Intellectual Property Belong to the Trade Family?
© Springer International Publishing Switzerland 2015Christoph Herrmann, Bruno Simma and Rudolf Streinz (eds.)Trade Policy between Law, Diplomacy and ScholarshipEuropean Yearbook of International Economic Law10.1007/978-3-319-15690-3_9
Does Intellectual Property Belong to the Trade Family?
World Trade Organization, Rue de Lausanne 154, 1211 Geneva, Switzerland
The author is Counsellor in the WTO Secretariat. This contribution has been prepared strictly in a personal capacity. The views expressed are not to be attributed to the WTO, its Secretariat, or any of its Member governments.
I first met Horst G. Krenzler in my former professional life as a European Commission official when he was the Director-General at the European Commission’s Trade Directorate. This post was certainly made for him, as he was an excellent lawyer and a brilliant diplomat at the same time—two capacities that were and continue to be essential ingredients for making trade policy work. Later on, I worked with him in his function as the co-editor of a commentary on the EU’s external trade and customs legislation.1 This provided me with yet another opportunity to appreciate his outstanding qualities, here in the form of his academic interests and capacities.
I have chosen the old and nevertheless still interesting question as to whether intellectual property belongs to the trade family as the topic for this contribution because of the key characteristics of Horst G. Krenzler’s personality, my own professional background, and, last but not least, the fact that this question was already the subject of controversial debates, including within the Commission, when he was heading DG Trade. This contribution will thus attempt to provide a short legal, academic and—hopefully also—diplomatic answer in honour of Horst G. Krenzler who was a master in all these disciplines.
Introduction: There Are Different Ways of Looking at the Relationship Between Intellectual Property Rights and Trade
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) forms an integral part of the set of agreements concluded when the World Trade Organization (WTO) was established as a result of the Uruguay Round negotiations in 1995. Its name leaves no doubt about the negotiators’ agreement at the time that intellectual property rights (IPRs) are related to trade, hence its name, and thus belong to the WTO as the multilateral institutions administering and overviewing matters related to international trade.
This said, there are admittedly many ways of looking at and understanding the relationship between IPRs and international trade, including from the perspective of trade-related IPRs and that of IP-related trade. Some have thus sought to define this relationship in a positive way, viewing the adoption of uniform protection and enforcement standards for IPRs at international level as a necessary ingredient to foster trade in legitimate trade, or, to put it differently, to reduce trade in IPR-infringing goods.2 There are also those views however, that have tried to shed some light on the connection from a more defensive perspective, viewing IPRs essentially as a potential barrier to legitimate trade.3 Both these viewpoints have found their way into the WTO’s TRIPS Agreement, as it takes up the potentially positive and negative linkages at the same time, namely in its Preamble, as well as in its objectives and principles.
At the same time, some voices, mainly found in the academic world and in some developing countries, are still critical about the inclusion of the TRIPS Agreement in the WTO framework altogether.4 Either they consider that IPR protection and enforcement have literally nothing to do with trade, or they contest at least their coverage by multilateral disciplines that are administered by the WTO.
But even within the European Commission, there were views at the time when Prof. Dr. Krenzler was still heading DG Trade that questioned the appropriateness of including IPRs in trade agreements. This may, among others, explain why for a long time the free trade agreements (FTAs) concluded by the European Union (EU) only knew a very minimalist coverage of IPRs, if at all, rather than the approach taken by the US that has traditionally pursued the inclusion of a fully-fledged chapter with detailed provisions on IPRs in its FTAs.5 This only changed since the late 1990s, when the EU began to negotiate FTAs that include a comprehensive set of substantive provisions in the field of IPRs.
Against the background of such divergent opinions, the arguments used to support each position, theoretical and empirical evidence, as well as the way in which the link between IPRs and trade is handled in practice, in particular in the WTO and the EU, shall be reviewed in the context of the historical developments that led to the establishment of the current international framework for the protection and enforcement of IPRs. This review leads the author to conclude that the more powerful arguments plead in favour of characterising IPRs as an integral component of the international trade regime in today’s globalised world, not least because both weak and strong IPRs, each in their own way, potentially have an impact on the extent to which trade takes place and the direction it takes, and are thus directly related to trade. This, in turn, confirms that the TRIPS Agreement rightly has its place among the agreements administered by the WTO.
