0001 1 2 3 4 . CASE WESTERN RESERVE UNIVERSITY 5 SCHOOL OF LAW 6 7 CENTER FOR LAW, TECHNOLOGY & THE ARTS 8 THE DISTINGUISHED INTELLECTUAL PROPERTY LECTURE 9 "THE TRIPS AGREEMENT 10 TEN YEARS ON" 11 12 13 14 WEDNESDAY, FEBRUARY 2, 2005 15 16 PRESENTED BY: ADRIAN OTTEN 17 18 19 20 21 22 23 24 25 0002 1 MR. NARD: Good afternoon 2 everybody. My name is Craig Nard. I'm a professor 3 of law here at the Law School and Director of the 4 Center for Law, Technology & the Arts. And it's my 5 pleasure to welcome you to our distinguished 6 intellectual property lecture sponsored by the 7 Center for Law, Technology & the Arts. 8 This endowed lecture enables us to bring 9 distinguished visitors such as the one we have 10 today to the Law School to discuss some of the most 11 important issues in intellectual property, and 12 indeed that's what will occur today. 13 The distinguished intellectual property 14 lecturer this year is Mr. Adrain Otten. Mr. Otten 15 is the Director of the Intellectual Property 16 Division of the Secretariat of the World Trade 17 Organization, otherwise known as the WTO, the 18 responsibilities of which include intellectual 19 property, competition policy and government 20 procurement. 21 Mr. Otten is a graduate of Cambridge 22 University in England. After posts with the 23 Commonwealth Secretariat in London, working on 24 international trade issues, and with the Swaziland 25 Government in Brussels, assisting them in their 0003 1 negotiations with the EEC in the context of the 2 first Lomé Convention, Mr. Otten joined the GATT 3 Secretariat in 1975. He held a variety of posts 4 within the GATT Secretariat. Between 1986 and 1993 5 he was Secretary of the Uruguay Round Negotiating 6 Group on trade-related Aspects of Intellectual 7 Property Rights, otherwise known as TRIPS. And 8 since 1993 he has been the Director of the 9 Intellectual Property Division of the WTO 10 Secretariat. 11 It's a great pleasure for me and for the 12 Law School to have Mr. Otten with us. Please help 13 me welcome him. 14 (Applause.) 15 MR. OTTEN: Well, thank you very 16 much. And I'd like to start by thanking the School 17 of Law and the Center for Law, Technology & the 18 Arts and Professor Craig Nard in particular for 19 inviting me to speak today. And it is indeed an 20 honor and one of which I'm most appreciative. 21 It is now -- and thank you so much also for 22 giving up your time to come listen to me. 23 It's now just over ten years since the WTO, 24 including its agreement on trade-related Aspects of 25 Intellectual Property Rights, TRIPS Agreement, came 0004 1 into force. And I thought that this would be a 2 good opportunity to share with you some personal 3 reflections on the experience with this agreement 4 over that time. 5 I say personal because I would like to 6 make it clear that I am speaking in that capacity 7 today, and nothing that I say should be attributed 8 to the WTO, to its members or to the Secretariat. 9 Now, TRIPS Agreement, of course, covers a 10 great many things and it would not be possible to 11 discuss all aspects of the experience over the last 12 ten years now. I would therefore like to focus on 13 the North-South dimension of the agreement. And 14 this is the dimension that was perhaps most 15 controversial in the negotiation of the agreement 16 and remains so today.17 This also means that I will tend to focus 18 perhaps disproportionately on the patent area of 19 the agreement where most of the controversy seems 20 to arise. 21 As is well-known most developing countries 22 were initially very reluctant to see negotiations 23 take place on intellectual property matters in the 24 GATT Uruguay Round trade negotiations; certainly on 25 any matters which went beyond border enforcement, 0005 1 which was seen as a trade issue, a more mainland 2 stream trade issue. 3 Following the end of the Round in a 4 presentation I made in Brazil in August 1994, I 5 indicated why I thought the developing countries, 6 after many years of resisting proposals for higher 7 standards of intellectual property protection, 8 accepted the TRIPS Agreement. And these reasons 9 can be summarized as follows: 10 First, the results of the Uruguay Round 11 were a package which contained trade-offs between 12 different areas. And developing countries hoped 13 and expected to get important advantages elsewhere 14 in return for accepting the obligations in the 15 TRIPS Agreement. 16 Second, developing countries felt that they 17 had secured in the TRIPS Agreement important 18 elements of balance and flexibility which made the 19 agreement, while not ideal for their point of view, 20 acceptable. 21 Third, there was a preference to seeking a 22 multilateral resolution of issues and a 23 multilateral rule of law in relations between 24 countries in this area. And many felt that 25 realistically the alternative available to them was 0006 1 not maintenance of national discretion but a need 2 to negotiate bilaterally with major trading 3 parlors. 4 Finally, much that was in the TRIPS 5 Agreement was going with the grain of economic 6 policy reform towards more open and market-based 7 economic regimes in many developing and former 8 centrally planned economies; albeit going rather 9 further and faster than some might have decided 10 otherwise. There was a belief that such reforms 11 could prevent economic development through 12 stimulating domestic research and creativity in 13 facilitating the transfer of technology and foreign 14 direct investment. 15 So I thought today that it might be 16 interesting to revisit each of these four 17 considerations which I just mentioned and examine 18 what has happened in the intervening ten years to 19 see whether the hopes, fears, expectations of 20 developing countries have been realized and in what 21 measure. 22 So taking the first of these points, mainly 23 the trade-offs within the Uruguay Round 24 negotiations, evidently individual developing 25 countries had differing priorities among the 15 0007 1 areas of the Uruguay Round. However, it is 2 probably fair to say that there were three main 3 objectives of developing countries in other areas 4 that most impacted on the TRIPS negotiations. One 5 was preservation and strengthening of the 6 multilateral trading system. Much of the 7 background to the Uruguay Round had been a 8 brilliant concern with the system risks becoming 9 increasingly disregarded in practice and that 10 unilaterialism and bilaterialism would increasingly 11 predominate. While developing countries were never 12 convinced that, for example, a full-scale 13 investment agreement was necessary for the 14 successful conclusion of the negotiations, they did 15 come to accept that this was the case for TRIPS, 16 another of the so-called three new issues that were 17 on the agenda at that time. The other one being 18 services. And they further came to accept that 19 without a successful conclusion of the Uruguay 20 Rounds the multilateral trading system would be in 21 danger. 