IP Views

Observations on Proposed Amendments to Patent and Trademark Laws

by: Michael Z. Untalan and Karen O. Amurao-Dalangin

At the launch of the Doha Development Agenda in Doha in November 2001, the World Trade Organization (WTO) members agreed to find a solution giving developing countries with no manufacturing capacity the possibility to import patented drugs from exporting countries. A temporary solution was found in August 2003. Through a decision adopted on 6 December 2005, it has now been converted into a permanent solution by an agreement of the WTO members to amend the TRIPS Agreement.

The amendment of the TRIPS Agreement will allow certain countries to export patented drugs to other countries with no manufacturing capacity in the pharmaceutical sector, by making effective use of compulsory licenses. It includes safeguards against abuse and trade diversion and rules to ensure transparency. The amendment also contains provisions on transfer of technology and regional cooperation. WTO members will have until 1 December 2007 to ratify the amendment in accordance with their national laws. The decision is the final piece of the jigsaw to make the Doha Declaration on the TRIPS Agreement and Public Health fully operational.

This decision shows that the WTO rules are flexible and that the WTO can adapt its rule book to answer humanitarian concerns. It gives countries in need a permanent solution to the problem of crucial access to important medicines to treat pandemics.

In keeping with the DOHA Declaration and the subsequent WTO decisions, Senator Manuel A. Roxas II proposes to amend Republic Act No. 8293 (1998) or the Intellectual Property Code of the Philippines ("IP Code") through Senate Bill No. 2139 ("SB No. 2139"). The Bill's primary objective in amending the IP Code is to lower drug or medicine prices. It seeks to make patent and trademark laws more responsive to the health care needs of the Filipino people by legitimizing the (a) early development of patented medicines; (b) parallel importation of medicines; (c) exemption of government importation, manufacture, sale or distribution of medicines from the standard compulsory licensing requirements; (d) government importation, manufacturing, sale or distribution of drugs or medicines with trademarks and trade names; and by (e) disallowing new uses or derivatives of a patented drug to be covered by a separate or new patent.

SB 2139 further seeks to (a) shield government importation, manufacture, sale and distribution of medicines from temporary restraining orders or injunctions; (b) provide legal protection for the concerned government officials from all kinds of suits for acts done in good faith; and (c) vest original and exclusive jurisdiction to the Intellectual Property Office (IPO) over cases involving the government's importation and issuance of compulsory licenses for medicines, including trademark cases filed in relation thereto.

Intellectual Property Rights Protection vis-a-vis Measures to Protect Public Health

Under the Constitution, the State is mandated to protect inventors' rights to their intellectual property and creations. The State must "protect and secure the exclusive rights of scientists, inventors, artists, and other gifted citizens to their intellectual property and creations, particularly when beneficial to the people, for such period as may be provided by law."1 Intellectual property protection in itself provides social and technological benefits. It is designed to encourage inventors and creators because they can expect to earn some future benefits from their creativity; hence, encouraging new inventions such as new medicines. The State, however, has a legitimate concern about its effect on prices, particularly on drugs or medicines. The State is also constitutionally mandated to "protect and promote the right to health of the people"2 and to "adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost."3 Thus, the need to create a balance between two important areas of public concern, namely, the right of the people to health and the exclusivity of rights of the patent owners.

Like many other developing countries, our State seeks to implement measures to protect public health, specifically to promote access to medicines for all. Among these measures are compulsory licensing, parallel importation and the early development of medicines.

The WTO similarly recognizes its member countries' right to protect public health. During the Doha Ministerial Conference in November 2001, the WTO adopted a separate declaration on the TRIPS Agreement and Public Health ("Doha Declaration") where it underscored the member countries' ability to use the "flexibilities" that are built into the TRIPS Agreement, including compulsory licensing and parallel importation.4

These flexibilities are found in the following articles of the TRIPS Agreement:

Article 7. Objectives. The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of right and obligations.

Article 8. Principles.

1.Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

2.Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

Article 30. Exceptions to Rights Conferred. Members may provide exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.

Compulsory licensing, parallel importation, early development of patented medicines and government use are WTO-recognized "exceptions" to patents rights. They come under the above flexibilities in the TRIPS Agreement which allow governments to fine tune the intellectual property rights protection granted in order to meet social goals, subject to certain limitations and conditions to ensure that intellectual property rights protection remain in place and to prevent abuse of such rights.

We take exception, however, to the validity of some of the proposed amendments, such as disallowance of new patents for new uses, liberalization of compulsory licensing requirements, exemption of government importation, manufacture and distribution of branded medicines from trademark rights, and the absolute prohibition against injunctions.