History Shows Interesting Parallels with Today’s Debate
Historically speaking, the IPR regime has known significant variations with respect to its primary functions and objectives that were admittedly not always trade-related. This may also explain why the evolution of the IPR regime has sometimes been divided into a territorial, international and global period.6 The functions of the IP system thus range from providing an incentive to foreign workers to move to other countries to the use of the IPR regime as a protectionist tool, such as witnessed during the period of the Great Depression in the twentieth century, and finally, in the more recent past, as a means to promote trade.
At the very beginning, there was, indeed, no international framework for IPR protection, nor was there an obvious link with trade. Rather, one of the principal ideas that drove, for example, the grant of patent rights focused on the development of the local economy through the attraction of foreign skilled labour forces. Starting in the fourteenth century, IPRs would thus essentially serve the immigrant artisan to ensure exclusive exploitation of his knowledge and skills that were unknown to local artisans.7 If at all, they were only remotely related to trade across borders in this period. This first period saw the gradual development of national frameworks for the protection of IPRs, firmly based on the principle of territoriality and not providing protection to inventors and creators beyond national borders.
Since the eighteenth century though, this changed considerably, as countries began implementing a national IP policy as part of their broader trade policy. In particular, as international trade in industrial products was growing in the second half of the nineteenth century, the link between IPRs and trade increasingly took a central role in discussions both at national and international level. This development was accompanied by a growing interest in international cooperation on IP matters which led, among others, to the proliferation of an important number of bilateral agreements.8 This said, positions taken with regard to the link between IPRs and trade during this second period approached the question from radically different perspectives.9 On the one hand, there was strong pressure to limit or abolish, for example, patent rights in order to secure free trade and competition10 or to secure access to works created by foreign authors.11 In other words, the proponents of this approach saw in IPRs a negative, protectionist measure that stood potentially in the way of international trade. On the other hand, others actively supported at the same time the development of an international framework for the protection and enforcement of IPRs. Their primary objective was to overcome the shortcomings and costs resulting from the territorial nature of domestic IPR regimes by providing a mechanism to inventors and creators to protect their works in other countries when those were traded across national boundaries. The advocates of this position also viewed the nascent body of IPRs governed by international treaties as almost naturally related to trade, albeit from a different, that is, positive perspective, insofar as adequate protection and enforcement of IPRs were perceived as fostering international trade.
Their efforts, based on the conviction that IPRs and trade are intimately linked to each other, as well as the above-mentioned conclusion of many bilateral agreements, were instrumental in the move towards the adoption of the first two international treaties, i.e. the Paris Convention for the Protection of Industrial Property in 1883 and the Berne Convention for the Protection of Literary and Artistic Work in 1886. Both were administered by a specialised agency, the United International Bureaux for the Protection of Intellectual Property, which was created in 1893 and, in 1967, became the World Intellectual Property Organization (WIPO). Despite the underlying link between IPRs and trade, IPRs were thus brought into an international framework that was handled in a pretty much isolated fashion for some decades and for which matters related to international trade were far from central.12 To a large extent, they were delinked from other policy dimensions and treated as a domain that would necessarily have to be dealt with by technical experts. On the other side of the spectrum, the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT) 1947 as the body in charge of liberalising and regulating international trade in goods knew only a few provisions that implicitly or explicitly related to IPRs,13 mainly because IPRs were predominantly perceived as an obstacle to trade. Those provisions and the related case law under the GATT have nevertheless been taken by some already as an indicator for the link between IPRs and trade, illustrating how IPRs can impact on international trade.14