22 Now a second objection was the 23 liberalization of trade in agricultural. And the 24 link with TRIPS was particularly evident for Latin 25 American countries and other canes group 0008 1 agricultural developing countries. 2 Third, for quite a number of other 3 developing countries, especially in South and East 4 Asia, the link with textile and clothing was 5 critical. We have been reminded of this in recent 6 months by some of these countries as the date of 7 the 1st of January 2005, the final elimination of 8 the system on restrictions on textile trade 9 approached. And this is the same date, not by 10 coincidence, as the final date for compliance with 11 TRIPS Agreement by developing countries. 12 Now obviously this is not the place for a 13 full-scale analysis of experience with the WTO as a 14 whole, but a few brief observations I think should 15 be made for the sake of completeness. 16 First, I believe that the results of the 17 Uruguay Round as embodied in the WTO have been 18 successful in preserving, and to a significant 19 extent, reinforcing the multilateral trading 20 system. And particularly, the greatly strengthened 21 dispute settlement system has increased the 22 enforceability of WTO rights, especially in the 23 smaller and developing countries. We can see this 24 in the use that developing countries are actually 25 making of the system now. 0009 1 For example, over the period 2002 to 2004 2 developing countries made up a majority of 3 complainants initiating cases, some 55 percent. 4 And they were about 40 percent of the respondents. 5 The trading system has, I believe, come 6 (inaudible) major challenges it has faced over the 7 last decade, such as the Asian financial crisis of 8 the late 1990s and the emergence of China as a 9 major trader. The commitment of members, including 10 the major trading entities of the system seems to 11 remain high as their efforts to launch and propel 12 the present Uruguay Round of negotiations 13 illustrate. 14 Of course not all is rosy. For example, 15 there is increasing concern about the implications 16 for multilateralism of the ever-extending network 17 of regional and bilateral preferential trade 18 agreements. 19 Now as regards agriculture, the most 20 significant result of the Uruguay Round was the 21 substitution of a situation where agriculture 22 largely escaped the disciplines of multilateral 23 rules by a comprehensive set of multilateral 24 commitments covering export subsidies and domestic 25 support as well as tariff findings. 0010 1 This system, besides leading to significant 2 liberalization in its own right -- although less 3 than some had hoped for -- is an essential basis 4 for the more ambitious liberalization of 5 agriculture presently being negotiated in the 6 Uruguay Round. 7 Moreover, the importance of the Uruguay 8 Round commitments in putting a ceiling on support 9 measures, especially by rich countries where none 10 existed before, is presently being tested; so far 11 broadly it seems to the satisfaction of the 12 complainants in the dispute settlement cases 13 brought by Brazil against the United States on 14 cotton and by Australia, Brazil and Thailand 15 against the EC export subsidies on sugar. And both 16 these cases are presently under appeal before the 17 appellate body. 18 As regards textiles and clothing, the 19 system of trade restrictions under the textiles 20 agreement was successful as the multi-fiber 21 agreement has been eliminated on schedule on the 22 1st of January, 2005, despite apprehensions in some 23 quarters that this might proof to be difficult 24 given the end-loading of the liberalization agreed 25 in the Uruguay Round. 0011 1 So now I'll turn to the second of the 2 points that I mentioned at the outset relating to 3 the balance and flexibility in the TRIPS 4 Agreement. 5 Now, as reflected in Articles 7 and 8 of 6 the TRIPS Agreement, and in its preamble, the TRIPS 7 Agreement seeks to find rules that would enable 8 countries to establish a proper balance between the 9 conflicting goals and interests affected by the 10 protection of intellectual property, notably 11 between the long-term social interest in promoting 12 creativity inventiveness and the short-term social 13 interest in maximizing access to existing creations 14 and inventions and also between the interest of 15 producers and users of intellectual property. 16 Now of course finding this balance is 17 inherently controversial and attempting to do so at 18 the international level, especially where you have 19 both developed and developing countries involved is 20 even more difficult. And at the international 21 level the issue gets somewhat transmuted into a 22 question of finding a proper balance between on the 23 one hand the need in an interdependent world for 24 countries to accept some commitments to protect the 25 intellectual property of other countries, and on 0012 1 the other hand their concerns to preserve policy's 2 face and to optimize the intellectual property 3 system from a domestic perspective. 4 Now, in the Uruguay Round negotiations in 5 finding an acceptable balance, both developed and 6 developing countries had to compromise. And the 7 TRIPS Agreement allows greater flexibility than 8 some developed countries would have liked; for 9 example in regards to compulsory licensing, 10 exhaustion, transition periods, patentability of 11 plants and animals and quite a number of other 12 areas. And on the other hand, developing countries 13 went further in committing themselves to protect 14 intellectual property that many of them thought 15 ideal; for example in relation to patentability, 16 patent protection of computer software and so on. 17 However they did secure greater flexibility than 18 what was being achieved at that time and 19 subsequently has been achieved in some bilateral 20 negotiations. 21 Now the question I'd like to discussion is 22 how the balance struck in the TRIPS Agreement has 23 faired over the last ten years. Of course, there 24 has continued to be great controlicy about the 25 proper balance to intellectual property systems. 0013 1 And no doubt this is to some extent inevitable and 2 even desirable, given the need to makes difficult 3 trade-offs between sometimes conflicting objectives 4 as well as the need to adjust to changes in 5 technology. And there are a number of reasons 6 however why the debate on the balance of 7 intellectual property protection has perhaps been 8 particularly difficult in recent years. 