Thailand's Compulsory Licensing of Pharmaceuticals Under TRIPS Stirs Controversy

by Robert S. Dailey



The new Thai government has been experimenting with the compulsory licensing provisions of Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). To date, Thailand has unilaterally declared compulsory licenses for three patented drugs: (i) Stocrin, a first-line anti-retroviral used in treating HIV/AIDS; (ii) Kaletra, a second-line anti-retroviral also used to treat HIV/AIDS; and (iii) Plavix, a platelet anti-aggregant that reduces the risk of clot formation.

The TRIPS Agreement and the Doha Declaration provide flexibility for countries to grant compulsory licenses to patents under certain conditions. The flexibility seeks to make essential medicines available to the world’s poor who cannot afford treatments for diseases like AIDS, malaria, tuberculosis, etc. Nevertheless, this flexibility also seeks to preserve innovators’ financial incentives by preventing outright confiscation of their patent rights.

Article 31(b) of TRIPS generally permits issuance of compulsory patent licenses only after the country has “made efforts to obtain authorization from the right holder on reasonable commercial terms . . . .” Nevertheless, the country may waive the negotiation requirement in cases of national emergency, extreme urgency, and public non-commercial use. Thailand appears to have waived the negotiation requirement under the argument that the licenses will be used for public non-commercial use.

But under Article 31 of TRIPS, these licenses are not free. Their scope of use must be limited to the purpose for which the license was authorized. See Art. 31(c). The licenses are non-exclusive and non-assignable. See Art. 31(d)-(e). They must terminate when the circumstances that led to their issuance have ceased to exist and are unlikely to recur. See Art. 31(g). And most importantly, the country must pay adequate remuneration for each use of the license, taking into account the economic value of the authorization. See Art. 31(h).

MSF (Doctors without Borders), Oxfam, and various religious groups have praised the Thai government for its bold conduct. But it is hardly clear that Thailand’s conduct is indeed laudable, especially in light of its TRIPS obligations.

First, ICTSD reports that Thailand has offered patent holders a mere 0.5% royalty. This is far below the typical 6-15% royalty that one would expect under the application of the Georgia Pacific factors. This is especially the case for Plavix, whose sales are likely directed to upper-class Thai consumers who want access to a wide array of Western lifestyle drugs. But when the royalty offer is extraordinarily low, the country’s conduct looks more like confiscation than a TRIPS-permitted compulsory license.

Second, Thailand’s actions appear to push the limits of what qualifies as a “public non-commercial use.” Some have argued that the public non-commercial use provision is narrow, and includes only necessary government functions such as defense and aerospace. Critics of this approach have pointed out that negotiators rejected such a narrow reading of Article 31 in the Brussels round. Nevertheless, Thailand reads the provision in a manner that encompasses even the most arbitrary measures. This broad reading probably asks too much of Article 31. After all, Article 31(b) appears to emphasize the need for negotiations between the issuing country and the patent holder. Also, Articles 31(c) and 31(g) seem to contemplate the existence of a “circumstance” that would serve as a predicate to issuing the compulsory license. Thailand has refused to cite any circumstances to justify its actions in these three cases.

Few would argue with the need to make essential medicines available to the suffering poor around the world. This has been a major consideration for all TRIPS signatories. Article 31 of TRIPS and the Doha Declaration provide a workable and agreed-upon means for achieving these important ends without unduly expropriating the rights of patent holders. Therefore, it is unclear why Thailand has chosen a course of action that likely places it in violation of these international agreements.

The new Thai military government has promised to grant compulsory licenses for eleven more patented drugs, so it’s unlikely that we’ve heard the last of this issue.


Source: OrangeBookBlog.com

Robert S. Dailey is a third-year law student at the University of North Carolina at Chapel Hill. He holds a Ph.D. in physical chemistry. Rob was a member of the 2006 class of summer associates at McDonnell Boehnen Hulbert & Berghoff.



RELATED READING:
- 19-Feb-07 Reuters article
- 17-Feb-07 Thai News Agency article, with link to Thai gov't white paper
- 16-Feb-07 Intellectual Property Watch article
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