Integrating Intellectual Property Rights and Development Policy


November 2002

Commission on Intellectual Property Rights Report on Integrating Intellectual Property Rights & Development Policy - Comments from GlaxoSmithKline


GlaxoSmithKline (GSK) welcomes the opportunity to comment on the Report of the Commission on Intellectual Property Rights. We have focussed our comments on those sections of the Report most relevant to our own activities.

Intellectual property is critical to GSK and to patients throughout the world. The fundamental framework on which medical advances depend, and which has led to sustained investment in research and development, requires intellectual property. Patents stimulate and underpin the search for new and better medicines, including those for diseases prevalent in the developing world.

The role of intellectual property is recognised by Kofi Annan, who has said that "intellectual property is key to bringing forward new medicines, vaccines and diagnostics urgently needed for the health of the world's poorest people". It was recognised in the Doha Declaration, which addressed the healthcare needs of the developing world and stated "intellectual property protection is important for the development of new medicines….". It was recognised by the UK Government's High Level Working Group on Access to Essential Medicines in the Developing World, which brought together a wide range of stakeholders and commented "It is clear that to increase R&D expenditure on neglected diseases will require a continued commitment for protection of intellectual property…". Finally, in the Pharmaceutical Industry Competitiveness Task Force Report of 2001, the UK Government and the UK pharmaceutical industry agreed that "effective intellectual property rights for pharmaceuticals are an essential precondition for sustained investment in the R&D of new medicines".

There have been appropriate attempts in recent years to ensure that the international IP framework balances the needs of all stakeholders, including the developing world, for example through the helpful clarification of TRIPS flexibilities in the Doha Declaration. We hoped the work of the Commission would further reinforce that process. However, we believe the opportunity has been missed.

We are concerned about the Commission's perspective. Unfortunately, recognition of the role of intellectual property in improving healthcare, and by implication in supporting development, does not appear to be shared by the Commission on Intellectual Property Rights. The authors appear to have started from the unproven assumption that intellectual property has a detrimental impact on developing countries, rather than adopting a more neutral starting point. Indeed, it is perhaps significant that the Commission was asked "to consider whether and how IPRs could play a role in helping the world meet these [development] targets."

We are concerned about the Commission's methodology. The Commission admits "we have also been struck by the inconclusive and contested nature of much of the economic research devoted to elucidating the impact of IPRs, even in relation to the developed world. There is much that is uncertain and given the nature of the subject, may remain so…" and notes "the paucity of studies that directly address these issues of critical importance to policymakers in developing countries, let alone reach definitive conclusions on the impact of IPRs."

Despite this lack of economic data, and the contradictory nature of much of the existing evidence, the Commission initiated little new research. Its analytical approach is therefore open to the following criticism:

· `it fails to address relevant facts. For example, it glosses over the Attaran Study and his strong evidence and conclusion that IP is, at most, a minimal cause of the existing crisis in access to medicines
· it applies inconsistent standards to the weight it gives to evidence. For example, it dismisses evidence regarding the positive effects of increased IP on economic growth (page 22) and research activity (page 33) as failing to show a relationship of cause and effect. Elsewhere, however, it accepts evidence which is equally open to criticism - for example, see the whole section on History (pages 18-20), the econometric evidence on the effect of patents on prices of medicines (pages 36-38) and the Commission recognition elsewhere (page 21) that econometric evidence is often contested precisely because it does not show cause and effect.
· it treats simple assertions as evidence of a problem, without discussing the accuracy of these assertions. A good example of this comes at page 116 where it is stated that "some would argue that this standard [of inventiveness] as it is now applied, for example by the USPTO or EPO, is too low resulting in a proliferation of patents for trivial inventions".

We are concerned that the Commission draws generalised conclusions. While professing to recognise a distinction between "developing countries" on page 2, nearly all subsequent references to "developing countries" (including recommendations) group them all together. No attempt is made to recommend adoption of strong IP standards in any developing countries. At most, the Commission says things such as countries "may" want to adopt standards higher than it generally recommends. We question the assumption that all developing countries have the same needs and that the so-called "South" will never have any ideas worth protecting and will rely on theft of others' IP for their development.

We believe that the Commission has failed to place IP in a proper context. IP is a policy tool. Its purposes include the promotion of innovation and technology transfer, each of which is supportive of, not inimical to, development. However, IP is only one such tool. The Report fails even to consider what other tools could or should be used to promote development and how IP integrates with these tools. It also fails to assess the relative impact of IP on development in comparison to other factors such as local political will, education standards or international trading rules. Dealing with IP in total isolation gives a wholly disproportionate impression of its impact. This flaw in the Commission's approach unfortunately pervades the whole Report and, in our view, weakens many of its conclusions .

