On 8 January 2020 the European Commission published a “Report on the protection and enforcement of intellectual property rights in third countries.” The objective of this report is to “identify third countries in which the state of IPR protection and enforcement (both online and offline) gives rise to the greatest level of concern” (European Commission, Report on the protection and enforcement of intellectual property rights in third countries, January 2020). According to the Commission, “priority countries” are those “deemed to cause the greatest economic harm to EU interest” (Ibid). The European Commission report mirrors the US Special 301 process of targeting countries which are deemed to provide insufficient protection of intellectual property rights.
The Commission report established 3 categories of countries:
Priority 1: China
Priority 2: India, Indonesia, Russia, Turkey and Ukraine
Priority 3: Argentina, Brazil, Ecuador, Malaysia, Nigeria, Saudi Arabia and Thailand
In its report, the European Commission singled out countries for enacting policies on: 1) local working requirements (Ecuador and India), 2) strict patentability criteria (Argentina, India, Indonesia and Russia), and 3) compulsory licensing (Ecuador, India, Indonesia and Turkey). In addition, the Commission expressed concerns on the role played Brazil’s National Sanitary Regulatory Agency (ANVISA) in examining patent applications. Finally, the Commission alleged the “absence of an effective system for protecting undisclosed test and other data generated to obtain a marketing approval for pharmaceuticals” in Argentina, Brazil, China, India, Indonesia, Malaysia, Russia, Saudi Arabia, Ukraine and the United Arab Emirates (Ibid, 12).
In relation to local working requirements for patents, the Commission expressed concern that non-compliance with local working requirements in Indonesia or Ecuador could trigger the issuance of a compulsory license:
Indonesia and Ecuador create legal uncertainty, which is not conducive for innovation in these countries. These requirements oblige patent holders to manufacture the patented product or use the patented process in Indonesia or Ecuador. The non-compliance with the requirement triggers the risk of issuing a compulsory licence (Ibid, 11-12).
With respect to patentability criteria, the Commission noted:
Restrictive patentability criteria applied in Argentina, India, Indonesia and Russia reduce or remove incentives to innovate, for instance in order to find more stable forms of compounds with longer shelf-lives, medicines which may be easier to store, dosages which are safer or reduce side-effects (Ibid, 12).
In the summary findings, the Commission made the following observations on compulsory licensing:
Moreover, stakeholders report that very broad, vague and arbitrary criteria are applied for granting compulsory licences, which undermine the effective patent protection in Ecuador, India, Indonesia and Turkey, notably for pharmaceuticals and chemicals but also for other sectors where local production is being promoted (Ibid).
The Commission made the following India-specific comments in relation to patentability criteria, compulsory licensing, and the protection of undisclosed and other data:
Several constraints on patent protection continue to be detrimental to EU companies. Restrictive patentability criteria combined with difficulties to enforce patents granted, as well as very broad criteria being applied for granting compulsory licences or for revoking patents, make effective patent protection in India very difficult, notably for pharmaceuticals and chemicals but also for other sectors where local production is being promoted. Even if some positive measures have been undertaken by the Indian Patent Office to improve registration efficiency, there is still a worryingly large patent backlog (Source: Ibid, 22).
Another area of continued concern reported by rightholders is the absence of an effective system for protecting undisclosed test and other data generated to obtain marketing approval for pharmaceutical and agrochemical products against unfair commercial use, as well as their unauthorised disclosure. To date, there seems to be no statute that specifically addresses regulatory data protection for pharmaceuticals and for the protection of trade secrets, which creates legal uncertainty (Ibid)
The Commission made the following observations in relation to Indonesia:
Restrictive patentability criteria make effective patent protection in Indonesia very difficult, notably for pharmaceuticals and plant protection products. Despite complaints from stakeholders, the Indonesian Patent Law continues to provide for a local working requirement. Stakeholders also complain about Ministerial Regulation No. 39 of 2018 on Procedures of Imposition of Patent Compulsory Licence (Regulation 39/2018 on Patent Compulsory Licences) as it seems to confirm the possibility that compulsory licences can be granted on the basis of mere non-compliance with the local working requirement but also because it appears to establish vague and potentially arbitrary criteria to issue compulsory licences (e.g.if a patent is “detrimental to the public interest” (Ibid, 24-25).
The European Commission provided the following complaints on Russia’s policies on patentability criteria, compulsory licensing, and parallel importation:
Several constraints on patent protection remain problematic for EU companies. Restrictive patentability criteria, inefficient regulatory data protection and patent enforcement as well as vague grounds for the issuance of compulsory licences make effective patent protection in Russia very difficult, notably for pharmaceuticals.
