Letter, Identification of Countries involving the Special 301 provisions

Intellectual Property
Innovation and Chair of the Special 301 Committee
Office of the United States Trade Representative
Washington, D.C.

Submitted electronically to http://www.regulations.gov, docket number USTR-2010-0003

Re: 2010 Special 301 Review: Identification of Countries Under Section 182 of the Trade Act of

1974: Request for Public Comment, 75 Fed. Reg. 2578 (January 15, 2010).

Dear Ms. Groves:

The Biotechnology Industry Organization (BIO) is submitting these written comments in response to the request by the United States Trade Representative (USTR) for comments involving the “Special 301” provisions of the Trade Act of 1974. BIO is very pleased to have the opportunity to submit these comments, and respectfully requests that USTR consider the following views.

BIO represents more than 1,200 biotechnology companies, academic institutions, state biotechnology centers and related organizations in the United States and 33 other nations. BIO Members are involved in the research and development of healthcare, agricultural, industrial and environmental biotechnology products and services.

Intellectual property rights are of critical importance to the biotechnology industry. BIO Members depend on obtaining patents and related rights in a timely and predictable manner. The ability to enforce those patents is critical. Biotechnology is also a uniquely global enterprise.

Therefore, BIO Members have a particular interest in encouraging uniform and robust intellectual property protection in all countries and regions of the world. As a general matter, BIO notes with concern recent trends in a number of countries that undermine the intellectual property protection essential to provide an enabling environment for innovative biotech companies.

We focus our comments this year on a limited number of countries that are of particular concern.

Priority Foreign Country. In light of continued egregious and onerous policies relating to compulsory licensing of patents that systematically deny adequate and effective intellectual property protection, and the lack of any significant progress in addressing these policies, BIO urges USTR to designate Thailand as a Priority Foreign Country.

Priority Watch List. BIO requests that USTR place the Philippines on the Priority Watch List. BIO also requests that Argentina, Chile, China, India, Indonesia, and Israel maintain their current status on the Priority Watch List.

Watch List. BIO requests that USTR place Canada on the Watch List, and that Brazil, Colombia, Egypt, and Mexico maintain their current status on the Watch List.

Section 306 Monitoring. BIO requests that USTR continue to monitor Paraguay under Section 306.

PRIORITY FOREIGN COUNTRY

Thailand

In light of continued egregious and onerous policies relating to compulsory licensing of patents, and the lack of any significant progress in addressing these policies, BIO urges USTR to designate Thailand as a Priority Foreign Country.

The Thai Government continued its support of compulsory licensing of patented pharmaceutical products as part of its trade policy in 2009. These actions illustrate a continued disregard for intellectual property rights that are critical for the development of new medicines, and they constitute an egregious and onerous policy that denies adequate and effective protection of intellectual property rights. BIO is aware of efforts by the Thai government to develop a biotechnology sector, and appreciates its outreach to the biotechnology industry. However, policies such as compulsory licensing will only serve to drive biotech investment away from Thailand.

The Thai Government’s defense of compulsory licenses for drugs that treat noncommunicable diseases, such as cancer, stroke, or myocardial infarction, is of particular concern, given that many of BIO’s Members’ research and development efforts target such chronic diseases. These policies go well beyond the letter and spirit of the Doha Declaration, which provides a mechanism for governments to deal with acute public health crises, and impact the ability of biotechnology research and development efforts to recoup their massive investments.

The medical management of non-communicable diseases may be complex and costly, but it does not rise to the level of a public health emergency. These extraordinary measures should not be used systematically to facilitate budgetary planning.

BIO Members appreciate that diseases that can be treated with drugs affect a great many people and are matters of national concern for many governments. At the same time, the decision to maintain policies relying on compulsory licenses continues to undermine the adequate protection of intellectual property that is important to BIO Members, and consequently provides a powerful disincentive for our Members to do business in Thailand. BIO continues to believe that the most effective global solutions will result from policies that respect and encourage innovation.

Thailand also fails to provide meaningful protection for the pharmaceutical test data required to prove safety and efficacy of new drug products. The implementing regulations for the Trade Secrets Act provide a five-year term of protection for “maintenance of the trade secrets” of pharmaceutical test data. However, the regulations do not appear to provide the data protection against “unfair commercial use” in a manner consistent with Thailand’s obligations under Article 39.3 of the TRIPS Agreement. This protection is critical to biopharmaceutical companies and their ability to successfully launch a product in a particular market.

