Terms of reference
"To examine, in the light of the relevant provisions of the covered agreements cited by the United States in document WT/DS50/4, the matter referred to the DSB by the United States in that document and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
Chairman: Mr. Thomas Cottier
Panelists: Mr. Douglas Chester
Mr. Yanyong Phuangrach
"Extent of executive power of the Union.
(1) Subject to the provisions of this Constitution, the executive power of the Union shall extend
(a)to the matters with respect to which Parliament has power to make laws; and
(b)to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any treaty or agreement:
Provided that the executive power referred to in sub-clause (a) shall not, save as expressly provided in this Constitution or in any law made by Parliament, extend in any State to matters with respect to which the Legislature of the State has also power to make laws."
-Chapter III (Sections 6 through 11) deals with applications for patents. These provisions do not require that applications for patents must be limited to patentable subject matter. In respect of the subject matter of the claims, they only require that such applications should be for inventions.
-Inventions are defined in Section 2(1)(j) as, inter alia, any new and useful substance produced by manufacture, including any new and useful improvement of such a substance.
-Section 5 makes it clear that inventions claiming substances intended for use, or capable of being used, as a food, medicine or drug or relating to substances prepared or produced by chemical processes are not in themselves patentable, but methods or processes for their manufacture are. Under Section 2(1)(l)(iv) the term 'medicine or drug' includes insecticides, germicides, fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants.
-Chapter IV of the Patents Act concerns the examination of applications. Section 12 requires that, when the complete specification has been filed2 in respect of an application for a patent the application shall be referred by the Controller General of Patents, Designs and Trademarks to an examiner. The examiner shall ordinarily report to the Controller within a period of 18 months on, inter alia, whether the application and the specification are in accordance with the requirements of the Act and whether there is any lawful ground for objecting to the grant of the patent under the Act.
-Paragraph 2 of Section 15 states that, if it appears to the Controller that the invention claimed in the specification is not patentable under the Act, he shall refuse the application.
(a)India has failed to implement the obligation in Article 70.8 to establish a mechanism that preserves the novelty of applications for pharmaceutical and agricultural chemical product patents during the TRIPS transition period, regardless of when those applications are filed during that period.
(b)Article 70.8 of the TRIPS Agreement requires India to ensure that persons who filed or would have filed "mailbox"3 applications had the "mailbox" been in place on time and maintained can file such applications and receive the filing date they would have received.
(c)In the alternative, if the Panel finds that India has had a valid mailbox system4 in place, India has failed to comply with its transparency obligations under Article 63 of the TRIPS Agreement.
(d)The obligation to establish an exclusive marketing rights system arose on 1 January 1995, based on the text of Article 70.9. Because India has failed to implement an exclusive marketing rights system legislatively, it is currently out of compliance with this obligation under the TRIPS Agreement.
(e)India has failed to implement the obligation in Article 70.9 that marketing rights be granted so that competitors of the owner of such right will not be permitted on the market absent the owner's consent.
Article 70.8 and 70.9
(f)That the Panel recommend that India bring its measures into conformity with its obligations under the TRIPS Agreement.
(g)That the Panel suggest that India implement its obligations under Article 70.8 and 70.9 in a manner similar to the way in which Pakistan has indicated it is implementing these obligations.
(a)India is providing a means for filing patent applications for pharmaceutical and agricultural chemical products consistently with Article 70.8 of the TRIPS Agreement. This means is capable of attaining the objectives of Article 70.8 of the TRIPS Agreement.
(b)The United States' request, referred to under 3.1(b) above, is a request for a ruling on how India should eliminate the consequences of an alleged violation of Article 70.8 of the TRIPS Agreement. Article 19.1 of the DSU does not permit the Panel to make a ruling on how India should eliminate the consequences of the alleged violation of Article 70.8 of the TRIPS Agreement.
(c)The United States' request for findings based on Article 63 should not be considered by the Panel, since the Panel's terms of reference do not cover the United States' Article 63 claim and the scope of factual and legal claims cannot be expanded after the first written submission.
(d)In the alternative, if the Panel were to consider that it can examine the United States' claim:
(i)Article 63 does not apply to developing countries until 1 January 2000;
(ii)if the Panel were to consider that Article 63 already applies to India, India has published the elements of its means of filing that are subject to the transparency requirements of Article 63.1.
(e)Since there has not been any request for exclusive marketing rights in India, India has not failed to accord exclusive marketing rights to any product entitled to such rights under Article 70.9 of the TRIPS Agreement.
(f)Since the issue of the scope of exclusive marketing rights was not an issue relating to an existing measure, the United States' request, referred to under 3.1(e) above, amounts to a request for a declaratory judgement, which type of finding does not fall within the competence of panels because Article XXIII of GATT 1994 and the DSU permit only complaints on measures actually taken.
Article 70.8 and 70.9
(g)The United States' request that the Panel suggest that India implement its obligations under Article 70.8 and 70.9 in a manner similar to the way in which Pakistan has indicated it is implementing these obligations should be rejected as procedurally and legally inappropriate.
- The Patents Act and the administrative practices governing patent applications permitted the filing of a patent application for a pharmaceutical or agricultural chemical product notwithstanding the fact that such products were currently not patentable. Section 6 of the Act provided for the receipt of applications for a patent for inventions. It was not a precondition of Section 6 that the application should relate to a patentable invention. The Patents Act of 1970 defined "invention" in Section 2(1)(j) and further provided in Section 3 that certain subject matters were not inventions. In Section 5, the Act recognized that there might be an invention in relation to pharmaceutical products and chemical products, but provided that such inventions were not patentable in respect of the product itself while being patentable for the methods or processes of manufacture.
- It was true that, should an application be examined under the provisions of Section 12, the examiner would be duty‑bound to apply the provisions of Section 5 and at this stage raise objections to the patentability of a pharmaceutical and agricultural chemical product. However, applications for patents for pharmaceutical and agricultural chemical products were not being referred by the Controller General of Patents, Trademarks and Designs for examination. Therefore, the question of their rejection did not arise, since that question could only arise after examination and the application of Section 5. Thus, patent applications for pharmaceutical or agricultural chemical products would not be refused and withdrawn from consideration prior to the date when such protection would become available. Once patent protection or exclusive marketing rights for pharmaceutical and agricultural chemical products must be granted in accordance with Article 70.8(c) and 70.9, a complete record going back to the date of entry into force of the WTO Agreement of all patent applications for pharmaceutical and agricultural chemical products, including the date and the sequence of the applications, would thus be available.
- Article 70.8(a) of the TRIPS Agreement created, at present, only one obligation for India in respect of pharmaceutical and agricultural chemical products, namely "to provide as from the date of entry into force of the WTO Agreement a means by which applications for patents for such inventions can be filed" (emphasis added by India). A method of filing applications for pharmaceutical and agricultural chemical products had been made available and was being used.
- WTO Members were free to determine the means by which patent applications could be filed. Article 70.8(a) required Members to provide "a means" for filing; it did not prescribe the choice of a particular method. This was explicitly recognized in Article 1.1 of the TRIPS Agreement which made clear that "Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice" (emphasis added by India). India had initially decided to provide for a means for the filing of applications through an ordinance by the President and, when this ordinance had lapsed, through administrative action by instructing the patent offices to continue to receive applications and to store them separately for future action in accordance with Article 70.8. Both the legislative and the administrative approaches were available to India under Articles 1 and 70 of the TRIPS Agreement. It was therefore not correct for the United Statesto claim that India must create a mailbox system in its law for the filing of patent applications (emphasis by India). WTO Members were free to determine the means by which patent applications could be filed and India was free to choose an administrative method pending the change in legislation.
- The means currently provided by India was capable of attaining the objectives of Article 70.8. The main rationale of the requirement of subparagraph (a) of Article 70.8 was to ensure that the WTO Member, when it eventually granted patents for pharmaceutical and agricultural chemical products, was able to assign a filing date to the patent for the purpose of determining the remaining patent term. Any method of filing, registration and storage of applications that enabled the Member to assign a filing date to patent applications must, therefore, be regarded as a proper means for filing within the meaning of Article 70.8.
- The number of filings submitted under this system indicated that the companies concerned did not experience or anticipate any difficulty in the matter of filing their applications.5
- India had made it clear that changes to its laws were necessary to establish a mailbox system consistent with the requirements of Article 70.8. India had done so through statements and actions surrounding its issuance and notification of the Patents (Amendment) Ordinance 1994 and its attempt to get the Patents (Amendment) Bill 1995 adopted by Parliament. The text of the Patents Ordinance made it clear that the relatively automatic system for the rejection of pharmaceutical and agricultural chemical product patent applications must be modified to establish a legally defensible mailbox system. The Patents Ordinance had, temporarily, amended Section 5 of the Patents Act by the insertion of a Chapter IVA stipulating special rules for the handling of mailbox applications, which overrode the operation of Section 12 of the Patents Act and prohibited the Controller to forward mailbox applications to examiners. India thus had thought that it was necessary to modify the Indian Patents Act with respect to the handling of applications for pharmaceutical and agricultural chemical products (emphasis by the United States). The Patents Ordinance would not have been issued unless the President, presumably acting on the advice of his legal experts, had determined that it was "necessary" to take "immediate action" under Article 123 of the Indian Constitution. The importance of issuing the Ordinance and implementing its provisions in India’s laws had been restated in the context of the Indian Government’s unsuccessful attempts to get the Patents (Amendment) Bill 1995 passed by Parliament. The Indian Government had also stated in its notification of 6 March 1995 of the Patents Ordinance to the Council for TRIPS that the Ordinance had been issued "with a view to meet India’s obligations under paragraphs 8 and 9 of Article 70 of the [TRIPS] Agreement". These statements made perfectly clear that India knew it had to make amendments to the Patents Act to implement its Article 70.8 mailbox obligations, and that if it did not do so it would be out of compliance with its TRIPS obligations.
- As a result of the rejection by Parliament of the Patents (Amendment) Bill 1995, Sections 5, 12 and 15 of the Patents Act 1970 remained in force and continued to require that applications drawn to pharmaceutical and agricultural chemical products be rejected. In this case, Parliament must take action to modify this statutory system before an administrative system of the type described by India could have legal effect.