Apparently, SB No. 2139 proposes to amend the IP Code to take full advantage of the flexibilities and other measures that are permitted by the TRIPS Agreement in pursuit of the goal of promoting access to medicines for all. Whether or not the proposed amendments are consistent with, and comply with the criteria established by, the TRIPS Agreement, the WTO rules, and other principles governing the current international trend are considered in the following discussion.

I. Section 21 disallows new patents for new uses, or molecules or compounds of a patented invention

The proposed amendment of Section 21 of the IP Code considers new uses or molecules or compounds of a patented invention as part of the original patent; hence, not allowed for new patents. This amendment is intended to prevent "evergreening" of patents. "Evergreening" is a mode of perpetuating a patent's term (before its expiration) by seeking separate patent protection for a patented product's "multiple attributes" or on "updates" to the patent. The strategy is coursed through effective and clever use of permissible patent prosecution routes.

It is an underlying principle of patent law that if a product or process, be it a chemical composition or a method of manufacture or use, is already known, then it may not be patented. "Knowledge" in this context is anything which has been put in the public domain anywhere in the world. Therefore, under this principle, if a chemical compound is known, it would not be possible to patent the compound itself, even if new properties of that compound are subsequently discovered.

Note also that the method of medical treatment is a non-patentable subject matter.5 So that if an invention relates to a known substance or composition which is to be used in a method of treatment of a human or animal body by surgery, therapy or diagnosis, the method of treatment cannot be patented even if the use of that substance or composition in any such method does not form part of the state of the art.

The method of medical treatment exclusion to patentability has historically caused problems where a known substance, already used to treat a particular medical condition, is found to be useful in treating some other medical condition, this second use having been previously unrecognized. The substance itself cannot be patented because it is not new. As most recently confirmed in Pfizer Inc. v. The Commissioner of Patents, [2005] 1 NZLR 362, the method of treating the particular medical condition cannot be patented either. Without patent protection, there may be little incentive to investigate the properties of existing pharmaceuticals to determine if they have other, previously unknown, medical uses. Hence, a specific derogation from the absolute novelty requirement has been devised.

In the European community, where methods of medical treatment are also non-patentable, the Swiss-type claim6 was devised to enable second medical uses to gain some patent protection. These claims were termed "Swiss-type" claims6 since they were first allowed in a 1984 decision of the Swiss Federal Intellectual Property Office. If the use of the compound for the specified therapeutic purpose is new, then such claim is considered to be novel even if the same substance had previously been used in medicine for a different purpose. The protection of second therapeutic use by Swiss-type claims was allowed by the Commissioner of Patents in a Practice note which appeared in Patent Office Journal 1412 on 7 July 1997, and was approved by the Court of Appeals in Pharmaceutical Management Agency Ltd. v. Commissioner of Patents.7

Research tends not to stop at one pharmaceutical activity and a particular pharmaceutical may, due to subsequent research, be found to have two or more pharmaceutical activities. To take an every day example, the drug Aspirin was originally marketed as a drug to alleviate headaches. It was subsequently discovered also to benefit those suffering from some form of heart disease. The research which goes into discovering such second medical uses can be enormous and the results may be no less worthy of patent protection than the original research which established the first pharmaceutical use. The exemption, however, does not allow patenting of these products themselves even if only in relation to treating the new disease.

In fact, under the United States law, it is specifically provided that eligible processes include "a new use of a known process, machine, manufacture, composition of matter, or material."8 Thus, even if a composition is old, a process using it in a new and unobvious way may be patentable.9 In evaluating the patentability of new use claims, the question is whether the claimed method of use would have been obvious; it is not pertinent whether the compositions that are the subject of the use are themselves known or new or unobvious. The real question is whether the newly discovered utility would have been obvious. Obviousness requires some relationship between the use taught by the prior art and the use discovered by the patent applicant.10

A new use of an old product or material must be claimed as a process though, and not as a product; an old product, being old, can never be patented as such.11 However, if the product must be altered, even only slightly, to adapt it to the new use, then the invention may be patentable in a product context as well, provided of course that it can survive the obviousness inquiry.12 It is also a general rule that merely discovering and claiming a new benefit of an old process cannot render the process again patentable.13

This is in consonance with Article 54 (5) of the TRIPS Agreement which states that any substance or composition, comprised in the state of the art, for use in a method of medical treatment, shall not be excluded from patentability, provided that such use is not comprised in the state of the art.

In view of the above, we believe that the proposed amendment of Section 21 of the IP Code, which is intended to exclude the so-called "Swiss-type" claims from patentability, contravenes the TRIPS Agreement. Such exclusion may possibly gain reproach from other countries and may even invite action against the Philippines before a WTO Panel for TRIPS violation. Indeed, if the development cannot be patented then there would be no protection against others using that finding for their own profit. Without the benefit of patent protection, new research into further uses of known drugs has less incentive.