Thailand also does not provide a formal system to prevent regulatory approval of generic versions of pharmaceuticals that are still covered by a valid patent. The lack of such a “patent linkage” mechanism facilitates patent infringement in the Thai market, leading to potential loss of exclusivity for patented inventions in the biopharmaceuticals area and increased enforcement costs. This is particularly harmful in the biotech sector as biotech drug development can cost a billion dollars or more and can take more than a decade. Without assurance of recoupment of investment, and in particular in these difficult economic times, biotechnology research and development will diminish.

Finally, our Members report a growth in availability of counterfeit pharmaceutical products in the Thai market. This raises a number of significant concerns and constitutes not only a risk to the valuable intellectual property rights of BIO Members, but a serious health risk to the Thai public.

We strongly urge USTR to designate Thailand as a Priority Foreign Country. Thailand’s continued support of compulsory licensing as part of its trade policies denies U.S. industry adequate and effective protection of its intellectual property rights. The lack of effective protection for pharmaceutical test data and the apparent growth in counterfeit pharmaceutical products in Thailand also raise significant concerns. More aggressive monitoring and engagement with Thailand on this issue is fully warranted.

PRIORITY WATCH LIST

The Philippines

In 2008, the Philippine government enacted the Republic Act 9502 (R.A. 9502), also known as the “Universally Accessible Cheaper and Quality Medicines Act of 2008.” This legislation amended the Intellectual Property Code of the Philippines. The amendments weakened the protection of biopharmaceutical inventions in the Philippines. As a result, BIO Members are denied adequate and effective intellectual property protection. BIO urges USTR to place the Philippines on the Priority Watch List.

The amendments introduced a provision into Philippine law that denies patent protection for a new form of a known substance which does not result in “enhancement of the known efficacy, safety and purity of that substance.” The amendments appear to exclude from patentability many significant inventions in the biopharmaceuticals area. For example, a new form of a known substance with improved heat stability for tropical climates, or having other benefits that may not result in “enhanced efficacy” per se, would be denied patent protection even if it met all other patentability criteria. This additional patentability requirement appears to be inconsistent with the obligations of the Philippines under Article 27.1 of the TRIPS Agreement, which provides that patents be made available to “any inventions … in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.”

Moreover, this additional requirement applies only to drugs or medicines, and therefore creates a higher standard of patentability for this category of invention. This is inconsistent with the non-discrimination requirement of Article 27.1 of the TRIPS Agreement that “patents shall be available and patent rights enjoyable without discrimination as to the … field of technology.”

R.A. 9502 also contains provisions that expand the grounds on which compulsory licenses may be granted. This includes a new ground that permits a compulsory license “where the demand for the patented drugs and medicines is not being met to an adequate extent and on reasonable terms, as determined by the Department of Health.” This provision, which apparently can be invoked at the discretion of a government agency, has the potential to undermine adequate and effective protection of patent rights for biopharmaceuticals and is not consistent with the non-discrimination clause of TRIPS Article 27.1.

The Philippines also does not provide a formal system to prevent regulatory approval of generic versions of pharmaceuticals that are still covered by a valid patent. The lack of such a “patent linkage” mechanism facilitates patent infringement, leading to potential loss of exclusivity for patented inventions in the biopharmaceuticals area and increased litigation costs.

R.A. 9502 also expands permissible grounds for parallel importation of patent-protected products only with regard to “drugs and medicines.” This provision violates the nondiscrimination clause of TRIPS Article 27.1. In addition, the provision permits importation of patented drugs and medicines from a country where the product was placed on the market by “any party authorized to use the invention.” This appears to permit importation of goods even where they are placed on the foreign market without authorization of the patent owner, e.g., where the “authorized party” in the foreign market was operating under a compulsory license.

Thus, the amendment effectively gives extraterritorial effect to a foreign compulsory license, even where the rationale for the compulsory license was based on factors related solely to the national market in the jurisdiction that imposed the license. This is highly inequitable and appears to be inconsistent with recognized standards of “international exhaustion” of patented inventions.

In addition, the Philippines does not provide for meaningful protection for pharmaceutical test data required to prove safety and efficacy of new drug products. The implementing regulations of R. A. 9502 purport to provide protection against “unfair commercial use.” However, the same regulations clarify that “[t]he [Bureau of Food and Drugs] shall not be precluded from using all data, including, but not limited to, pre-clinical and clinical trials, of an applicant when evaluating other applications.” This appears to expressly permit “unfair commercial use” by generic competitors of the pharmaceutical test data generated by innovators to support marketing approval applications without any data exclusivity period to protect these data.

BIO requests that USTR work with the Philippines to provide for an intellectual property regime that provides adequate and effective protection of intellectual property rights for U.S. rights holders in that country. In light of this weakening of patent protection for biotechnological inventions, BIO requests that USTR place the Philippines on the Priority Watch List.

