It is pertinent to note that the USTR was given powers under Special 301 when the Uruguay Round of negotiations under the General Agreement on Tariffs and Trade (the predecessor organisation of the WTO) was considering the inclusion of IPRs as an additional area within the purview of the multilateral trading system. India, along with several developing countries like Brazil, had opposed the inclusion of IPRs in the trade rules.
In the first year of Special 301s implementation (1989), the USTR did not identify any priority foreign country. Instead, it created the watch list and priority watch list of countries. However, in the three crucial years before the end of the Uruguay Round of the WTO negotiations in 1993, India was identified as a priority foreign country. This was clearly done with a view to seal the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which India, along with several other developing countries, was reluctant to accept. In opposing the TRIPS agreement, developing countries had argued that the agreement would strengthen the patent monopolies, which would result in increase in prices of life-saving products like pharmaceuticals.
WTO came with the expectation that unilateral actions by the dominant economic powers will be pass. However, the expectations were belied: USTR refused to discontinue the Special 301 investigations even when these investigations run counter to the letter and spirit of the WTO. In fact, the dispute settlement undertaking (DSU) of the WTO restrains the members of the organisation from making a determination of a
violation of any of the covered agreements, except through recourse to dispute settlement in accordance with the rules and procedures of the DSU.
The threat posed by Special 301 was commented on by the WTO dispute settlement panel that adjudicated the dispute brought by the European Union, questioning the legality of the US using such unilateral measures. The panel observed, WTO members faced with a threat of unilateral action, especially when it emanates from an economically powerful member, may be forced to give in to the demands imposed by the member exerting the threat, even before DSU procedures have been invoked. According to the panel, Merely carrying a big stick is, in many cases, as effective a means to having ones way as actually using the stick. The threat alone of conduct prohibited by the WTO would enable the member concerned to exert undue leverage on other members. It would disrupt the very stability and equilibrium which multilateral dispute resolution was meant to foster and consequently establish, namely equal protection of both large and small, powerful and less powerful members through the consistent application of a set of rules and procedures.
Let us now turn to the on-going Special 301 investigations and reasons for targeting India. Ever since these investigations began a quarter century back, Indias Patents Act, which was a key factor behind the development of the generic pharmaceutical industry in the country, has been seriously questioned by the lobbies in the US. Over the past few decades, Indias domestic pharma industry has supplied affordable medicines not only to the domestic market, but exported life-saving drugs to a number of countries, including the US.
Indias generic pharma industry faced an uncertain future following the introduction of the TRIPS Agreement in 1995, as the Indian Patents Act needed several amendments. However, the Indian government was able to provide some succour to this industry by including two crucial features in the amended Act, both of which are now subject of the Special 301 investigations. The first of these is the denial of patents on minor innovations, which include, among others, mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, provided in section 3(d) of the amended Act. The second is the grant of compulsory licence on any patent that fails to meet reasonable requirements of the public or is not available to the public at a reasonably affordable price or is not worked in India.
In recent years, both these features of Indias Patents Act have been in focus. The first of these arose in 2012, when the Comptroller General of Patents granted a compulsory licence to an Indian firm, Natco to produce an anti-cancer drug (Nexavar) in India, the patent for which was owned by the German firm, Bayer. Natco was granted the licence as the patent-owner was charging an abnormally high price (R2.8 lakh for a months dose). Under the terms of the licence, Natco was directed to provide a months supply of Nexavar for R8,800 and to pay Bayer a royalty of 7% on the sales turnover of the drug.
Last year, the Supreme Court passed a landmark judgement striking down the application of Novartis AG for the grant of patent on an anti-cancer medicine, Glivec. The key message the judges conveyed through their ruling is that minor modifications of proprietary products does not qualify for the grant of patent rights. By doing so, they endorsed the provisions of section 3(d) of the Indian Patents Act. The ruling allowed generic firms to market their version of the medicine at a price 15 times lower than that charged by Novartis and was hailed as an important step in putting the interests of consumers ahead of the profits of the big pharmaceutical firms.
US business lobbies and other interest groups, in their submissions, have challenged the decisions taken by the SC and the Indian patent office during the Special 301 hearings last month, arguing that the measures taken are in violation of the provisions of the TRIPS Agreement. The reality is, however, completely to the contrary. In fact, the decisions taken by the SC and the patent office are consistent with the provisions of the TRIPS Agreement as well as the Doha Declaration on TRIPS Agreement and Public Health. In the Doha Declaration, adopted in 2001, ministers of WTO member countries agreed that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. More importantly, they affirmed that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members right to protect public health and, in particular, to promote access to medicines for all.
The explicit support that the USTR has consistently provided to the lobbies to target Indias Patents Act contradicts the practices followed in the US to prevent abuse of patent rights. Knowledge Ecology International, a public interest organisation based in the US, has in its submission to the Special 301 investigation, provided evidence that the US has issued more compulsory licences than any other country in the world. Issuance of most of these licences have been authorised by the Federal Trade Commission, which has often forced the patent-holders to license their patents on a royalty-free basis such as in the cases of Bosch and Google, which were not even for any public health reason.
The author is director general, Research and Information System for Developing Countries (RIS), New Delhi