9 One has been the growth of what is often 10 referred to, no doubt oversimplistically, as the 11 anti-globalization movements including increasing 12 the influential civil society groups who tend to 13 see intellectual property law as unduly reflecting 14 the interests of big business. 15 Anti-globalization sentiments have tended 16 to focus on the trade and on the WTO, and then 17 within the WTO and the TRIPS Agreement. Linked to 18 some extent with this I would mention increasing 19 debates, perhaps especially in the United States, 20 as to whether the strengthening of domestic 21 intellectual property protection has overshot the 22 optimal point of balance. 23 Third is the digitization of information on 24 the Internet, which has given rise to a roster of 25 difficulties in intellectual property issues in 0014 1 this ten years. 2 And finally one can point to the growth of 3 the HIV AIDS crisis, especially in Africa, which 4 has focused a lot of attention on how intellectual 5 property rules affect access to medicines. 6 Much of this debate in recent years about 7 the optimal point of balance in IP systems has not 8 concerned the TRIPS Agreement or taken place 9 outside the context of the WTO. Examples include 10 the debates about the intellectual property 11 implications of the Internet, which at the 12 international level have given rise to the WIPO 13 Internet treaties and the WIPO Internet domain name 14 processes, about the extension of the term of 15 protection for copyright and the open source 16 movement, and about the patentability of computer 17 software and business methods, and more generally 18 about the quality of patents granted. 19 At the international level increasing 20 numbers of international organizations in addition 21 to the WTO and WIPO have taken up issues relating 22 to intellectual property; the United Nations, 23 Office of the High Commission of the Human Rights, 24 the World Health Organization, Convention on 25 Biological Diversity, the World Bank, the UNDP, the 0015 1 FAO contract, to name only a few. 2 Now turning to the WTO and the TRIPS 3 Agreement itself, what we have seen over the last 4 ten years is that the balance struck in the 5 agreement has been criticized from both sides. On 6 the one hand it has not being accepted by all the 7 developed countries as necessarily providing for 8 adequate and effective protection of their 9 intellectual property. And there has been 10 continuing efforts in some quarters to get trading 11 partners to provide enhanced protection in 12 important respects. This is notably of course the 13 case of the United States where the 1994 Uruguay 14 Round Agreements Act made this explicit. 15 On the other hand, we have seen proposals 16 presented by developing countries aimed at 17 improving the balance in the agreement from their 18 perspective. While in general developed countries 19 have sought in the WTO to preserve rather than 20 enhance the TRIPS Agreement from their point of 21 view, each of the three major intellectual property 22 initiatives that have been taken up in the WTO, 23 since it came into being, has reflected in some 24 measure concerns on the part of developing 25 countries to rebalance the agreement in their 0016 1 favor. 2 And I'd like now to say a few words about 3 each of these, namely about TRIPS and public 4 health, about the nexus of issues related to 5 biotechnology, biodiversity and traditional 6 knowledge, and finally to touch on the issue of 7 geographical indications. 8 So first on the issue of TRIPS Agreements 9 and public health. Now the heart of this issue is 10 a debate about whether the flexibility in the TRIPS 11 Agreement was sufficient to insure that it is 12 supportive of public health. Especially in 13 permitting affordable access to existing medicines 14 in poor countries while also promoting research and 15 development into new ones. And there were 16 different views being expressed about the nature 17 and scope of the flexibility in the TRIPS Agreement 18 and those also concerned about the extent to which 19 governments would feel free to use this flexibility 20 without the fear of coming under pressure from 21 trade partners or industry. 22 Now in order to respond to these concerns 23 WTO members adopted a Doha in November 2001, a 24 declaration on the TRIPS Agreement and public 25 health. This declaration emphasizes that the TRIPS 0017 1 Agreement does not and should not prevent members 2 from taking measures to protect public health, 3 reaffirms the right of them to use to the full 4 provisions of the TRIPS Agreement which provide 5 flexibility for this purpose. It also makes it 6 clear that the agreement should be interpreted and 7 implemented in a manner supportive of WTO members' 8 right to protect public health. 9 The declaration also contains a number of 10 important clarifications of some of the specific 11 flexibilities in the TRIPS Agreement while 12 maintaining members' commitments in the agreement. 13 For example, it makes it clear that each member is 14 free to determine the grounds upon which a 15 compulsory license is granted. It also makes it 16 clear that each member has the right to determine 17 what constitutes a national emergency or other 18 circumstances of extreme urgency, which are the 19 instances where an abbreviated procedure for the 20 grant of a compulsory license is permitted. 21 And thirdly, the public health crises, 22 including those relating to HIV, AIDS, 23 tuberculosis, malaria and other epidemics can 24 represent such circumstances. 25 Now in regard to the exhaustion of 0018 1 intellectual property rights, and therefore a 2 member's right to permit parallel imports, the 3 declaration makes it clear that the effect of the 4 relevant provisions in the TRIPS Agreement on 5 exhaustion is to leave each member free to 6 establish its own regime without challenge, subject 7 to the general TRIPS provisions prohibiting 8 discrimination on the basis of the nationality of 9 persons. 10 It should also be noted that while 11 emphasizing the scope in the TRIPS Agreement to 12 take measures to promote access to medicines, the 13 declaration recognizes the importance of 14 intellectual property protection for the 15 development of new medicines and reaffirms 16 commitments of WTO members in the TRIPS Agreement. 17 In regards to the least developed 18 countries, I think there is about 49 of these on 19 the UN list of least developed countries, the 20 declaration gave them an extension of their 21 transition period from 2006 through to 2016 in 22 regards to protection and enforcement of patents 23 and rights and undisclosed information with respect 24 to pharmaceutical products. 