As a result of the concerns outlined above, we believe that the Report presents an unbalanced and inaccurate analysis of the impact of IPR on developing countries. Some key conclusions reached by the Commission are at best highly questionable. These include:

· that IP is of little relevance in promoting trade, technology transfer or investment
· that IP is "of at best secondary importance in generating incentives" for development of drugs for developing world diseases. In fact, IP is a necessary (but not sufficient) incentive for such development. As stated above, this has been publicly acknowledged by a number of respected and impartial commentators.
· that IP is, or is likely to become, a barrier to access to medicines.

The first two conclusions have the effect of undermining the very rationale for IP protection in the developing world. The latter gives the impression that IP is harmful to the developing world. They are illustrative of the tone of the whole Report. Although many recommendations when seen in isolation are apparently unobjectionable, when taken in the context of the Report as a whole, they suggest that developing countries would be well advised to adopt the lowest standards of IP in order to promote development.

As we stated above, we believe the Commission initiative represented an important opportunity, one that we believe has been missed. Unfortunately, the Report is being seen around the world as endorsed by the UK Government. We hope that the Government, and all other stakeholders, will recognise the need to pick a sensible path between those recommendations that will support development and those that will actually be detrimental to it.

Specific Comments

Chapter 1: Intellectual Property and Development

Introduction - IPRs as a Stimulus to Innovation

Commission Report - "Further innovation based on the protected technology may be stifled because, for instance, the length of the patent term is too long or the scope of the protection granted is too broad." (page 14)

The Commission cites no coherent evidence to the effect that this is in fact a problem. In the gene and research tool patenting field, GSK is only aware of anecdotal reports to support this claim, and we are certainly not aware of any evidence in support of the assertion beyond this field. In Europe, patent law actually provides for an "experimental use" exception from infringement that allows defined research activities on patented subject matter to be undertaken by academic and commercial institutions without infringement. Such research may itself lead to an invention, which may be an improvement of, or a new use for, the patented subject matter, for which third parties are free to obtain their own patent protection. Patents of this kind are commonly referred to as "dependent patents". They can be commercially exploited using the mechanism set out in Article 31(l) TRIPs.

History (page 18)

The Commission argues that "several lessons can be learned from history". It is implied that one such lesson would be that as weak IP at certain stages has encouraged development for (now developed), countries, it follows that developing countries today should be encouraged to adopt similarly weak IP laws until they reach a certain (undefined) level of development.

Even assuming that the data are correct, they show nothing more than an association, in certain circumstances, between "weak" levels of IP and technological and economic growth. They fail to demonstrate a causative link between the two, still less the extent of any causative link. Nor is there any analysis of whether or not stronger IP would actually have increased the speed of development.

The Commission also fails to address certain facts which suggest the importance of IP protection in development. These include the following:

· Pharmaceutical industry investment in Mexico and Brazil increased significantly after each country strengthened their IPR in the 1990s; for example, investment in Brazil totalled $2b between 1996 and 2000, resulting in jobs, tax revenue, exports and GDP growth
· The fact (acknowledged by the Report) that Canada used compulsory licensing extensively in the pharmaceutical field between 1969 and the late 1980s but then decided to tighten its IP laws in 1980s and to introduce tax breaks (also acknowledged by the Report, page 37). It would appear that widespread use of compulsory licensing undermined Canada's R&D base to such an extent that the Government felt the need to take dramatic action to re-build its science base starting with the re-introduction of tougher IPR.
· Lack of patent protection for pharmaceutical products is associated with a "brain drain" from India. India's own trade association OPPI estimated that more than 15% of scientists working for US pharmaceutical companies in the US are of Indian origin. This "brain drain" in itself impacts development. The remaining chemical engineers in the pharmaceutical industry in India have, at least until recently, spent their time on reverse engineering to circumvent existing "process" patents (i.e. re-inventing the wheel) rather than on innovation. Similarly, in the 1960s, only 16% of Korean scientists and engineers with doctorates from the US returned to Korea. In contrast to India, in the 1980's, when Korea's patent laws were strengthened, some 60% returned.
· India has introduced fairly high standards of IP protection outside the pharmaceutical industry. As the Commission notes, some 28 companies set up R&D centres in India between 1997 and 1999. Moreover, since the introduction of "black box" protection in India, many Indian companies have devoted more resources to pharmaceutical innovation, and at least one Western pharma company has set up a research facility.
· GSK maintains both a research and a manufacturing presence in China, which provides "product" patent protection. It does not have such a presence in India, where patent protection for pharmaceuticals is not available.