Argentina

Argentina continues to have deficiencies with respect to its patent system and the protection of data supplied to regulatory agencies in support of product marketing authorizations. BIO requests that USTR maintain Argentina on the Priority Watch List.

Argentina’s patent examination system continues to suffer from a backlog of patent applications that delays the grant of patent protection for valuable inventions and thereby denies the adequate and effective protection of intellectual property rights for BIO Members. We understand that Argentina has taken steps in recent years to reduce its backlog, but excessive delays are persistent. Currently, the National Institute of Industrial Property (INPI) performs substantive examinations according to the chronological order of the filing date of the corresponding request of examination. Typically in Argentina, substantive examination begins five to six years after the filing date. Consequently, a patent application requires around eight to ten years to be granted. Argentina’s patent law neither provides for sufficient patent term extensions to fully compensate for unwarranted delays by INPI in the examination of patent applications, nor provides provisional protection rights to applicants of such pending patent applications. Thus BIO Members are exposed to a substantial loss of patent term due to delays in examination.

In addition, Argentina remains outside of the Patent Cooperation Treaty (PCT), which facilitates the filing and examination of patent applications in 142 member countries. Acceding to this widely accepted agreement would be a positive step toward reducing unnecessary expenses and facilitating the procurement of patent protection in Argentina for BIO Members.

Further, the highly restrictive patent examination guidelines issued by the National Institute of Industrial Property in Argentina exclude protection for a wide range of biotechnological inventions. The criteria adopted by INPI, which denies patent claims directed to transgenic plants and animals, their parts and components, also appear to be inconsistent with the Argentine patent law. The patent law provides an exclusion to patentability only for living material and substances that are “pre-existing in nature.”

Transgenic plants and animals, their parts and components are not preexisting in nature. BIO Members also continue to experience difficulties enforcing patent and plant variety protections in Argentina.

Argentina also does not provide adequate protection for the data that must be generated in support of marketing authorization to prove that biotechnology products applicable to the pharmaceutical and agricultural chemical industries are safe and effective. This protection is critical to the ability of biotechnology companies to develop and commercialize such biotechnology products in a particular market. It is moreover an obligation of Argentina under Article 39.3 of the TRIPS Agreement that such data be protected against “unfair commercial use.” Persistent deficiencies in the patent and data protection regime in Argentina deny adequate and effective protection for the intellectual property rights of BIO Members.

Chile

Chile does not provide adequate protection of data that is required for submission in support of applications for marketing authorization for pharmaceuticals consistent with its obligations under Article 17.10.1 of the US-Chile Free Trade Agreement (FTA). This protection is essential for marketing of biopharmaceuticals in key markets. The Chilean laws undermine this protection by placing onerous conditions on the availability of this protection. They also provide that such protection may be revoked for broad grounds, including “reasons of public health, national security, [and] public non-commercial use,” among other circumstances. These provisions are not consistent with Chile’s obligations under either the FTA or Article 39.3 of the TRIPS Agreement.

Further, Chile is not in compliance with its obligations under Article 17.10.2 of the USChile FTA to refrain from granting marketing approval for a drug to a third party prior to expiration of a relevant patent. This is highly important to prevent infringement of the patents of BIO Members. The lack of such protection is particularly troubling in light of Chile’s clear obligations provided under the FTA.

In addition, Chile’s patent laws do not provide for sufficient patent term extensions, consistent with obligations under the FTA to fully compensate for unwarranted delays in the marketing approvals process. The patent law in Chile also excludes transgenic plants and animals from patent protection, thereby further limiting the availability of meaningful protection for valuable biotech innovations. To the extent that protection is available, significant backlogs delay ability to obtain rights essential to adequately protection these inventions. Chile’s intellectual property regime falls short of its obligations in a number of ways that deny protection for biotechnological inventions. In light of these deficiencies of the intellectual property regime in Chile, and particularly in light of its apparent lack of compliance with the USChile FTA provisions, BIO requests that Chile remain on the Priority Watch List.

China

China has made important improvements in its intellectual property system in recent years. Nonetheless, many areas of concern remain in regard to the protection of biotechnological inventions in China. BIO requests that USTR maintain China on the Priority Watch List. BIO Members remain deeply concerned about the trafficking of counterfeit pharmaceuticals and biologics in China. Counterfeiting not only deprives the owners of intellectual property of the value of their assets, but poses a threat to public health, along with the consequent economic costs. Counterfeit medications place the public at unnecessary risk and divert the resources of industry and government agencies. BIO urges USTR to continue to promote more effective interdiction and enforcement directed toward traffickers and distributors of counterfeit biopharmaceuticals in China.

