog/index.php?p=907


EU Threatens Taiwan With WTO Case Over Law On Compulsory Licences


31 January 2008


By David Cronin


Intellectual Property WatchBRUSSELS -


The European Union has demanded that Taiwan change its intellectual property law within two months following a probe into how the East Asian island overruled patents on recordable CDs (CD-Rs).


Philips, the Dutch electronics giant which holds patents for the core technologies used in CD-Rs, filed a complaint with the EU in early 2007 over the activities of a Taiwan-based company Gigastorage.


Since the 1990s, Philips had given licences to use technology for which it held patent rights to several companies in Taiwan. These firms went on to supply about 80 percent of the global market in CD-Rs by the early part of this decade.


While Gigastorage was one of the firms with which Philips had a licence agreement, this accord was scrapped in 2001. Gigastorage subsequently asked the Taiwanese national authorities to enable it to continue making the discs by issuing a compulsory licence. Its request was granted in 2004.


After investigating Philips’ complaint, the EU’s executive, the European Commission, warned on 30 January that it could start dispute proceedings against Taiwan in the World Trade Organization unless its patent law is swiftly amended.


http://ec.europa.eu/trade/issues/respectrules/tbr/pr300108_en.htm



The Commission has objected to a provision in the Taiwanese law allowing national authorities to grant a compulsory licence if a rights-holder has refused a voluntary one.


...According to the EU Commission the provision of the [Taiwanese] Patent Act dealing with compulsory licences was inconsistent with Article 28 of the TRIPs Agreement, because it allows the grant of the such licences where there is no more than a refusal to deal on the part of the patent owner. Further, the Commission services concluded that the interpretation of various procedural requirements relating to the grant of compulsory licences in the decisions of the authorities of Chinese Taipei were inconsistent with Article 31 of the TRIPs Agreement. The Commission services also found that Chinese Taipei had failed to respect the obligation to ensure that the compulsory licences were not used to produce for export, and that in fact they had been predominantly used to produce for export."


[THE EUROPEAN COMMISSION'S OBJECTION TO COMPULSORY LICENSES FOR WHAT ESSENTIALLY AMOUNTS TO A 'FAILURE TO WORK'/ REFUSAL TO DEAL' IS QUITE HUMOROUS GIVEN THAT EUROPE HAS TAKEN THIS POSITION WITH RESPECT TO U.S. PHARMACEUTICAL AND SOFTWARE PRODUCTS SOLD IN EUROPE, AND BRAZIL & THAILAND HAVE DONE THE SAME THING AS TAIWAN WITH RESPECT TO U.S. HIV/AIDS DRUG PATENTS].


...“The EU fully supports the use of compulsory licensing in specific circumstances, in particular to facilitate access to medicines,” said Peter Mandelson, the European commissioner for trade.


“However, we cannot accept the abuse of this system. I hope that the Taiwanese authorities will move quickly to bring their law and practice into line with WTO rules. I cannot rule out seeking WTO dispute settlement if they do not.”


The Commission said that it is challenging Taiwan’s patent law as part of its overall efforts to remove barriers to trade encountered by European firms doing business abroad. In a 2006 strategy paper titled Global Europe, the Commission argued that the protection of European patent rights outside the EU’s borders is essential to guarantee the competitiveness of European industry.


A report prepared by EU officials who examined the Philips’ complaint concludes that “circumstantial evidence” has been found to suggest the Taiwanese authorities are willing to use compulsory licensing as an industrial policy instrument, rather than as a limited exception to patent rights.


[THIS PRACTICE IS OTHERWISE REFERRED TO AS 'IP OPPORTUNISM']


It suggests that a compulsory licence was issued in this case to pressurise Philips into lowering the royalty rates it charged to all CD-R manufacturers in Taiwan. None of the other CD-R manufacturers in Taiwan opposed the advantages given to Gigastorage, it noted.