II. Sections 72.3 and 72.4 allow the early development of patented drugs ("Bolar" Provision)

Under Article 30 of the TRIPS Agreement, governments can make "limited exceptions" to patent rights, provided certain conditions are met. To qualify as a valid exception under Article 30, the following criteria must be met: (1) the exception must be "limited'; (2) the exception must not "unreasonably conflict with the normal exploitation of the patent'; (3) the exception must not "unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.' The three conditions are cumulative, each being a separate and independent requirement that must be satisfied.

Section 72 of the IP Code provides for certain limitations/exceptions to patent rights. Sections 72.3 and 72.4, however, are sought to be amended in order to include "early development of patented medicines" as among the limitations/exceptions to patent rights. Thus:

72. Limitations of Patent Rights. - The owner of a patent has no right to prevent third parties from performing, without his authorization, the acts referred to in Section 71 hereof in the following circumstances:

. . . . . . . . . . . .

72.3. Where the act consists of making or using exclusively for experimental use of the invention for scientific purposes or for commercial purposes that do not unreasonably conflict with a normal exploitation of the patent and that do not unreasonably prejudice the legitimate interests of the patent owner, taking into account the legitimate interests of such third parties.

72.4. Where the act includes testing, using, making or selling the invention including any data related thereto, solely for purposes reasonably related to the development and submission of information required under any law of the Philippines or of another country that regulates the manufacture, construction, use or sale of any product.

Note that the conditions set forth in Section 72.3 for the use of patented inventions for commercial purposes merely adopted the second and third requirements of Article 30 of the TRIPS Agreement. While the second and third conditions both relate to the economic impact of the exception, the first condition - the "limited" character of an exception - must be assessed with respect to their impact on the rights of the patent owner. To determine whether a particular exception constitutes a "limited' exception, the extent to which the patent owner's rights have been curtailed must be measured.14

Sections 72.3 and 72.4 are incorporated in order to allow the early development of patented drugs. Some countries allow manufacturers of generic drugs to use the patented invention to obtain marketing approval - for example from public health authorities - without the patent owner's permission and before the patent protection expires. The generic producers can then market their versions as soon as the patent expires. This provision is called the "regulatory exception" or "Bolar" provision.

The Bolar provision is one of the most widely adopted Article 30-type exceptions in national patent laws - the exception under which use of the patented product for scientific experimentation, during the term of the patent and without consent, is not an infringement. It is often argued that this exception is based on the notion that a key public policy purpose underlying patent laws is to facilitate the dissemination and advancement of technological knowledge. Thus, to allow the patent owner to prevent experimental use during the term of the patent would frustrate part of the purpose of the requirement that the nature of the invention be disclosed to the public. To the contrary, the argument concludes, under the policy of the patent laws, both society and the scientist have a "legitimate interest' in using the patent disclosure to support the advance of science and technology.15 It has thus been upheld as conforming to the TRIPS Agreement in a WTO dispute ruling. In its report adopted on 7 April 2000, a WTO dispute settlement panel said Canadian law conforms to the TRIPS Agreement in allowing manufacturers to do this.16

The counterpart provision of Section 72.4 of the IP Code in the United States provides:

It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention . . . . solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs . . . .17

Citing the above provision, the United States Supreme Court, in Merck KGAA v. Integra LifeSciences I, LTD., et al.18 ruled that uses of patented inventions in preclinical research, the results of which are not ultimately included in a submission to the Food and Drug Administration (FDA) are not infringing. It thus appears that the Bolar provision is an internationally recognized limitation to patent rights.

From another point of view, it is observed that a central objective of any patent law system is to provide incentives for inventors who may expend considerable resources on developing new technology. Patent law rewards innovation by granting patent owners the right to license other people to use their invention for up to 20 years from the date the patent application is filed. In the medical context, however, the real term of patent protection is often much less because a medical product patent normally requires years to be examined and granted, and then more years to be evaluated by the relevant government agency for safety approval. Therefore, the real protection after a new medical product comes to market is often much less than 20 years.19

The patent system is designed to allow the patent owner to have some strictly limited time to recoup the investment expended in developing the new invention. The cost of clinical trials is often the largest expense in the development of a viable new drug. Unless the research results of such clinical trials are protected, other drug companies would be able to unfairly compete by referring to the data without having to contribute to the cost of the extensive tests. Systems to ensure that drug innovators who generate clinical trial data obtain some limited term of exclusivity to protect the results of their clinical trials from unfair commercial use exist in many countries. These systems are frequently termed "data protection" or "data exclusivity," but might better be characterized as laws requiring each company to "do its own homework."20 In this respect, it may be said that allowing the early development of patented medicines unreasonably conflicts with the normal exploitation of the patent and unreasonably prejudices the legitimate interests of the patent owners.