We acknowledge that none of the evidence referred to above of itself proves a significant causal link between strong IP protection and development. However, each fact shows as much of a positive association between strengthened IP and development as the evidence cited by the Commission purports to show a negative association.

The Evidence About the Impact of IP

The conclusions drawn by the Commission from studies of academic papers (page 24) are inconclusive - they show some positive and some negative effects of IP. Even if these conclusions are justified by those studies, this simply proves that IP alone will not have a significant impact on development. It is one of a number of factors. However, there is no attempt to put the impact of IP into context in the development debate.

Technology Transfer

Commission Report - "The determinants of effective technology transfer are many and various. The ability of countries to absorb knowledge from elsewhere and then make use and adapt it for their own purposes is also of crucial importance. This is a characteristic that depends on the development of local capacity through education, through R&D and the development of appropriate institutions without which even technology transfer on the most advantageous terms is unlikely to succeed. …… This aspect of the process of the technology transfer is largely in the hands of developing countries themselves." (page 24)

GSK agrees with the assessment that a number of factors contribute toward a conducive environment for technology transfer. Central to these for the pharmaceutical industry are appropriate economic, scientific and market conditions. However, strong IPR is also an important factor, at least for the innovative pharmaceutical industry. The existence and enforcement of an IPR system in a recipient country is generally a prerequisite for any out-licensing / joint venturing decisions, and industry's confidence in that system is a key element. As mentioned above, history demonstrates that where IPR is strong and a market exists, investment is far more likely to follow.

It is difficult to see how the recently expressed concerns of many African countries to have local manufacturing capabilities for pharmaceuticals can be addressed if they do not adopt appropriate standards of IP.

Chapter 2: Health

GSK has products, and R&D or donation programmes, in six of the WHO's priority disease areas, as well as in HIV/AIDS. We are currently the only international pharmaceutical company engaged in research and development for new interventions to prevent and treat the World Health Organisation's top three priority diseases - HIV/AIDS, malaria and TB. We have a research centre at Tres Cantos in Spain, dedicated to diseases of the developing world. GSK has also been offering substantial discounts on vaccines to governments, charities and agencies for public health programmes for over 20 years, and offering preferential prices to governments of developing countries for our HIV/AIDS anti-retroviral treatments since 1997.

Commission Report - "We believe that presence or absence of IP protection in developing countries is of at best secondary importance in generating incentives for research directed to diseases prevalent in developing countries." (page 33)

Increased R&D of medicines and vaccines for diseases of the developing world requires intellectual property protection and a viable market - IP is a necessary, but not sufficient incentive. While it is true that R&D is incentivised by the existence of a market and without such a market costly and risky R&D is unlikely to happen, that is no reason to dismiss the role of IP. The Commission fails to take the next step in its reasoning and ask what role IP plays as an incentive for R&D if there is a market. The answer is that IP is a necessary incentive, as it allows the innovator to exploit the market and to obtain a return on investment. Without IP, the innovator will be subject to generic competition from early in the product's life thus, in essence, depriving the innovator of the market.

We therefore believe IP should not be dismissed as "of at best secondary importance". Indeed, it is interesting to note that elsewhere the Chair of the Commission seems to acknowledge this. In the unpublished paper cited at footnote 20 to Chapter 6 he says:

"Remember that, without some form of monopoly or oligopoly rent, there will be no way to support research and development - proprietary position is essential."

Without IP, the private sector (the sector that undertakes the vast majority of the risk and cost of drug development) is unlikely to undertake development of drugs relevant primarily to the developing world. Because the Commission fails to recognise this, it is able to argue that weak IP will not have a significant negative impact on the developing world.

By the same token, the Commission fails to ask what happens to R&D if there is no IPR protection in the first place. If IPR were so unimportant to the generation of new ideas, then one would expect numerous examples of healthy research-based economies absent of IPR. None of these exist, at least in the modern world. Indeed, as our comments on Chapter 1 show, there is evidence that introduction of IP in at least some developing countries is associated with increased local R&D and retention of local research personnel. Further, India's history demonstrates how a weak IP system can at best lead to waste of R&D effort on re-engineering and at worst, a brain drain of talent to IP protected regimes.