25 Now there has been one area where WTO 0019 1 members have recognized the TRIPS Agreement as 2 adopted did not contain sufficient credibility, and 3 this is from a public health perspective. And this 4 concerns the ability of members with no or limited 5 manufacturing capacity to make effective use of 6 compulsory licensing. It was not in dispute that 7 members can issue compulsory licenses for 8 importation as well as for domestic production, 9 however the concern was whether sources of supply 10 from generic producers in other countries to meet 11 such demand would be available, particularly in the 12 light of the provision in Article 39F of the 13 agreement, which states that any compulsory license 14 granted to generic producers in these countries 15 should be predominately for the supply of the 16 domestic market of the member granting the 17 compulsory license and therefore not for 18 exportation. 19 So Paragraph 6 of the Doha Declaration 20 recognizes the problem and called for an 21 expeditious solution. And this was achieved 22 through the adoption by WTO members in August 2003 23 of a decision waiving the restriction in Article 24 31F where this is necessary to enable production 25 and export of pharmaceuticals under a compulsory 0020 1 license to meet the needs of these countries with 2 inadequate domestic manufacturing capacity. The 3 waiver was subject to a number of conditions, for 4 example to insure transparency and to safeguard 5 against the risk of diversion of the products to 6 unintended markets. 7 The final consensus was reached on this 8 decision with the aid of the chairman's statement 9 setting out a number of shared understandings, for 10 example, the system would be used for public health 11 purposes and not for commercial policy or 12 industrial policy purposes. 13 Now, the WTO members agreed that this 14 waiver would be a temporary solution and would be 15 replaced by a permanent solution in the form of an 16 amendment. And they are presently working on this. 17 Now a second area where many developing 18 countries sought to improve the balance in the 19 TRIPS Agreement from their perspective is that of 20 the three related issues of the protection of 21 biotechnological inventions and plant varieties, 22 the relationship of biodiversity and protection of 23 traditional knowledge and folklore. 24 Article 27.3B of the TRIPS Agreement, which 25 allows certain exceptions to the normal rules of 0021 1 patentability for plants and animal inventions, was 2 itself a compromise and as such a review of its 3 provisions was foreseen after four years. And this 4 has been underway since 1999. And it has given 5 rise to a range of views. And I guess we're still 6 some way from having consensus on agreement. 7 For example, the African group has 8 advocated that all plant and animal inventions 9 should remain nonpatentable and that greater 10 precision be given to the terms used in the 11 provision; for example, what is microorganism and 12 what is an effective pseudogenerous system of 13 protection of plant variety. 14 Some delegations have expressed a 15 preference for eliminating the exception allowing 16 the provision and so that the normal rules for 17 patentability would apply. 18 And the third view is that the present 19 language of Article 27.3B remains acceptable and 20 that there is no need for further clarification; 21 clarification would only limit national flexibility 22 in the view of some of these countries. 23 Now, the aspect of these three related 24 issues that is at present being most actively 25 pursued by some developing countries in the WTO is 0022 1 the relationship between the TRIPS Agreement and 2 the convention on biological diversity. A group of 3 such countries is proposing the TRIPS Agreement 4 should be amended to oblige each member to require 5 applicants of the patents related to biological 6 materials or traditional knowledge to disclose in 7 their patent application as a condition of 8 patentability the source and origin of the 9 biological source and traditional knowledge and the 10 evidence of having obtained prior informed consent 11 for accessing it and of having entered into fair 12 and export benefit sharing arrangements as foreseen 13 in the CBD. 14 We have different views about the merits of 15 this proposal. It has wide support from other 16 developing countries. The Western European 17 countries seem ready to go some way down the road 18 to being proposed and to accept some disclosure 19 requirement legally binding on patent applicants in 20 respect to the source of genetic material and 21 traditional knowledge. And some other developed 22 countries say they are reviewing their position on 23 the matter. And there are some, including the 24 United States, who see no need for such a 25 requirement, and in their view the objectives of 0023 1 the CBD can be realized notably through contractual 2 means without burdening, as they see it, and 3 complicating the patent system in the way proposed. 4 And in addition to their being different 5 views on the merits of the proposal there are also 6 different views as to whether this issue was made 7 part of the package of issues under negotiations in 8 the present Doha Round of negotiations. 9 Protection of traditional knowledge and 10 folklore is also on the WTO agenda with respect to 11 developing countries. And while many attach 12 importance and the African group has made 13 proposals, I would say that the main focus of work 14 on the subject is at present in the WIPO 15 intergovernmental committee on intellectual 16 property genetic sources and traditional knowledge 17 and folklore. 18 Now, the third -- I just touched on the 19 third major area of debate about the evolution or 20 possible evolution of the TRIPS Agreement and that 21 relates to geographically indications, especially 22 proposals for extending the higher level of 23 protection which presently only has to be given to 24 GIs for wines and spirits to other product areas. 25 Some of the proponents, especially those from 0024 1 developing countries, say that the present 2 difference of treatment creates an imbalance 3 between (inaudible) countries that produce and 4 export wines and spirits and other countries and 5 that this ought to be rectified. However, I should 6 emphasize that the GI's protection issue is not at 7 all a South one, but one where there are strong 8 views on both sides to be found amongst both 9 developed and developing countries. 10 Moreover this is another issue where the 11 members are divided on whether the matter was or 12 was not made part of the present round of trade 13 negotiations by the Doha Declaration which launched 14 those negotiations. 15 Now issues of the balance in intellectual 16 properties -- in the intellectual property system 17 have also taken it prominently in the dispute 18 settlement activity under the TRIPS Agreement. 