From: James Love <james.love@cptech.org>
To: Ip-health <ip-health@lists.essential.org>
Subject: [Ip-health] Thailand compulsory license: Letter to Ambassador Susan C. Schwab (USTR)
Date: Wed, 13 Dec 2006 07:10:56 -0500


* Karan K. Bhatia, the Deputy U.S. Trade Representative, has recently
pressured the Thailand government over the compulsory license issued
on patents covering the AIDS drug efavirenz.

* This follows a long history of US pressure on Thailand concerning
patents and medicines.  See, for example:   Susannah Markandya,
"Timeline of Trade Disputes involving Thailand and access to
medicines," July 23, 2001. http://www.cptech.org/ip/health/c/thailand/
thailand.html, Tido von Schoen-Angerer, Jiraporn Limpananont, "US
pressure on Thailand," The Lancet, Vol 358, 20 July, 2001,  Dylan C.
Williams, "A Morality Tale on AIDS,"World Health: A Lethal Dose of
U.S. Politics , The Asia Times June 19, 2006 (Entered into the
Congressional Record by Congressman McDermott, http://www.house.gov/
mcdermott/sp060619.shtml).

This is a letter sent by CPTech yesterday to Ambassador Susan C.
Schwab of the USTR.  We discuss the nature of the dispute between the
USTR and the government of Thailand, clarify the trade rules
regarding prior negotiation when compulsory licenses are for
government uses, detail recent compulsory licenses in the United
States, and outline a more productive way to frame the global issue
of who pays for R&D on new medicines.  Jamie


http://www.cptech.org/ip/health/c/thailand/ustr12dec2006thailand.pdf
http://www.cptech.org/ip/health/c/thailand/ustr12dec2006thailand.html

Consumer Project on Technology
1621 Connecticut Avenue, NW, Suite 500, Washington, DC 20009

December 12, 2006

Ambassador Susan C. Schwab
United States Trade Representative
600 17th Street, N.W.
Washington, DC 20508
United States of America

Dear Ambassador Schwab:

We ask that the United States government not interfere with the Thai
government decision to issue a government-use license on patents
covering the AIDS drug efavirenz.

There is a concern that the USTR may have suggested to the Thai
government that the WTO TRIPS agreement requires prior negotiations
with patent owners before a compulsory license is issued. If so, the
assertion was wrong. Article 31 of the TRIPS does not require prior
negotiation before authorizing non-voluntary use of a patent, in any
of the following cases:

   1.  a national emergency or other circumstances of extreme urgency,
   2.  cases of public non-commercial use, or
   3.  where such use is permitted to remedy a practice determined
after judicial or administrative process to be anti-competitive

In this particular case, the non-voluntary use was for a government
owned entity that will provide medicines for a national program to
treat AIDS. Under the WTO rules, there is no obligation for prior
negotiation with patent owners in such cases.

There is also no requirement for prior negotiation with patent owners
under the various US bilateral (and regional) trade agreements the
United States has recently negotiated. The reason for this is
obvious. In the TRIPS and the bilateral or regional trade agreements,
these sections on prior negotiation were written to accommodate US
law and practice. Our own government is not required to negotiate
with patent owners or copyright owners before authorizing use by or
for the government.

The main United States statute regarding use of a patent in such
circumstances is 28 USC 1498. There is no obligation for prior
negotiation or prior notice with the patent owner under 28 USC 1498,
when a non-voluntary authorization is for the government./1 This
includes uses by third parties:

For the purposes of this section, the use or manufacture of an
invention described in and covered by a patent of the United States
by a contractor, a subcontractor, or any person, firm, or corporation
for the Government and with the authorization or consent of the
Government, shall be construed as use or manufacture for the United
States.

As trade officials charged with promoting US norms for intellectual
property protection, it is useful to review what those norms actually
are. The United State has a number of mechanisms to issue compulsory
licenses on patents. These include, in addition to 28 USC 1498, the
following:

    * Mandatory patent licenses under Section 308 of the Clean Air
Act (see: http://www.epa.gov/docs/fedrgstr/EPA-AIR/1994/December/
Day-30/pr-251.html). This statute is unfortunately not consistent
with the provisions of the US FTA agreements negotiated with Jordan
(2000), Singapore (2003), and Australia (2004).


    * Compulsory licenses for patents "affected with the public
interest" that are of primary importance in the production or
utilization of special nuclear material or atomic energy, for non-
military purposes (See 42 USC 2183). This statute is unfortunately
not consistent with the provisions of the US FTA agreements
negotiated with Jordan (2000), Singapore (2003), and Australia (2004).

    * The Bayh-Dole Act march-in rights for patents on inventions
conceived with federal funding,

    * Remedies to anticompetitive practices.

    * Compulsory licenses issued under the procedures set out by the
US Supreme Court in the recent eBay decision. This approach is
arguably not consistent with the provisions of the US FTA agreements
negotiated with Jordan (2000), Singapore (2003), and Australia (2004).

The following are a just few recent examples of the use of compulsory
licenses by the United States:


    * In 2001, DHHS Secretary Tommy Thompson used the threat to use
28 USC 1498 to authorize imports of generic ciprofloxacin, for
stockpiles against a possible anthrax attack.

    * In 2001, the Department of Health and Human Services used its
authority to exercise March-In rights for patents on stem cell lines
held by the Wisconsin Alumni Foundation as leverage to secure an open
license on those patents./2

    * In 2002, the US FTC ordered a compulsory cross-license of the
Immunex tumor necrosis factor ("TNF") patent, to Serono, including
the "freedom to practice in the research, development, manufacture,
use, import, export, distribution and sale of TNFbp-I Products and
certain glycosylated and nonglycosylated fragments, derivatives and
analogs thereof in the United States."

    * In 2002, the US Department of Justice required Microsoft to
license on reasonable and non-discriminatory terms intellectual
property rights in a number of different protocols needed to create
products that were interoperable with Microsoft Windows./3

    * In 2005, the FTC ordered a compulsory license of Guidant�s
intellectual property surrounding the RX delivery system for Drug-
Eluting Stents.

    * In 2005, the US Department of Justice cited its right to use
patents in 28 USC 1498 when it opposed injunctive relief for
infringement of the patents relating to the Blackberry email services
supplied to both the government and private firms that used the
Blackberry device to communicate with the government./4

    * In a November 2005 Congressional hearing, DHHS Secretary
Michael Levitt testified before the House of Representatives that he
had threatened to override the patents on treatments for Avian Flu if
companies had not expanded US production facilities./5 More recently,
the Centers for Disease Control threatened to use US Bayh-Dole "march-
in" rights to issue compulsory licenses on patents on reverse
genetics, which are needed to manufacture vaccines for avian flu.

    * In June 2006, a court granted Microsoft a compulsory license
to use two patents owned by z4 Technologies that relate to digital
rights management systems used by Microsoft for its Windows and MS
Office software programs./6

    * In July 2006, a court granted DirectTV a compulsory license to
use the Finisar patent on integrated receiver decoders (satellite set
top boxes), for a royalty of $1.60 per device./7

    * In August 2006, a court granted Toyota a compulsory license on
three Paice patents for hybrid transmissions, for a royalty of $25
per automobile./8

    * In September 2006, a court granted Johnson and Johnson a
compulsory license to use three of Jan Voda�s patents on guiding-
catheters for performing angioplasty./9

The point of this history lesson is to emphasize a point that some
USTR officials seem to overlook. The flexibilities in the TRIPS
agreement are there for good reasons. As evidenced by the many cases
described above, there are many situations where any country will
want to limit or create exceptions to the exclusive rights of a patent.

In the case of efavirenz patents, Thailand is clearly seeking to
create a policy that will strengthen competition among generic
suppliers, and enhance it's own capacity to manufacture AIDS
medicines. The benefits of this policy will be more pronounced over
time, as competition, economies of scale and learning by doing lead
to more efficient production by generic producers.

Looking more closely at Thailand, one can see why this is so
important. The United States has a much higher national income than
Thailand, but a much lower rate of HIV infection. When compared to
Thailand, the US has thirty-five times the income per HIV patient./10

                   United States      Thailand

Population (2005)      297 million    64 Million
GNI (2005 )           $13 trillion  $177 billion
GNI per capita (2005)
                      $ 43,740        $ 2,750
HIV+ population      1,200,000        580,000
Rate of HIV infection
(per 100,000)            404          906
GNI per HIV+ person  $10.8 million  $ .3 million

Because of US trade policies, including the 1993 agreement negotiated
by former USTR Mickey Kantor,/11 Thailand has been slow to provide
treatment to its very large population of AIDS patients. Until
November 2006, Thailand had not used the compulsory licensing
provisions that are permitted in the TRIPS. Thailand started its
treatment program by relying extensively on a handful of older AIDS
drugs that were off patent in Thailand. These products are not the
best that modern science offers. Many Thai AIDS patients suffer from
the predictable side effects associated with the older medicines. In
any case, over time, AIDS patients everywhere develop resistance, and
cannot be treated without access to new medicines.

Thailand will need sustainable access to second line AIDS drugs at
affordable prices. If Thailand does not issue compulsory licenses on
the patents for these medicines, it will have to limit access to
treatment. This will mean much suffering and death, an outcome that
is avoidable.

The United States should not pressure Thailand on the issue of
issuing compulsory licenses on patents for AIDS drugs. It should
accept the fact that Thailand, like all WTO members, has an
obligation to take measures to "promote access to medicines for all."/12

The United States and other high-income countries are increasingly
realizing that they too have to consider using compulsory licenses on
patents for medical inventions. For example, Canada and several
European countries have threatened to use compulsory licenses on the
Myriad patents for tests used to identify the risks of breast cancer
-- tests that are not widely available in the United States, because
of the high price./13 It is increasingly difficult for high-income
countries to afford the prices for new treatments for cancer or other
severe illnesses. With our own aging population, we cannot have a
sustainable program of access to the latest medical discoveries,
without having the ability to at least threaten to override the
exclusive rights of a patent.

The tough USTR positions on patents, pharmaceutical test data and
drug prices in trade negotiations are an attempt to deal with the
global problem of funding medical R&D. They focus entirely on
measures that raise drug prices. In our opinion, this is a mistake.
We believe the United States would be better off embracing a new
approach, one that focuses on sharing the costs of medical R&D -- not
just through high drug prices, but through any mechanism that
supports relevant R&D efforts. For example, we would benefit if our
trading partners would engage with the NIH to share the costs of
medical R&D for global health problems, provide sustainable funding
for the many new non-profit product development ventures, or if they
would fund new mechanisms to stimulate R&D, such as advanced
marketing commitments for new vaccines, or "prize funds" that reward
medical innovations that improve health outcomes./14

Last week the World Health Organization (WHO) convened the first
meeting of it's new Intergovernmental Working Group on Intellectual
Property Rights, Innovation and Public Health. At this first meeting,
thirty-three countries, including Thailand, supported work on a new
treaty or agreement to provide sustainable sources of R&D for global
health priority projects. It is in the interest of the United States
that other countries, rich and poor, do more to pay the costs of such
research. But for many of our trading partners, an agreement to
support medical R&D would be more appropriate and acceptable than a
trade framework that only seeks to raise drug prices.

As the new head of USTR, you have the opportunity to reframe our
trade policy so that it provides a rational, effective and ethical
solution to the global free rider problem. We need to ensure that
everyone contributes fairly to the costs of medical R&D, but in a
framework that ensures people can have access to new inventions.

I would like to meet with you and your staff to discuss these matters.

Sincerely,

James Love


Director
Consumer Project on Technology

Cc:

Karan K. Bhatia, Ambassador, Deputy U.S. Trade Representative

Victoria A. Espinel, Assistant U.S. Trade Representative for
Intellectual Property Rights

Barbara Weisel, Assistant U. S. Trade Representative for Southeast
Asia-Pacific and Pharmaceutical Policy

Senators Edward Kennedy, Hilary Clinton, Barack Obama, Sherrod Brown,
Bernie Sanders, Chuck Schumer, Diane Feinstein, Barbara Boxer, Trent
Lott, Chuck Grassley, Byron Dorgan, Richard Durbin, Ron Wyden,
Patrick Leahy

Speaker Nancy Pelosi, Representatives Charles Rangel, Henry Waxman,
John Dingell, Tom Allen, Janice Schakowsky, Rahm Emanuel, Dan Burton,
Rosa DeLauro, Jo Ann Emerson, Dennis Kucinich, Barbara Lee, Sander
Levin, Jim McDermott, Maxine Waters, Peter Stark, Charles Gonzalez,
John Lewis, Xavier Becerra, John Larson, Linda Sanchez, Lloyd Dogget,
Howard Berman, Lois Capps, Joe Crowley, Mark Udall, Betty McCollum,
Raul Grijalva, Hilda Solis