We believe though that the noble purpose of allowing the early development by other drug companies of patented drugs would weigh more than the commercial rights and interests of patent owners.

III. Section 72.1 adopts the international exhaustion of rights to legitimize parallel importation of medicines

The IP Code, at present, adopts the national exhaustion of patent rights as the "right to import" is among the rights conferred by a patent upon its owner. The law is now sought to be amended by adopting international exhaustion of rights with respect to medicines for the purpose of allowing parallel importation of drugs. The issue of the exhaustion of intellectual property rights is a matter of state policy which governments are free to decide. There is nothing in the TRIPS Agreement which may be used to address this issue.

Parallel imports involve the import and resale in a country, without the consent of the patent holder, of a patented product that was put on the market of the exporting country by the patent holder.21 The underlying concept for parallel imports is based on the principle of exhaustion of rights. This principle is premised on the fact that where the patent holder has been rewarded through the first sale or distribution of the product, he/she no longer has the right to control the use or resale of the product.22 It would also be in line with WTO's trade liberalization objective that from the moment a product is marketed, the patent holder can no longer control its subsequent circulation.23

Parallel importation is implemented in many countries, particularly in developing countries which have no manufacturing facilities. Parallel importing is a useful policy tool by which developing countries will be able to provide quick access to life-saving drugs, and to respond speedily to a health crisis or need. In this regard, parallel importation is considered a legitimate measure which WTO Members are permitted to adopt to protect public health and nutrition.24

No provision in the TRIPS Agreement prohibits parallel importation. Specifically, Article 6 thereof allows each member country the freedom to incorporate the principle of international exhaustion of rights - the underlying justification for parallel imports - in its national legislation. It further states that members are not subject to the WTO dispute settlement system for disputes relating to exhaustion of rights. In other words, even if a country allows parallel imports in a way that another country might think otherwise, this cannot be raised as a dispute in the WTO unless fundamental principles of non-discrimination are involved. 25

Note, however, that Article 31 (f) of the TRIPS Agreement states that products made under compulsory license must be "predominantly for supply of the domestic market." This applies directly to countries that can manufacture drugs - it limits the amount they can export when the drug is made under compulsory license. And it has an indirect impact on countries unable to make medicines and therefore wanting to import generics. They would find it difficult to find countries that can supply them with drugs made under compulsory licensing. Paragraph 6 of the Doha Declaration relates exactly to this issue, assigning further work to the TRIPS Council - to sort out how to provide extra flexibility, so that countries unable to produce pharmaceuticals domestically can import patented drugs made under compulsory licensing.26

The problem was resolved on 30 August 2003 when WTO members agreed on legal changes to make it easier for countries to import cheaper generics made under compulsory licensing if they are unable to manufacture the medicines themselves. The decision waives the exporting countries' obligations under Article 31 (f) - any member country can export generic pharmaceuticals products made under compulsory licenses to meet the needs of importing countries, provided certain conditions are met. These conditions aim to ensure that beneficiary countries can import the generics without undermining patent systems, particularly in rich countries. They include measures to prevent the medicines from being diverted to the wrong markets. And they require governments using the system to keep all other members informed, although WTO approval is not required.

Recently, or on 6 December 2005, the WTO members approved amendments to the TRIPS Agreement, making permanent the 30 August 2003 "waiver" of exporting countries' obligations under Article 31 (f). The waiver will now be formally built into the TRIPS Agreement when two thirds of the WTO's members have ratified the change. They have set themselves until 1 December 2007 to do this. The waiver remains in force until then.

As with the 2003 waiver, the permanent amendment will allow any member country to export pharmaceutical products made under a compulsory license for this purpose. As a corollary, all WTO member countries will become eligible to import under this amendment. Thus, our government is now seeking to amend the IP Code to allow the Philippines to import pharmaceutical products which are manufactured in other countries under compulsory licensing. Section 72.1 of the IP Code is proposed to be amended as follows:

72.1. . . . . Provided that, with regard to drugs or medicines, the limitation on patent rights shall apply after a drug or medicine has been introduced anywhere in the world by the patent owner, or by any party authorized to use the invention.