- India's claim that the Patents Act 1970 permitted it to grant special treatment to applications drawn to pharmaceutical and agricultural chemical products because such applications allegedly were different from applications drawn to other types of unpatentable subject matter listed in Section 3 of the Patents Act had no legal or regulatory basis. The process for review of applications that dealt with subject matter listed in Sections 3 and 5 was identical to the review of any other type of subject matter - once filed with the Patent Office, these applications were to be forwarded to examiners for a review of patentability. Section 15 of the Patents Act stated that an examiner shall identify unpatentable subject matter, regardless of whether it fell within the subject matter listed in Sections 3 and 5. In any event, this alleged distinction between applications drawn to different types of unpatentable subject matter was irrelevant. The matters before this Panel related only to the fact that Sections 5, 12 and 15 of the Patents Act required the Controller to forward applications drawn to pharmaceutical and agricultural chemical products to examiners and ultimately reject them for being drawn to unpatentable subject matter. Therefore, Indian law did not permit the Indian Patent Office to treat, on an ad hoc basis, one set of applications any differently; once filed with the Patent Office, applications must be forwarded to the examiners for a review of patentability. India’s attempt to claim that it was able to do so was contrary to the law, and any patents granted on applications filed under this informal, unrecognized system might be subject to legal challenge based on a claim that they were filed and processed in a manner inconsistent with the current law. In such a case, a court might find that the system for handling the applications was ultravires and applications filed under that system could not result in the grant of a valid patent. A group of 11 patent experts convened by the Indian Government in 1994 to discuss whether India's laws must be amended to implement Article 70.8 and 70.9 had known this. They specifically had considered the option of implementing the mailbox system administratively and rejected it, finding it far too likely to invite legal challenges to any applications filed under such a system. They had concluded that amendments to the Patents Act to disable the automatic process for forwarding applications to examiners and ultimately rejecting those drawn to pharmaceutical and agricultural chemical inventions were necessary to establish a mailbox system in accordance with Article 70.8.
- India's claim that it had a mailbox system in place was called into question by the fact that it had never notified such a system to the Council for TRIPS, as required by the TRIPS Agreement. The only notification India had made to the Council for TRIPS was the notification setting forth the text of the Patents (Amendment) Ordinance 1994. This notification made it clear to all governments and potential applicants that the system established by the Ordinance created the basis for accepting mailbox applications. In other words, without this system mailbox applications would not be processed or have the legal status required by the TRIPS Agreement. India had never sent a follow-up notification to the Council for TRIPS stating that, notwithstanding the clear requirements of its law, applications for unpatentable subject matter would not be refused and would receive the status required by the TRIPS Agreement.
- India's claim that it had implemented a mailbox system was inconsistent with its obligations under Article 63 of the TRIPS Agreement to publish or make publicly available the specific terms and provisions of its system "in such manner as to enable governments and right holders to become acquainted with them" (emphasis by the United States). This claim had been made for the first time on 8 April 1997 in a confidential document that would not be circulated to WTO Members, let alone to the public. The private sector had no idea of the existence of this system and those people who, despite all indications to the contrary, had invested time and money in filing applications claiming pharmaceutical and agricultural chemical inventions, had no idea of the legal status of their applications. This could not under any criteria be considered an acceptable implementation of India’s Article 70.8 obligation, particularly in light of the transparency obligations in the TRIPS Agreement, and should create a presumption that it did not have a legally valid system in place. Article 70.8 was clear in its requirement that an open and known process be developed for accepting applications for pharmaceutical and agricultural chemical product patents and granting those applications the proper legal status. The first element of this obligation was the establishment of a system that people knew about and knew how to use. A mailbox system that was unknown to the world was useless.
- The principal purpose of the requirement to establish a mailbox system was to ensure that applications that were filed in the transitional period would not lose their novelty and, consequently, to allow mailbox applicants to preserve their ability to obtain patent protection for pharmaceutical and agricultural chemical products in a Member taking advantage of some or all of the transitional period. The benefit provided by the system was such that, when patent protection for pharmaceutical and agricultural chemical products was established, such protection would also be available to persons who had filed applications during the transitional period based on the effective filing date of their applications. To this end, Article 70.8 did not require the examination and grant of the patent at the time of application; rather it required that a system be established to ensure that effective filing dates were granted in anticipation of the future benefit of eligibility for product patent protection based on those dates. A mailbox applicant must have the assurance that the application would lead to the grant of a patent if the conditions foreseen in paragraphs (b) and (c) of Article 70.8 were met (emphasis by the United States). In the case of India, which had indicated its intent to take advantage of the entire transitional period, this future benefit of the mailbox system would not be available to applicants until 2005. Once a filing date had been granted and applications were given the required legal status, the applicants would be able to factor this status into their operations and business decisions.
- The mailbox system, therefore, had a rationale common to many other WTO obligations, "namely to protect expectations of the contracting parties as to the competitive relationship between their products and those of other contracting parties"6. The Superfund report had established clearly the importance of "creat[ing] the predictability needed to plan future trade"7. Applicants must be able to anchor, during the transitional period, their right to receive a patent at the end of the transitional period so that they could plan their business operations accordingly (e.g., where to invest, where to move operations, whom to hire, which distribution networks to establish, etc.). As regards how applicants could make informed business decisions based on the right to seek a patent in the future, it should be borne in mind that, if the particular application proved unpatentable in other WTO Members during the transitional period, then this right might not be of much value, but that, on the contrary, if an application proved to be patentable everywhere else, then it would presumably be patentable in India at the end of the transitional period; thus, the current right to seek patent protection based on the appropriate filing date was of great strategic and commercial value to applicants. Article 70.8 established the expectation that through the grant of this legal status to their applications, applicants would be able to establish their competitive position in the country at issue and factor this competitive position into their business plans.
- Despite India’s claim that it had decided for the moment not to enforce the mandatory provisions of Sections 5, 12 and 15 of the Patents Act 1970 (which claim was unknown to other governments and the public), that "measure continues to be mandatory legislation which may influence the decisions of economic operators"8. The economic operators in the present case - potential patent applicants - had no confidence that a valid mailbox system had been established, and thus would not file mailbox-eligible applications in India. To paraphrase the Beer II panel, a non-enforcement of a mandatory law that violated a WTO obligation did not ensure that the obligation was not being broken.9 Here, Sections 5, 12 and 15 mandated that applications for pharmaceutical and agricultural chemical product patents be forwarded to examiners, determined to be drawn to unpatentable subject matter, and rejected. Because India had failed to establish a fully functional mailbox system that granted mailbox applications the legal status required by the TRIPS Agreement as of their priority filing date, large numbers of applications that would have been filed were currently being withheld until India established such a system. Although India would not be obligated to grant patents on such applications meeting the criteria for patentability set out in Article 27 of the TRIPS Agreement as of their appropriate filing date until the end of the transitional period, it would not be sufficient that the legal changes necessary to provide an assurance of patentability were made at the end of the transitional period. Applicants must be given the legal assurance of a current right to the conditional future benefit that they would be able to seek patent protection on the basis of those criteria as of 1 January 1995, allowing them to plan their business operations accordingly as of that time. If a valid mailbox system were established today and an applicant who would have filed in July 1995 did so tomorrow and was assigned its July 1995 filing date, that applicant would be granted the right it must have under the TRIPS Agreement, but would have lost almost two years of shaping its business plan with the knowledge that it had an application with the legal status required by Article 70.8.
- In light of India's clear violation of the mailbox provisions of the TRIPS Agreement, a showing of actual damage was not a prerequisite to a finding that India's failure to establish a TRIPS-consistent mailbox system was nullifying or impairing benefits under the TRIPS Agreement. Article 3.8 of the DSU provided that, where there was a violation of the obligations under a covered agreement, the action was considered prima facie to constitute a case of nullification or impairment. In any event, during 1995 and 1996 the United States Patent and Trademark Office had received over 50,000 such applications.10
- Under India’s legal system there was more than one method by which it could satisfy its obligations under Article 70.8 of the TRIPS Agreement. This could be done by statute, subordinate legislation, such as rules or regulations, and even by administrative instructions and practice. Initially, India had chosen the legislative route to provide a means for receiving applications for pharmaceutical and agricultural chemical products and according priority to them. At present, India administratively continued to receive applications for pharmaceutical and agricultural chemical products and was deferring their examination. Such an administrative decision was permissible under Article 73(1)(a) of the Indian Constitution which provided that "the executive power of the Union shall extend to the matters to which Parliament has the power to make law". Under this constitutional provision, the Executive could act administratively in cases in which Parliament had legislative competence. In the case of providing the necessary "means" under Article 70.8 of the TRIPS Agreement, the relevant legislative power would be Entry 49 of List I or List III of the Seventh Schedule to the Constitution which read "Patents, inventions and designs; copyright; trade marks and merchandise marks". In this connection, two Supreme Court opinions showed that administrative action was an available method for the Executive, namely J.R. Raghupathy vs State of Andra Pradesh and Union of India vs H.R. Patankar and Others.11
- Advancing evidence of the decision not to take up the applications for examination until 1 January 2005, India referred to a question that had been asked in Parliament about the action taken or proposed to be taken in respect of applications for pharmaceutical and agricultural chemical products (Unstarred Question No. 2601 asked by a Member of Parliament (Lok Sabha)) and the reply given by the Government in Parliament on 2 August 1996 that "the applications for patent will be taken up for examination after 1 January 2005 as per the WTO Agreement which had come into force on 1 January 1995".12
- There was no requirement that Parliament should recognize an administrative practice unless explicitly required by the Constitution or statute.
- With regard to the claim of the United States with respect to Article 123 of the Constitution, India stated that Article 123 was intended to enable legislation even when Parliament (either House or both Houses) was not in session. Therefore, the determination that the President was required to make under Article 123 was that it was necessary to take immediate action to promulgate an Ordinance despite Parliament not being in session and not that legislation was the only means of satisfying a particular obligation (emphasis by India).
- Article 70.8 merely stated that a means of filing must be provided. It did not state that it must be made "clear to the public" through "press releases or international news reports". Article 70.8 merely stipulated that Members provide a means by which applications could be filed and that "to provide" means "to supply for use"; it did not mean "make known to the world". The usefulness of a means of filing did not depend on it being made "known to the world"; it was sufficient that individual companies that wished to submit an application could obtain the necessary information from the relevant authorities. The fact that as many United States' companies as could be expected on the basis of past trends had in fact filed applications under the means provided by India underscored this point.