Dr. Margaret Chan, Director-General Elect, World Health Organization

Dr. Howard Zucker, Assistant Director-General, World Health Organization

Dr Suwit Wibulpolprasert, Senior Advisor on Health Economics,
Ministry of Public Health, Thailand

Cecilia Oh, UNDP

---------FOOTNOTES------------

1/ TRIPS Article 31.b states "In the case of public non-commercial
use, where the government or contractor, without making a patent
search, knows or has demonstrable grounds to know that a valid patent
is or will be used by or for the government, the right holder shall
be informed promptly." There is a similar provision in NAFTA. NAFTA
Article 1709(10)(b) also requires that patent owners be notified
"promptly," but not before a compulsory license is issued. See also:
Executive Order 12889, Implementation Of The North American Free
Trade Agreement, December 28, 1993:

Sec. 6. Government Use of Patented Technology. (a) Each agency shall,
within 30 days from the date this order is issued, modify or adopt
procedures to ensure compliance with Article 1709(10) of the NAFTA
regarding notice when patented technology is used by or for the
Federal Government without a license from the owner, except that the
requirement of Article 1709(10)(b) regarding reasonable efforts to
obtain advance authorization from the patent owner:

(1) is hereby waived for an invention used or manufactured by or for
the Federal Government, except that the patent owner must be notified
whenever the agency or its contractor, without making a patent
search, knows or has demonstrable reasonable grounds to know that an
invention described in and covered by a valid United States patent is
or will be used or manufactured without a license; and

(2) is waived whenever a national emergency or other circumstances of
extreme urgency exists, except that the patent owner must be notified
as soon as it is reasonably practicable to do so.

2/ September 5, 2001, "National Institutes of Health and WiCell
Research Institute, Inc.,

Sign Stem Cell Research Agreement," http://www.nih.gov/news/pr/
sep2001/od-05.htm.

3/ United States Of America, Plaintiff V. Microsoft Corporation,
Defendant. Civil Action No. 98-1232 (CKK), FINAL JUDGMENT, (November
12, 2002). For a detailed account of work to implement the order,
see: INTERIM JOINT STATUS REPORT ON MICROSOFT'S COMPLIANCE WITH THE
FINAL JUDGMENTS, http://www.usdoj.gov/atr/cases/f201300/201386.htm

4/ The United States� Statement Of Interest, November 2005., NTP,
INC., Plaintiffs, V. RESEARCH IN MOTION, LTD., Defendant., Civil
Action No. 3:01CV767.

5/ See video excerpts from November 8, 2005 Hearings of the
Subcommittee on Health of the House Committee on Energy and Commerce,
http://www.cptech.org/ip/health/tamiflu/hearingexcerpts11082005.html

6/ This case was decided under the new US Supreme Court standard for
granting injunctions on patents. See eBay Inc. v. MercExchange,
L.L.C., 126 S. Ct. 1837, 1839-1841 (U.S. 2006)).

7/ Ibid.

8/ Ibid.

9/ Ibid.

10/ Assuming that the ability to pay is linear in terms of income, a
second line AIDS drug that is sold for $1,000 in Thailand would be
equivalent to a product selling for $70,000 in the United States.
With health care budgets rising faster than incomes, the impact is
even worst for the lower income country.

11/ http://www.cptech.org/ip/health/c/agreements/thai-1994-ip.html.
See also: Susannah Markandya, Timeline of Trade Disputes involving
Thailand and access to medicines, July 23, 2001. http://
www.cptech.org/ip/health/c/thailand/thailand.html.

12/ Paragraph four of the 2001 Doha Declaration on TRIPS and Public
Health.

13/ The tests are more widely available in countries that have
shipped patient tests to offshore testing labs where patents are not
in effect.

14/ Aidan Hollis. An Optional Reward System for Neglected Disease
Drugs, 2005; Joseph Stiglitz, Give Prizes not Patents. New Scientist,
September 16, 2006; Thomas Pogge on Online Opinion. "A New Approach
to Pharmaceutical Innovations," June 21, 2005; James Love. "Measures
to Enhance Access to Medical Technologies, and New Methods of
Stimulating Medical R&D." Paper for the WIPO Open Forum on the draft
Substantive Patent Law Treaty (SPLT), March 2006.

---------------------------------
James Love, CPTech / www.cptech.org / mailto:james.love@cptech.org /
tel. +1.202.332.2670 / mobile +1.202.361.3040

"If everyone thinks the same: No one thinks."  Bill Walton"

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