According to the Commission, the case sets a “terribly dangerous precedent of an industrial policy built on violation of the TRIPS agreement.”


A Taiwanese diplomat familiar with the case said that producers on the island had encountered a “dramatic change” because the international price of CD-Rs has fallen considerably in recent years. Although the Taiwanese authorities had asked Philips to reassess the royalty rates it was charging to reflect this situation, the Dutch firm declined to do so, the diplomat said.


[THIS SOUNDS AWFULLY SIMILAR TO THE BRAZILIAN GOVERNMENT'S ARGUMENT THAT BRAZIL HAS ENCOUNTERED A 'DRAMATIC CHANGE' BECAUSE THE INTERNATIONAL PRICE OF ITS NATIONAL 'UNIVERSAL ACCESS TO HEALTHCARE' PROGRAM HAVE INCREASED CONSIDERABLY IN RECENT YEARS.]


“It might seem odd that the Commission wants us to change the law within two months,” the diplomat continued. “Maybe it just wants to send out a signal not just to Taiwan but to others that it will vigorously safeguard Europe’s intellectual property concerns.”


Despite the Commission’s warning, a preliminary settlement was reached between Philips and Gigastorage in October 2007. The settlement followed a ruling in Philips’ favour, delivered by the US International Trade Commission earlier in the year. The Commission said its aim is a change to Taiwanese law.


http://www.usitc.gov/secretary/fed_reg_notices/337/337-TA-474.Notice.1170697224.pdf


The amount of compensation being paid as a result of the settlement has not been disclosed.


[THE PRIOR SITUATION DESCRIBING THE EUROPEAN UNION'S GROWING DISPUTE WITH TAIWAN OVER THE LATTER'S ISSUANCE OF A COMPULSORY LICENSE AGAINST EUROPEAN COMPANY (PHILIPS) INFORMATION / ENTERTAINMENT TECHNOLOGIES FOR THE PURPOSE OF SECURING A BETTER PRICE MUST BE READ IN LIGHT OF TAIWAN'S PREVIOUS ISSUANCE IN 2005 OF A COMPULSORY LICENSE FOR EUROPEAN COMPANY (ROCHE) MEDICINES:


'Taiwan’s Adventures With Tamiflu’


“In November 2005, Taiwan's government issued a license to allow local companies to manufacture generic versions of Tamiflu -- the only drug in the world considered effective in combatting the effects of bird flu. To date, Taiwan has recorded no cases of bird flu, but according to health authorities, it lies squarely in the path of migrating birds from China...At the time, Taiwan's health authorities stated very clearly that the purpose of the compulsory license was only to stockpile enough Tamiflu to protect against an outbreak of bird flu. But...Taiwan[] [subsequently]...amend[ed] [its] patent laws to allow the export of its generics to other nations.¨


...‘The new provision will relax regulations on drug exportation, so that upon the request of poorer countries, local drug companies may manufacture and export drugs to those countries without the consent of the patent holders...As such, these medicines would be available at a much cheaper price than their authorized versions...


This amendment seems custom-designed to allow companies which are making generic Tamiflu for Taiwan's DOH under compulsory license conditions to make extra money from their participation in the project. And it seems to contradict the DOH's earlier statement made when it was enacting compulsory licensing conditions in November 2005, when it said that any Taiwan-made generic Tamiflu was strictly for local use only and would not be exported to any other country’... [W]hatever gains Taiwan generates with developing nations, it will lose with the developed world...” (Andrew Leonard - Salon 2006)


¨The following compulsory licensing conditions were agreed upon between Taiwan’s DOH and the patent-holder, during negotiations:

§“Taiwan must use Tamiflu supplied by Roche before resorting to using any supply produced under the compulsory license”;

§“The compulsory license could be cancelled if TDOH obtained a voluntary license from Roche during the compulsory period”;

§“The products produced under the compulsory license would be limited to domestic prevention”;

§“Taiwan’s Dept. of Health would provide adequate remuneration to Roche” (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP)