MERCADO

One issue that has generated significant controversy is whether failure to meet local working requirements (which is a ground for granting compulsory licences under the Paris Convention), can be a valid ground for compulsory licensing under TRIPS. The argument that TRIPS does not recognise local working requirement as a ground for compulsory licensing is based on the provision of TRIPS Article 27(1) which states that patents shall be available ‘without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced. The pertinent question is whether this provision overrides compulsory licensing under the Paris Convention. Article 2(1) of TRIPS seems to confirm the fact that Members rights under the Paris Convention are still very much at large as it provides that Members shall ‘comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967)’.69

Article 2(2) further provides that nothing in the TRIPS Agreement shall derogate from existing obligations that Members may have to each other under the Paris Convention.

Consequently, it has been argued that TRIPS Article 27.1 does not prohibit Members from imposing a working requirement in relation to patents. Rather, what it prohibits is Members obliging patentees to work the patent in their territories; thus importation would be sufficient evidence of compliance with working requirement.70Further, by including international

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TRIPS AgreementArticle 31(k); By Article 31(i) & (j),the legal validity of any decision relating to compulsory licensing shall be subject to judicial or administrative review by a distinct higher authority in the country issuing it. Any decision relating to remuneration for granting compulsory licensing shall equally be subject to judicial or administrative review.

68

TRIPS AgreementArticle 31 (l).

69_{See M Halewood, ‘Regulating Patent Holders: Local Working Requirements and Compulsory Licenses at}

International Law’ (1997) 15(2) Osgoode Hall Law Journal 243, 255.

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29 exhaustion of rights in TRIPS,71 developing countries would seem to have forfeited the right to rely on the local working requirement which would have been available under the Paris Convention.72 Alternatively, some commentators have expressed the view that although the TRIPS Agreement incorporates two seemingly contradictory provisions, the fact remains that Article 5(A), (2) of the Paris Convention dealing with local working requirements has been unequivocally incorporated into the TRIPS Agreement. Consequently, a holistic approach to the interpretation of the relevant provisions would therefore support the conclusion that the right of states to impose local working requirements is still very much at large under the TRIPS Agreement.73

It is submitted, however, that the language of Article 27.1 of TRIPS clearly prohibits countries that are signatory to TRIPS from imposing local working requirements in relation to the grant of patents. The resulting question is whether such countries may, where they are parties to the Paris Convention, rely on the local working requirements in the Paris Convention to derogate from the language of Article 27.1. It does appear that the combined effect of Article 2.1 and 2.2 of TRIPS is to preserve the rights and obligations of parties under the Paris Convention.

Two cases involving local working requirements have come before the WTO Dispute Settlement Board. In the first case, Brazil- Measures Affecting Patent Protection,74 the US disputed the legitimacy of Article 68(1) (I) (II) of the Brazilian Industrial Property Code of 1996, which contains a local working requirement. In the second case, United States- US Patent Code,75 Brazil contended that Chapter 18 of the US Patents Act which requires local working of patented inventions obtained with federal assistance runs afoul of the TRIPS Agreement, and Articles III and XI of the GATT 1994. Both cases were settled between the two parties outside the WTO dispute resolution system and as a result, the WTO Dispute Settlement Board has not had an opportunity to make a pronouncement on the validity of local working requirement under the TRIPS Agreement.

Kevin McCabe notes that local working requirements are unpopular for manufacturers,

71

The concept of exhaustion of rights is explored in chapter four below.

72

Pires de Carvalho, above n 5, 198.

73

Mercurio and Tyagi above n 22, 275, 325-26.

74

Brazil- Measures Affecting Patent Protection, WTO DocWT/DS199/1 (8 June 2000).

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30 particularly in the field of biotechnology. He argues that companies from developed countries seldom manufacture patented products in developing countries and imposing local working requirements would force them to have a facility in virtually every country, a situation that would be quite burdensome and onerous for foreign companies.76 While it will be impracticable to attempt to compel companies to work their inventions in every country, it should nonetheless be open to countries to grant a compulsory licence for inventions that are not being worked in their territories where they deem that to be in their national interest. A manufacturer who feels such compulsory licence will be significantly injurious to his or her interest must therefore be willing to prevent compulsory licensing by working the patents locally.

Leges posteriors priores contrarias abrogant is a principle of statutory interpretation to the effect that a latter statute shall be deemed to overrule any earlier statute that contradicts it.77 This principle seems to have received legislative articulation in international law by virtue of Article 30(2) and (3) of the Vienna Convention on the Law of Treaties which provide that when all parties to an earlier treaty are also parties to a later treaty and the later treaty does not specify that it is subject to or not to be considered as incompatible with the earlier treaty, then the earlier treaty shall only have the force of law to the extent permitted by the later treaty. Article 30(4) of this Treaty goes further, to provide that when the parties to the later treaty do not include all the parties to the earlier one, as between States Parties to both treaties, the later treaty shall prevail to the extent that it is not subject to the earlier treaty. On the other hand, as between a State party to both treaties and a State party to only one of the treaties, the treaty to which both States are parties governs their mutual rights and obligations.78

Having regards to the fact that Article 2 of TRIPS expressly provides that Members shall not derogate from existing obligations under the Paris Convention, it follows that by virtue of Article 30(2) of the Vienna Convention on the Law of Treaties, TRIPS Members that are signatory to the Paris Convention reserve the right to use lack of local working requirements as a ground for granting compulsory licences. While there is a clear contradiction between the

76_{K W McCabe, ‘The January 1999 Review of Article 27 of the TRIPS Agreement: Diverging Views of}

Developed and Developing Countries toward the Patentability of Biotechnology’ (1998) 6 Journal of Intellectual Property Law 41, 62.

77

B A Garner (ed.) Black’s Law Dictionary (Thomson Reuters 9th ed., 2009) 1843.

78

Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 UNTS 331 (entered into force 27 January 1980) art 30 (4).

31 TRIPS Agreement and the Paris Convention in relation to the right to impose local working requirements for patents, it does seem that the principle that a latter law supersedes any contrary provision in an earlier law does not apply here. This is because of the saving provision in TRIPS Article 2.1 which clearly obliges Members of the WTO to comply with the relevant provisions of the Paris Convention in relation to Parts 1 through IV of TRIPS. Article 2.2 further reinforces the position that nothing in Parts 1 to IV of the TRIPS Agreement shall derogate from existing provisions under the Paris Convention. It is thus submitted that the right of countries to impose local working requirements have been sufficiently preserved, either intentionally or through sheer inadvertence, at least in so far as parties who are Members of the Paris Convention are concerned.

1.2.2. TRIPS Compulsory Licensing Regime– Pre Doha Developments