- Article 70.8 did not state that the means of filing provided must be notified to the WTO. Besides, it should be stressed that India was continuing to apply the same means of filing that it had initially provided by virtue of the Ordinance and which had been given publicity and notified to the WTO. The transparency obligations were set out in Article 63, not in Article 70.8; moreover, these obligations related in this case to the Patents Act of 1970, which had been published, and not to the administrative arrangements made under that Act. In any event, as noted above, as a practical matter, adequate publicity had been given to the means of filing which had initially been provided by India and subsequently continued administratively.
The terms of the TRIPS Agreement
- India maintained its argument that WTO Members were free to determine the means by which patent applications could be filed and that Article 70.8(a) required Members to provide "a means" for filing without prescribing the choice of a particular method. In this context, it also reiterated that Indian law did not require a change in law to implement these obligations and reiterated that the transparency obligations in the TRIPS Agreement could not be found in Article 70.8 but in Article 63.
- Subparagraph (a) of Article 70.8 must be read in conjunction with subparagraphs (b) and (c) of that provision and the transitional arrangements set out in Article 65. Subparagraph (a) of Article 70.8 obliged Members to provide a means of filing, i.e. the first step in a procedure leading to the grant of patent protection "as from the date of entry into force of the WTO Agreement", i.e. 1 January 1995. The obligation to apply the TRIPS Agreement’s criteria of patentability and to provide patent protection when those criteria were met arose only "as of the date of application of this Agreement" (subparagraphs (b) and (c)). This date was defined in Article 65. Paragraph 4 of that Article made it clear that the relevant date of application in India of the provisions on product patents in respect of pharmaceutical and agricultural chemical products was 1 January 2005. Article 70.8 thus established two different obligations that became effective on two different dates: the obligation to provide a means of filing on 1 January 1995 and the obligation to accord patent protection on 1 January 2005. Given this context, subparagraph (a) of Article 70.8 could not be interpreted to establish already now the obligation to provide for the grant of patents in the year 2005. To give this interpretation to subparagraph (a) would effectively turn an obligation that arose at the end of a transitional period into a current obligation. The rationale of Articles 65 and 70 was clearly to permit developing country Members to postpone changes in their law that other Members were required to make under Article 27 of the TRIPS Agreement. It would be inconsistent with that rationale if Article 70.8(a) were interpreted to require the establishment of a procedure that would lead to the granting of a patent (emphasis by India). The consequence of such an interpretation would be that developing country Members would have to change their law to provide for the patentability of pharmaceutical and agricultural chemical products before having to grant patentability to other products (emphasis by India) ‑ a consequence completely at odds with the purpose of Article 65.4 which was designed to extend for these products the period of transition beyond the normal five‑year period.
- The fundamental purpose of the transitional arrangements was to enable developing countries to accept the WTO Agreement without having to change their patent law at the same time. There had been a recognition among the negotiators of the TRIPS Agreement of the fact that many developing countries still needed more time to build the domestic consensus necessary to accord patent protection, in particular for products where patentability was perceived to have certain adverse implications. The United States’ complaint was an attempt to eliminate this function of the transitional arrangements of the TRIPS Agreement. During the first five years of the TRIPS Agreement, during which developing countries expected to be free from the need to make any legislative change, they thus would have to make such changes in the most sensitive area (emphasis by India). The United States’ interpretation of Articles 70.8 and 70.9, therefore, effectively turned transitional arrangements designed to create a special benefit in respect of pharmaceutical and agricultural chemical products into a source of an additional burden. To the knowledge of India, no developing country had acted under Article 70 on the basis of the interpretations proposed by the United States. Examination of the notifications submitted to the TRIPS Council under Article 63.2 of the TRIPS Agreement relating to Article 70.8 showed that not one of these notifications provided for a procedure to be established under which patents for pharmaceutical and agricultural chemical products would be made available as from 2005.
- Regarding the jurisprudence of the CONTRACTING PARTIES to GATT 1947 under which certain basic obligations under GATT, such as the national treatment obligation under its Article III and the general prohibition of quantitative restrictions under its Article XI, had been interpreted as obligations "protecting expectations" of Members as to the "competitive relationship" between their products and those of other Members and that a measure could therefore be inconsistent with these provisions even if it had not yet had a trade effect, India would not suggest that the Panel apply a different principle to the basic obligations set out in the TRIPS Agreement. However, it argued that, under the transitional arrangements of the TRIPS Agreement, the date of application of the provision to which the principle developed by the CONTRACTING PARTIES could be applied in this case, i.e. Article 27 of the TRIPS Agreement, had not yet arrived.
- It would have far-reaching implications if - for the sake of creating predictable conditions of competition - the many arrangements under the WTO agreements were interpreted to entail the immediate obligation to empower the executive authorities to carry out the obligations that would have to be observed at the end of the transitional period. To give a specific example, the Agreement on Textiles and Clothing permitted the maintenance of restrictions during a transitional period. Did that Agreement imply the obligation to change any domestic law mandatorily prescribing these restrictions? A provision creating the obligation to establish certain conditions of competition as from a specified date or as from the occurrence of a certain event could not be interpreted as entailing the obligation to provide for such conditions of competition in the domestic law in advance of that date or event. The CONTRACTING PARTIES to GATT 1947 had never used the concept of conditions of competition to advance the effective date of application of an obligation.
Object and purpose
- The purpose of subparagraph (a) of Article 70.8 emerged clearly from subparagraphs (b) and (c) of that provision and Article 70.9. According to subparagraphs (b) and (c), developing country Members must grant patents to pharmaceutical and agricultural chemical products for a period of at least 20 years "counted from the filing date" as if the criteria for patentability laid down in the TRIPS Agreement were being applied on "the date of filing". Furthermore, according to Article 70.9 only products for which a patent application had been filed in accordance with Article 70.8(a) were eligible for the grant of exclusive marketing rights. The purpose of subparagraph (a) was thus not to create a procedure ensuring that pharmaceutical and agricultural chemical products would become patentable or would be given exclusive marketing rights, but rather to ensure that each patent applicant obtained a date of filing on the basis of which patent protection could be granted as from the date on which Article 27 applied and that exclusive marketing rights could be granted to products at the point at which they were eligible for such rights (emphasis by India).
- The only evidence that India could muster to show that it had made a public decision to establish an administrative mailbox system was a question and answer in the Lok Sabha that apparently had taken place on 2 August 1996. However, it was interesting to note that the answer to the question: (a) did not state that the applications that had been filed had been granted the proper legal status; (b) had apparently never been made known to the public (let alone notified to other WTO Members through the Council for TRIPS); and (c) was of no apparent legal effect.
- The opinions provided by India clarified that amendments to the Patents Act were necessary to establish a mailbox system. They did not support India's assertion that it could create a mailbox system through administrative guidance. In Union of India vs. H.R. Patankar and Others, the Supreme Court had held that "if there are no statutory rules in force.... or even if there are statutory rules but they are silent on any particular subject, it is competent to the Government [to make appropriate rules] to fill in the lacuna in the statutory rules"13. Rather than an instance of statutory silence or a gap in statutory rules, the present case concerned a specific statutory provision that directed the Controller to forward applications to the examiners, where applications drawn to pharmaceutical or agricultural chemical products would be identified as being drawn to unpatentable subject matter and ultimately rejected. By implication, Union of India stood for the proposition that the Government was not authorized to issue administrative guidance that was contrary to the letter of the law. In J.R. Raghupathy vs. State of A.P., the Supreme Court had addressed the issue of the ability of the High Court to review the Government's exercise of discretion conferred upon it, even when that exercise of discretion was contrary to its own guidelines. Citing prior authorities, the Court had held that administrative guidelines had no statutory force and conferred no right on any citizen to complain that they were not being met.14 Thus, even if India had issued instructions to its Controller to ignore the mandatory nature of Article 12(1) of the Patents Act 1970, which the United States doubted, those instructions would have no legal effect and a court would be unable to compel the Patent Office to follow them. The J.R. Raghupathy case also stood for the proposition that, where a statute was to be implemented by a designated authority, Parliament "must have assumed that the designated authority would act properly and responsibly, with a view to doing what was best in the public interest and most consistent with the policy of the statute"15. This language did not provide any support for the Indian Government's assertion that it was permitted to act administratively in a manner that thwarted or circumvented clear and direct statutory instruction to take a particular action. As a result, the Indian patent experts referred to earlier had been correct in their conclusion that the Patents Act 1970 must be amended if India was to fully implement the mailbox obligations under Article 70.8 of the TRIPS Agreement.
- The written answer from the Government to Unstarred Question No. 2601 in the Lok Sabha on 2 August 1996 put beyond any doubt that the applications received had a proper legal status. The Government had stated in this written answer that until 15 July 1996 as many as 893 applications had been received from Indian as well as foreign companies in the fields of drugs and medicine. It had further been stated that these applications would be taken up for examination after 1 January 2005 as per the WTO Agreement which had come into force on 1 January 1995. It was to be borne in mind that the Indian legal system was based upon common law systems and that any statement, more particularly written statement, made in any House of the central legislature, by the Minister who was an authorized functionary of the Government, put that Government under the obligation of the common law doctrine of "estoppel", in the sense that the Government at no stage could perform any act in contravention of the position already taken under that statement.
- As regards the United States' assertion that the answer to Unstarred Question No. 2601 had apparently never been made known to the public, all answers to questions put by Members of Parliament were given in writing and were laid on the table of the relevant House and circulated amongst all Members of that House. The national and international electronic, print and other media had open access to the answers given in the House and widely reported them. Questions and answers given were reported in the Reporters published by the secretariat of the respective House and formed a permanent printed record which was accessible to the public.
- Regarding the United States' assertions based on the two Indian Supreme Court opinions, India stated that it was a settled proposition in Indian law that the executive power of the central government under Article 73 was co-extensive with the legislative power of the Parliament. In other words, it extended over the whole of the territory of India with respect to the matters enumerated in List I (including Entry 49 "Patents, inventions and designs; copyright, trademarks and merchandise marks") and List III of the Seventh Schedule to the Indian Constitution. In J.R. Raghupathy vs State of Andra Pradesh, the Supreme Court had stated that the executive powers of the Union under Article 73 were much wider than the prerogative powers in England. The provisions of Article 73 of the Constitution as interpreted in Union of India vs H.R. Patankar and Others and J.R Raghupathy vs State of Andra Pradesh were in the nature of support mechanisms for the legislative provisions in the Patents Act 1970 which formed the basis for the current filing system. The United States had quoted the J.R.Raghupathy opinion out of context. The essence of the Supreme Court opinion was that if there were certain deviations from the guidelines set for in-house management of the government departments, the courts did not need to interfere. However, where administrative instructions impinged upon the rights of persons, there was no way out and the courts were bound to come into active play. The explicit position taken by the Supreme Court in Union of India vs H.R. Patankar made it clear that even if there were any statutory rules, but they were silent on any particular subject, the Government was competent to fill in the lacunae in the statutory rules.