This rather shadowy existence of IPRs within the multilateral system only changed in the 1970s, when the US Government began establishing a much more straightforward linkage between IPRs and trade to support its call for a multilateral framework to deal with the protection and enforcement of IPRs.15 At that time, there was growing concern about the steady increase of counterfeiting and piracy in international trade among developed countries and the perception that WIPO treaties did not provide for adequate protection standards and enforcement mechanisms. Among others, this made the US adopt “Special 301” legislation in the Omnibus Trade Act of 1988, designed to take up alleged deficiencies of IPR protection in third countries as a matter of priority in bilateral negotiations and to allow for retaliatory measures under trade statutes in case of IPR infringements.16 But even before this, it had already led to a proposal to negotiate rules on trade in counterfeit goods as part of the Tokyo Round of multilateral trade negotiations (1973–1979) under the auspices of the then GATT. While the US and other developed countries argued that the GATT was the appropriate forum to deal with the trade-related aspects of counterfeiting and piracy, their proposed draft “Agreement on Measures to Discourage the Importation of Counterfeit Goods”17 did not find the unanimous support of negotiators and therefore did not become part of the results of the Tokyo Round in 1979. Subsequent work in the GATT in this area, in particular that carried out by the Group of Experts on Trade in Counterfeit Goods established by the Contracting Parties in 1984, also remained inconclusive, noting, among others, the existence of diverging views as to whether the GATT was the appropriate and competent forum to take action at the international level.18
It was only in 1986, when trade ministers came together in Punta del Este, Uruguay, that an agreement could be reached to include a section on “trade-related aspects of IPRs, including trade in counterfeit goods” in the mandate on future trade negotiations.19 The declared aim was to reduce the distortions and impediments to international trade, to promote effective and adequate IPR protection and to avoid that enforcement measures become barriers to legitimate trade. To do so, existing GATT provisions were to be clarified and a multilateral framework of principles, rules and disciplines to be established. This said, in line with the controversial views already held by GATT negotiators prior to the launch of the Uruguay Round,20 discussions in the then established negotiating group on trade-related aspects of IPRs focused in the initial phase precisely on what is also the topic of this contribution, i.e. whether and to what extent IPRs were to be considered as sufficiently trade-related so that they would be covered by the mandate. Developing countries saw the term “trade-related aspects” as only referring to trade in counterfeit goods and anti-competitive practices regarding IPRs, whereas others understood it as a broader mandate to also establish substantive rules on IPRs in general. On the occasion of the mid-term review of the Uruguay Round negotiations in April 1989, a decision in favour of a broader reading of the mandate was taken, including, in particular, the establishment of adequate standards for the protection and enforcement of trade-related IPRs.21 Subsequent negotiations resulted in the inclusion of the TRIPS Agreement with substantive protection and enforcement standards in the results of the Uruguay Round of multilateral trade negotiations, the Final Act of which was signed at the Marrakesh Ministerial Meeting in April 1994 together with the Agreement Establishing the WTO. IPRs thus fully integrated into the trade arena when the WTO opened in 1995. In recognition of their economic importance and the steadily increasing share of services and IPRs in international trade, the new multilateral trading system administered and overviewed by the WTO was thus extended into these hitherto uncovered areas of trade.
This move back to the trade arena is, in particular, supported by rapid technological developments, the evolution of cross-border exchanges of goods, services, capital and knowledge more generally,22 as well as the recognition of innovation and technological development as key ingredients for economic development that thus became an endogenous factor of economic growth.23 Traditionally, trade was looked at in categories, such as products and industry sectors,24 to expand also to services since the GATS Agreement (General Agreement on Trade in Services) became part of the WTO in 1995. This products/services/industry-based approach is still largely reflected in the way in which the WTO was conceived during the Uruguay Round negotiations. Coupled with the steady increase of global value chains25 and the growth of corporate R&D investment in the knowledge-based industry, there is, however, also growing recognition of the importance of trade in goods and services embedding a more or less significant portion of knowledge.26 A 2013 report by the European Patent Office and the Office for Harmonization in the Internal Market estimated, for example, that IPR-intensive industries accounted for most of the EU’s external trade, with 88 % of imports consisting of products of IPR-intensive industries, and the share of exports of such products even amounting to 90 %.27 Hence the characterisation sometimes found in literature of both the TRIPS and GATS Agreements as the WTO’s “trade in knowledge” agreements.28 This trend towards a more knowledge-based analysis of the object of trade supports the view that IPRs are trade-related, as they typically represent the know-how and other forms of knowledge that make a physical good. As such, they have a direct bearing on market access, which is different from other issues such as labour standards, which are also described by their critics as not belonging to the WTO as the forum dealing with trade matters.
