RESTRICTEDWORLD TRADE
ORGANIZATIONIP/C/W/127
10 February 1999
(99-0498)
Council for Trade-Related Aspects
of Intellectual Property RightsOriginal:  English
NON-VIOLATION NULLIFICATION OR IMPAIRMENT
UNDER THE AGREEMENT ON TRADE RELATED ASPECTS OF
INTELLECTUAL PROPERTY RIGHTS (TRIPS)
Communication from Canada
By means of a communication from its Permanent Mission, dated 5 February 1999, Canada
has requested that the following text be circulated to Members.
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Issue
Article 64 of the TRIPS Agreement makes provision for a non-violation nullification or
impairment ("non-violation") remedy under the Agreement.  According to the terms of this Article,
recourse to non-violation complaints concerning intellectual property rights will become available on
1 January 2000, unless there is consensus among all WTO Members to the contrary.  To date, there
have been no substantive discussions about non-violation nullification or impairment by the TRIPS
Council.  Canada believes that there is an urgent need to begin this examination.  Canada is concerned
that applying the remedy in the context of intellectual property may constrain Members’ abilities to
introduce important measures in many vital areas.
Background
Incorporated into the TRIPS Agreement is Article XXIII of GATT 1994, which makes a
measure which qualifies as "non-violation nullification or impairment" subject to compensation.  In
simple terms, a "non-violation nullification or impairment" measure is one which, while it does notconflict with the provisions of the agreement, has the effect of nullifying or impairing a "benefit"
ensured under a treaty.  The rationale for such a provision is to protect the overall balance of
concessions reasonably expected when the agreement was reached.
This concept finds its roots in trade in goods.  Its history and application have been in the
areas of market access, dating back to the early days of international trade agreements when
governments could circumvent the relatively few undertakings (usually with respect to tariff bindings)
by erecting new, non-tariff barriers to undermine the promises contained in the agreements.  In its
construction (narrow interpretation of the measure, concept of reasonable expectations, standard of
causation, heightened evidentiary standard) and its application (only eight cases under GATT, oneunder the WTO), this remedy reflects the concern of Members that its scope be carefully
circumscribed.  After all, having agreed to specific obligations in exchange for a defined set of
scheduled benefits, governments did not want to expose themselves to disputes for actions that do not
infringe the terms of the agreement.IP/C/W/127
Page 2
During the Uruguay Round negotiations, the conc ept of non-violation was extended to apply
to the other multilateral agreements on trade in goods (in addition to GATT 1994) and to trade in
services.  During the TRIPS negotiations in particular, there was significant disagreement regarding
the inclusion of a provision on non-violation in the context of an intellectual property agreement.  Asa result, the final text included reference to the c oncept, but delayed the provision's entry into force
until 1 January 2000, and provided that the Council for TRIPS "examine the scope and modalities" for
such complaints in the intervening period and submit recommendations to the Ministerial Conference
for approval.  The Ministerial Conference may decide to approve such recommendations or to extend
the moratorium by consensus (Article 64).
In Canada's view, the effect of the doctrine in the context of TRIPS is highly undesirable for
related reasons: (1) it is very difficult to gauge the degree of liability that would be created through
introducing non-violation into the TRIPS regime; and (2) as a result, domestic policy making may be
unacceptably constrained.
Issues of Concern
1. Uncertainty as to Scope
The non-violation remedy is based on the premise that a government measure can be the
subject of a complaint even if it does not violate specific obligations.  Given its unusual nature, the
remedy was narrowly construed by GATT panels, although there is some uncertainty regarding its
interpretation as a result of the WTO panel in the Japan-Film  case.  This adds to the uncertainty
surrounding the remedy and potentially makes it an extremely broad one.    Furthermore, the remedy
has not been used frequently, so there is little analysis upon which to rely.
To understand the nature and scope of the obligation not to nullify or impair expected benefits
as it applies to intellectual property rights, one has to appreciate how the TRIPS Agreement differsfrom GATT and GATS and how these differences make the consequences of the remedy much more
difficult to predict.  Unlike other WTO agreements, such as those concerning goods or services, the
TRIPS Agreement is not principally concerned with questions of market access and does not include a
commitment to a certain level of market access.  There is not the same exchange of rights and
obligations within the TRIPS Ag reement as there is in GATT and GATS.  Instead, the TRIPS
Agreement sets out basic rules to ensure that all WTO Members follow universal minimum standards
for intellectual property protection, and that those standards are applied consistent with national
treatment and MFN.  This distinction between the TRIPS Agreement and other WTO agreements has
important consequences for the application of the non-violation remedy in the context of intellectual
property.