Commission Report - "Because the IP system does little to stimulate research on diseases that particularly affect poor people, public funding for research on health problems in developing countries should be increased.

Public funding for research on health problems in developing countries should be increased. This additional funding should seek to exploit and develop existing capacity in developing countries for this kind of research and promote new capacity, both in the public and private sectors." (page 34)

GSK recognises that the traditional "for profit" pharmaceutical model that is successful for the discovery and development of medicines for the developed world is not appropriate for R&D into diseases which are prevalent only in the developing world. Developing a drug or vaccine is costly, risky and time-consuming. Only private industry has ever put up the money and the time to do it. It is a fact that business has to make a return on investment. For medicines or vaccines used primarily in the developing world, the lack of a market means it is difficult, probably impossible, for a company to recover its costs. The return on investment is too low to justify an adequate allocation of resources. The only hope for a developing world disease product is for there to be a significant first world market, but realistically this is rare..

The public sector model has different, but still strong, limitations. Developing new drugs or adapting existing drugs to meet developing world needs requires development expertise, clinical trial expertise and regulatory expertise. These come from years of experience. The R&D-based pharmaceutical industry possesses these skills. Others do not. Discovery is a strength in academia, but development and manufacturing capabilities are lacking. So is the necessary understanding of what the regulatory authorities require to approve a drug. And it simply is not possible for them to acquire these skills quickly or cheaply, even if they were motivated to do so.

So we need to look at the third way - a partnership model for developing world disease R & D. Put simply, companies provide the technology that they have invested in for decades, as well as their development and distribution expertise, to the partnership. And the public sector partners help fund the development costs while also helping to ensure that the medicines and vaccines developed get to the people that need them. This has the double benefit of encouraging R&D and accelerating the product's uptake in the developing world.

If breakthroughs are to be made in the area, then stakeholders need to work collaboratively, respecting each other's expertise, rather than trying to compete.

The suggestion that public money should be directed towards the public sector may well help to stimulate research in the short term. However, it may not prove viable in the longer term and, more importantly, may not generate the much-needed therapies in the most efficient way possible.

Unless the private sector, which has the expertise in drug development, is expected to act as simply a contracted research organisation (which is most unlikely from a commercial perspective given the opportunity costs this would involve), it will need other guarantees of return for its efforts. Patent rights (or some other form of exclusivity) are likely to be required, again demonstrating the importance of patents as an incentive.

Commission Report - "Given that in developing countries most people are poor and that patent protection can increase prices, it is necessary to examine with particular care the arguments put forward by some that patents in developing countries are not likely significantly to affect access to pharmaceuticals subject to patent protection."

Notwithstanding the statement above, the Commission seems to have failed to examine the arguments with particular care or to look at the empirical evidence about the existing access crisis. A number of relevant, undisputed facts have seemingly been ignored by the Commission.

For example;

· Over 95% of drugs on the WHO Essential Medicines List (EML) are not patent protected and yet the WHO says that 30% of people in developing countries do not have access to these drugs. We conclude from this that patents cannot therefore be a barrier to access to these drugs. However the Commission states "it does not follow that the patent system has no adverse effects. Even if patents do not exist for particular products and countries, the patent system may still have an effect on access to medicines. Most low income developing countries have to rely on imports for their supplies. The existence of patents in potential supplier countries may allow the patentee to prevent supplies being exported to another country, particularly through controls on distribution channels." [emphasis added]. This fails to address the facts, as there are no patents in key supplier countries for these products.
· In India, which has very limited intellectual property protection for pharmaceuticals and the most well-developed generics industry in the developing world, there are 4m HIV positive people who do not have access to ARV drugs despite several Indian companies manufacturing several of the ARVs. The proportion of HIV patients receiving anti-retroviral medicines is no greater than in, for example, Africa where patents are alleged to be a barrier. Patents cannot be a barrier to access in India. These data are not mentioned by the Commission.
· Attaran's evidence of patenting of HIV drugs in Africa is mentioned by the Commission. Attaran concludes that patents "generally do not appear to be a substantial barrier to …..treatment in Africa today". However, the Commission does not address this evidence nor the conclusion reached by Attaran. It merely expresses surprise that the patenting level described by Attaran is as high as it is.
· Millions of people have been dying from malaria and TB in the developing world for many years, certainly long before most relevant countries (including some in the EU) granted patent protection for pharmaceutical products. Patents therefore cannot have been a barrier to access under these circumstances
· The Commission refers to the falling prices of HIV drugs in the last 2 years, implying incorrectly that this was solely due to generic competition, but fails to mention that the consumption of allegedly cheaper drugs is still minimal in comparison to demand.

