To Waive or Not Waive? Analysing the Necessity and Challenges of the TRIPS Waiver Proposal

Recently, pharmaceutical companies have come up with novel solutions to limit the spread of coronavirus, but have been reluctant to share these benefits. In October 2020, India and South Africa introduced a proposal for the waiver of TRIPS to combat COVID, specifically to address this concern of developing countries. The “waiver” is in fact a far-reaching proposal that is sought to be made applicable to vaccines, treatments and diagnostics. It is intended to apply to patents, trade secrets and know-how in relation to products for the prevention, containment and treatment of COVID. It includes a “peace clause” that prevents the use of DSU procedures against actions taken under the waiver. In this context, this piece analyses the insufficiency of the existing measures under the WTO to ensure global cooperation for health services and vaccine production for COVID; and also assesses whether the waiver alone can combat this insufficiency, particularly from the perspective of developing countries.            

Insufficiency of existing mechanisms

Voluntary agreements and Covax are some of the existing mechanisms to facilitate international cooperation for combatting the inequality faced by developing countries, especially for vaccine production. However, under the TRIPS the specific mechanism to combat such issues is in the form of compulsory licensing (“CL”). It has been argued that a waiver is not required as Article 31 and Article 31bis of the TRIPS allow sufficient leeway for necessary actions to control and treat COVID (here). This existing mechanism is insufficient because of the legal, political and practical challenges outlined below.

Legal Challenges

A CL, as per Article 31(a) of the TRIPS, unlike the waiver of intellectual property protection, can be used only for a specific product by individual countries. To trigger the use of Article 31, an extreme urgency must be proven and attempts to negotiate voluntary licenses on agreeable commercial terms must have been made. As per Article 31(h), when a CL is issued, the patent holder must also be remunerated adequately. This term does not have a specific interpretation and the ambiguity of ‘adequate remuneration’ can be used to impede the use of CL.

Another issue with the use of a CL is that it applies only to the domestic market (Article 31(f), TRIPS). This means that the free flow of technology and information pertaining to vaccines and medical devices is not guaranteed through a CL. This problem was seemingly resolved by the introduction of Article 31bis. However, Article 31bis does not resolve the issue of free flow of information as countries such as Japan, New Zealand and the EU have opted out of Article 31bis. In order to use Article 31bis, a notification to the TRIPS council by both the exporting and importing country is required. The issue in using Article 31bis is also exemplified in the recent hurdles that Bolivia has faced in using CL for vaccines. Bolivia is facing hurdles in importing vaccines from Canada because of the complexity of the Article 31bis regime and the failure of the Canadian government to grant authorisation to the exporter.

Political challenges

Politically, a CL is not a desirable or feasible option for all states due to the threat of challenges and trade sanctions. An instance of this can be seen in the actions of the EU and the US to criticize and pressurize developing countries for the use of CL. Free Trade Agreements (FTA) and Regional Trade Agreements (RTA) can be used as instruments to exercise this pressure. Retaliation by pharmaceutical companies is also likely as witnessed in Thailand where, after a CL was issued, the company refused to introduce new medicines produced by it in Thailand.

Practical challenges

Information disclosed through patents is, in reality, insufficient to replicate a product. Often the full extent of the tacit knowledge that is required is kept as a secret and requires the cooperation of the patent holder to be of use.

This practical challenge is unprecedented. For instance, as a response to the HIV/AIDS crisis, several countries such as Malaysia, Thailand, Ghana, Zambia used compulsory licenses to help provide lifesaving drugs at affordable prices. However, this situation is markedly different as there is a significant knowledge deficit, issues of access to raw materials and an absence of identification of the scope of operation of the CL.

Challenges Presented by the Waiver

As a response to the inadequacy of the TRIPS mechanism and the insufficiency of global cooperation, the waiver is seen as a possible solution. However, even a waiver will not provide a solution for the practical problems arising from the lack of capacity and technology transfer at a domestic level. Crucially, at a time like this, an IP waiver could mean that producers scramble over scarce raw materials while not possessing the actual knowledge to translate these into useful products. Concerns have arisen that such a waiver would hamper innovation and research. Scholars argue, citing the use of mRNA technology in vaccines, that without a robust incentives structure based on predictable intellectual property laws, private enterprises would refuse to innovate and invest in developing such technology. Legally, developing countries would still be required to make changes in their domestic laws to actually benefit from the waiver.

Moving forward from the waiver and compulsory licensing

Therefore, the debate surrounding the waiver can be divided into two broad camps, one that argues against the waiver on the grounds that it is unnecessary and harmful. The other argues for the waiver on the grounds that it can provide an immediate solution and is necessary in light of the public health crisis that covid presents.

In these approaches a compulsory license and a waiver are presented as “either/or” legal options. However, a CL can very well coexist with the waiver especially buttressed by provisions such as the peace clause. This “blended approach” can help reconcile some of the differences between these opposing viewpoints – some of which also ignore that the waiver is also a political instrument that can be leveraged to prompt favorable voluntary licensing terms from private actors. For instance, Brazil used the threat of compulsory licensing to negotiate lower prices for antiretroviral drugs. The waiver can then create consent by pharmaceutical companies to provide medical products and overcome the practical challenges faced by developing countries.

Further, while recognising that the opponents of the waiver have valid concerns, some solutions that can be explored are: the creation of a global WTO fund to provide compensation to right holders and, preparation of model legislations that make it easier for developing countries to use the CL mechanism. A compensation fund can ensure that the incentive structure of IP rights is not invalidated completely and a model legislation can help remove domestic hurdles in using the CL in the event that a full waiver cannot be agreed upon. These solutions can help balance the competing considerations of IP rights and public health. In any case, every possible solution, whether a waiver or the use of CL’s or a blended approach, requires global cooperation. Countries must share the recognition that nowhere is safe unless everywhere is safe.

Mugdha Mohapatra is a fifth year student of law at the National Law School of India University Bengaluru. She is an editor of the Indian Journal of International Economic Law at NLSIU. 

Image: Blake Cale, ‘Vaccine’ (here).

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