In-Transit Seizure of Generic Medicines: A Jurisdictional Enquiry
Piyush Kumar and Sandeep Chaitanya
Students, National Law University, Jodhpur-342304, Rajasthan
Note- This article has been written a few months ago and since then there has been some legal development on this issue but the same has not been incorporated in the article. Readers are advised to update themselves.
Abstract: A number of articles recently appeared in national and international journals on in-transit seizure of generic medicines produced in India by the EU authorities. All these writings make a jurisdictional as well as a normative enquiry to check the legitimacy of the EC Regulation 1383/2003. While it is not denied that Jurisdictional issues cannot be solved without an enquiry into substantive provisions of law, this article makes only a jurisdictional enquiry into the validity of the EC Regulation 1383/2003 from a public international law perspective. The purpose of this article is to show that the EU lacks perspective jurisdiction under public international law to seize generic medicines not meant for the European Market.
Keywords: Seizure, Generic Medicine, Doctrine of Manufacturing Fiction, In-transit
INTRODUCTION
Jurisdiction is a mixed question of fact and law. Therefore, an overlapping between the principles for determining jurisdiction and substantive provisions of law is inevitable, owing to which the author has dealt with the issue of territoriality of intellectual property (substantive provision) as well. While doing so it has been ensured that there be minimum encroachment on the substantive provisions of intellectual property law, and at the same time related issues like legitimate trade, extensive Trips protection etc. remain untouched. The anti-trust regime of USA and UK has also been discussed in the article due to the similarities between the anti-trust regime of USA and the dispute of in-transit seizure of generic medicines.
FACTUAL MATRIX
The EC Regulation 1383/2003 empowers customs authorities to seize in-transit goods on suspicions of IP infringement. On 4th December, 2008 a consignment of generic medicines being transported from India to Brazil was seized by the Dutch authorities in view of this regulation. The consignment contained Losartan Potassium produced by Dr. Reddy’s Laboratories Ltd. (based in India) which is used in the treatment of hypertension. The drug has not been patented in either India or Brazil but has been patented in Europe under the name of Cozaar by Merck, a global giant in the pharmaceutical sector. Many similar incidences followed 4th December 2008 and India along with Brazil registered a protest in the WTO with vocal supports from countries like China and Japan.[1] This incident sparked a huge debate among the academia. The matter was taken up bilaterally between India and the EU and the EU has promised to repeal the regulation.
JURISDICTION
Jurisdiction is of three type viz. prescriptive jurisdiction which includes power of a state to legislate on a particular matter[2], adjudicative jurisdiction which includes power of domestic courts to adjudicate a dispute and enforcement jurisdiction which includes power of the concerned authorities to enforce adjudication. Of the three, we are concerned with prescriptive jurisdiction only. Prescriptive jurisdiction includes legislative competence over national territory and is termed as sovereign rights.[3] One of the most important premises of international law is that there is no limitation on the exercise of jurisdiction by a state unless such exercise of jurisdiction is conclusively prohibited by some other principle of international law.[4]
The onus lies on the state disputing jurisdiction to prove that the exercise of jurisdiction is unjustified.[5] While on the other hand, the state claiming jurisdiction will have to show that such exercise of jurisdiction falls under well recognized principles of public international law. It is important to note that application of all such principles is not obstacle free except the territoriality principle. The territoriality principle of exercising jurisdiction is accepted worldwide and problems rarely arise in exercising it.
The territoriality principle assumes two kinds of interpretation viz. subjective territoriality and objective territoriality. Under the subjective interpretation, jurisdiction can be assumed if any component of the impugned act initiates within the territory of the state claiming jurisdiction. According to the objective interpretation, jurisdiction can be exercised if the impugned act consummated within the territorial limits of the state or if the effect of the impugned act is gravely felt within the territorial limits of that state.[6] This in effect means that there has to be sufficient ground for exercising territorial jurisdiction and the existence of such grounds is an issue relative to the rights of other states and not a question of basic competence.[7] If EU is giving extraterritorial effect to EC regulation 1383/2003, it is possible only after weighing the competing interest of India and Brazil vis-a-vis EU. Such a comparison of interests is not merely a question of jurisdiction, and hence outside the scope of this article.
The objective interpretation of the territoriality principle has been extended in degree[8] by US federal courts[9] in the name of the effect doctrine in their anti-trust laws and consequently it has resulted in a series of objections by other countries alleging it to be extra-territorial in effect. The present EC Regulation prime facie seems to be based on the effect doctrine and the same is discussed in the next section.
