WORLD TRADE
ORGANIZATIONIP/C/W/352
20 June 2002
(02-3440)
Council for Trade-Related Aspects
of Intellectual Property RightsOriginal:  English
PARAGRAPH 6 OF THE DOHA DECLARATION OF THE TRIPS AGREEMENT
AND PUBLIC HEALTH
Communication from the European Communities and their member States
By means of a communication dated 19 June 2002, the following text has been received from
the Permanent Mission of the European Communities a nd their member States with the request that it
be circulated to the TRIPS Council.
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1. Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health recognizes
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.Therefore, the Declaration instructs the TRIPS Council to find an expeditious solution to this problem
and to report to the General Council before the end of 2002.  The view of the EC is that finding "an
expeditious solution" to this problem means, in effect, that one should be found before the end of
2002.
2. The March 2002 TRIPS Council has allowed Members to present their preliminary views on
the possible solution to the problem identified under paragraph 6 of the Declaration on the TRIPSAgreement and Public Health. At this meeting,  four basic options were put on the table:
(i) an authoritative interpretation based on Article 30;
(ii) an amendment to Article 31 in order to overcome the restriction, under Article 31(f),
to the possibility to export products manufactured and/or sold under a compulsorylicence;
(iii) a dispute settlement moratorium with regard  to the non-respect of the restriction under
Article 31(f);  or
(iv) a waiver with regard to Article 31(f).
The European Communities and their Member States  (hereinafter "the EC") thank those Members
who presented their views at that occasion and ha ve carefully taken note of all positions and
arguments.
3. It appears from the statements made at that m eeting, that several Members consider that the
perceived problem mainly stems from the restriction contained in Article 31(f) of the TRIPSAgreement.  The latter limits the possibility to export products manufactured under a compulsory
licence, as it specifies that any use under a compulso ry licence shall be authorized predominantly for
the supply of the domestic market authorizing such use.  The rationale behind this provision lies in theIP/C/W/352
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territorial nature of patent law and in the need to avoid circumvention of patent rules.  As a result, the
present situation is that the uses permitted by a compulsory licence are limited to "predominantly
supply the domestic market" of the WTO Member granting such a licence.  This does nevertheless
allow a non-predominant part of the products concerned to be destined to supply foreign markets
(except under the circumstances addressed by Article 31(k)).
4. Therefore, the EC, while considering it worthwhile to maintain the basic principle contained
in Article 31(f), are of the view that an appropriate  solution to the problem identified in paragraph 6 of
the Declaration may consist of adding a new paragr aph to Article 31 which would carve out a clearly
circumscribed exception to the restriction imposed by Article 31(f) with the view to facilitating the
use of a patent, under a compulsory licence, on a pharmaceutical product needed to address public
health problems in another Member. This option had already been dealt with in the ECCommunication to the TRIPS Council of 4 March 2002 (IP/C/W/339).
5 The EC consider that the addition of such a new paragraph to Article 31 of the TRIPS
Agreement offers the best guarantees for a sustainable, balanced and workable solution to the problem
raised under paragraph 6 of the Doha Declaration. The insertion of a textual provision into the TRIPSAgreement itself has the advantage of providing for a straightforward, clear, legally secure, effective
and permanent solution within an existing legal framework, i.e. Article 31 of the TRIPS Agreement.
6. The other options that have been referred to at the March 2002 TRIPS Council have their
merits too, but do not necessarily combine all of the advantages mentioned above.  A waiver or adispute settlement moratorium could be appropriate and effective mechanisms for a solution, but they
may fall short of providing the type of sustainable and legally secure solution that the EC are aiming
for.  Likewise, an authoritative interpretation on Article 30 of the TRIPS Agreement may fail to offer
the same level of legal security for all parties involved as a textual addition to Article 31(f) would do.
Moreover, from a legal point of view, doubts have been expressed as to whether the criteria ofArticle 30 offer sufficient scope for such an exception, thus questioning the legal merits of this
solution.
7. The addition of a new paragraph to Article 31 would fall under the procedural rules set out by
Article X of the Marrakesh Agreement.  As for a ll amendments of international agreements, it is a
procedure that takes time.  However, nothing would prevent Members, once an agreement has been
reached on the substance of the amendment, to agree on a temporary arrangement pending the entryintro force of the additional paragraph to Article 31, such as for example a dispute settlement
moratorium, or possibly a waiver, although the latter may take more time from a procedural point of
view.