19 Probably the most important cases for interpreting 20 the TRIPS Agreement have focused largely or to a 21 significant extent on the scope of clauses in the 22 TRIPS Agreement which allow members to provide for 23 exceptions to substantive rights. 24 For example, the panel on U.S. Copyright 25 Act, which considered the extent to which the 0025 1 so-called homestyle and business exemption from 2 paying royalties for the playing of broadcast music 3 in certain retail establishments was consistent 4 with the TRIPS Agreement, undertook an in-depth 5 analysis of the so-called three-step test in 6 Article 13 for the conditions that should be 7 applicable to limited exceptions in the copyright 8 area according to the TRIPS Agreement. 9 Panel on Canada Patent Protection 10 Pharmaceutical Products had to consider in detail 11 Article 30 of the TRIPS Agreement in its finding 12 that the regular treaty review exception, which is 13 similar to the Bolar clause in the Hatch-Waxman Act 14 in the United States was covered but not being a 15 stockpiled exception under the Canadian law. 16 And the more recent panel, which of course 17 has yet to be circulated has been called upon to 18 interpret Articles 17 and 24 which provides for 19 exceptions to rights in the area of trademarks and 20 geographic implications respectfully. 21 Now, I'd like to turn to the third of the 22 four points that I mentioned at the outset, namely 23 the TRIPS Agreement and the multilateral rule of 24 law. Now, I mentioned that one of the underlying 25 purposes of the TRIPS Agreement was to establish a 0026 1 functioning multilateral rule of law in 2 intellectual property protection between 3 countries. Although long-standing important 4 multilateral conventions already existed at the 5 time of the Uruguay Round negotiations, they no 6 longer represented a functioning international 7 consensus about the extent to which countries 8 should protect the intellectual property of the 9 nationals and companies of other countries, 10 especially more so in the area of industrial 11 property than in the area of copyright where was 12 there an act of such consensus. 13 Now the performance of the TRIPS Agreement 14 in establishing a multilateral rule of law is 15 clearly closely related to the issue which I've 16 just discussed, namely the extent to which the 17 balance struck in the TRIPS Agreement has continued 18 to command international acceptance over time. 19 I'd now like to focus on another aspect, 20 and this is the question of settlement of disputes 21 between countries in the area of intellectual 22 property. One of the goals of the TRIPS Agreement 23 as made clear in its preamble was that this should 24 be done through multilateral procedures. And this 25 is also a wider goal of the WTO system as a whole. 0027 1 The key elements of the final Uruguay Round 2 package was a deal whereby on the one hand a much 3 strengthened dispute settlement system covering not 4 only goods but also services and intellectual 5 property and providing for the quasi automatic 6 adoption of panel and appellate reports would be 7 established. And on the other hand members would 8 commit themselves to use it to resolve disputes, 9 and in particular not to make determinations of 10 violation or on retaliation except in accordance 11 with the multilateral procedures and findings. 12 For many members one of the main concerns 13 that it was hoped that this would meet related to 14 the operation of Section 301 of the United States 15 Trade Act, at least in the area of intellectual 16 property. 17 Since the WTO came into force, the 18 question of whether the Section 301 mechanism is 19 consistent with the United State's obligations 20 under the WTO has been the subject of the findings 21 of the WTO panel. This followed two complaints by 22 the EC that the mechanism required the USTR -- the 23 United States Trade Representative -- to make 24 determinations and impose retaliatory measures 25 inconsistently with Article 23 of the dispute 0028 1 settlement understanding. 2 Now the panel did not uphold the EC 3 complaint, finding that relevant sections of the 4 U.S. Trade Act gave the USTR the necessary 5 discretion not to act inconsistently with the DSU. 6 And the panel further gave weight to U.S. 7 undertakings that the USTR would use this 8 discretion to this effect that were articulated in 9 the statements of administrative action that 10 accompanied the U.S. legislation implementing the 11 results of the Uruguay Round, especially as this 12 statement had been approved by Congress. 13 Now, in regard to intellectual property, 14 there will be no complaints under the WTO dispute 15 settlement system about the way in which Section 16 301 has been operated. No formal complaints 17 anyway. This does not mean that there are no 18 aspects of Section 301 that other countries do not 19 like, especially the so-called Special 301 relating 20 to intellectual property, such as the investigation 21 and monitoring of their practices by the United 22 States and the compiling of watch and priority 23 watch lists. 24 Some of these aspects are not of course 25 unique to the United States. And there have been 0029 1 open complaints alleging that they are inconsistent 2 with WTO rules. 3 Now, another issue about which some 4 developing countries and civil society groups have 5 expressed concern in regard to unilaterialism is 6 the linkage of eligibility for GSP, generalized 7 system of preferences, benefits to requirements 8 relating to the protection of intellectual 9 property. This issue has not in itself been a 10 subject of any ruling under the WTO dispute 11 settlement system. However, in one recent case, 12 the WTO appellate body has pronounced on some 13 aspects of the question of the extent to which 14 donor countries can discriminate between 15 beneficiary countries in the grant of GSP 16 treatment. 17 The appellate body found that by virtue of 18 the term nondiscriminatory in the enabling clause, 19 which provides the legal basis for GSP treatment in 20 the WTO, preference-giving countries are required 21 to insure that identical treatment is available to 22 all similarly situated GSP beneficiaries; that is, 23 GSP beneficiaries that have the development, 24 financial and trade needs to which the preferential 25 treatment is intended to respond. So this is the 0030 1 first WTO ruling which states the donor WTO members 2 do not have unconstrained freedom in the conditions 3 that they attach to their GSP schemes that leads to 4 differential treatment of beneficiaries. And some 5 legal observers have speculated on the possible 6 implications of the ruling for conditions other 7 than those which the case specifically concerned -- 8 the case specifically concerned EC treatment which 9 was related to efforts to combat drug production 10 and trafficking. 