The evidence cited above establishes that it is misleading and counter-productive to focus on IP and patents as a barrier to access to medicines.

It is welcome that the Commission recognises that many factors - other than just IPR - impact upon access to healthcare in the developing world. The real issues are lack of political will, funding and infrastructure. However, although the Commission acknowledges that other factors have a role, it makes no attempt to assess their relative importance. Without knowing which factors are and are not significant (and we believe the facts clearly demonstrate that patents are not significant), no assessment can be made as to how policy changes relating to one factor will impact the access crisis. The Commission suggests that adoption of weaker patent rules will have a significant effect on improving access for the poorest. It will not. It will, however, have a significant adverse impact on research and development in the future and may impact on the activities of R&D companies in the developing world.

Commission Report - "Countries need to adopt a range of policies to improve access to medicines. Additional resources to improve services, delivery mechanisms and infrastructure are critical. Other macroeconomic policies need to be in harmony with health policy objectives. But so also does the IP regime. Countries need to ensure that their IP protection regimes do not run counter to their public health policies and that are consistent with and supportive of such policies." (page 39).

GSK agrees that IP policies should not run counter to public health policies, but challenges the implication that strong IP rules are counter to healthcare policies and weak IP rules support them.
It is important to recognise that income generated by patents allows innovative companies to add value locally by providing medical, clinical, regulatory and philanthropic support in developing countries. Innovative companies do not simply sell products. The Commission fails to address this benefit and the problems that will arise if this added value is removed. Similar support from the generics is rarely, if ever, forthcoming. The short term attraction of "cheaper" generics and the contribution they make to public health policies needs to be seen in this broader context.

Commission Report - "Developing countries should not eliminate potential sources of low cost imports, from other developing or developed countries. In order to be an effective pro-competitive measure in a scenario of full compliance with TRIPs, parallel imports should be allowed whenever the patentee's rights have been exhausted in the foreign country. Since TRIPs allows countries to design their own exhaustion of rights regimes (a point restated at Doha) developing countries should aim to facilitate parallel imports in their legislation" (page 42)

The report acknowledges the value of differential pricing and the need to segment markets to prevent low priced products undermining high priced markets. However, it then undermines this statement by failing to differentiate between "developing countries". GSK's offer of not-for-profit preferential prices to 63 of the world's poorest countries (and corresponding calls for greater protection against diversion from these countries) is predicated upon the belief that wealthier developing countries, such as Brazil, are better able to make some contribution to the costs of R&D and should not therefore be entitled to receive our floor price. Differentiation must be made between the likes of Brazil and Burundi. Parallel trade between Brazil (the eighth largest economy in the world) and Burundi would endanger existing preferential pricing schemes.

Moreover, by encouraging "developing" countries to adopt widespread use of parallel imports, the report contradicts its previous conclusion that "widely supported moves to establish differential pricing would reduce margins to reward R&D in developing countries, further undermining any incentive for additional research on developing country diseases". (page 33). Extensive parallel trade will undermine the R&D incentive and the incentive to differentially price.

Parallel trade has never been shown to facilitate the availability of lower cost medicines. Parallel traders buy goods in low-price countries and resell at higher prices in the importing country. This form of arbitrage (witnessed recently by GSK with the illegal re-importation of our ARVs back into Europe from Africa) benefits neither the patients nor governments - only the parallel trader is enriched. In fact, it "sucks" medicines from poorer, lower-cost markets into higher-cost markets and opens up the supply chain to the threat of counterfeit or poor quality products.

Commission Report - "Developing countries should establish workable laws and procedures to give effect to compulsory licensing, and provide appropriate provisions for government use." (page 44)

This is a good example of a recommendation that is unobjectionable in itself but which, when taken in context, is disturbing. It is set in a context of inaccurate conclusions about the lack of incentive created by IP and the adverse impact of patents on access. It follows directly on from statements that "essential elements" of compulsory licensing laws should include straightforward and fast procedures, full exploitation of TRIPs flexibilities and royalties which "need not be very high".

In context, therefore, this recommendation clearly implies that compulsory licensing (actual or threatened) should regularly be used as a matter of policy as opposed to as an exceptional remedy to address abuses of patent rights. Use of compulsory licensing in this manner would significantly undermine the benefits to be gained from patents (which are real) without having a significant beneficial impact on access.