The trend to recognise IPRs as an integral part of trade is furthermore backed by the extent to which they have been covered in the more recent FTAs and which has evolved more or less in parallel with the coming into being of the TRIPS Agreement in 1995. Earlier FTAs concluded since the 1950s knew hardly, if any, IP provisions, assuming that these only had a bearing on international trade in form of an exception to liberalising such trade in line with GATT Article XX. This changed dramatically from 1997 onwards, when in particular the US, later followed by the EU and the European Free Trade Association (EFTA) pushed for the inclusion of increasingly detailed chapters regulating the protection and enforcement of IPRs in FTA negotiations with their trading partners.29 This is not least based on the recognition that adequate IP protection can foster trade of goods and services embedding IPRs.30 To some extent, this latest trend is now also replicated by some developing countries that sometimes seek to cover IPRs in a fairly detailed manner in their respective FTAs.31
Another development that established a direct link between trade instruments and IPRs outside the multilateral framework could be observed in the US where, in 1974, the amendments to the Trade and Tariffs Act had called into life “Section 301”. As part of the amendments, the eligibility for the Generalized System of Preferences (GSP) that provides for unilateral trade preferences to certain goods from developing countries, was made conditional upon adequate protection of IPRs. This constituted yet another move to make IPRs an integral part of the US trade policy.32 In the past, the Office of the United States Trade Representative (USTR) reviewed, for example, the status of Brazil as a GSP beneficiary country for reason of inadequate IPR protection.33 In the case of Ukraine, GSP eligibility was even temporarily suspended for lack of adequate IP protection from 2001 to 2006 and, in 2013, Ukraine’s eligibility as a GSP beneficiary was again reviewed.34 Other WTO Members have adopted similar programmes. The EU, for example, has put in place a scheme of lower tariffs.35 These and other such programmes are based on the so-called Enabling Clause or the “Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries”, adopted under the GATT in 1979, which allows WTO Members to accord differential and more favourable treatment to developing countries.36 Consequently, albeit constituting unilateral preferential measures, their application, including any envisaged modifications or withdrawals of GSP benefits, are governed by WTO rules, as was confirmed by the dispute between India and the EU in relation to a special arrangement under the EU’s GSP scheme to combat drug production and trafficking for some selected countries that excluded India from these benefits.37 In particular, para. 4 of the Enabling Clause thus requires notification of the planned modification or withdrawal to the other party, as well as according adequate time and opportunity to discuss any difficulties and providing support to reach a satisfactory solution. In addition, Article 19(1)(d) of the EU’s Regulation No 978/2012, for example, explicitly allows for temporary withdrawal for reasons of serious and systematic unfair trading practices, provided that these practices are prohibited and actionable under the WTO Agreements and have been found as such by the competent WTO body. This usefully illustrates the potential positive side effects resulting from the inclusion of IPRs in the trade arena in the sense that it protects countries against the subjective assessment of their IPR regime by their trading partners and the subsequent adoption of unilateral measures, in this case taking the form of withdrawal of GSP benefits, without prior consultations and possibly recourse to the WTO dispute settlement mechanism in order to determine the level of TRIPS compliance.38
Taking the historical background provided above together with the more recent developments outside the WTO, establishing a firm link between IPRs and trade through the incorporation of the TRIPS Agreement in the WTO may thus appear as a pure formality that merely confirmed a longstanding fact.
Strong Arguments for and Against a Link Between IPRs and Trade Animate the Debate
In particular, developed countries have constantly argued that IPR protection is needed to ensure that inventors and creators get adequate return for their investment in developing new technologies and bringing their creations to the market. They also see IPRs as a tool to encourage foreign direct investment and/or exports, as well as innovation and technology transfer which, in turn, would support developing countries in their efforts to build up their own technological basis and subsequently export products.39 In addition, harmonising the standards of IP protection and enforcement would positively affect international trade insofar as transaction costs associated with such trade would be reduced.
Their interest to bring IPR standards under the GATT/WTO umbrella as part of the Uruguay Round negotiations was essentially threefold: to allow for trade-offs with other areas of negotiations and thus to achieve better outcomes in the field of IPRs, to be able to use the WTO’s powerful dispute settlement mechanism, and to cover a wide range of countries in one strike, since adhering to the TRIPS Agreement was and remains a prerequisite for a country to become a WTO Member. More generally, there was also the firm belief that linking IP protection and trade would result in more effective outcomes, namely in the form of stronger protection through reliance on more powerful trade policies.40 To support their view, the proponents argued that IPRs affected trade flows and that insufficient protection would distort trade and could act like non-tariff trade barriers. For example, firms may refrain from exporting their patent-protected goods to markets with weak IPR protection for fear of being exposed to counterfeiting and piracy. In a similar vein, trade in counterfeit and pirated goods could negatively impact on the promotion of international trade in genuine goods.41 As this fell within the competence of the GATT, it should be mandated to address the matter.