Under this proposed amendment, parallel importation can be undertaken where: (1) the patented product has been marketed in another country by the patent holder; (2) the product is sold under a compulsory license; or (3) the product is marketed in another country through legitimate means without the authorization of the patent holder, such as where the product is not protected in the exporting country.27

Interestingly, a group of developed countries are listed as announcing that they will not use the system to import. A number of other countries announced separately that if they use the system as importers it would only be for emergencies or extremely urgent situations. These countries are: Hong Kong China, Israel, Korea, Kuwait, Macao China, Mexico, Qatar, Singapore, Chinese Taipei, Turkey and United Arab Emirates. So far, Norway, Canada and India have informed the WTO that their laws are complete, while the Republic of Korea and the European Union (EU) have said their new laws are on the verge of coming into force.28

A separate statement by General Council chair Amina Mohamed, Kenya's ambassador, describes members' "shared understanding" on how the decision is interpreted and implemented. It says the decision will be used in good faith in order to deal with public health problems and not for industrial or commercial policy objectives, and that issues such as preventing the medicines getting into the wrong hands are important.29

We therefore believe that no legitimate objection may be raised against the validity of allowing parallel importation of medicines in our country. As stated by WTO Director-General Pascal Lamy: "The agreement to amend the TRIPS provision confirms once again that members are determined to ensure the WTO's trading system contributes to humanitarian and development goals as they prepare for the Hong Kong Ministerial Conference."

IV. Section 74.3 exempts government importation, manufacture, sale and distribution from the standard requirements of compulsory licensing

Although the term "compulsory licensing" does not appear in the TRIPS Agreement, it is nevertheless among the flexibilities that are written into the Agreement. Article 31 of the TRIPS Agreement refers to "other use without authorization of the right holder." This phrase seems to cover compulsory licensing since "other use" includes use by governments for their own purposes. Article 31 states:

Where the law of a member allows for other use of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government, the following provisions shall be respected:

. . . . . . . . . . . .

[b] such use may only be permitted if, prior to such use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. This requirement may be waived by a Member in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. In situations of national emergency or other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable. 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;

[c] the scope and duration of such use shall be limited to the purpose for which it was authorized, and in the case of semi-conductor technology shall only be for public non-commercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive;

. . . . . . . . . . . .

[h] the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization;

. . . . . . . . . . . .

[k] Members are not obliged to apply the conditions sets forth in subparagraphs [b] and [f] where such use is permitted to remedy a practice determined after judicial or administrative process to be anti-competitive. The need to correct anti-competitive practices may be taken into account in determining the amount of remuneration in such cases. Competent authorities shall have the authority to refuse termination of authorization if and when the conditions which led to such authorization are likely to recur.

Governments can issue compulsory licenses to allow other companies to make a patented product or use a patented process under license without the consent of the patent owner, but only under certain conditions aimed at safeguarding the legitimate interests of the patent holder. Note that these conditions apply to both government use and other use. Under the same provision, such requirements or conditions may be waived specifically in cases of national emergency or other circumstances of extreme urgency or in cases of public non-commercial use.

The conditions set forth in Article 31 of the TRIPS Agreement are incorporated in Section 95.1 of the IP Code which provides that: "The license will only be granted after the petitioner has made efforts to obtain authorization from the patent owner on reasonable commercial terms and conditions but such efforts have not been successful within a reasonable period of time."

Section 74 of the IP Code, which specifically allows use of invention by the government without the patent owner's consent, subjects such use to the same conditions and requirements for compulsory licensing (Sections 95 to 97 and 100 to 102, IP Code).30

At present, the instances where the requirements for compulsory licensing under the IP Code are dispensed with are the following: [1] anti-competitive practices; [2] national emergency or other circumstances of extreme urgency; and [3] public non-commercial use.31 SB No. 2139 seeks to extend these exceptions to government importation, manufacture, sale and distribution of medicines aimed to protect public health. Thus:

74.3. Subject to the control, supervision and determination of the respective Secretaries of the Department of Health and Department of Trade and Industry, the importation, including parallel importation, or manufacturing or sale or distribution by the government or any of its authorized representatives of drugs or medicines to protect public health shall be immediately executory only upon filing of an ex parte notice before the Intellectual Property Office (IPO). This procedure shall be an exception to the application of the standard requirements of compulsory licensing . . . .

This exception, which merely requires that the same be for the "protection of public health," appears too broad and general. Article 31 [b] of the TRIPS Agreement limits the exceptions to three circumstances, namely, [1] anti-competitive practices; [2] national emergency or other circumstances of extreme urgency; and [3] public non-commercial use. The second exception, where public health concerns may be categorized, must be justified by the extremely urgent and emergency nature of the circumstances. Absent such national emergency or extreme urgency of the situation, the government must first attempt to negotiate with the patent owner to obtain reasonable commercial terms. It is only when such efforts failed that the government could proceed with the importation, manufacture, sale and distribution of the patented medicines without the patent owner's consent.32

Compulsory licensing is in itself a curtailment of the patent owner's rights; hence, an exception to patent rights. Article 31 of the TRIPS Agreement provided for certain conditions before the exception may be exercised. These conditions work as a balance between the exception and the legitimate interests of the patent holders. The conditions may only be waived if justified by the circumstances. The TRIPS Agreement specifies the grounds or circumstances when the conditions may be waived. Hence, national legislation should limit these grounds to those specified in the TRIPS Agreement or to circumstances of similar nature.

