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US seeks dispute panel against Brazil over patents

by Chakravarthi Raghavan

Geneva, 19 Jan 2001 --   The United States has sought the establishment of a dispute panel to rule on the WTO/TRIPS compatibility of Brazil’s patent law, in particular its provisions enabling compulsory licensing if a patent is not worked locally and allowing parallel imports if a patent owner chooses to work the patent in Brazil through imports only.

The US request came before the Dispute Settlement Body Friday, but this being the first time the request came before the DSB, Brazil blocked a consensus.

In an intervention at the DSB, Brazil said that its law was completely in accord with TRIPS, and suggested that the US should think again about its request, noting that the US patent law itself required ‘local working’ of inventions by small business firms and universities, as also of federally-owned patents.

The next meeting of the DSB is set for 1 February, when the US could renew its request (and get automatic reference to a panel).

The US, in its complaint, said that the TRIPS prohibited discrimination regarding availability of patents and enjoyment of patent rights on the basis of whether products are imported or locally produced. This obligation, in the US view, prohibited WTO members from requiring ‘local working’ of the patented invention as a condition for enjoying exclusive patent rights.

[Art.27.1 of TRIPS provides that “patents shall be available and patent rights enjoyable without discrimination as to the place of invention, field of technology and whether products [are] imported or locally produced. Art. 28 (which defines the rights conferred) provides that patent owner of a product could prevent third parties not having the owner’s consent from acts of making, using, offering for sale, selling or importing. However a footnote makes clear that this right in respect of use, sale, importation or other distribution of goods, is subject to Article 6 of TRIPS. And that Article makes clear that (subject to the requirement about national most-favoured- nation treatment provisions in Art. 3 and 4), nothing in the TRIPS agreement shall be used for purposes of dispute settlement to address the issue of exhaustion of intellectual property rights - a doctrine that has been widely interpreted to mean that once a patent-owner has put a patent product on the market in a country, there is an exhaustion of rights and the product could be imported from that country into another without the authorization of the patent-holder in another country. And some patent law experts like Dr. Carlos Correa, say the preamble of the Agreement and Articles 7 and 8 make clear that the objective of promoting technology transfer may be ensured in some circumstances by compulsory licensing.”]

The US in its complaint to the DSB said that Art. 68 of Brazil’s 1996 industrial property law imposed a local-working requirement, with the stipulation that a patent shall be subject to compulsory licensing if it is not ‘worked’ in the territory of Brazil, and that a compulsory license shall be granted on a patent if it is not manufactured in Brazil or if the patented process is not used in Brazil. Also, the law provides, that if a patent owner chose to exploit the patent through importation, others could either import the patented product or obtain the product from the patented process. This article, the US contended, discriminated against US owners of Brazilian patents. Consultations held with Brazil on 30 May 2000 had failed to reach an agreement, and hence the US sought reference to a dispute panel.

In reply, Brazil expressed surprise at the US request. In Brazil’s view, the consultations between Brazil and the US had proved useful in clarifying the questions raised by the US on Brazil’s industrial property law.  Further consultations would enable Brazil to better clarify the conditions of implementation provided in the law itself, and this should reassure the US as to the compatibility of the Brazilian law with TRIPS. Brazil would hence encourage the US to reconsider its decision.

Brazil totally disagreed with the US claim that Art.68 of Brazil’s industrial property law conflicted with Article 27.1 and 28.1 of TRIPS.  Brazil was confident that its industrial property law was consistent with TRIPS, and was “among the most advanced legislation in industrial property law in the world.”

“In this sense,” added Brazil, “the US by requesting a panel against Brazil, is sending a negative and self- defeating message to other developing countries who are incorporating the standards of the TRIPS agreement into their legislation.”

Despite its vague allegation, the US had been unable to demonstrate any concrete injuries caused by Art.68 of the Brazilian law to the US industry.

Also, said Brazil, “it appears to us that the premises underlying the complaints by the US against Brazil are not consistent with its own legislation on patents.”

“We will be very curious in this regard to hear from the US how it explains the consistency of Articles 204 and 209 of the US patents code with its own interpretation of Art. 27.1 and 28.1 of TRIPS, especially as regards ‘local work’ requirements. Under Art 204 (‘Preferences for the US industry’), the US patent code requires that small business firms and universities ‘manufacture substantially’ their invention ‘in the United States’. Article 209 of the US patent code also establishes a local-work requirement for federally-owned patents.” – SUNS4819

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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