- The Panel's terms of reference did not cover the United States' Article 63 claim. According to Article 7.1 of the DSU, the mandate of the Panel was to examine the matter referred to the DSB in the document in which the United States had requested the establishment of a panel in accordance with Article 6 of the DSU, i.e. document WT/DS50/4. Neither that request nor, earlier, the United States' request for consultations had raised the issue of transparency or compliance with Article 63 of the TRIPS Agreement. In these requests, the United States had summarized the issues as follows: "The legal regime in India currently does not make patent protection available for inventions as specified in Article 27 of the TRIPS Agreement or provide systems that conform to obligations of the TRIPS Agreement regarding the acceptance of applications and the grant of exclusive marketing rights. As a result, India's legal regime appears to be inconsistent with the obligations of the TRIPS Agreement, including but not necessarily limited to Articles 27, 65 and 70".
- According to Article 6.2 of the DSU, the request for the establishment of a panel must meet two central requirements: it must "identify the specific measures at issue" and "provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly". The United States' request did not identify lack of transparency as a specific measure at issue. The vague reference to "obligations of the TRIPS Agreement, including but not necessarily limited to" is not sufficient to present the problem clearly. The recent WTO Panel on European Communities ‑ Regime for the Importation, Sale and Distribution of Bananas21 had concluded in a comparable situation that "reference to a WTO Agreement without mentioning any provisions or to unidentified 'other' provisions are too vague to meet the standards of Article 6.2 of the DSU".
- Under the unusual and unfortunate circumstances of this case - where India had indicated publicly and during consultations that it had no mailbox system in place and refused to answer United States' questions regarding whether such a system existed - it would be appropriate for the Panel to provide the United States with an opportunity to identify specific legal claims regarding transparency during the first substantive meeting. The only reason that Article 63 had not been explicitly referenced previously was that India had maintained for two years that it had no mailbox system in place and first claimed that it had a mailbox system in place in its first written submission to the Panel.
- The basis for the ruling of the Bananas Panel was that panel procedures should not operate so as to permit surprise and prejudice of a party's interests. That concept was applicable here, where the interests of the United States would be unfairly disadvantaged if the Panel did not consider, in the alternative, its Article 63 claim.
(i) The Bananas Panel had found that because of the way the panel request had been written "it is not possible at the panel request stage, even in the broadest generic terms, to describe what legal 'problem' is asserted. While a reference to a specific provision of a specific agreement may not be essential if the problem or legal claim is otherwise clearly described, in the absence of some description of the problem, a mere reference to an entire argument or simply to 'other' unspecified agreements or provisions is inadequate under the terms of Article 6.2".22 The Panel therefore had indicated that where a "problem" had been clearly described, a reference to a specific provision in a specific agreement might not be necessary. In this case, the United States had made abundantly clear in its panel request and in its first written submission to the Panel that the "problem" was India’s failure to implement a mailbox system that (a) allowed applicants to submit applications and (b) granted those applications the required legal status. Assuming that India had a system in place, its failure to make that system known to WTO Members was necessarily part of this "problem". This transparency issue could not be separated from the central "problem" of not establishing a useful mailbox system, i.e. a system enabling applicants to know how and where to submit applications.
(ii) India could not realistically claim surprise, particularly because its own actions had delayed full consideration of this issue. The panel on Brazil - Measures Affecting Desiccated Coconut had noted regarding Brazil’s refusal to consult that such a refusal was "a matter which this Panel views with the utmost seriousness. Compliance with the fundamental obligation of WTO Members to enter into consultations where a request is made under the DSU is vital to the operation of the dispute settlement system..... pursuant to Article 4.6 of the DSU, consultations are 'without prejudice to the rights of any Member in any further proceedings'. In our view, these provisions make clear that Members' duty to consult is absolute, and is not susceptible to the prior imposition of any terms and conditions by a Member".23 It was no less serious a matter when a Member refused in consultations to provide information of which it was aware, or gave misleading information in consultations. The Panel could and must respond to this situation through a simple application of the concept of estoppel: where a party had actively refused to respond concerning information within its exclusive control, or had given misleading information in consultations, that party should be held to its earlier representations and estopped from contradicting them at a later stage in the proceeding. At the very least, the other party should be able to present arguments on that information in the ongoing proceeding. Any contrary result would act as an incentive for parties to be as uninformative as possible in consultations and would lead to a breakdown in the WTO dispute settlement process.
- It was incorrect that India had only informed the United States of the mailbox system currently in place in India in its first written submission to the Panel. The United States had been informed about the means of filing in India during the consultations held on 27 July 1996 with the United States and the European Communities. The internal written record of the Indian Government on the consultations held between India and the United States and the European Communities on 27 July 1996 in Geneva indicated that the representative of India had given the following information:
"In the meanwhile, product patent applications in the pharmaceutical and agrochemical sector were being received under the provisions of the Patents Act of 1970. About 1,000 applications had been received so far, and are being preserved in a manner which will facilitate establishing the necessary queuing order as and when the necessary legislation is in place. The Patents Act 1970 has provided the necessary legal scope for receipt of applications for product patents even in sectors like pharmaceuticals and agrochemicals though the Patents Act 1970 does not provide for the processing of such applications or for grant of product patents in those sectors."
The Indian record of the consultations further indicated that the United States had responded to this information as follows:
"The US appreciated the update given by India. It was helpful to know that around 1,000 applications had been filed."
If the United States had been of the view that the means of filing in question should have been published in accordance with Article 63 of the TRIPS Agreement, notwithstanding the fact that the Patents Act of 1970 had been published, it could therefore easily have identified this issue in the request for the establishment of a panel.
- Under the DSU, the complainant could not expand the scope of its factual and legal claims after having made its first submission.It was a well‑established practice that the first written submission of the complainant incorporated all its legal claims and all the requests for findings and recommendations it wished to submit to the Panel. This practice was reflected in paragraphs 5 and 7 of the standard Working Procedures in Appendix 3 to the DSU which stated that "At the first meeting with the parties, the Panel shall ask the party which has brought the complaint to present its case" and that "Formal rebuttals shall be made at a second substantive meeting of the Panel". It followed from these procedures that the written submissions for the first meeting must constitute the full presentation of the case by the complainant. An indirect reflection of this principle was Article 10.3 of the DSU which stated that "third parties shall receive the submissions of the parties to the dispute to the first meeting of the Panel". This provision had obviously been drafted on the assumption that the first submission informed the third parties fully of the complainant's case. However, not only third parties’ rights would be curtailed if complainants could introduce new claims and requests after the first submission, but also the rights of the respondent. This had been recognized in the recent report of the Panel on European Communities ‑ Regime for the Importation, Sale and Distribution of Bananas, which had ruled that:
"For the purposes of determining whether a Complainant in this matter has made a claim, we have examined its first written submission, as we consider that document determines the claims made by a complaining party. To allow the assertion of additional claims after that point would be unfair to the respondent..... In our view, the failure to make a claim in the first submission cannot be remedied by later submissions....." (emphasis added by India)24
The extremely tight timetables for panel work set out in the DSU entailed the need for complainants to carefully prepare their case in advance of the proceedings and incorporate in their first submission all their factual and legal claims. According to paragraph 12 of the Working Procedures annexed to the DSU, five to eight weeks normally lapsed between the receipt of the first written submission of the complainant and the receipt of the written rebuttals. Thus, while the complainant could prepare its case without any time constraint, the respondent normally had only five to eight weeks to prepare its rebuttal, which created a significant imbalance between complainants and respondents. According to the Working Procedures, only two to three weeks normally lapsed between the first meeting of the Panel and the receipt of the written rebuttals. If the complainant were permitted to make new claims at the time of the first substantive meeting, the time available to prepare the rebuttal would therefore be reduced by more than half and the existing imbalance would be exacerbated to the point of effectively curtailing the respondent's right to be given sufficient time for the preparation of its rebuttal - a right which Article 12.10 of the DSU specifically accorded to developing countries.
- The United States had no information as to what might be in an Indian staffer's notes from the consultations held with India, but could state, as it had throughout this proceeding, that until India's first written submission to the Panel, the Indian Government had never stated that it had established a valid mailbox system. Had the Indian Government made this assertion earlier, the United States would necessarily have included a reference to Article 63 of the TRIPS Agreement in its panel request. In light of this surprise, equity demanded that the Panel be able to take up the transparency issue, in the alternative.
- India had been given three opportunities to respond to the United States' alternative transparency claim under TRIPS Article 6325, and its last written submission on this issue had been submitted seven weeks after the first substantive meeting of the Panel with the parties. India had therefore had a reasonable opportunity to respond to this issue. Furthermore, India could not claim prejudice to third parties as a basis for refusing a claim under Article 63. Article 10.3 of the DSU stated that "[t]hird parties shall receive the submissions of the parties to the dispute to the first meeting of the Panel". The rules of the DSU provided for third parties no more than the opportunity to present views to a panel. Dispute settlement was conducted first and foremost for the benefit of the parties to the dispute, not for the benefit of third parties or possible third parties.
- Article 63 applied to developing countries only as of 1 January 2000. According to Article 65.2 of the TRIPS Agreement, developing countries were entitled to delay up to 1 January 2000 the date of application of the TRIPS Agreement except for its Articles 3, 4 and 5. Consequently, the provisions of Article 63 established obligations applicable to India only as of 1 January 2000. It was true that the minutes of meetings of the Council for TRIPS made reference to a "Working Hypothesis" according to which national laws and regulations would be notified as of the time that the corresponding substantive obligation applied26, but this "Working Hypothesis" did not reflect a common understanding among Members on their obligations under the TRIPS Agreement. It had been elaborated because the differences of interpretation among Members on the scope of the transparency obligations during the transitional period could not be overcome. At the meeting of the Council for TRIPS of 21 September 1995, the Chairman had noted the existence of the "Working Hypothesis" but then correctly had stated that the "basic differences of interpretation had remained".27 An informal arrangement of this type did not establish obligations binding under international law and could therefore not modify rights or obligations under a WTO agreement. The legal situation under Article 63 had not been changed as a result of the elaboration of the "Working Hypothesis".