Effect doctrine and objective territoriality principle
Under the objective territoriality principle, jurisdiction can be exercised if a particular act is consummated in that state though it may have started in some other state or if the impugned act produces grave effects on the social and economic order of that state. The effect doctrine is said to be an extension of the objective territoriality principle. This doctrine has been reluctantly accepted in international law.[10] It is argued that the effect doctrine is an extraterritorial exercise of jurisdiction and hence laws and policies of one sovereign clash with the laws and policies of the other sovereign giving rise to confliction claims.[11] By an extended application of the Sherman Act, USA can exercise jurisdiction even when its export advantages are affected due to outside cartelization. If there is an agreement outside the territories of USA refusing to buy or sell to the undertakings in USA, then in that situation USA can extend its competition law.
Position in the EU
The EU also follows a similar kind of doctrine but in a narrower degree.[12] The EU confines the effect doctrine to internal effects only. It requires some internal effect such as higher price of imported goods due to cartelization and this is called the implementation approach. According to the ECJ rulings in view of article 81 and 82 of EC Treaty, place of formation of the agreement or territorial identity of the parties involved in the agreement is immaterial in deciding application of the EU Competition Law. What matters is the place of implementation of the agreement.[13] Therefore in essence if implementation of the agreement in common market is capable of affecting trade between member states and restrict competition within the common market or constitute an abuse of dominance within the common market or substantial part of it, the EU Competition Law will apply. Compared to the EU, USA would not require such effects in US market. USA can exercise jurisdiction if there is cartelization against exporting to USA.[14] Implementation approach as well as effect doctrine both are criticized for its extra-territorial application in many cases but implementation doctrine varies from effect doctrine in the sense that it does not cover situations as large as effect doctrine such as distortion of export commerce of USA.[15]
This Judicial Imperialism of USA was seriously objected to by many nations.[16] The EU was the forerunner in making hue and cry upon facing extraterritorial anti-trust legislations of USA and in order to counter those legislations UK went on to enact counter legislations permitting defendants residing in UK to not comply with the US court orders passed in view of anti-trust legislation.[17] In light of this the passing of EC regulation 1383/2003 seems surprising. This two faced politics of EU is not only ethically erroneous and legally inconsistent but also tends to undermine international relations.
International Comity
Exercise of effect doctrine/implementation approach tends to ignore international comity in many situations. International comity is a jurisdictional concept which requires application of foreign law or limitation of domestic law out of respect for foreign sovereignty.[18] The foundation of international comity is international relation between two countries and it either avoids or mitigates conflict of laws between two sovereigns. Comity as a principle has been quite deceptive, unregulated by any set principles.[19]
The EU does not follow the test of international comity in deciding the issue of jurisdiction in their anti-trust regime.[20] Differently put, competing interests of different sovereigns is not a reason in the EU to restrain the exercise of jurisdiction.[21] The case of seizure of in-transit generic medicines by the EU seems to be based on the same notion that international comity is not a ground to invalidate EC Regulation 1383/2003. However, the EU still needs to prove some substantial effect on the EU market/export advantages due to trade of generic medicines between India and Brazil.
No substantial effect
It is also important to note that the EU can legitimately exercise jurisdiction over in-transit goods if export of those goods bear substantial effect on the EU market on the lines of implementation approach. It is difficult to imagine a situation where sale of generic medicines in the developing world would substantially tamper the trading interests of giant pharmaceutical companies of the EU.[22] Similarly it is also not possible to imagine a situation where its export advantages will be hampered due to trade of generic medicines in Brazilian market. Merck being a global giant can still export Cozaar to Brazil and compete with Indian generic pharmaceutical companies and establish de-facto monopoly. Therefore, even by applying effect doctrine it is not possible for EU to grant validity to the EC Regulation 1383/2003.
Resolving the dispute of in-transit seizure of goods requires higher inquiry and mere discussion on just international law at jurisdictional level will not be sufficient, and the authors have already acknowledged this limitation. Intellectual property is a very sensitive issue and its ramifications are capital intensive. Any small incident in intellectual property leads to ramifications on numerous stakeholders, all of whose interests cannot be balanced; nevertheless, each stakeholder can enjoy a minimum set of rights. Intellectual property tries to strike a balance between public interest and the need for innovation. It is this complex nature of intellectual property which requires this article to delve into the nature of intellectual property and examine the nature of rights available in Intellectual Property and how they can be protected. Does international Intellectual Property law permit cross border enforcement of domestic Intellectual Property laws?
EXTRA-TERRITORIALITY OF IP LAW: IS IT STILL TERRITORIAL?