In January 2018, Russia adopted a Roadmap for the Development of Competition in the Healthcare Sector and, in October 2018, the Ministry of Economic Development issued Order No 527 on the patenting of pharmaceutical compositions and their uses. Both the Roadmap and the Order, if implemented, would exclude follow-on inventions (patent applications on new indications, new methods of treatment, new combinations, new pharmaceutical forms and new manufacturing methods If a known active ingredient) from patent protection. It would negatively affect the pharmaceutical sector by applying more restrictive patentability criteria than those applied in other sectors, which raises concerns in terms of compliance with the TRIPS Agreement.
As regards the prevention of parallel imports, stakeholders report negative developments. In February 2018, the Russian Constitutional Court ruled that judicial authorities are not allowed to apply the same sanctions against parallel imports as against counterfeit goods unless the parallel import causes harm similar to counterfeit goods. This interpretation causes serious legal uncertainty for right holders concerning the extent of their entitlement to prevent parallel imports (Ibid, 27).
In relation to Turkey, the Commission made the following observations on compulsory licensing and parallel importation:
As far as patents are concerned, stakeholders report that the Industrial Property Code establishes vague and potentially arbitrary criteria to issue compulsory licences as it allows the Turkish government to issue such licences in situations when the level of availability on the Turkish market is claimed to not satisfy the domestic demand.
In the Industrial Property Code of 2017,Turkey replaced the national exhaustion principle with the international exhaustion principle, which liberalised parallel imports, depriving EU right holders of the ability to control the exploitation of the goods put on the market by the right holder or with their consent. Since Turkey is in a customs union with the EU, the application of a different exhaustion regime than the EU creates serious problems in relation to the free circulation of goods (Ibid, 29).
With respect to Ukraine, the European Commission provided the following comments on Ukrainian provisions on patentability criteria:
In the area of patents, three draft laws have beensubmitted to the Verkhovna Rada (the Parliament) in the last two years. These laws would introduce restrictive patentability criteria and deny protection for certain substances (salts, ethers, combinations, polymorphs, metabolites, etc.) and new uses of medicines of known medicinal product. Such exclusions would limit incentives to innovate in order to find more stable forms of compounds with longer shelf lives and dosages, which are safer or reduce side-effects. These draft laws are not in line with international standards and the European Patent Convention (Ibid, 31).
The Commission provided the following observations on Argentina’s patentability criteria and provisions for protecting undisclosed test and other data:
Several constraints on patent protection remain detrimental to EU companies, and research and innovation more broadly. Restrictive patentability criteria combined with difficulties to enforce patents granted, as well as the patent examination backlog make effective patent protection in Argentina very difficult, notably for pharmaceuticals, agro-chemicals and biotechnological innovations. As a result, Argentina is the only G20 member where the number of patent applications has decreased over the last two years. Measures to address the patent examination backlog have not borne fruit and it still takes up to 10 years to examine a patent in the pharmaceutical, agro-chemical and biotechnology fields. This backlog is reportedly due in part to the fact that INPI does not have enough specialised staff in these areas and limited financial autonomy.
Another area of continued concern reported by stakeholders is the absence of an effective system for protecting undisclosed test and other data generated to obtain marketing approvals for pharmaceutical and agrochemical products. The uncertain protection of regulatory test data deters innovators from bringing modern medicines to the Argentinian market (Ibid, 33)
In relation to Brazil, the Commission provided the following complaints on patent backlogs and ANVISA:
As regards patents, despite the increased number of patent registrations in 2018 and the efforts made by INPI to reduce the patent backlog, it still takes about 10 years for a patent application to be examined (13 years for information technologies and pharmaceutical patents) . Another area of continued concern reported by stakeholders is the interference of the Brazilian health authorities (ANVISA) in pharmaceutical patent applications before they have been examined by the INPI (Ibid, 35)
With respect to Ecuador, the Commission expressed concern that Ecuador’s local working requirement could trigger the issuance of a compulsory license:
Several constraints on patent protection remain. The IP Code appears to include a local working requirement that raises concerns in view of Ecuador’s compliance with Article 27 of the TRIPS Agreement. The contested provisions may oblige the patent holder to manufacture the patented product or use the patented process in the territory of Ecuador and non-compliance with the requirement may trigger the possibility of issuing a compulsory licence. These provisions appear to discriminate against imported patented products, in favour of locally produced ones (Ibid, 37).
In relation to Malaysia, the Commission noted:
With respect to pharmaceutical and agrochemical products, there have been no changes as regards Malaysia’s regulatory data protection system, where protection is not granted if a marketing authorisation is not applied for in Malaysia within eighteen months from the granting of the first marketing authorisation anywhere in the world (Ibid, 38).