8. By proposing the addition of a new paragraph to Article 31 of the TRIPS Agreement, the EC
aim at striking the right balance between the call for overcoming the restriction imposed by
Article 31(f) to exports of pharmaceuticals produced under compulsory licences and the underlying
rationale of Article 31(f). As its objective is to ensure speedy and low priced supplies of
pharmaceutical products to those in need, while maintaining a proper legal environment to encourage
research and development into new products, it fully conforms to the spirit of the Doha Declaration
and to the mandate contained in its paragraph 6.
9. The basic principle of such an exception would be that the Members concerned would not be
obliged to apply the condition set forth in Article 31(f) in those cases where a compulsory licence is
granted for the use of a patent (here : the acts of manufacturing the product and selling it to an entityimporting it into another Member) with a view to supplying another Member, specifically designated
in the authorization, with a patented pharmaceutical product or with a pharmaceutical product
manufactured through a patented process, when a number of conditions are fulfilled.  This would
allow Members in need of a given pharmaceutical product to deal with public health problems,
especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics, and for whichIP/C/W/352
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they have no or insufficient production capacity, to rely on another WTO Member to ensure supply
under a compulsory licence.  The new paragraph should further specify under which conditions the
exception can be triggered and applied.
10. Whatever mechanism the WTO Membership will ultimately opt for, the modalities under
which the mechanism will operate, such as for instance the product scope, will have to be clearly
spelled out.
11. In fact, the product scope is already defined by paragraphs 1 and 6 of the Doha Declaration.
The first paragraph reads:
 "We recognize the gravity of the public health problems, afflicting many developing and
least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria
and other epidemics".
The sixth paragraph refers to "the pharmaceutical sector".  Hence, the product scope is to be defined
as pharmaceutical products needed to deal with public health problems afflicting many developingand least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and
other epidemics.
12. In line with the spirit of the Doha Declar ation, Members that would qualify for importing
these products would be developing country Members, focussing especially on least developedcountry Members and low income Members, with no or insufficient domestic manufacturing capacity,
or, in case that product is patented in that Member, no or insufficient manufacturing capacity other
than that of the patent holder of the product in that Member.
13. It will be in the interest of all, and not at least of the beneficiaries of the products concerned,
that these products would not be diverted from thei r intended destination and that the system would
not be abused for purposes other than to provide pharmaceutical products at strongly reduced prices to
those in need.  Hence, the need to ensure that the necessary measures are taken to avoid abuses and
trade diversion.  In the EC’s view, such measures s hould be reasonable in view of the complexity of
the problems and the situations that may arise from the practical application of the proposed
exception.  It is also important to keep in mind that the prevention of trade diversion is of major
importance to guarantee the legal security of the right holders concerned and to preserve the basicprinciples of the TRIPS Agreement.
14. Therefore, if one considers an exception to Article 31(f), one would have to specify that:
(i) the products manufactured  on the basis of the authorization, given pursuant to the
new paragraph to Article 31, should not be put into circulation on the market of the
country of production, but should in their entirely be exported to the Member(s)
designated by the authorization (and not to any other country);
(ii) the product will be offered for sale, sold or distributed solely in the Member(s)
designated by the authorization and not be re-exported from that Member;
(iii) the Member granting the licence for export has taken all necessary regulatory and
administrative measures to ensure that condition (i) is effectively respected;  and
(iv) the importing Member has taken all reasonable and necessary regulatory and/or
administrative measures to ensure that condition (ii) ( i.e. no further re-exportation) is
effectively respected.  This means that the new provision would not impose rights andobligations on the producing Member only.  A legal obligation will also be incumbent
on the importing Member: it will be the importing Member’s responsibility toIP/C/W/352
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promulgate and enforce measures (and in particular, but not exclusively, proper
border controls, supervision over the distribution of the pharmaceuticals concerned
and the imposition of the necessary constraints on the distributor(s)) necessary to
prevent re-exportation of the products concerned.  The EU acknowledges concerns
that have been expressed as to the additional burden such obligations may impose onthe Members concerned.  Therefore, it is crucial that the measures to be taken remain
reasonable and proportional, both with regard to the risk of trade diversion as with
regard  to the institutional and administrative capacities of the Member concerned.
Finally, all WTO Members should take their responsibility in preventing the importation of the
products concerned into other markets.