The inclusion of "public health protection" as an additional ground for exemption from the operation of the compulsory licensing requirements appears to be inconsistent with the TRIPS Agreement. At the very least, Section 74.3 must specify the parameters or circumstances that would justify the operation of this provision.

The flexibilities that are found in the TRIPS Agreement must not be used to undermine intellectual property rights protection. Article 31 [g] of the TRIPS Agreement provides that: "The authorization for such use shall be liable, subject to adequate protection of the legitimate interests of the persons so authorized, to be terminated if and when the circumstances which led to it cease to exist and are unlikely to recur." The provisions of Section 74.3 appear to be far from complying with the requirements and conditions of the TRIPS Agreement.

V. Section 166.2 allows government importation, manufacture, sale and distribution of branded medicines, and excepting the same from the operation of trademark rights

Trademark laws bar a third party's unauthorized use of trademarks and trade names on goods or services that are identical or similar to those in respect of which the trademark is registered.33 Section 166 of the IP Code further prohibits the entry at any customhouse of the Philippines any imported merchandise which bears or copies the name of any domestic product, manufacturer, or dealer, or which shall copy or simulate a registered mark.34

SB No. 2139 seeks to amend Section 166 by providing an exception to trademark rights as follows:

Section 166.2. The importation, manufacturing, sale or distribution by the government of drugs or medicines with trademarks and trade names for the protection of public health as provided in Section 74.3 of this Act shall be a limited exception to the rights conferred by trademarks and/or trade names . . . .

Section 166.2 appears to allow the government or any of its authorized representatives not only to import branded medicines, but also to manufacture these medicines and to sell and distribute them under similar brands or marks. No valid justification exists for such exception to trademark rights. On the contrary, it undermines the very essence of the law on trademarks and trade names:

The purpose of the law protecting a trademark can not be overemphasized. They are to point out distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into a market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition.35

The proposed exception in Section 166.2 may only be allowed in cases of importation of branded medicines from countries where the medicines are licensed by the patent holders. Moreover, medicines which are manufactured, or which are imported from another country where it is manufactured under compulsory license or through other legitimate means without the authorization of the patent owner must be sold as generic medicines or under another brand name. No person, including the government, should be allowed to use one's trademarks and trade names without the latter's express consent. Otherwise, it will create market confusion and tend to blur product liability as it is unsure who should be responsible for the adverse effects, if any, of drugs brought in through parallel importation or manufactured under compulsory licensing.

Dictionaries tend to define "generic" as a product - particularly a drug - that does not have a trademark. For example, "paracetamol" is a chemical ingredient that is found in many brand name painkillers and is often sold as (generic) medicine in its own right, without a brand name. This is "generic from a trademark point of view." Sometimes "generic" is also used to mean copies of patented drugs or drugs whose patents have expired - "generic from a patent point of view." When copies of patented drugs are made by other manufacturers, they are either sold under the name of the chemical ingredient (making them clearly generics), or under another brand name (which is still considered generics from the point of view of patent law).36

VI. Sections 74.3 and 166.2 seek to shield government importation, manufacture, sale and distribution of medicines from temporary restraining order and injunction

A similar prohibition appears in Presidential Decree No. 1818 (1981) entitled "Prohibiting Courts from Issuing Restraining Orders or Preliminary Injunctions In Cases Involving Infrastructure and Natural Resource Development Projects of, and Public Utilities Operated by, the Government."37

The prohibition was justified in Philippine Ports Authority, et al. v. Court of Appeals, et al.38 where the Supreme Court explained:

The prohibition in P.D. No. 1818 applies "in controversies involving facts or the exercise of discretion in technical cases." It is founded on the principle that to allow the courts to determine such matters would disturb the smooth functioning of the administrative machinery.39 In Republic v. Capulong,40 this Court defined discretion as follows:

"(W)hen applied to public functionaries, (discretion) means a power or right conferred upon them by law of acting officially, under certain circumstances, uncontrolled by the judgment or conscience of others. A purely ministerial act or duty in contradiction to a discretional act is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard to or the exercise of his own judgment upon the propriety or impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires neither the exercise of official discretion or judgment."