The underlying principle should be to aim for strict standards of patentability and narrow scope of allowed claims, with the objective of:

· limiting the scope of subject matter that can be patented
· applying standards such that only patents which meet strict requirements for patentability are granted and that the breadth of each patent is commensurate with the inventive contribution and the disclosure made
· facilitating competition by restricting the ability of the patentees to prohibit others from building on or designing around patented inventions
· providing extensive safeguards to ensure that patent rights are not exploited inappropriately.

We deal with several of these points in our comments on Chapter 6, along with our concerns about how the Commission describes the use of compulsory licensing laws in the US and UK.

Commission Report - "Most developing countries, particularly those without research capabilities, should strictly exclude diagnostic, therapeutic and surgical methods from patentability, including new uses of known products." (page 49)

Nowhere in the Report is there a discussion of the benefits of allowing patents for new uses of known products i.e. that without such patents there is no incentive to do R&D into new uses. In the medical field, there are numerous examples of second uses being developed for known products. Examples include Taxol for breast cancer, zidovudine for HIV, and atovaquone (originally an anti-malarial) for opportunistic infections.

It is unlikely that these developments would have taken place were it not for the availability of patent protection for the new use. Indeed, in the EU, introduction of extended market exclusivity through data protection is being considered as a necessary incentive for research into new uses despite the existence of patent protection for such new uses.

If, as we believe, the Commission wrongly undervalues the importance of IP as a precondition of medical research for diseases of the developing world, implementation of this recommendation would reduce the already weak incentives for research into such diseases.

Commission Report - "Countries may allow health authorities to approve equivalent generic substitutes by "relying on" the original data. Developing countries should implement data protection legislation that facilitates the entry of generic competitors, whilst providing appropriate protection for confidential data, which may be done in a variety of TRIPS compatible ways. Developing countries need not enact legislation the effect of which is to create exclusive rights where no patent protection exists or to extend the effective period of the patent monopoly beyond its proper term." (page 51)

As statements of law, the first and third sentences of this paragraph are simplistic and contentious. Adoption by developing countries of these recommendations would almost certainly lead to WTO Dispute Resolution.

Further, data protection in the sense of exclusive rights will be the only incentive for R&D in cases where, for whatever reason, patent protection is unavailable (including adoption of the recommendations of high standards of patentability and no patents for therapeutic methods/new uses of known substances). In these cases, if exclusive rights are not granted, there will be no incentive to undertake R&D.

Chapter 4 - Traditional Knowledge and Geographic Indications

GSK's practical interest in these issues is limited and few if any of our patent applications rely on any form of traditional knowledge (TK) or indigenous genetic resources. However, we would make the following comments about some of the Report's observations.

Commission Report - "There is much to gain at this early stage by considering the issues in a number of fora, while ensuring coherent approaches are developed and that effort is not duplicated." (page 79)

The complexities involved in defining TK and identifying some legal protection for it, do not lend themselves well to consideration by just one forum, and particularly not to the TRIPs Council alone. GSK therefore supports and awaits with interest WIPO's deliberations around finding a sui generis model for TK protection, as well as ongoing discussion within the CBC and UNCTAD.

Commission Report - "Those countries that only include domestic use in their definition of prior art should give equal treatment to users of knowledge in other countries. In addition, account should be taken of the unwritten nature of much traditional knowledge in any attempt to develop further the patent system internally." (page 83)

GSK believes an effective way of avoiding the inappropriate exploitation/commercialisation of TK would be to ensure that TK is recognised globally as prior art. Appropriate and accessible databases of TK could be developed which patent examiners would take into account as part of "prior art" searches.

Commission Report - "All countries should provide in their legislation for the obligatory disclosure of information in patent application of the geographical source of genetic resources from which the invention is derived….. Sanctions, possibly of the type discussed above, should be applied where it can be shown that the patentee has failed to disclose the known source or where he has sought to deliberately mislead about the source." (page 87)

As with TK, GSK would support the introduction of a multilateral system for disclosing and sharing the information about the geographical origin of non-human biological material used to support patent applications. However, we would not support any obligation on patent applicants to provide proof of evidence of benefit sharing or prior informed consent as a "pre-condition" for securing or maintaining, or as a requirement for the validity of, a patent. Equally, and again as with TK, in GSK's view the legal consequences of failing to obtain consent or to share benefits adequately should lie outside the ambit of patent law.