At the same time, the international framework for the protection of IPRs, essentially composed of a set of multilateral treaties administered by WIPO, was perceived as too diverse and ineffective by the representatives of this view. From their perspective, the growing membership in some of these treaties and pressure from developing countries to weaken the international IP system made any progress towards further harmonisation increasingly difficult and controversial,42 as illustrated, for example, by the failure to amend the Paris Convention in 1985. At the same time, membership in other treaties remained limited to a few countries. In addition, the absence of an effective mechanism to settle disputes in WIPO was deplored. The 1985 Report of the Group of Experts on Trade in Counterfeit Goods reflected some of this criticism. For example, concern was expressed about Article 9 of the Paris Convention since it was not binding and the determination of remedies and sanctions were left to national law. Also, the Paris Convention would not offer a proper and effective dispute settlement mechanism.43
On the other side of the spectrum, criticism with respect to the link between IPRs and the multilateral trading system is essentially twofold: a more radical view disputes the trade-related nature of IPRs as such, whereas a more moderate view accepts that IPRs are, at least in part, trade-related, but does not see minimum standards of protection as belonging in the WTO. Rejecting the TRIPS Agreement in today’s form as part of the WTO is thus common to both views. Interestingly, this position was also taken by the copyright industry in the US in the initial phase of the Uruguay Round negotiations: although fully supportive of the view that IPRs belonged to the trade domain, it did not favour the multilateral approach because of concerns of possible trade-offs that could be made in the course of the negotiations and result in a weaker protection.44
The group of critics includes those who are otherwise to be counted among the advocates of free trade.45 This is, in particular, interesting from a historical perspective, as the arguments used by representatives of this group mirror, to a large extent, the late nineteenth century debate, when many called for the abolition of patent protection as a protectionist tool that would stand in the way of free trade (see above, second section). Jagdish Bhagwati has thus constantly argued that the TRIPS Agreement does not belong to the WTO as it delays the process of liberalising trade.46 For him, protecting IPRs “is simply a matter of royalty collection” that was forced into the WTO as a result of strong industry lobbying.47 Similarly, others have assessed the existing standards of IPR protection and enforcement as overly restrictive, providing too high rewards to the right holders while negatively impacting on competition and innovation.48 In their view, the TRIPS Agreement failed to recognise that the IP regime needed in developing countries to achieve their developmental and other domestic policy objectives was different from that suitable for developed countries.49 IPRs should therefore not have been included in the WTO, not least because trade negotiators were not competent for the subject matter and WIPO already existed as an international organisation to deal with IP matters that, in light of their complexity, deserved to be covered by a separate regime.50 Consequently, the extension of the WTO’s mandate to IPRs was perceived as an expansion to matters that reached far beyond a country’s border and that were only tangentially trade-related at best. Therefore, they would not belong to traditional trade areas, but affected areas of vital interest to countries, such as health and food security.51 Some went even further and classified the TRIPS Agreement as covering non-trade issues, similarly to labour and environmental standards, which would be fundamentally different from the WTO’s objective of liberalising trade52 and which would actually limit sovereign states in their right to trade, rather than making IPRs subservient to trade.53 According to these voices, the inclusion of the TRIPS Agreement in the WTO was not a natural fit, but the result of strong industry lobbying which gained the support of policymakers in developed countries, in particular the US.54 An imbalance was thus created in the multilateral system, as the coverage of IPRs only benefited developed countries, while developing countries faced a delay in their own technological development.55
Next to these critical voices are also those who hold the view that only parts of the TRIPS Agreement are trade-related, whereas other sections that are primarily aiming at setting standards and harmonising the IP regime would not belong to the WTO. This was namely the position taken by many developing countries during the Uruguay Round negotiations who voiced strong concerns about the incorporation of substantive IPR protection rules in the WTO.56 Thus, while accepting the inclusion of provisions directed towards combating international trade in counterfeit and pirated goods, Chile rejected in the final stage of the Uruguay Round negotiations the inclusion of minimum standards of IPR protection in the WTO; rather, if at all adopted, those should be covered by a separate agreement to be administered by another international organisation, such as WIPO.57 In a similar move, India only partially admitted that IPR protection should be dealt with as a matter of trade. Consequently, it held the view that multilateral rules under the future WTO Agreement should only apply in situations of proven trade distortion.58 In 1991, the Chairman’s report to the Group of Negotiations on Goods to which the composite draft text of the future TRIPS Agreement was attached, consequently took note of the fact that one approach consisted of concluding a single agreement covering the protection and enforcement standards for all IPR categories. Another approach supported by many developing countries was reported as rejecting such a comprehensive agreement. They were seeking the separation into two agreements, the first limited to provisions covering trade in counterfeit and pirated goods, to be covered by the GATT/WTO, and the second on standards and principles, to be implemented by the relevant international organisation.59
This position, taken by many developing countries, coincided—perhaps surprisingly—to a large extent with the approach taken by developed countries when the discussions were first initialled in the GATT. Thus, the “Agreement on Measures to Discourage the Importation of Counterfeit Goods” that had been proposed by the US and other developed countries in 1979 (see above, second section) only contained a limited number of mostly procedural provisions on IPR enforcement and suggested the establishment of a dispute settlement mechanism. At the same time, Article I.3 of the draft agreement explicitly provided that “the substantive intellectual property law of the Parties is unchanged by this Agreement”.60 In other words, the setting of minimum standards for IPR protection within the framework of the GATT had not been envisaged by the proponents at that point in time.