With advancement in technology and increasing dependence on international trade it has become difficult to confine intellectual property within the boundaries of the country granting the patent in question. Protection of intellectual property is no more dependent on strict territoriality principle, hence it is argued that intellectual property is not a regional concern but an international concern and territoriality of intellectual property is an outdated concept in view of international trade.[23]
It is therefore sometimes argued that protection of intellectual property is not territorial but largely depends on how much protection is available globally which in turn can lead to conflicting decisions. There are many international conventions to solve the issue of conflict of laws but they have rendered little help in the area of intellectual property.[24] Strict territoriality has never been followed in the international intellectual property regime. Two prominent illustration of this would be national treatment and prior art. According to national treatment no party to WTO can accord higher benefits on its nationals. Put differently, protection granted to foreign national would not be less than the one given to nationals.[25] According to prior art, patent will not be granted by a country if alleged invention already exist provided that country follows worldwide prior art. A modest extension of the territoriality principle can be seen from Blackberry case[26] wherein a US federal court held that in order to examine the issue of infringement it may not be proper to confine enquiry within the territorial limits of a country. Therefore the argument can be made that despite not entering into the European internal market, medicines were certainly in the European customs zone.[27]
The aforementioned discussion does not in any way imply that territoriality of IP is not accepted by the international IP community. On the other hand it is important to note that protestors of the EC Regulation 1383/2003 contended before the WTO that territoriality is the edifice of intellectual property.[28] Intellectual property protection, according to the principle of territoriality, is limited to national jurisdictions. This in essence means that geographical coverage of intellectual property right is coterminous with the jurisdiction of the state granting patent.[29] Each patent is governed by the laws of that state and can be enforced only within the four corners of that State. A patent owner seeking to protect his invention worldwide will have to obtain as many as 153 patents and a single patent will not suffice. Territoriality of intellectual property has been one of the primary reasons for the formation of international conventions on intellectual property since 1883.[30] In Brown v Duchesne,[31] the US Supreme Court declined to exercise jurisdiction in a matter wherein a French vessel in US territory used a gaff on board covered by a patent in US. The Court held that it did not amount to infringement because it was not intended to be used in USA.
DOCTRINE OF MANUFACTURING FICTION: ARGUMENT FOR TERRITORIALITY OF IP
Dutch courts while upholding the validity of the EC Regulation 1383/2003 have held that if goods in-transit violate the IP rights granted by the member countries then such goods can be deemed to have been produced in the EU. This is called the doctrine of manufacturing fiction. This doctrine has been criticized as being violative of international intellectual property law.[32]
This doctrine subsumes interdependence of patent rights but eventually goes against the mandate of international intellectual property conventions. Take for instance, Article 2 of TRIPS, which requires member countries to comply with the provisions of the Paris convention.[33] Principle of independence is thus one of the edifices of intellectual property law and it is sometimes equated with the territorial nature of intellectual property rights.[34] Granting a patent to a product is within the sole discretion of a sovereign and hence a sovereign right.[35] The doctrine of manufacturing fiction unnecessarily interferes with these sovereign rights and violates the principles of international comity as well.
CONCLUSION
Anti-trust laws are intended to ensure fair competition whereas by seizure of goods in-transit, an attempt is made to protect the interest of big pharmaceutical companies. Whole gamut of events suggests that EC Regulation 1383/2003 was not intended to ensure compliance with TRIPS but rather to safeguard the trading interests of giant pharmaceutical companies of the EU. This type of action in the pharmaceutical industry is uncalled for. In the context of developing countries whose ailing population relies on cheap Indian generic medicines, this incident will worsen their situation because any change in route would increase prices of the drugs. Diplomacy and furthering the interests of select stakeholders at the cost of several others on issues involving life-saving drugs should be avoided. Such actions amount, in effect, to a violation of human rights as well. Passing of EC Regulation 1383/2003 by the EU is unwarranted under international law. The EU lacks prescriptive jurisdiction to pass such regulation.
Acknowledgement
Authors are highly indebted to Mr. Yogesh Pai, Assistant Professor of Law at the National Law University, Jodhpur for mooting this topic and area of enquiry.
[1]http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds409_e.htm, (12 April 2011)
[2] This also includes executive rule making and judicial directions
[3] Brownlie Ian, Principles of Public International Law, 6th edn (Oxford University Press, New Delhi), 2003, p. 289
[4] Shearer I A, Starke’s International Law, 11th International Student Edition (Oxford University Press), 1994, p. 184
[5] S.S. Lotus (Fr. v Turk.), 1927 P.C.I.J. (ser. A) No. 10 (Sept. 7)
[6] Board of trade v Owen, [1957] AC 602 (604); R. v Cox [1968] 1 All E R 410 (414)
[7]Brownlie Ian, Principles of Public International Law, 6th edn (Oxford University Press, New Delhi), 2003, p. 298
[8] Shearer I A, Starke’s International Law, 11th International Student Edition., (Oxford University Press), 1994, p. 189
[9] United States v Aluminum Co of America, 148 F 2d 416 (2nd Cir 1945) The effect doctrine was adopted by the US Court in this judgment.