- As regards paragraph 1 of Article 63, which was the only paragraph the United States had referred to at the first substantive meeting of the Panel with the parties while not having specified any paragraph in its written submission, India took the view that the law on which India had based its means of filing had been published. This means of filing had been established on the basis of the Patents Act 1970 which, like all other acts of Parliament, had been published in the Gazette of India. According to Article 63.1, only "laws and regulations, and final judicial decisions and administrative rulings of general application" had to be published. The decision of India to continue to receive applications for pharmaceutical and agricultural chemical product patents under the Patents Act was an administrative measure of a kind that did not need to be published under Article 63.1. Under that provision, only the law on which this measure was based was subject to the publication requirement.
- It was not correct that Article 63 applied to developing countries only as of 1 January 2000. The Council for TRIPS had decided on 21 November 1995 that "[a]s of the time that a Member is obliged to start applying a provision of the TRIPS Agreement, the corresponding laws and regulations shall be notified without delay (normally within 30 days, except where otherwise provided in the TRIPS Council)".28 The TRIPS Council had also decided that amendments to laws and regulations shall be notified within 30 days where no translation is required.29 India had participated in these decisions and had not objected to them. In fact, India had already notified the Patents (Amendment) Ordinance 1994 on 6 March 1995 well before this clarifying decision had been issued by the TRIPS Council. India was well aware of the obligation to notify any amendments to its laws or regulations regarding Article 70.8 in accordance with this decision, but had failed to do so. India's claim that it did not have to do so because its mailbox system had been created through administrative guidance was of no merit, because administrative guidance could not be used to overcome the express provisions in the Patents Act 1970 requiring the rejection of mailbox-type applications.
The terms of the TRIPS Agreement
- According to Article 70.9, exclusive marketing rights must be granted by India to a pharmaceutical or agricultural chemical product for which a patent application had been made only after the product met the following conditions:
(a) A patent application had been filed in respect of that product in another Member of the WTO after 1 January 1995.
(b) The other Member of the WTO had granted the patent.
(c) The other Member had approved the marketing of the product.
(d) India had approved the marketing of the product.
(emphases above by India)
- The last step in the procedures prior to eligibility ‑ marketing approval in the Member not according patentability ‑ was a step controlled by the Member that must subsequently grant exclusive marketing rights or patentability.It was consequently not an abstract category of products that was eligible for exclusive marketing rights under Article 70.9; the individual products that were eligible would be known before the duty to accord exclusive marketing rights arose. Article 70.9 was a transitional provision the application of which was triggered by specified future events.31
- The United States had not presented evidence showing that all the above-mentioned events had occurred with respect to a particular pharmaceutical or agricultural chemical product. The principal products covered by Article 70 were drugs and medicines. It took considerable time to obtain a patent for such products and then to obtain the marketing approval first in the country of origin and then in the country in which exclusive marketing rights were sought under Article 70.9. So far, no request for exclusive marketing rights had been received by the Government of India. There was, therefore, no question of India having denied exclusive marketing rights to any product entitled to such rights under Article 70.9 of the TRIPS Agreement.
- According to the text of Article 70.9, an exclusive marketing right must be granted for a pharmaceutical or agricultural chemical product only "until a product patent is granted or rejected in that Member". The terms of Article 70.9 thus explicitly accorded developing country Members the right to choose between the grant of patentability and the grant of exclusive marketing rights with respect to each pharmaceutical or agricultural chemical product for which a patent application had been made. It would be logically inconsistent with this right to opt out of the obligation to grant exclusive marketing rights if Article 70.9 were interpreted to oblige Members to provide in their legislation for the general availability of exclusive marketing rights as from 1 January 1995.
- The obligation under Article 70.9 needed to be distinguished from those under other provisions of the TRIPS Agreement. The TRIPS Agreement made a clear distinction between obligations to change the domestic law governing intellectual property rights and obligations to take, or refrain from taking, specific measures in relation to intellectual property rights. For instance, according to Article 27 of the TRIPS Agreement "patents shall be available for any invention". The obligation created by this provision was thus not merely to take a specific measure but to change the law to make future measures possible. The same applied to Article 42 of the TRIPS Agreement, according to which "Members shall make available to right holders civil judicial procedures concerning the enforcement of any intellectual property right covered by this Agreement". Articles 27 and 42 of the TRIPS Agreement thus set out requirements to change the domestic law to create legal opportunities for inventors and right holders. These provisions were violated when the Member failed to adjust its law to create those opportunities and complaints could therefore be brought before the opportunity had actually been denied to a particular inventor or right holder. Most of the basic provisions of the TRIPS Agreement were of this nature, such as Articles 26.1, 28.1, 32, 36, 39.2 and 41.1. Articles 45, 46, 47, 48, 50, 53 and 56 stated that the competent authorities "shall have the authority" to perform certain acts. In the case of all these provisions, the drafters thus chose terms that made it explicit that the domestic law of Members must give certain persons and authorities defined rights. If the drafters had meant to do so in the case of exclusive marketing rights, they would therefore have chosen terms such as "the competent authorities shall have the authority to grant exclusive marketing rights" or "exclusive marketing rights shall be available". Instead, they had chosen terms clearly indicating that particular products shall be granted such rights after they met certain conditions. Article 70.9 of the TRIPS Agreement, therefore, did not fall into this category of norms. (emphases above by India)
Object and purpose
- Article 70.9 formed part of the transitional arrangements for developing countries and its object and purpose could therefore only be ascertained in the light of these arrangements.32 According to Article 70.9, an exclusive marketing right had to be granted only for a maximum period of five years. This five‑year period corresponded to the five‑year period by which developing country Members might, according to Article 65.4, delay the application of the provisions on product patents in areas of technology not protectable on 1 January 1996, i.e. the period between 1 January 2000 and 1 January 2005. The purpose of Article 70.9 was thus to give inventors of pharmaceutical and agricultural chemical products the economic privilege of an exclusive marketing right for the five‑year period preceding 1 January 2005 if their products were denied patentability even beyond the normal five‑year transitional period for developing countries. It would be completely contrary to this purpose to interpret Article 70.9 as giving rise to obligations before 1 January 2000. That Article 70.9 essentially related to events that the drafters expected to take place during the period covered by Article 65.4 became obvious when one analysed the practical operation of Article 70.9. In order to be eligible for the grant of an exclusive marketing right, a United States' inventor must have filed a patent application in the United States after 1 January 1995 and have been granted the patent in the United States and marketing approval in both the United States and in India. Common sense and practical experience indicated that all these steps took a long time and normally the products in question would not get on the market in a developing country before the expiry of the ten-year transitional period. The provision had been made for the grant of exclusive marketing rights of up to five years only to tide over the gap between the obtaining of marketing approval and the grant of patent protection for the product in question in a developing country benefiting from the ten-year transitional period, so that inventions that met the criteria for patentability on or after the date of entry into force of the Agreement would become eligible for protection in such countries by the time that protection became of commercial significance, either by the grant of a patent after the expiration of the ten-year period or by an exclusive marketing right for products getting marketing approval before that time. Commentators had confirmed these practical implications.33
- That the object and purpose of Article 70.9 were not to oblige developing countries to make exclusive marketing rights available immediately upon the entry into force of the WTO Agreement but to tide over the gap between marketing approval and patentability during the five years preceding the end of the ten‑year transitional period could also be deduced from commercial realities. In general, it simply made no commercial sense to obtain an exclusive marketing right for a five‑year period unless that period was immediately followed by the grant of the exclusive rights to be conferred on patent owners under Article 28 of the TRIPS Agreement. If the inventor of a pharmaceutical product obtained an exclusive marketing right in 1997 and made his product known and widely used in India, his competitors could enter the market in the year 2002 and free‑ride on the inventor’s marketing efforts for three years. Only in the year 2005 could the inventor again enjoy the exclusive rights of a patent owner. Thus, even if an inventor had succeeded in obtaining a patent in the United States and marketing approval in the United States and India within a period of less than five years, he would nevertheless in most situations have a commercial interest to request exclusive marketing rights only in the year 2000 so as to ensure a seamless transition from exclusive marketing rights to the exclusive rights of a patent owner. The economic purposes of Article 70.9 would thus not be furthered if it were interpreted to give rise to obligations before 1 January 2000.
- Article 70.9 obliged a Member to grant exclusive marketing rights for a particular product only "until a product patent is granted or rejected in that Member". Under Article 70.9 developing countries were thus explicitly given the right to choose between the grant of exclusive marketing rights and the grant of patentability. The economic impact of the grant of an exclusive marketing right was very similar to that of the grant of the exclusive rights to be conferred under Article 28 on the owners of patents. Moreover, exclusive marketing rights must be granted even for those products for which a patent could be rejected consistently with the TRIPS Agreement. The function of Article 70.9 was thus not only to create rights for holders of patents in other Members but also to give developing country Members an incentive to opt for patentability. Under the United States’ interpretation the provision could not fulfil this function.
- According to the United States’ interpretation of Article 70.9, developing countries would be obliged to take a decision on the patentability of pharmaceutical and agricultural chemical products immediately while being able to postpone that decision with respect to all other products until 1 January 2000. This interpretation therefore frustrated the basic purpose of the transitional regime established by Articles 65 and 70, which was to give developing countries the right to postpone sensitive decisions beyond the date of entry into force of the WTO Agreement. In fact, this interpretation would turn Article 70 on its head because it would oblige developing countries to decide on the patentability of pharmaceutical and agricultural chemical products before having to implement the TRIPS Agreement with respect to other products (emphasis by India).
- Examination of the 14 notifications submitted to the TRIPS Council under Article 63.2 of the TRIPS Agreement showed that not one of these notifications provided that exclusive marketing rights were made available as from 1995 in the domestic law.
- As was the case with Article 70.8, India had made it clear that modifications to its intellectual property system were necessary to implement the requirements of Article 70.9.35 While India was correct in its claim that Members were free to determine the manner in which they implemented their obligations, Members were not free to determine whether their obligations must be implemented at all. India had repeatedly made clear that, unless its laws and regulations were modified, it would not have implemented its obligations under Article 70.9. Having made this matter clear, it was unable to assert now that, because it had discretion as to the manner in which it fulfilled its Article 70.9 obligations, it could decide to do nothing.