11 Now, there has also been debate, at least 12 in some civil society circles, about how bilateral 13 or regional agreements which entails so-called 14 TRIPS-plus commitments relate to the TRIPS 15 Agreement. Some civil society groups tend to 16 characterize such agreements, at least in 17 negotiations between developed and developing 18 countries, as not entirely voluntarily and argue 19 that they are unaccounted to the spirit of the 20 TRIPS Agreement and undermine exploring and 21 establishing multilateral rule of law. 22 Well, while the TRIPS Agreement makes it 23 clear that members are not obliged to implement 24 more extensive protection of intellectual property, 25 it explicitly states that it does not prevent them 0031 1 from doing so, provided they do not contravene the 2 provisions of the TRIPS Agreement. 3 As I mentioned early, there have been a 4 number of multilateral agreements such as the WIPO 5 Internet treaties as well as bilateral and regional 6 agreements which have done this. 7 I'd now like to turn to experience with 8 the settlement of intellectual property disputes 9 under the WTO dispute settlement mechanism. This 10 was bound to be a challenge. It represented, as I 11 think I mentioned early, the first time that public 12 international law in this area -- in the area of 13 intellectual property, would be subject to a 14 functioning multilateral dispute settlement 15 mechanism. And since the TRIPS Agreement 16 incorporates by reference much of the pre-existing 17 multilateral IP law, long-standing provisions of 18 treaties might have to be interpreted often for the 19 first time. 20 Further it would be important that the WTO 21 trade base system would show itself capable of the 22 adaptations necessary to handle disputes in the 23 intellectual property area. 24 Now I believe that it's fair to say that so 25 far the operation of the WTO dispute settlement 0032 1 system in the TRIPS area has gone smoothly. 25 2 complaints relating to 20 separate matters have 3 been lodged in the TRIPS area. This represents 4 about seven and a half percent of the total of 325 5 complaints under the system so far. 6 Panel reports and where there have been 7 appealed appellate body reports have been adopted 8 in seven cases and two additional cases, those 9 relating to the GI system for the protection of -- 10 I'm sorry, the EC system for the protection of 11 GIs. In these two cases panel reports have been 12 submitted to the parties to the dispute but not yet 13 circulated. Nine cases have been settled 14 bilaterally between the parties to the dispute and 15 the terms of the settlements are made public and 16 can be important in influencing the way others 17 implement the agreement. And as regards the rest, 18 consultations are still pending, or in some cases 19 the matter -- the cases become inactive. 20 Well, it's onto the subject matter of 21 cases. I mentioned earlier quite a number of them 22 have referred -- have related to the scope of 23 allowable exceptions and therefore the balance in 24 the TRIPS Agreement. A number of others have 25 concerned transitional matters. And a number have 0033 1 focused on enforcement, but none of the enforcement 2 cases have been the subject of rulings, rather 3 they've been settled bilaterally. 4 Some of the panel and appellate body 5 reports have had to interrupt important traditions 6 of the WIPO conventions which are incorporated into 7 the TRIPS Agreement. For example, 11 (inaudible) 8 of the Burn Convention in the U.S. Copyright Act. 9 Another example is Article 6 (inaudible) of the 10 Paris Convention in the case relating to United 11 States Section Hope, what is often referred to as 12 Havana Club. And that case also more generally 13 illuminated interpretation of Articles 15 and 16 of 14 the TRIPS Agreement on trademarks. 15 The panels and the appellate body have, I 16 believe, taken care to interpret provisions of the 17 TRIPS Agreement and of the WIPO conventions in ways 18 which reconcile them and avoid conflicts. And 19 panels have invariably sought factual information 20 from the WIPO about the drafting history and 21 subsequent practice in regard to WIPO provisions 22 that they are called upon to interpret. 23 Now in most cases the recommendations and 24 adopted reports and the results of bilateral 25 settlements appear to have been implemented by the 0034 1 members concerned. In two cases, U.S. Copyright 2 Act and the U.S. Havana Club implementation is 3 still pending. In the first of these, the United 4 States agreed on compensation to the EC pending 5 modification of its legislation. And this is 6 something which is urged by the dispute settlement 7 understanding. 8 And this is quite an interesting case 9 because it broke new ground in the operation of the 10 dispute settlement system in three respects. One 11 was that the two parties agreed to resort to 12 arbitration under the DSU to determine the amount 13 of nullification, impairment of benefits and this 14 is the only use of the voluntary arbitration option 15 for this purpose and any other purpose so far. 16 The second was that the arbitrators assess 17 the amount in terms of lost revenue to rightholders 18 rather than in terms of lost trade, which has been 19 the traditional grasp of the WTO approach to 20 measure nullification or impairments. 21 And third, in the light of the arbitrator's 22 report the United States and the EC agreed on a 23 temporary arrangement by which the United States 24 would make a lump sum payment of $3.3 million by 25 way of compensation for the three-year period 2002 0035 1 to 2004. And this is the first time, to our 2 knowledge, that compensation has been provided in 3 this form, which is incidentally something which 4 has been advocated by many developing countries in 5 the ongoing negotiations on the revision of the 6 DSU. 7 Now, one of the concerns of developing 8 countries about making the GATT or WTO dispute 9 settlement system applicable to the TRIPS Agreement 10 was that they might be the subject of a large 11 number of complaints and through so-called 12 cross-retaliation might put their market access 13 rights in jeopardy if found in breach of their 14 TRIPS commitments. 15 Now, what's been the experience on this 16 aspect? Most TRIPS complaints have been between 17 developed countries with only 7 of the 25 directed 18 at developing country respondents. While this 19 concentration on complaints involving developed 20 countries was not surprising prior to the 2000 21 deadline for implementation by developing 22 countries, we have not seen so far any large scale 23 recourse to dispute settlements against developing 24 countries after this date. In fact, since that 25 time there have been only two complaints filed 0036 1 concerning developing country implementation, both 2 in 2000 and both settled bilaterally. 