15. The application of the proposed exception would lead to the specific situation that a product
sold in one country (in certain cases pursuant to a compulsory licence) would have been produced in
another country under a compulsory licence.  One would indeed have to deal with a special situation
where patent protected products would cross the borders while covered by compulsory licences in
both the country of production and the country of consumption (except in those cases where the
product in question is not patented in the country of consumption).  In view of this situation it will be
of paramount importance to ensure full transparency of the process and to ensure that the patent
holder(s) and other WTO Members remain fully informed of the steps undertaken in view of granting
the authorization.  Furthermore, transparency would also contribute to preventing trade diversion: by
being informed of the use of the exception, other Members will be able to increase their vigilancewith regard to possible (re) importation of the products concerned.
16. In line with the spirit of the Doha declar ation, the ultimate objective of the proposed
exception should be to facilitate the delivery of medicines to the populations in need at strongly
reduced prices.  To provide confidence that such an outcome can be fully met, within the shortest
possible time frame and on a sustainable basis, it will be crucial to enable the patent holder to make a
proposal to rapidly solve the issue by making sustainable voluntary licensing and strongly reduced
pricing offers, though without unduly delaying the procedure leading to the possible granting of a
licence.  Therefore:
(i) it would be appropriate that both Members involved would, in any event, promptly
notify the right holder of their intention to issue a compulsory licence. In case theproduct in question is not patented  in the country without manufacturing capacity, the
intention to request another Member to issue a licence in view of its supply should be
notified to the WTO.  A significant advantage of this procedure would be that
Members interested in manufacturing and delivering the goods could make
themselves known to the Member without manufacturing capacities;
(ii) the right holder should be given the opportunity, within a short timeframe after
notification, to make an offer to supply the relevant products at strongly reduced
prices;
(iii) if such commitment by the original manufacturer of the product meets the needs of
the Member without manufacturing capacity, notably in terms of price, safety andsustainability, this should be a sufficient reason not to resort to a compulsory licence
under the proposed exception.  It would be  up to the Member without manufacturing
capacity to judge whether the offer by the original manufacturer is sufficient  to meet
its needs.
What matters most is to ensure adequate, speedy and sustainable supply of reliable pharmaceutical
products.  In this respect, the EC welcome the fact that a number of pharmaceutical producers, bothIP/C/W/352
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research-based and generic, have expressed their willingness to deliver pharmaceutical products to
developing countries at strongly reduced prices. Therefore, opportunities need to be created and
maintained to facilitate such speedy solutions. The objective of achieving sustainable supply of
pharmaceutical products at strongly reduced prices is best served if all possible options are explored
when resort to a compulsory licence is being considered.
17. Finally, in order to allow for a swift procedure in cases of extreme urgency or national
emergency in the importing Member, the new paragraph to Article 31 should specify that, if the use of
the product is intended to address such a case of a national emergency or other circumstances of
extreme urgency in the importing Member, the Member authorizing the production will not be obliged
to first apply the condition set out in the first sentence of subparagraph (b).  This would, in other
words, stretch the already existing exception under Article 31(b) to situations where a compulsorylicence is issued in a Member other than the Member facing a national emergency or other
circumstances of extreme urgency, in view of supplying the latter Member.  This should not be a
reason for both Members involved not to promptly no tify the right holder of the intention to grant a
licence.
18. All relevant requirements of Article 31, other than Article 31(f), would remain fully
applicable to the Member granting the licence under the proposed exception.  Also, in case the
pharmaceutical product concerned is patented in the country of importation, the latter will have to
issue a compulsory licence for its import, thereby also  respecting the relevant requirements of Article
31 of the TRIPS Agreement.  If no such patents ar e in place, importation would not be circumscribed
by patent rules.
19. The Doha Declaration on TRIPS and Public Health shows the WTO Membership’s
willingness to engage in a constructive and fruitful debate and its ability to find a balanced solution
that takes into account the interests of all.  The EC are convinced that Members will continue their
work in the same spirit, and will make all necessary efforts to come to a reasonable and satisfactory
solution within the timeframe prescribed by paragraph 6 of the Doha Declaration with a view to
improving access to affordable medicines.
20. The EC welcome any comments other Members of the WTO may have and remain open to
consider any alternative solution that might solve the problem identified under paragraph 6 of the
Doha Declaration in a timely and adequate manner.
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