The difficulty of applying non-violation to TRIPS obligations is most apparent in examining
the concept of "benefit".  The rationale for the non-violation remedy is that Members enter into a trade
agreement that is grounded in "reasonable expectations" of the benefits to result.  Hence, it seems
essential that there be some common understanding among Members at the time they negotiate of
what such "benefits" would consist.  In the case of intellectual property, there are very different views
of what is meant by "benefit" - it is a term that has generated much debate but no common view.
Consistent with the main objectives of the TR IPS Agreement, the Canadian viewpoint is that
"benefit" consists primarily of the right conferred on the intellectual property holder to prohibit
unauthorized use.  However, some Members have asserted that overall anticipated economic returns
are the proper benefit of an intellectual property right.  Because of a lack of agreement or evensubstantial discussion of the meaning of "benefit" in  the context of intellectual property rights, a panelIP/C/W/127
Page 3
would have to come up with a definition almost in a void.  This goes beyond the desirable mandate of
the dispute settlement process.
It is normal that there will be different interpretations of obligations but, in this instance, the
lack of a common view on the essential element of the remedy makes its application veryunpredictable.  Any such uncertainty has a chilling effect on the exercise of legitimate regulatory
authority.  The greater the uncertainty, the greater the impact.  Moreover, in given cases, it can lead to
a severe curtailment of what many would regard as the normal exercise of sovereign authority to
achieve health, safety and environmental objectives.
2. Undermining Regulatory Authority
Because of the indeterminacy of non-violation in th e context of intellectual property, Governments
may find themselves genuinely and unduly constrained in the development of policy.  It is recognizedthat measures and policies enacted in pursuit of legitimate public policy objectives, even if fully
consistent with the obligations of the TRIPS Agreement, may have an impact on intellectual property
rights. Through the process of binding dispute se ttlement, Members could discover that the vague
concept of non-violation applied to TRIPS obligations may take on a much wider scope than was ever
intended.
The exercise of normal governmental powers often results in a change in the conditions of
doing business.  Such changes may involve the diminishment of the value of an intellectual property
right.  For example, a requirement for plain packaging of cigarettes could be seen as "nullifying or
impairing" the benefit which cigarette-exporting countries expected their nationals to derive fromtheir trademark rights.
Due to the uncertainty surrounding the reme dy in a TRIPS context, it is vital that
Governments are fully cognizant of the obligations they assume, and that, to the greatest extent
possible, the obligations be written so as to minimize the possibility of unintended interpretation.
Conclusion
The non-violation remedy was developed in a context wholly different from the TRIPS
Agreement as a means of ensuring market access.  Transplanting this remedy into the TRIPS
environment is not suitable in the context of intellectual property and, in Canada's view, will introduceinto the Agreement a deleterious measure of uncertainty.  By so doing, it risks constraining Members'
abilities to introduce new and perhaps vital social, economic development, health, environmental and
cultural measures that might be construed as denying ill-defined benefits under the TRIPS Agreement.IP/C/W/127
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ANNEX I
Relevant Provisions
TRIPS
Article 64
Dispute Settlement
1. The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the
Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under
this Agreement except as otherwise specifically provided herein.
2. Subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994 shall not apply to the settlement
of disputes under this Agreement for a period of five years from the date of entry into force of the
WTO Agreement.
3. During the time period referred to in paragraph 2, the Council for TRIPS shall examine the
scope and modalities for complaints of the type provided for under subparagraphs 1(b) and 1(c) ofArticle XXIII of GAIT 1994 made pursuant to this Agreement, and submit its recommendations to the
Ministerial Conference for approval.  Any decision of the Ministerial Conference to approve such
recommendations or to extend the period in paragraph 2 shall be made only by consensus, and
approved recommendations shall be effective for all Members without further formal acceptance
process.IP/C/W/127
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GATT 1994
Article XXIII
Nullification or Impairment
1. If any contracting party should consider that any benefit accruing to it directly or indirectly
under this Agreement is being nullified or impaired or that the attainment of any objective of the
Agreement is being impeded as the result of
(a) the failure of another contracting party to carry out its obligations under this
Agreement, or
(b) the application by another contracting party of any measure, whether or not it
conflicts with the provisions of this Agreement, or
(c) the existence of any other situation,
the contracting party may, with a view to the satisfactory adjustment of the matter, make written
representations or proposals to the other contracting party or parties which it considers to be
concerned.  Any contracting party thus approached shall give sympathetic consideration to the
representations or proposals made to it.
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