Chapter 6 - Patent Reform

Commission Report - "We believe that in considering the design of their patent systems, developing countries should adopt a pro-competitive strategy …Such a pro-competitive strategy is best realised by seeking to restrict the scope of patent protection provided." (page 114)

Commission Report - "This should be achieved, within the constraints of international and bilateral obligations, by:

· applying standards such that only patents which meet strict requirements for patentability are granted and that the breadth of each patent is commensurate with the inventive contribution and the disclosure made

Moreover much research consists of the relatively routine development of existing technologies. For instance, gene sequencing, formerly a labour intensive manual technique, is now a fully automated process, involving little creativity." (page 112)

The vast majority of patent publications relating to DNA sequences relate to sequences that have been derived and characterised through the use of bioinformatic tools. In fact, experience shows that the patent system is working and that the relevant standards are already in place:

· Many of the patent publications are not granted patents but merely published applications.
· Many of these published applications have been withdrawn, abandoned or rejected by the Patent Offices. Many are also likely to be withdrawn, abandoned or rejected in the future.
· Many of the patents that have been granted (and most are US patents) have claims that have been significantly limited compared with the claims as filed with the original application.
· Of the small number of European patents that have been granted, a number of have been successfully opposed. The decision on the ICOS patent in particular appears to have set something of a precedent for the EPO in its examination for industrial application and inventive step.

Commission Report - "Some would argue that this standard [inventive step] as it is now applied, for example by the USPTO or the EPO, is too low resulting in a proliferation of patents for trivial inventions which may not contribute to the over-riding objective of the patent system which is the advancement of science for public benefit. …The objective of any standard should be to ensure that routine increments to knowledge, involving minimal creative input, should not generally be patentable." (page 116)

This statement of what "some would argue" is implicitly accepted in the Report without discussion. The Commission cites no evidence that these standards are too low or that "routine increments involving minimal creative input" are being patented; nor does it cite evidence that this is causing a problem either in the developed or in the developing world.

In fact, inventive step standards in the EPO and USPTO are amongst the highest in the world. And, as a generalisation, the smaller the contribution to the art, the narrower the scope of protection in any granted patent. This is because, in general, patents in the US and EPC countries give protection commensurate with the technological contribution.

Commission Report - "We are not aware of any significantly higher standard being applied currently elsewhere. However, there are examples of higher standards being applied in the past. For example, in the first half of the 20th Century, the US applied a "flash of creative genius" standard which would probably render the majority of patents currently issued invalid." (page 116)

In effect, this is simply an exhortation to grant fewer patents. Even if a higher standard of inventiveness is appropriate (and no evidence is given to support this), no evidence is put forward for the statement that "the majority of patents currently issued would be invalid". Application of such a test today might delay publication of new knowledge through patent applications (as companies would delay applying for patents until they had distanced themselves sufficiently from the prior art to satisfy the "flash of creative genius" test). More importantly, without being satisfied that their research involves the "flash of genius", companies might not pursue development of potentially advantageous products.

As a matter of practice, it is highly unlikely that the Patent Offices in many developing countries, which do not have significant experience in applying patent law, would be able to distinguish between something that is and is not "a flash of genius". Getting the balance right between too high and too low a standard requires many years experience with real life issues.

Commission Report - "For developing countries, the currently prevalent low standard of inventive step raises two concerns. The first is that as applied in developed countries, it could hinder research of importance to developing countries." (page 116)

Reference is made, on a number of occasions, to the possibility of patents hindering research, but no consistent body of evidence is given for this assertion. There is evidence that the contrary is true. The two examples given on pages 128 and 129 (CCR5 gene and Golden Rice) in fact show that patents did not substantially hinder research.

As previously stated, many patent laws actually contain provisions aimed at preventing hindrance of research, for example, through research exemptions and laws relating to exploitation of improvement patents though compulsory licensing.

Commission Report - "One suggestion that has been made would be to require the patent applicant to demonstrate that the proposed invention reflects a standard of inventiveness higher than that which is normal in the industry involved." (page 116)

If this is intended to mean that the person skilled in the art must be from, and assumed to have the common general knowledge of those in, the industry, this is in essence a statement of at least European practice.

If, however, it is intended to mean that a higher level of inventiveness is needed for patentability in innovative industries, this in fact penalises innovation. It is often those very industries that require incentives to undertake research. To make it harder to get patents for industries that are innovative would be a penalty for, and deterrent to, innovation. Further, this would complicate litigation enormously by requiring an assessment of how innovative an industry is.