- Regarding India's claim that it was in compliance with its obligations under Article 70.9 because no person had been denied exclusive marketing rights in India and that this was a matter for future implementation, the United States said that right holders had not been denied exclusive marketing rights because they had not sought such rights and they had not sought such rights because there were no such rights under Indian law or regulations to seek. Right holders would not even know to whom they should apply, let alone the procedures and costs involved or, since India had also failed to establish a mailbox application system, who would be eligible to request such protection had a system been in place. Even now, nearly two and a half years after the TRIPS Agreement had come into force, India had not stated where applications could be filed, what procedures would be followed, what authority would be responsible for reviewing applications, and the way in which rights would be enforced. In the absence of relevant information, it was impossible for a national of a WTO Member to request such protection, even if it were available.
- Even though the level of actual damages suffered by United States' interests was irrelevant, since the United States had made a prima facie showing that India had failed to implement its obligations under Article 70.9 and it was, consequently, unnecessary for the United States to identify particular companies that would be eligible for exclusive marketing rights, the United States understood from its private sector that, had a mailbox system been in place since 1 January 1995, and had exclusive marketing rights been provided in accordance with Article 70.9, some companies would have begun seeking exclusive marketing rights under Indian law. Their ability to do so was dependent on the Indian health authorities processing their applications, but they had met all the requirements for such protection other than those dependent on the actions of the Indian health authorities. Evidence of this could be found in the letter to Ambassador Barshefsky from Dr. Harvey E. Bale, Jr.36
- The obligation in Article 70.9 to establish a system for the grant of exclusive marketing rights was not distinguishable from any other obligation in the TRIPS Agreement and did require changes in India's laws. Article 70.9, like Article 27, required the grant of certain rights upon the fulfilment of specified conditions. In the case of Article 27, a patent must be granted if an application was filed that was drawn to an invention that met the criteria of novelty, non‑obviousness and industrial application. In the case of Article 70.9, exclusive marketing rights must be granted if a mailbox application was filed that met the criteria set out in Article 70.9. Both provisions demanded the establishment of a system for the grant of the specified rights.
- As with the obligation to establish a fully functional mailbox system under Article 70.8, the obligations in Article 70.9 established expectations on the part of WTO Members and potential applicants that exclusive marketing rights would be available. As long as India did not have in place a system for the grant of those rights, potential applicants would not be able to request the grant of such rights, let alone make informed business decisions with the understanding that such rights might be requested and granted. The expectations created by the inclusion of Article 70.9 in the TRIPS Agreement would be frustrated until India had established a clear and stable system for the grant of such rights. The Superfund case was thus relevant to this matter because it clarified that Members were obligated "to protect expectations" of other Members as to the "competitive relationship" between their respective products. Moreover, in applying the principle behind the Superfund decision to the present case, there was no need to wait for a violation to take place or speculate on whether it would take place, since the present case concerned a failure to take an affirmative action to implement a specific obligation in a WTO agreement.
- The grant of an additional five years in Article 65.4 to implement the provisions on product patent protection in Article 27 of the TRIPS Agreement had been balanced against the inclusion of obligations to establish fully functional mailbox and exclusive marketing rights systems in Articles 70.8 and 70.9. India could not now be permitted to pocket the benefit of an additional five years of transition and not implement the corresponding obligation. The Appellate Body recently had made this clear in the Wool Shirts case, in which India had argued that under the Agreement on Textiles and Clothing (ATC) the burden of proof should be shifted to the importing country taking temporary safeguard action. In rejecting the Indian argument, the Appellate Body had clarified that the ATC was a transitional arrangement containing "carefully negotiated language..... which reflects an equally carefully drawn balance of rights and obligations of Members.....".37 This characterization was equally applicable to the balance between the transitional rules in Article 65.4 of the TRIPS Agreement and the obligations established in Article 70.8 and 70.9 of the TRIPS Agreement. As the Appellate Body succinctly had stated in the Wool Shirts report "[t]hat balance must be respected".38 The quid pro quo for taking advantage of the transitional period was the grant of exclusive marketing rights. Far from turning Article 70.9 on its head, this represented the core balance in this area of the Agreement. If India did not want to grant patents, then it must grant exclusive marketing rights; conversely, if it did not want to grant exclusive marketing rights, then it must grant patents.
- There was nothing in the Agreement indicating that the obligation to provide exclusive marketing rights arose only after 2000. When the drafters of the Agreement intended a transitional period to apply to a particular obligation, they had specifically included the transition in the Agreement. There was no such transition with respect to the obligations in Article 70.9. On the contrary, Article 70.9 specifically stated that the obligation to provide exclusive marketing rights applied "notwithstanding the provisions of Part VI" of the TRIPS Agreement, which established the transitional periods. As a result, just as with Article 70.8, the obligations of Article 70.9 must be fulfilled as of the date of entry into force of the WTO Agreement.
- India had provided no support for its argument that the obligation to comply with Article 70.9 had not yet arisen. None of the commentators India had quoted had stated that it was impossible for a pharmaceutical or agricultural chemical product to fulfil all the criteria for the grant of exclusive marketing rights. They all left open the possibility that those criteria might be fulfilled long before the end of the transitional period and none of them suggested that the obligation to implement Article 70.9 did not arise on 1 January 1995. Moreover, as Dr. Bale's letter39 showed, there was at least one company that was seeking exclusive marketing rights in India in respect of two pharmaceutical products.
- The United States had sidestepped the results of India's legal demonstration by asserting that, according to Article 3.8 of the DSU, trade damage was presumed and that it was therefore not necessary to speculate on whether products had become eligible for exclusive marketing rights. That response did not deal with the interpretative issue before the Panel, which was what triggered the application of the obligations under Article 70.9: the entry into force of the WTO Agreement in 1995 or the series of future events listed in that Article. The principle that a failure to observe an obligation was presumed to cause nullification or impairment was totally irrelevant in addressing the interpretative question of whether the obligation already existed.
- The principles recognized by the GATT CONTRACTING PARTIES, that the basic provisions of the GATT established conditions of competition and that mandatory legislation could constitute a measure within the meaning of those provisions even before the legislation was applied in a concrete case, were equally irrelevant, because they simply did not address the issue which was before this Panel, namely as of when certain conditions of competition had to be established and as of when mandatory legislation could be considered to be actionable (emphasis by India). It would be logically untenable to use these principles to turn transitional arrangements designed to postpone the applicability of obligations into current obligations forcing Members to immediately empower their executive authorities to take the measures necessary to meet the obligations applicable at the end of the transitional period.
- If the United States' argument that it would be easier to plan business if the transitional provisions of the TRIPS Agreement were interpreted to require legislative changes before the end of the transitional period were accepted, it would have to be applied to all the transitional arrangements contained in the WTO agreements. Thus, it would arguably be easier for Indian textiles’ producers to plan business if all textiles-importing WTO Members had legislation presently in place providing for the elimination of textiles import restrictions on the date of the termination of the Agreement on Textiles and Clothing. Unfortunately, however, the obligation to bring the textiles restrictions into conformity with the GATT would arise only in the future just as the obligation to grant patents or exclusive marketing rights only arose in the future. Until the end of the transitional periods accorded under different WTO agreements, the source of predictability could therefore only be the relevant WTO agreement. The CONTRACTING PARTIES had never applied the principles invoked by the United States in the manner suggested by the United States. To do so would constitute an unanticipated change in obligations that could not legitimately be brought about by way of interpretation, and to do so only in the field of intellectual property rights but not in the many other areas covered by transitional arrangements would be fundamentally unfair.
- India's research had not revealed any case in which a product for which a patent application had been filed after 1 January 1995 had received marketing approval in India and had thus become eligible for exclusive marketing rights in India under Article 70.9. The letter from Dr. Bale produced by the United States merely stated that one company "has received a patent and marketing approval for a drug in the United States and Europe and is ready to request the grant of exclusive marketing rights from the Indian health authorities". The request that this company intended to submit to the Indian health authorities was obviously a request for marketing approval; only when that approval had been obtained would this product become eligible for exclusive marketing rights. There was no evidence available in India of any such case. It should also be noted that before any applicant could make such a request, it must first request the Indian health authorities, i.e. the Drugs Controller General of India, to grant marketing approval.
- Although it was difficult to provide evidence or state with absolute certainty when products would start becoming eligible for exclusive marketing rights under Article 70.9, a delay of ten or more years between the date of filing of applications for patents and the grant of marketing approvals seemed likely. In India, registration and approval of new drugs required submission of technical data on safety and efficacy as well as analytical specifications in relation to steps of manufacture, in-process control and marketing status in other countries, clinical trial data generated within the country and examination labels and package inserts. The technical data were examined in consultation with the experts. The final bulk drug was required to be tested at the Central Drugs Laboratory, Calcutta, as per analytical specifications furnished. A new drug derived out of cell-line and recombinant DNA based products also needed approval from the Ministry of Science and Technology and the Ministry of Environment. If a new drug was already marketed in a number of countries and pre-clinical and clinical data generation was adequate, Phase III multi-centric clinical trial was required to be carried out on a protocol approved by the Drugs Controller General of India. If the data were complete, as per the requirements of Schedule Y of the Drugs and Cosmetics Rules, an average time of three years was taken for approval and registration of new molecules with a maximum period of eight to ten years. Discovery of drugs in India for the purpose of registration and approval took much longer as, at that point of time, there might not be access to scientific data available on the drug published in international journals and literature. In respect of agricultural chemicals, the time schedule for grant of marketing approvals would depend on the submission of satisfactory data by the applicant and the satisfaction of the Registration Committee constituted under the Insecticides Act. As in the case of pharmaceuticals, it could not be stated with absolute certainty as to when products would become eligible for exclusive marketing rights under Article 70.9.
- The United States was seeking a ruling on a potential future measure. The United States was apparently asking for this finding because of concerns it had about the nature of some provisions in the lapsed Patents (Amendment) Ordinance 1994 and the Patents (Amendment) Bill of 1995, which would have accorded the Government discretionary powers to subject exclusive marketing rights to certain conditions. However, even the said Ordinance and Bill did not make it mandatory for the executive authorities to grant exclusive marketing rights subject to compulsory licensing or other use. However, since neither of these instruments was in force in India, the scope of exclusive marketing rights was a matter that had not yet arisen. The United States was thus essentially asking the Panel to make a declaratory judgement on a potential future action that the executive authorities of India might be authorized to take on the basis of a law Parliament might adopt.