Until recently, the Court of Justice of the EU (CJEU) could also have been counted in the group of those who saw only parts of the TRIPS Agreement as being related to trade. First in its Opinion 1/94 which was then echoed by subsequent judgments, the Court acknowledged that the section on border measures in the TRIPS Agreement clearly belonged in the trade arena. At the same time, it considered for a long time that this would not be the case for other sections of the agreement, such as the provisions on patent protection (see below, sixth section). Others have also tried to distinguish between those TRIPS provisions that could be considered as trade-related and those for which this would not be the case. Attempts to identify the types of IPRs that could be considered as trade-related, for example, by reference to Article 7 TRIPS, concluded though that the objectives as set out in this provision are not suitable to achieve this goal.61
Reviewing the arguments defended by each side as briefly summarised above, the question of whether the TRIPS Agreement stands for or against liberalisation of global trade and whether, as such, it therefore belongs to the family of trade agreements administered by the WTO or not turns out to be among the most controversial issues. To answer this question, it is worthwhile to take account of the WTO’s objectives more generally. As the mission statement by the former Director-General, Pascal Lamy, indicates, the organisation counts among its key objectives not only the reduction or elimination of barriers to trade, but also the setting of rules that govern the conduct of international trade. In a similar vein, the same statement also confirms that, for the WTO, “market opening must be accompanied by sound domestic and international policies that contribute to economic growth and development according to each member’s needs and aspirations”.62 In other words, the WTO does not stand for liberalisation outside any regulatory framework. Nor does it aim at establishing a multilateral framework supportive of “wild liberalisation” that would, for example, favour free trade in counterfeit and pirated goods at the expense of trade in legitimate goods.
Quite to the opposite: as the Preamble of the TRIPS Agreement confirms, the drafters of the agreement rightly considered that the harmonious liberalisation of trade significantly relied on the promotion of a balanced set of effective and adequate standards for the protection of IPRs and for their enforcement and therefore agreed on the inclusion of the TRIPS Agreement in the WTO. The EU’s common commercial policy as redefined by the Lisbon Treaty shares this vision: its objectives include the contribution to a harmonious development of global trade and the elimination of barriers to such trade (Article 206 of the Treaty on the Functioning of the EU (TFEU)). At the same time, Article 207 TFEU makes commercial aspects of IPRs part of this policy, in other words, views them as contributing to, not blocking, the achievement of the overall trade objectives.
Understood as such, the WTO’s principal objective clearly speaks in favour of incorporating the TRIPS Agreement under its umbrella. Although the agreement regulates rather than liberalises trade, it nevertheless represents a milestone in the harmonious trade liberalisation that takes account of other policy objectives and, in that capacity, belongs to the WTO.
The TRIPS Agreement Links IPRs to Trade in a Manner That Is Both Offensive and Defensive
By its very name, the TRIPS Agreement obviously assumes the trade-related nature of IPRs. This is confirmed by its Preamble, as well as a number of specific provisions both in the area of substantive rights and the enforcement of IPRs. Thus, in line with the negotiating mandate of the Uruguay Round adopted in Punta del Este in 1986,63 the Preamble of the TRIPS Agreement adopts a balanced approach to the link between IPRs and trade. On the one hand, there is the offensive interest in protecting IPRs in the course of trade. In this regard, the Preamble sees the principles, rules and disciplines established by the Agreement as a means to reduce distortions and impediments to international trade and to combat international trade in counterfeit goods. On the other hand, there is the defensive interest in ensuring that enforcing IPRs is not becoming a barrier to legitimate trade, which is also recognised by the Preamble. Similarly, negotiations outside the WTO are often guided by the same motives, as was illustrated, for example, by the Preamble to the Anti-Counterfeiting Trade Agreement (ACTA) that was negotiated by a group of like-minded countries. The agreement was due to combat the proliferation of counterfeit and pirated goods through enhanced cooperation and more effective rules enforcing IPRs in order to preserve legitimate trade and the sustainable development of the world economy, while at the same time ensuring that such measures do not become barriers to legitimate trade.64
The substantive provisions on IPR protection and enforcement in the TRIPS Agreement that specifically address the link with trade follow the division into these two sub-categories that pursue offensive and defensive objectives. Accordingly, the first set of provisions seeks to ensure the respect of IPRs in the course of trade, including as regards the possibility to use them without being subjected to unjustified requirements, and explicitly uses the term “trade” for that purpose. Among these provisions is Article 16.1 TRIPS, according to which the trademark owner can prevent others from using, without his or her consent, in the course of trade identical or similar signs for goods or services which are identical or similar to those for which the trademark has been registered and where such use is likely to confuse consumers. Also in the field of trademarks, Article 20 TRIPS stipulates that the use of trademarks in the course of trade is not unjustifiably encumbered by special requirements. Finally, Article 69 TRIPS obliges WTO Members to cooperate and to exchange information in order to eliminate international trade in goods infringing IPRs.