3 Retaliation, or put more properly, 4 suspension of the concessions or our obligations 5 can be authorized under the dispute settlement 6 system as a last resort if a member found to be 7 nullifying or impairing benefits fails to implement 8 recommendations and fails to provide acceptable 9 compensation. 10 To date there has been no case of a member 11 obtaining authority to retaliate in response to the 12 failure of another member to comply with its TRIPS 13 obligations. So-called cross-retaliation is 14 possible if retaliation in the same sector of the 15 WTO is not practical or practicable or effective. 16 We've had one instance only so far of 17 authorized cross-retaliation. This involved TRIPS 18 but in the sense of enabling a developing country 19 to use withdrawal of its TRIPS obligations as a 20 means of putting pressure on the developed country 21 member to comply with its obligations under the 22 GATT relating to trading goods. And this was the 23 authority giving to Ecuador not to apply certain 24 obligations on intellectual property matters 25 relating to the protection of performance producers 0037 1 of sonograms -- or photograms, broadcasting 2 organizations, industrial designers and 3 geographical indications in response to a failure 4 of the European communities to bring its banana 5 regime into compliance with its GATT obligations. 6 Now the authorization given to Ecuador, 7 which I don't believe they actually carried out, 8 nonetheless did contribute towards a subsequent 9 resolution of the matter between Ecuador and the 10 EC. 11 Now, I was going to talk about TRIPS and 12 the promotion of economic development, about 13 transfer of technology and the like, but I don't 14 know how I'm doing for time. 15 MR. NARD: A couple minutes, then 16 we'll open it up to questions. 17 MR. OTTEN: Okay. Well, I won't go 18 into detail, just to say that there is evidence of 19 an increasing use of the patent system by some 20 developing countries. If you look at the number of 21 applications, for example, or grants by the USPTO 22 for some developing countries, they've gone up very 23 markedly, but sometimes from a rather low base. 24 For many developing countries the domestic 25 use of the patent system still remained modest. 0038 1 And virtually all of them, as incidentally is the 2 case with industrial countries as well, a large 3 majority of patents go to non-residents. So for 4 many developing countries it's the impact on the 5 transfer of technology and on foreign direct 6 investment which may be of primary interest. 7 Now, transfer of technology of course is 8 an important objective of the TRIPS Agreement, 9 which sees it really as being realized in two 10 ways: One is that the protection and cross with 11 intellectual property in itself should promote the 12 transfer of technology, and secondly, that when it 13 comes to the least developed countries, a need for 14 more proactive measures is recognized through the 15 creation of incentives by developed countries to 16 promote the transfer of technology to least 17 developed countries. 18 There is a debate going on on this issue. 19 And unfortunately I don't have time to go into it 20 but I do believe that to some extent the two sides 21 are still talking past each other. There are 22 conceptual reasons that can be advanced by both 23 sides about whether higher IP protection will be 24 helpful or not. There is however, a growing body 25 of empirical econometric research which, as I 0039 1 understand it, is coming out with evidence that on 2 balance there is more weight on the side -- that 3 the enhancement of protection of intellectual 4 property will promote the transfer of technology 5 (inaudible) on the other side. But I don't think 6 the researchers would complain that the evidence is 7 conclusive and, you know, there are different 8 pictures coming out, especially when it relates to 9 interpreting the different stages of development 10 and about the balance of the effects as between 11 licensing and on foreign direct investment. So 12 this seems an area where further work is required. 13 As regards the provisions in the TRIPS 14 Agreement relating to the provision of incentives 15 for the transfer of technology to least developed 16 countries, they -- there has been put in place in 17 the WTO a mechanism designed to insure the 18 systematic monitoring of what the developed 19 countries are doing to realize this provision. 20 This was a decision that was adopted in 2003, just 21 the beginning of 2003. And this involves annual 22 reports which are then subject to review in the 23 council for TRIPS. 24 Now, let me just conclude with a few final 25 remarks. So my aim in this presentation has been 0040 1 to look at the factors that caused developing 2 countries to accept the TRIPS Agreement and review 3 what has happened over the last ten years in 4 relation to each. 5 It would neither be appropriate for me to 6 attempt to draw a specific conclusion nor is this 7 the type of issue that is susceptible to a neat 8 conclusion, but I'd just like to summarize a few 9 points. 10 First, in regard to trade-offs and other 11 areas of the Uruguay Round that were of key concern 12 to many developing countries, it is fair I believe 13 to say that the WTO has, as a rule, achieved 14 positive results in relation to the preservation 15 and strengthening of the trading system and in the 16 areas of agriculture and textiles and clothing. 17 Of course this doesn't mean that there are 18 no longer any problems in these areas and that 19 further efforts are not necessary, and indeed such 20 efforts are at the heart of the present Doha Round 21 trade negotiations. 22 Turning to the issue of securing acceptable 23 balance and degree of flexibility in the IP system 24 from the North-South perspective, one can say while 25 we're having pressures for both sides in the wider 0041 1 international discussion in the WTO, the many 2 initiatives have been by developing countries 3 seeking to rebalance the system in their favor. In 4 one area, TRIPS and public health, this has lead to 5 important clarifications regarding the flexibility 6 in the TRIPS Agreement and the way it should be 7 used and interpreted. An agreement on increasing 8 the flexibility in one significant respect. 9 The area of biotechnology, biodiversity, 10 traditional knowledge, many of the developing 11 countries are to use the patent system to secure 12 more effective enforcement of their rights under 13 the CBD and also to compliment the existing IP 14 system with some form of pseudogenerous protection 15 of traditional knowledge. 