- The WTO dispute settlement procedures did not permit rulings on potential future measures. Article 64 of the TRIPS Agreement stated that the provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the DSU shall apply to consultations and the settlement of disputes under the TRIPS Agreement except as otherwise specifically provided in that Article. The texts of Article XXIII:1(a) of GATT 1994, Article 19.1 of the DSU and Article 22.8 of the DSU made clear that the provisions defining the cause of action, the remedy available and the scope for retaliation all presupposed the existence of a measure that was currently nullifying or impairing benefits and capable of being brought into conformity with the obligations under the WTO Agreement (emphasis by India). The only WTO procedure that permitted the resolution of interpretative issues in the abstract was that set out in Article IX:2 of the WTO Agreement, according to which the WTO Ministerial Conference and the General Council had the power to adopt authoritative interpretations.
- The customary practice of the CONTRACTING PARTIES to GATT 1947 had been to examine under Article XXIII only measures that were currently applied. The CONTRACTING PARTIES had never ruled on potential future measures or what type of law might be required to meet future obligations (emphasis by India). They had proceeded on the assumption that a contracting party would meet its obligations under the GATT as long as its legislature had not yet taken a decision to the contrary or had left the executive authority the option of acting in accordance with the GATT.42 According to Article XVI:1 of the WTO Agreement "the WTO shall be guided by the..... customary practices of the CONTRACTING PARTIES to GATT 1947.....". In Japan ‑ Taxes on Alcoholic Beverages, the Appellate Body had noted that Article XVI:1 of the WTO Agreement brought the legal history and experience under GATT 1947 into the realm of the WTO in a way that ensured continuity and consistency. The customary practice of the CONTRACTING PARTIES, while not binding on panels, should be taken into account by panels where relevant to any dispute. The Panel could therefore not deviate from the customary practice of the CONTRACTING PARTIES without due cause and justification.
- Panel rulings on potential future measures would be regarded by the WTO Membership as an unacceptable interference in domestic decision-making processes. GATT contracting parties had generally refused to consult under the formal dispute settlement procedures on measures they had not yet taken. When asked to consult on provisions in the Treaty of Rome that accorded the European Communities the competence to impose quantitative restrictions inconsistently with the GATT, the European Communities had pointed out that "many contracting parties had permissive legislation of a general character which, if implemented in full, would enable them to impose restrictions in a manner contrary to Article XI. These countries were, however, not required to consult with the CONTRACTING PARTIES about their possible intentions as regards the implementation of such legislation".43 The United States had shared this view in the past, as illustrated by its reaction to the report of the panel on Wine and Grape Products44 which had examined a law which mandatorily imposed on the executive authority the requirement to apply a definition of industry for the purposes of anti‑dumping and countervailing duty investigations of wine and grape products that was inconsistent with the Tokyo Round Subsidies Code (emphasis by India). When this report was adopted in 1992, the United States had declared that it "reserved its position of opposition to the Panel’s view that it was ripe for the Panel to consider a matter that did not involve an actual initiation of an action, but rather an abstract question whether a proceeding, if initiated, would have been consistent with the Subsidies Code"45 (emphasis by India). In a case involving countervailing duties, the United States had thus formally objected to a panel examination of a future action prescribed by its existing law; in the present case involving intellectual property rights, the United States was seeking the examination of a measure that was not even referred to in any existing law. The Members of the WTO had often expressed legitimate concerns regarding the future policies of their trading partners, for instance about possible action under Section 301 of the United States Trade Act of 1974 or about protectionist bills under consideration by the United States Congress.46 However, the view had nevertheless prevailed that formal international inquiries into matters still under domestic consideration were an inappropriate and unwelcome interference into the domestic decision‑making process, and the drafters of the DSU therefore rightly had not authorized panels to make declaratory judgements on potential future measures. Questions of striking an appropriate balance of interests at the national level between the holder of an exclusive marketing right, on the one hand, and society, on the other, as well as of the conformity of possible legislation with the basic provisions of the Constitution of India and the various decisions of the Apex Court which had elaborated these provisions were outside the jurisdiction of a dispute settlement panel.
- Unlike many other provisions of the WTO agreements, the TRIPS Agreement contained obligations to act affirmatively to establish rights, procedures and remedies in respect of intellectual property. The United States was not alleging that India had taken an action that was inconsistent with its obligations under the TRIPS Agreement; on the contrary, it believed that India had failed to take affirmative actions that it was required to take under the TRIPS Agreement. In defining how India had violated the TRIPS Agreement, the Panel must indicate with some specificity which affirmative obligation India had not met. It was important to distinguish between the request that the Panel define how India was out of compliance with its TRIPS obligations and the request that the Panel suggest a way in which India could meet those obligations. The requested finding above represented an example of a request to define what obligations India had not met. The request that the Panel suggest that India implement these obligations in a manner similar to the way in which Pakistan was implementing these obligations was an example of the second category. India was attempting to blur the distinction between these two categories and between the affirmative obligations in the TRIPS Agreement and the prohibitions found in other WTO agreements.
- India had not contested, nor could it contest, that the TRIPS Agreement required that exclusive marketing rights be granted so that competitors were not permitted on the market without the consent of the right holder. There was no basis in the TRIPS Agreement to conclude that the drafters had intended to depart from the ordinary meaning of the terms used. Whenever they had intended a type of right to be subject to permissive or mandatory exceptions, they had provided specifically for such exceptions in the text defining the right.47 Likewise, where the permissive or mandatory exceptions applying to one type of right were intended to apply to another type of right, this had specifically been provided in the text of the Agreement.48 Therefore, had the drafters of the Agreement intended the exclusive marketing rights to be subject to a permissive or mandatory exception, they would have either included such exception in the text of Article 70, or they would have incorporated by reference an exception in another part of the Agreement. India had failed to grant to the holder of marketing rights the exclusive right to control the entry of competitors onto the market during the period of those rights and, thereby, to implement Article 70.9.
Request for a suggestion that India implement its obligations under Article 70.8 and 70.9 in a manner similar to the way in which Pakistan had implemented these obligations
- It had serious doubts whether a panel constituted to resolve a dispute on the basis of rights and obligations enshrined in a multilateral agreement should formally endorse a settlement bilaterally negotiated between two sovereign States in the context of their particular overall relations.
- There were technical reasons that would make it inappropriate to transpose the system adopted by Pakistan to India. Pakistan had agreed with the United States that the relevant date of filing for the purposes of Article 70.8 would be the date on which a patent application had been filed not in Pakistan, as foreseen in Article 70.8, but in another Member (emphasis by India). In India, patent applications for pharmaceutical and agricultural chemical products had been filed and a filing date had been given to each of these applications. The United States’ request for a panel suggestion would therefore imply that applications made in other Members would have to be inserted by India into the queue of applications already made. Consequently, the order of priority of the applications would have to be changed in a manner that was not foreseen in the TRIPS Agreement and that favoured some Members over others. The United States was therefore requesting that the Panel suggest a solution whose consistency with the TRIPS Agreement would be doubtful in the case of India.
- India had adopted an Ordinance in late 1994 allowing the filing of patent applications concerning pharmaceutical and agricultural chemical products, since these products were not patentable under existing Indian law. This Ordinance had meanwhile lapsed and had been replaced, according to India, by administrative instructions to the Indian patent authorities to continue to accept filings. How could India now argue that simple administrative instructions to accept filings were sufficient, while it had felt the need to act by an Ordinance in the first place which had been meant to be replaced by a formal act of its legislature? An administrative instruction was only capable of binding the administration itself; it could not have an effect on the applicants. In other words, if there was a dispute between several applicants about the time of the filing, such a dispute could not be resolved by simply adopting an instruction addressed to the administration. A legislative act capable of creating rights and obligations between applicants was therefore necessary.
- Questions arose as to what were the precise terms of the administrative instructions, where they had been published and what were the guarantees in case of a dispute before the Indian courts. In answering these questions, India would have to admit that simple administrative instructions did not fulfil the requirements laid down in Articles 70.8 and 70.9.
- As far as the exclusive marketing rights under Article 70.9 were concerned, India claimed that no applications had been filed so far. India seemed to believe that because of the absence of such applications the entry into force of the mechanism allowing such filings could be postponed. This position was untenable. Article 70.9 was intimately linked with Article 70.8 which in turn left no doubt that it applied as of the date of entry into force of the TRIPS Agreement for a Member, i.e. 1 January 1995. In promulgating the Ordinance already referred to, India had itself recognized the obligation to put the mechanism required by Article 70.8 into place by that date. India could not now argue that the rules governing the exclusive marketing rights envisaged under Article 70.9 should only be adopted once applications for such exclusive marketing rights had been received. Moreover, how would it be possible to file such applications in the absence of any rules governing such applications? Was it not the absence of such rules that had led to the absence of applications? Rules must be put in place before applications could be made and those rules should have existed as of 1 January 1995.
-In respect of Article 70.8 of the TRIPS Agreement, India did not share the Panel's assessment of the legal situation in India;
-It was procedurally and legally incorrect for the Panel to rule on Article 63 of the TRIPS Agreement, mainly because the United States had requested a ruling on this provision only in case the Panel were to find that India had a valid mailbox system in place; and
-The Panel's discussion of Article 70.9 of the TRIPS Agreement did not define the issue presented to the Panel correctly and did not fully take into account India's arguments.
The Panel carefully examined these assertions, as elaborated below.
"The measures under examination had been found to be inconsistent with Article XI. At issue was thus their elimination or bringing them into conformity with GATT, not their publication."53
Thus, according to India, the United States' claim on Article 63 should not be addressed by the Panel, even if it could be interpreted as an additional claim. If the Panel were to take that step, it would be the first panel to do so.
"The Panel recognized that, given its finding that the EEC measures were a violation of Article XI:1 and not justified by Article XI:2(c)(i) or (ii), no further examination of the administration of the measure would normally be required. Nonetheless, and even though the Panel was concerned with measures which had already been eliminated, it considered it appropriate to examine the administration of the EEC measures in respect of the provisions mentioned above, in view of the questions of great practical interest which had been raised by both parties.