In holding that judicial review of the public bidding of the development, management and operation of the Manila International Container Terminal was premature, the Supreme Court held in Hon. Reinerio Reyes, et al. v. Hon. Doroteo Cañeba, et al.41 that:

. . . Acts of an administrative agency must not casually be overturned by a court, and a court should as a rule not substitute its judgment for that of the administrative agency acting within the perimeters of its own competence. The respondent trial Judge surely has no special competence in respect of container terminal operations. The multiplication of administrative agencies in which government performs its many tasks, is characteristic of life today in a developing country. Courts have no brooding superintendence of such administrative agencies.

Since Section 74.3 of SB 2139 places the "government importation, manufacture, sale, or distribution of medicines for the protection of public health" under the control, supervision and determination of the Department of Health (DOH) and the Department of Trade and Industry (DTI), it may be argued that the above principles similarly apply to the proposed amendment.

In Supreme Court Circulars 13-93 12 (1993) and 68-94 (1994), judges were reminded to comply strictly with P.D. 1818. Consequently, Chief Justice Hilario G. Davide Jr. issued Administrative Circular No. 07-99 dated June 25, 1999, reiterating the earlier circulars and reminding all judges of lower courts to exercise utmost caution, prudence and judiciousness in the issuance of TROs and writs of preliminary injunction.

P.D. 1818 was subsequently superseded by Republic Act No. 8975 (2000). A similar prohibition was adopted in R.A. No. 897542 with the exception of the Supreme Court which retains the authority to issue TROs and preliminary injunctions against government infrastructure projects. R.A. No. 8975 further provides the following exception:

This prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that the applicant was not entitled to the relief sought.

The foregoing shows that despite the apparent validity of the prohibition, the legislature recognizes that there may be occasions of abuse in the administrative agency's exercise of discretion or a transgression of its constitutional boundaries. In such cases, a pressing need for a temporary restraining order or preliminary injunction arises to prevent grave injustice and irreparable injury. Such need was affirmed by the Supreme Court in Hon. Reinerio Reyes, et al. v. Hon. Doroteo Cañeba, et al., where it said:

. . . . Where, however, there is clear and convincing proof that an administrative agency has acted so arbitrarily and capriciously as to amount to a grave abuse of discretion, or an act without or in excess of its jurisdiction, a court may of course and should intervene to protect public interest or private rights in a proper case.43

This was echoed in Bureau Veritas v. Office of the President,44 where it was held that the courts will intervene only ". . . to ascertain whether a branch or instrumentality of the Government has transgressed its constitutional boundaries."

Indeed, although courts may not tread into matters requiring the exercise of discretion of a functionary or office in the executive and legislative branches, its interference is sanctioned when it is clearly shown that the government official or office concerned abused his or its discretion.45 In other words, despite the proposed prohibition, courts are not precluded from issuing TROs and injunctions to prevent grave injustice and irreparable injury.

The prohibition in Sections 74.3 and 166.2 must be subject to certain limitations or exceptions taking into account the possibility that the discretion granted to the DOH and the DTI is open to abuses. Note that inventors' rights are constitutionally protected and a violation of these rights entitle them to the legal remedies provided by law. Resort to such remedies may not be absolutely restrained or prohibited by any law, lest it becomes unconstitutional.

Moreover, the prohibition must be limited to "temporary restraining orders" and "preliminary injunctions" only. SB 2139 seeks to prohibit "injunction" in general. The remedy of injunction may not be absolutely restrained. Note that P.D. No. 1818 and R.A. No. 8975 both confined the prohibition to preliminary injunctions.

Conclusion

There must be an equitable balancing of rights in national legislations which affect public health and intellectual property rights, both being constitutionally protected. The protection of intellectual property rights in itself carries social and technological benefits. The way intellectual property is protected can also serve social goals. Strong protection encourages development of new inventions such as new medicines. It also fuels the boom in medical services.

Among the most important policy objectives of a country must be to ensure that drug innovators and other researchers are able to secure protection for the results of their research and development. In the absence of such protection, incentive to expend the resources needed to develop cutting-edge technological developments will be lost. Without solid protection for innovative inventions, a country will become a less attractive destination for research-based companies to transfer technology, know-how, and expertise. A second key area is to ensure that modern and state-of-the-art advancements in medical treatments are made available without undue delay.

Michael Z. Untalan and Karen O. Amurao-Dalangin

1 Article XIV, Section 13, 1987 Constitution.

2 Article II, Section 15, 1987 Constitution.

3 Article XIII, Section 11, 1987 Constitution.

4 The Doha Declaration states:

4.We agree that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all.

In this connection, we reaffirm the right of WTO members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose.

5.Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:

a.In applying the customary rules of interpretation of public international law, each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles.

b.Each member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.

c.Each member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

d.The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4.