[10] See United Kingdom Protection of Trading Interests Act 1980 and the Australian Foreign Proceedings (Excess of Jurisdiction) Act 1984. These Acts were passed to counter the extraterritorial legislation of USA. For example UK Act empowers Secretary of State to order any person to not comply with foreign orders, compliance of which will have adverse consequences on trading interest of UK. The Act also prohibited British corporations from giving documentation to a potentially hostile foreign interest and empowered British courts to seize the assets of any overseas power which impounded assets of British corporations.
[11] Kahn-Freund O, English Contracts and American Anti-Trust Law: The Nylon Patent Case, 18 Mod. L. Rev., (1955), 65-67
[12] See Eastern Aluminum, 1985 O.J. (L92) at 48
[13] A Ahlstrom Oy v EC Commission (Woodpulp), [1988] ECR 5193
[14] Dhall Vinod, Competition Law Today: Concepts, Issues and the Law in Practice (Oxford University Press, New Delhi), 2007, p. 410
[15] Noonam Chris, The Emerging Principles of International Competition Law, (Oxford University Press, New York), 2008, p. 284
[16]http://www.europeaninstitute.org/Fall/Winter-2009-Vol.-10-no.-3/eu-and-us-qcompetingq-via-their-competition-regimes.html (14 July 2011)
[17] United Kingdom Protection of Trading Interests Act 1980
[18] Paul R J, The Transformation of International Comity, 71 Law & Contemp. Probs., (2008), 19
[19] Dodge S William, International Comity in American Courts, (UCLA conference papers) 7-9, Available at www.asil.org/files/dodge.pdf, (28 March 2011)
[20] IBM v Commission, 1981 E.C.R. 2639. The court in this judgment declined to entertain the issue of international comity in deciding the question of jurisdiction.
[21] See Wood Pulp, 1988 E.C.R. at 5244
[22] Abbott Fredderick M., Seizure of Generic Pharmaceuticals in Transit Based on Allegations of Patent Infringement: A Threat to International Trade, Development and Public Welfare, World Intellectual Property Organization Journal , Vol. 1, (2009), 43
[23] Dinwoodie, Trademarks and Territory: Detaching Trademark Law from the Nation-State, 41 Houston Law Review (2004) 885
[24] Brand A. Ronald, Intellectual Property, Electronic Commerce and the Preliminary Draft Hague Jurisdiction and Judgment Convention, 62 University of Pittsburgh Law Review 581 (2001)
[25] Carvalho Nuno, The Trips Regime of Patent Rights, 2nd edn., (Kluwer Law International, Hague), 2005, p. 72
[26] NTP v Research in Motion, 418 F 3d 1282 (Fed. Cir. 2005)
[27] Seuba Xavier, Border Measures Concerning Goods Allegedly Infringing Intellectual Property Rights: The Seizures of Generic Medicines in Transit, International Centre for Trade and Sustainable Development , available at www.iprsonline.org/New%202009/Seuba_Border%20Measures.pdf, (01 April 2011)
[28] http://www.twnside.org.sg/title2/wto.info/2009/twninfo20090203.htm, (22 June 2011)
[29] Fawcett J. James, Intellectual Property and Private International law,4 Intellectual Property Quarterly, (1998) 444
[30] WIPO FORUM ON PRIVATE INTERNATIONAL LAW AND INTELLECTUAL PROPERTY, a background paper prepared by International Bureau. Available at www.wipo.int/edocs/mdocs/mdocs/en/wipo_pil_01/wipo_pil_01_9.pdf, (29 March 2011)
[31] 60 U. S. 183 (1856)
[32] Kumar P. Shashank, Border enforcement of intellectual property rights against In-Transit generic pharmaceuticals: an analysis of character and consistency, European Intellectual Property Review , 2010, 32(10), 506-519
[33] Article 4bis of the Paris Convention states:
(1) Patents applied for in the various countries of the Union by nationals of countries of the Union shall be independent of patents obtained for the same invention in other countries, whether members of the Union or not.
[34] Abbott Fredderick M., Seizure of Generic Pharmaceuticals in Transit Based on Allegations of Patent Infringement: A Threat to International Trade, Development and Public Welfare, World Intellectual Property Organization Journal , Vol. 1, (2009), 43
[35] Article 1.1, 29 and 62 of TRIPS
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