The second set of provisions pursues defensive interests. It aims at ensuring that IPR protection and enforcement and related procedures do not stand in the way of legitimate trade. For example, Article 3.2 TRIPS thus provides that exceptions to WTO Members’ basic obligation to guarantee national treatment to foreign right holders in relation to judicial and administrative procedures are only permitted where they are not applied in a manner that constitutes a disguised restriction to trade. Furthermore, both Articles 8.2 and 40.1 TRIPS open the door to the application of competition law in order to avoid that the abuse of IPRs or practices pertaining to IPRs unreasonably restrain trade. In the section on geographical indications, Article 24.8 TRIPS explicitly provides for the right of any person to use its name or the name of its predecessor in business in the course of trade, except where the public would be misled by such use. Last, but not least, Article 41.1 TRIPS is of significant importance in this context, as it takes up once more the underlying idea that enforcement procedures are not to be applied in a way that is blocking legitimate trade.
This said, there are also other provisions in the TRIPS Agreement that are directly related to trade without using the term “trade” as such. For example, the section on patents refers to the act of importing in several places and thus clearly establishes a link with trade. In this regard, Article 27.1 TRIPS requires the non-discriminatory availability of patent rights regardless of whether the products are imported or locally produced. Article 28.1 TRIPS lists among the exclusive rights, the possibility to prevent third parties from importing the patent-protected product or products obtained directly from a patent-protected process without the authorisation of the right holder. It also cross-refers the right of importation to Article 6 TRIPS which has a direct link to trade, too. According to this provision, read together with the clarification provided by paragraph 5(d) of the Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration),65 each WTO Member enjoys the freedom to determine the exhaustion regime which best meets its domestic policy objectives. Consequently, WTO Members have opted for national, regional or international exhaustion regimes. The choice impacts on the extent to which trade in goods embedding IPRs can take place: under national exhaustion, IPRs can serve to prohibit parallel imports and thus potentially function like a boundary around the national territory, whereas such parallel imports could take place in a country that has opted for international exhaustion of IPRs.
In addition, Article 31(f) TRIPS, by limiting the use of standard compulsory licences predominantly to supply the domestic market of the Member granting the licence, assumes that the non-predominant share of the production may be exported. In a similar vein, an additional flexibility, often referred to as the “Paragraph 6 System”, was agreed by WTO Members back in 2003 and subsequently proposed as a permanent amendment of the TRIPS Agreement in 2005.66 It aims at addressing the difficulty of WTO Members with insufficient manufacturing capacities to make effective use of compulsory licensing, as identified in paragraph 6 of the Doha Declaration. Under the System, WTO Members may grant special compulsory licences exclusively for the purpose of producing and exporting medicines to countries with insufficient manufacturing capacities in the pharmaceutical sector.67 Here again, the mechanism specifically addresses a situation where exceptions to patent rights can be applied in order to make and supply the medicines needed to the importing country, so that they do not stand in the way of trading generic medicines.