16 And as regards TRIPS jurisprudence under 17 the WTO dispute settlement system, the most 18 important cases I've also stated on the issue of 19 balance, in particular the scope of allowable 20 exceptions. 21 A further consideration for many developing 22 countries was a multilateral resolution of issues 23 and disputes between countries in the IP area. In 24 this regard to the WTO dispute settlement system 25 has shown itself capable of resolving disputes 0042 1 between members and in doing so shedding important 2 light on the TRIPS provisions. There is no 3 evidence that the fears of some developing 4 countries about large scale resort to the system 5 against them or to cross-retaliation are being 6 realized. 7 Indeed as I mentioned the only example of 8 cross-retaliation was the grant of authority for 9 its use in the TRIPS area by a developing county 10 with a view to enforcing its market access rights 11 under the WTO. 12 Progress has I think been made in 13 restraining unilateral determinations and sanctions 14 in regard to intellectual property matters on the 15 national trade instruments. Some observers however 16 continue to express concern about GSP 17 conditionality and bilateral or regional agreements 18 that contain TRIPS-plus provision. And as I think 19 I just mentioned in regard to the effects on 20 economic development in developing countries, there 21 is evidence of increasing use of the patent system 22 by some developing countries and has some positive 23 effect on the intellectual property protection on 24 the transfer of technology, but further work is 25 seen necessary to draw firm conclusions, especially 0043 1 as to the effects on developing countries at 2 different stages of development. 3 As for the LDCs, the system has being 4 established to insure effective monitoring of the 5 obligations on developed countries in Article 66.2 6 to provide incentives for the transfer of 7 technology, and we haven't, in fact, received the 8 first reports under this system. So thank you very 9 much. 10 (Applause.) 11 MR. NARD: We have time for a few 12 questions for Mr. Otten. 13 AUDIENCE MEMBER: Has the WTO expanded 14 its role in GMO limitations (inaudible) and items 15 especially related to that? 16 MR. OTTEN: Well, there is an 17 important dispute settlement case which is 18 presently underway on a slightly different issue. 19 It's not a TRIPS issue. This is an issue related 20 to a (inaudible), which is an agreement which calls 21 for countries to have regulations in this area 22 which are nondiscriminatory as between domestic 23 goods and imported goods and also which are not 24 unnecessarily restrictive of trade. But it doesn't 25 restrict trade more than is necessary to meet the 0044 1 legitimate public health or safety objective. And 2 the case that I'm referring to is the case on EC 3 restrictions on imports of Hormone B as it's 4 called. 5 On GMOs, I don't think we have an actual 6 case which is under consideration at the moment. 7 But this is a -- as I say, this is not an issue 8 which is -- in that aspect this is not an issue 9 which has cropped up in the intellectual property 10 area, but in the area of trading goods. 11 As I mentioned earlier there is some 12 ongoing discussion about the patentability of 13 biotechnological inventions which is somewhat 14 separate. 15 MR. NARD: Right here. 16 AUDIENCE MEMBER: I was wondering if you 17 could comment on in a post-9-11 world, how has the 18 TRIPS Agreement faired with regard to national 19 security technology, such as encryption, nuclear 20 refining processes and such? How has that effected 21 it? 22 MR. OTTEN: I can't say much about 23 that because the issue really hasn't surfaced in 24 any significant way. There is a national security 25 exception in the TRIPS Agreement which allows 0045 1 countries to delegate from their normal -- the 2 normal rules where national security -- were it's 3 necessary for national security purposes, but we 4 haven't had any specific discussion of that issue 5 in the WTO. 6 MR. NARD: Anyone else? Yes. 7 AUDIENCE MEMBER: I'm wondering how large 8 the WTO is. Do you know how many employees it 9 has? 10 MR. OTTEN: Well, the Secretariat 11 has about 600 staff, but probably the sort of the 12 policy officials if you would want to call them 13 that, probably about between 150 and 200. We have 14 a large number of translators, interpreters and 15 support staff and various staff. 16 Member governments have quite large numbers 17 of people who work on WTO issues including the 18 people who are posted full time in Geneva for that 19 purpose. So, you know, some of the bigger 20 delegations might have up to 20 staff posted in 21 Geneva, and then it runs down to, you know, the 22 smaller delegations will only have one or two who 23 are covering not only WTO matters but many other 24 matters. 25 MR. OTTEN: Time for one more. 0046 1 AUDIENCE MEMBER: (Unable to interpret.) 2 MR. OTTEN: Well, I hope I've 3 understood the question properly but you would have 4 noticed from what I've said that I've really said 5 very little about copyright and also trademark 6 issues and I guess that is because they don't seem 7 to raise, at least in the WTO, the kind of 8 North-South issues which, in particular, patent and 9 technology related areas do seem to raise, and I 10 think that's because many developing countries 11 themselves believe that providing proper protection 12 for offers and also performers is something which 13 is very important for the promotion of preservation 14 of their national cultures. And indeed quite a lot 15 of these countries have important concerns about 16 the way that it works, maybe being innocently 17 copied or performed in other countries. And some 18 of them also have quite important music and film 19 industries. I don't know if that's helps in 20 responding to your point, or forgive me if it 21 doesn't. 22 MR. NARD: Thank you very much. 23 Thanks to all of you for coming. 24 (Lecture concluded at 5:34 p.m.) 25 - - - 0047 1 State of Ohio, ) ) SS: 2 County of Cuyahoga. ) 3 4 C E R T I F I C A T E 5 This certifies that the foregoing is a true and 6 correct transcript of the proceedings had at 7 Case Western Reserve University, School of Law 8 On Wednesday, February 2, 2005, commencing at 9 4:30 p.m. 10 11 In the Matter of: 12 Center for Law, Technology & the Arts 13 The Distinguished Intellectual Property Lecture 14 "The TRIPS Agreement Ten Years ON" 15 16 17 ____________________ 18 Court Reporter 19 FINCUN-MANCINI COURT REPORTERS 1801 East Ninth Street 20 Suite 1720 Cleveland, Ohio 44114 21 (216) 696-2272 (216) 696-2275 FAX 22 23 24 25