"...The Panel therefore considered that the allocation of back‑dated quotas did not conform to the requirements of Article XIII:3(b) and (c). It also interpreted the requirements of Article X:1 as likewise prohibiting back‑dated quotas. It therefore found that the EEC had been in breach of these requirements since it had given public notice of the quota allocation only about two months after the quota period had begun."54
"Given the explicit aim of dispute settlement that permeates the DSU, we do not consider that Article 3.2 of the DSU is meant to encourage either panels or the Appellate Body to 'make law' by clarifying existing provisions of the WTO Agreement outside the context of resolving a particular dispute."55
The Panel fully agreed with the Appellate Body on this point. In the present case, the Panel had no intention of "making law" by clarifying existing provisions of the TRIPS Agreement outside the context of resolving the dispute before it. Rather, in view of the Appellate Body's observation on the limitation of its mandate under Articles 17.6 and 17.13 of the DSU in its recent report on the Periodicals case56, the Panel felt all the more strongly the need to avoid a legal vacuum in the event that, upon appeal, the Appellate Body were to reverse the Panel's findings on Article 70.8.
"There shall be taken into account, together with the context: (a)... ; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; (c)..." (emphasis added)
In the Panel's view, however, India had failed to demonstrate that the "subsequent practice" by developing country Members in fact established the agreement of all WTO Members regarding the interpretation of Article 70.9. On the contrary, the record showed that there had been no agreement on this issue in the Council for TRIPS; at most meetings of the Council, concern had been expressed by some Members about the absence of notifications or the limited information content of notifications related to the implementation of Article 70.9.57 Moreover, the matter had also been the subject of another recourse to the DSU in "Pakistan - Patent Protection for Pharmaceutical and Agricultural Chemical Products" (WT/DS36). In any event, to paraphrase an Appellate Body report58, the Panel felt that it was much too early for practice to have arisen under the TRIPS regime which had commenced only on 1 January 1995.
Suggestions by the Panel
Claims of the Complainant
Claims of the Respondent
Article 6.2 of the DSU provides that:
"The request for the establishment of a panel shall be made in writing. It shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. In case the applicant requests the establishment of a panel with other than standard terms of reference, the written request shall include the proposed text of special terms of reference."
We note that, regarding Article 6.2 of the DSU, the Bananas panel found that:
"While a reference to a specific provision of a specific agreement may not be essential if the problem or legal claim is otherwise clearly described, in the absence of some description of the problem, a mere reference to an entire agreement or simply to 'other' unspecified agreements or provisions is inadequate under the terms of Article 6.2. Accordingly, we find that references to a WTO agreement without mentioning any provisions or to unidentified 'other' provisions are too vague to meet the standards of Article 6.2 of the DSU."69
Furthermore, the panel stated that:
"For purposes of determining whether a Complainant in this matter has made a claim, we have examined its first written submission, as we consider that document determines the claims made by a complaining party. To allow the assertion of additional claims after that point would be unfair to the respondent, as it would have little or no time to prepare a response to such claims."70
Request for Suggestion Concerning Implementation
"A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."
Accordingly, the TRIPS Agreement must be interpreted in good faith in light of (i) the ordinary meaning of its terms, (ii) the context and (iii) its object and purpose. In our view, good faith interpretation requires the protection of legitimate expectations derived from the protection of intellectual property rights provided for in the Agreement. A similar view has also been taken in the Underwear panel report:
"[T]he relevant provisions [of the Agreement on Textiles and Clothing] have to be interpreted in good faith. Based upon the wording, the context and the overall purpose of the Agreement, exporting Members can... legitimately expect that market access and investments made would not be frustrated by importing Members taking improper recourse to such action."79
"Except as otherwise provided under this Agreement or the Multilateral Trade Agreements, the WTO shall be guided by the decisions, procedures and customary practices followed by the CONTRACTING PARTIES to GATT 1947 and the bodies established in the framework of GATT 1947."
Since the TRIPS Agreement is one of the Multilateral Trade Agreements, we must be guided by the jurisprudence established under GATT 1947 in interpreting the provisions of the TRIPS Agreement unless there is a contrary provision. As the Appellate Body indicated in the Japan -Alcoholic Beverages case, adopted panel reports "create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute".80 Indeed, in light of the fact that the TRIPS Agreement was negotiated as a part of the overall balance of concessions in the Uruguay Round, it would be inappropriate not to apply the same principles in interpreting the TRIPS Agreement as those applicable to the interpretation of other parts of the WTO Agreement.
"Where a Member does not make available as of the date of entry into force of the WTO Agreement patent protection for pharmaceutical and agricultural chemical products commensurate with its obligations under Article 27, that Member shall:
(a)notwithstanding the provisions of Part VI, provide as from the date of entry into force of the WTO Agreement a means by which applications for patents for such inventions can be filed;
(b)apply to these applications, as of the date of application of this Agreement, the criteria for patentability as laid down in this Agreement as if those criteria were being applied on the date of filing in that Member or, where priority is available and claimed, the priority date of the application; and
(c)provide patent protection in accordance with this Agreement as from the grant of the patent and for the remainder of the patent term, counted from the filing date in accordance with Article 33 of this Agreement, for those of these applications that meet the criteria for protection referred to in subparagraph (b)."
The United States claims that India has failed to fulfil its obligations under this paragraph by not establishing a valid system for receiving "mailbox" applications. In this regard, we note that the only obligation India currently assumes under this paragraph is that of subparagraph (a), the effective date of which is "the date of entry into force of the WTO Agreement", i.e., 1 January 1995. Obligations under subparagraphs (b) and (c) will become binding on India only "as of the date of application of this Agreement", which in this particular instance means no later than 1 January 2005 by virtue of the provisions of paragraphs 2 and 4 of Article 65 of the TRIPS Agreement. Thus, the question before this Panel is whether India has taken the action necessary to implement its obligations under subparagraph (a) of Article 70.8.
Nature of the Obligations
Mechanism for Implementing the Obligations
"Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice."
Thus, it is up to India to decide how to implement its obligations under Article 70.8. We therefore find that the mere fact that India relies on an administrative practice to receive mailbox applications without legislative changes does not in itself constitute a violation of India's obligations under subparagraph (a) of Article 70.8. The lapse of the Patents (Amendment) Ordinance 1994, which was promulgated for the purpose of specifically addressing these obligations, does not automatically mean the lack of a "means" for filing patent applications for pharmaceutical and agricultural chemical products in India.
"Even if Massachusetts may not currently be using its police powers to enforce this mandatory legislation, the measure continues to be mandatory legislation which may influence the decisions of economic operators. Hence, a non‑enforcement of a mandatory law in respect of imported products does not ensure that imported beer and wine are not treated less favourably than like domestic products to which the law does not apply."95
We find great force in this line of reasoning. There is no denying that economic operators -in this case potential patent applicants - are influenced by the legal insecurity created by the continued existence of mandatory legislation that requires the rejection of product patent applications in respect of pharmaceutical and agricultural chemical products. We note that the present situation is slightly different from the Malt Beverages case in that India is entitled to retain this mandatory legislation until 1 January 2005 by virtue of Article 65.4 of the TRIPS Agreement. The existence of the legislation per se is not a problem under the TRIPS Agreement. However, in the absence of clear assurance that applications for pharmaceutical and agricultural chemical product patents will not be rejected and that novelty and priority will be preserved despite the wording of the Patents Act, the legal insecurity remains.
"1. Laws and regulations, and final judicial decisions and administrative rulings of general application, made effective by a Member pertaining to the subject matter of this Agreement (the availability, scope, acquisition, enforcement and prevention of the abuse of intellectual property rights) shall be published, or where such publication is not practicable made publicly available, in a national language, in such a manner as to enable governments and right holders to become acquainted with them. Agreements concerning the subject matter of this Agreement which are in force between the government or a governmental agency of a Member and the government or a governmental agency of another Member shall also be published.
"2. Members shall notify the laws and regulations referred to in paragraph 1 to the Council for TRIPS in order to assist that Council in its review of the operation of this Agreement. The Council shall attempt to minimize the burden on Members in carrying out this obligation and may decide to waive the obligation to notify such laws and regulations directly to the Council if consultations with WIPO on the establishment of a common register containing these laws and regulations are successful. The Council shall also consider in this connection any action required regarding notifications pursuant to the obligations under this Agreement stemming from the provisions of Article 6ter of the Paris Convention (1967)."
Paragraphs 1 and 2 of Article 65 further read as follows:
"1. Subject to the provisions of paragraphs 2, 3 and 4, no Member shall be obliged to apply the provisions of this Agreement before the expiry of a general period of one year following the date of entry into force of the WTO Agreement.
"2. A developing country Member is entitled to delay for a further period of four years the date of application, as defined in paragraph 1, of the provisions of this Agreement other than Articles 3, 4 and 5."
"Where a product is the subject of a patent application in a Member in accordance with paragraph 8(a), exclusive marketing rights shall be granted, notwithstanding the provisions of Part VI, for a period of five years after obtaining marketing approval in that Member or until a product patent is granted or rejected in that Member, whichever period is shorter, provided that, subsequent to the entry into force of the WTO Agreement, a patent application has been filed and a patent granted for that product in another Member and marketing approval obtained in such other Member."
It is not contested that currently there is neither legislation nor administrative practice in place in India regarding the grant of exclusive marketing rights on those products that satisfy the conditions of Article 70.9. India also admits that legislation is needed to effect a system of granting exclusive marketing rights. As noted above, the Patents (Amendment) Ordinance 1994 had provisions to establish such a system as of 1 January 1995, but the system lapsed with the expiry of the Ordinance.
Context, Object and Purpose
(a)A mailbox application has been filed in India in respect of a pharmaceutical or agricultural chemical product;
(b)A patent application has been filed in respect of that product in another WTO Member after 1 January 1995;
(c) The other Member has granted the patent;
(d) The other Member has approved the marketing of the product; and
(e) India has approved the marketing of the product.
India argues that "common sense and practical experience indicate[s] that all these steps [take] a long time and normally the products in question [will] not get on the market in a developing country before the expiry of the ten-year transitional period" (emphasis added).117 That may be so. However, an average period of time is not relevant in this analysis. What really matters is when it would be possible for one product to meet the terms of Article 70.9. While one could generally argue that these events take some time to materialize, one can never indicate exactly how long they will take. Indeed, according to the United States, there is at least one United States' pharmaceutical company that has completed steps (b) through (d) above with respect to two products.118