Part III of the TRIPS Agreement on the enforcement of IPRs also incorporates a wide range of provisions that are directly related to trade. Thus, under Article 50.1 TRIPS, WTO Members are obliged to provide their judicial authorities with the authority to order provisional measures, including to prevent the entry into the channels of commerce of imported infringing goods immediately after customs clearance. Similarly, the entire Section 4 is closely connected to the act of importing goods and thus to trade. It provides for mandatory border measures to be made available by WTO Members which enable the right holder to take action against the importation of allegedly counterfeit trademark or pirated copyright goods (Article 51 TRIPS). The application of such measures to suspend the importation of goods involving other infringements of IPRs and to export infringing goods remains, however, optional. The same applies to ex officio action (Article 58 TRIPS) and the application of border measures to imports in small quantities of a non-commercial nature (Article 60 TRIPS). In addition, Article 59 TRIPS prohibits, in principle, the re-exportation of counterfeit trademark goods in an unaltered state.
Finally, another, at first sight fairly remote, link to trade can be found in the yet to be decided question as to whether non-violation and situation complaints should apply to the TRIPS Agreement. Under Article 64.2 TRIPS, the TRIPS Council was requested to examine the scope and modalities for complaints provided for in GATT Article XXIII:1(b) and (c) and to make recommendations to the General Council by end 1999. Given the impossibility of reaching a unanimous decision on this matter, WTO Members have constantly renewed a moratorium first agreed upon at the Doha Ministerial Conference in 2001.68 During the more than a decade-long opportunity to examine the issue, the question whether the TRIPS Agreement is a market access agreement or not figured prominently on the agenda.69 In this regard, some delegations took the view that the TRIPS Agreement is, indeed, about market access as it aimed at reducing distortions to international trade through the establishment of minimum standards for the protection and enforcement of IPRs. Like other WTO Agreements, the TRIPS Agreements thus established conditions under which international trade was to be conducted. Others argued that the TRIPS Agreement was not principally concerned with questions of market access and provided no commitments in this respect, but also recognised that IPRs might facilitate trade and investment. In other words, both sides in this debate seem to acknowledge the close link between IPRs and trade, notwithstanding their divergent views regarding the very nature of the TRIPS Agreement as a multilateral framework that provides for market access or not.
Certain WTO Dispute Settlement Cases Have Addressed the Effect of IPR Protection and Enforcement on Trade
A number of dispute settlement cases go beyond the mere interpretation of a given TRIPS provision and extend to the implications that such interpretation may have for trade. Some of these cases have been settled while others are still pending. For the purposes of this contribution, rather than attempting to cover the entire range of relevant panel and appellate body reports, a few cases have been selected in which the relationship between IPRs and trade plays a particular role.70 They back the view that IPRs do, indeed, directly impact on trade and that those dimensions are therefore closely linked to each other and better be dealt with under one roof, i.e. that of the WTO.
The most prominent cases which come to mind in this respect are the consultations71 which both India and Brazil requested in 2010 with the European Union regarding generic medicines in transit.72 The request for these consultations was motivated by a number of cases in which generic medicines, mostly manufactured in India, had been detained by EU Customs, mainly in the Netherlands, as they were transiting the Dutch territory in order to be shipped to various third country destinations.73 While there was no infringement reported in the exporting country and in the recipient countries, Customs’ action was requested by the right holders in most cases on grounds of alleged infringement of patent rights in the Netherlands. The principal measure at issue that authorised this kind of intervention by Customs in the EU was Council Regulation (EC) No 1383/2003 of 22 July 2003.74 It went beyond the minimum requirements set by Article 51 TRIPS insofar as it extended the scope of border measures in the EU to cover all IPRs, including patents, and to apply to goods in transit. Both India and Brazil argued in their respective requests for consultations that the EU’s Customs Regulation would be inconsistent, among others, with Article 41 TRIPS according to which enforcement procedures are to “be applied in such a manner as to avoid the creation of barriers to legitimate trade”. In other words, the claimants in this case clearly saw a link between IPRs, here patents, and trade, albeit in a negative way insofar as IPRs could potentially stand in the way of trade in generic medicines. More recently, a similar debate has emerged with respect to the amendments to the Community trademark as proposed by the European Commission in 2013.75 According to this proposal, the exclusive rights conferred on the right holder would entitle him or her under certain conditions to prevent third parties from bringing goods into the EU’s customs territory irrespective of whether those are meant to be released for free circulation there. In this case, the European Parliament’s (EP) rapporteur considered the proposed amendment as a potential threat to international trade76; ultimately, this led the EP to recommend the inclusion of additional language to ensure the smooth transit of generic medicines in compliance with the EU’s international (WTO) obligations.77 If at all needed, the question of how best to regulate IPR infringements occurring while goods are transiting a territory illustrates how important it is to address all aspects related to trade, including IPRs, in one place in order to ensure that the IPR regime is designed in a manner that fosters rather than blocks legitimate trade.