Commission Report - "Developing countries should adopt the best mode provision to ensure that the patent applicant does not withhold information that would be useful to third parties." (page 117)

The policy intention here is laudable. However, it displays a misunderstanding of how the patent system works in practice. Best mode will in fact almost certainly be disclosed because it is a requirement of US law. Thus, information as to best mode will be available to developing world scientists.

However, introduction of a best mode requirement in national law complicates (and thus increases the cost of) litigation which the Commission wishes to avoid.

Commission Report - "But what is meant by a broad claim? Take the example of an inventor of a new compound for the treatment of headaches. She discloses the potential use for her compound in her patent application, but her claims extend beyond that use to the compound itself, and all its potential uses. During the life of the patent, someone else establishes that the compound is also useful in treating heart disease. Is it right that the patentee can then prevent the compound being used, without her authorisation, for purposes she had not foreseen? Are such broad claims really justified on the basis of limited disclosure?" (page 117)

This is a highly rhetorical paragraph, suggesting its answer without proper analysis of the extent to which there is problem. Again, the tone of the paragraph suggests a clear message to limit patent protection without any analysis of the substance of the issue.

Commission Report - "Developing countries should also consider supplementing the judgement of patent examiners by inviting other available experts to comment on patent applications. In Brazil, applications for pharmaceutical-related patents are passed for evaluation to the Ministry of Health who may be in a better position to comment on, for example, the inventiveness of the claimed invention." (page 119)

We would be interested in the basis of the Commission's view that Ministries of Health will have experts available or be qualified to judge inventive step from a patent perspective.

Commission Report - In considering introducing or revising [compulsory licensing] legislation, they could seek guidance from the patent laws in other countries. For example, the US has used compulsory licensing in more than 100 antitrust cases. The UK provides that compulsory licences may be granted on the following grounds….." (page 119)

This follows from the discussion of compulsory licences in Chapter 2 and requires further comment as the references to US and UK law are misleading.

The vast majority of "compulsory licences" in the US are not compulsory licences of the type discussed in current debates (or Chapter 2) at all. They are conditions of merger clearance. When applications are made for merger clearance, the competition authority will, in some circumstances, require divestment of parts of a business and/or its rights. Thus, if two companies wish to merge, a condition of the merger may be such a "compulsory licence". The grant is not compulsory as the companies can decline to merge and the condition will not bite. One cannot draw parallels between this type of situation and a policy of compulsory licensing of the nature frequently discussed, particularly in the access to medicines debate.

In a very few of the cases (fewer than 10 of the more than 100 mentioned), the "compulsory licence" was part of a wider corporate restructuring that was required to remedy an anti-trust violation. These cases are extremely rare and, again, cannot be equated to adoption of a policy of regular compulsory licensing of the type frequently called for in recent debates.

Despite the breadth of the grounds for compulsory licensing in the UK, it is used rarely in the UK and, indeed across the EU as a whole. The European Commission recently estimated, based on experience of Member States existing patent systems, that if a Community Patent were introduced, there would be in the order of 10 compulsory licence cases per year in the EU.

The evidence does not support the implication that both the US and the UK regularly resort to compulsory licensing (or its threat); nor, therefore, does it support the implication that developing countries should do the same.

To the extent that UK compulsory licence law is relevant at all, it is relevant to the question of royalties. Under the transitional provisions of the Patents Act 1997, a form of compulsory licence (know as "licence of right") was available. Many of the cases related to pharmaceuticals. However, unlike, for example, the case of Canada (where a uniform royalty was set by Statute) the UK cases were based on full examination of relevant evidence and royalty rates of between 20-35% were often awarded. This is not mentioned by the Commission's discussion (page 44) which leads to the assertion that "the implication of other countries experience is that royalty rates need not be very high".

Given that TRIPs requires that "the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorisation" (Article 31h), the UK experience appears more relevant than that of Canada, and yet the Commission fails to draw on this evidence.

Commission Report - "An extensive use of compulsory licensing in developing countries is unlikely given the procedural complexities of the system." (page 120)

It is simply not true to say that the "system" (presumably referring to TRIPs) need be procedurally complex. Furthermore, although compulsory licensing may not be used regularly in the developing world now, its use or threat of use in the developing world is likely to increase because of the high profile that it has been given as a solution to, for example, the access to medicines issue.

The current discussions in the WTO about compulsory licensing for export would be unnecessary if there were little likelihood of compulsory licensing being used extensively in practice.


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