5 Section 22.3, IP Code; Article 52 (4), TRIPS Agreement.

6 Example: "use of compound X in the manufacture of medicament for the treatment of disorder Y."

7 www.iponz.govt.nz/iponz-docs/S/Swiss_Claim_Guidelines_final_version2.pdf.

8 35 U.S.C. $ 100(b).

9 Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 228 USPQ 90 (Fed. Cir. 1985).

10 In re Dillon, 892 F.2d 1554, 13 USPQ2d 1337 (Fed. Cir. 1989.)

11 In re Thuau, 135 F.2d 344, 57 USPQ 324 (CCPA 1943).

12 Hobbs v. Beach, 180 U.S. 383 (1900); Topliff v. Topliff, 145 U.S. 156 (1892).

13 In re Woodruff, 919 F.2d 1575, 16 USPQ2d 1934 (Fed. Cir. 1990).

14 Canada - Patent Protection for Pharmaceutical Products.

15 Id.

16 Id.

17 35 U.S.C. Section 271 (e) (1).

18 545 U.S. ___ (2005).

19 Thailand: IP Developments, Tilleke & Gibbins' Intellectual Property Division, July 2005, at 1, 2.

20 Id.

21 Correa, C. (2000a) Integrating Public Health Concerns into Patent Legislation in Developing Countries, South Center, Geneva.

22 Correa, C. (200b) Intellectual Property Rights, the WTO and Developing Countries - The TRIPS Agreement and Policy Options, Third World Network, Malaysia.

23 WHO 2001 Globalization, TRIPS and access to pharmaceuticals, WHO Policy Perspectives on Medicines, No. 3 March 2001, World Health Organization, Geneva.

24 Article 8, TRIPS Agreement provides: Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

25 Article 6, TRIPS Agreement states: For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights; See also Doha Declaration 5(d).

26 This is sometimes called the "Paragraph 6" issue, because that paragraph in the Doha Declaration on TRIPS and Public Health states: "We recognize that WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002.

27 See http://www.twnside.org.sg/title/drugs2.htm.

28 http://www.wto.org/english/news_e/pres05_e/pr426_e.htm.

29 Id.

30 Section 74, IP Code, provides: "Use of Invention by Government. - 74.1. A Government agency or third person authorized by the Government may exploit the invention even without agreement of the patent owner where:

(a) The public interest, in particular, national security, nutrition, health or the development of other sectors, as determined by the appropriate agency of the government, so requires; or

(b) A judicial or administrative body has determined that the manner of exploitation, by the owner of the patent or his licensee is anti-competitive.

31 Section 95.2, IP Code.

32 See Article 31 [b], TRIPS Agreement; Section 95.1, IP Code.

33 Section 147. Rights Conferred. - 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owner's consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed.

Section 155. Remedies; Infringement. - Any person who shall, without the consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using

34 Section 166. Goods Bearing Infringing Marks or Trade Names. - No article of imported merchandise which shall copy or simulate the name of any domestic product, or manufacturer, or dealer, or which shall copy or simulate a mark registered in accordance with the provisions of this Act, or shall bear a mark or trade name calculated to induce the public to believe that the article is manufactured in the Philippines, or that it is manufactured in any foreign country or locality other than the country or locality where it is in fact manufactured, shall be admitted to entry at any customhouse of the Philippines.

35 La Chemise Lacoste S.A. v. Fernandez, et al., G.R. No. 65659, 21 May 1984, citing Etepha v. Director of Patents, 16 SCRA 495.

36 WTO OMC Fact Sheet, September 2003.

37 The principal provision of P.D. No. 1818 states: Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project, or a mining, fishery, forest or other natural resource development project of the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation.

38 G.R. Nos. 115786-87, 5 February 1996.

39 Citing Malaga v. Penachos, G.R. No. 86695, September 3, 1992, 213 SCRA 516, 523-4 which cited Datiles and Co. v. Sucaldito, G.R. No. 42380, June 22, 1990, 186 SCRA 704.

40 G.R. No. 93359, July 12, 1991, 199 SCRA 134, 149 quoting Meralco Securities Corporation v. Savellano, L-36748, October 23, 1982, 117 SCRA 804, 812.

41 G.R. No. 82218, 17 March 1988.

42 Section 3, R.A. No. 8975 states: Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. - No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity, whether public or private, acting under the government's direction, to restrain, prohibit or compel the following acts . . . .

43 G.R. No. 82218, 17 March 1988.

44 G.R. No. 101678, February 3, 1992, 205 SCRA 705, 718.

45 Malayan Integrated Industrie, Corporation v. Court of Appeals, G.R. No. 101469, 4 September 1992, 213 SCRA 640, 651.

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