China enacted the Third Patent Law Amendments in December 2008. The amendments entered into force in October 2009. BIO Members are concerned about some of the changes made in these amendments. In particular, Article 5 of the Chinese Patent law prohibits patents for inventions “relying” on genetic resources where the acquisition or use of those resources is contrary to the “relevant laws and administrative regulations.” This could result in the rejection of applications for deserving new and useful inventions, or even the revocation of granted patents later found inconsistent with these provisions.

Further, the amendments to Article 26 for the first time require patent applicants to indicate the “direct source” and the “original source” of genetic resources if the completion of the claimed invention relies on genetic resources. These amendments appear to be intended to promote compliance with provisions of the Convention on Biological Diversity (CBD) relating to access to genetic resources and equitable sharing of benefits from utilization of these resources. However, such provisions will not further these goals, which can be accomplished most effectively by improved transparency in national access and benefit-sharing regimes. The failure to identify the “direct source” of a biological material used in the invention is apparently also a basis for denying a patent to an otherwise deserving invention. In the case of the “original source,” failure to disclose may also result in denial of a patent unless the inventor can “state the reasons” that the original source “could not be explained.” These special disclosure requirements impose unreasonable burdens on patent applicants, subjecting valuable patent rights to great uncertainty. Moreover, the Implementing Regulations define “genetic resource” to include “material from the human body.” This goes beyond the scope of the CBD, which excludes human genetic resources and, consequently, the scope of requirements is additionally complicated.

These amendments also do not appear to be consistent with China’s obligations under the TRIPS Agreement to make patents available for “any inventions” that are new, have inventive step, and are capable of industrial applicability. Further, the additional requirement for inventions in a particular field of technology (i.e., inventions involving genetic resources) is not consistent with China’s obligation to make such patents available, and patent rights enjoyable, “without discrimination … as to field of technology.”

The amendments to Articles 48 to 52 of China’s patent law provide changes with respect to compulsory licensing of inventions. BIO supports a number of changes in this area. However, significant clarification regarding the events that would trigger compulsory licensing, as well as the scope and duration of the licenses granted, is needed.

The Third Patent Law amendments also add a “Bolar exemption” to patent infringement for pharmaceutical products in Article 69(5). However, unlike the law of many countries that provide this exemption, the exemption codified in the patent law amendments is not balanced by extensions of patent term to compensate patent owners for delays encountered in the regulatory approval process. Without such a balancing provision, the amendment, standing alone, does not provide equitable treatment to owners of intellectual property rights relating to pharmaceutical inventions.

In respect of data protection for pharmaceutical and agricultural chemical products, China has implemented a six-year data exclusivity term. However, this term is not applied in practice in a manner consistent with adequate and effective protection of regulatory approval data. The law, as currently implemented, does not provide the level of protection that is necessary for biopharmaceutical entities to bring products to market, and permits unfair commercial use of pharmaceutical test data developed by innovators.

BIO urges USTR to engage with China in order to achieve a patent law that is fully TRIPS-compliant and that adequately and effectively protects intellectual property rights.

India

At the outset, BIO notes with appreciation several steps that India recently has taken toward enhancing both its intellectual property laws and the capacity of its patent office to examine and grant patents. However, the reforms to date fail to achieve adequate and effective protection for intellectual property rights in the biotechnology industry. BIO requests, therefore, that India remain on the Priority Watch List.

The Indian patent system still excludes from protection many biotechnology inventions. The Patent Office has determined that the Indian Patents Act excludes from eligibility many living organisms, such as transgenic plants and animals. Inventions of tissues, cells, viruses, and the processes of preparing them are not eligible for patent protection. Additionally, it remains unclear whether polypeptides, nucleic acids, and other biomolecules are eligible for patents under the Act. These are valuable inventions for which protection is mandated by the TRIPS Agreement, provided they are new, involve an inventive step, and have industrial applicability.

Thus, it remains difficult to obtain legal rights in India of any significant commercial value for biotechnology inventions.

The Indian Patents Act includes Section 3(d), which explicitly excludes from patentability new forms of a known substance that does not result in “enhancement of the known efficacy of that substance.” This requirement excludes from patentability many significant inventions in the pharmaceuticals area, e.g., new forms of known substances with improved heat stability for tropical climates, or having safety or other benefits that may not result in “enhanced efficacy” per se. In addition, this provision appears to be inconsistent with India’s obligations pursuant to Article 27 of the TRIPS Agreement, which requires that patents be made available to “any inventions … in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.” Section 3(d) also creates an additional hurdle to patentability that is applied only to certain chemical products, and therefore appears to violate the non-discrimination clause with respect to field of technology set forth in the TRIPS Article 27.

India’s Patents Act also requires applicants to disclose the source and geographical origin of biological materials used to make an invention that is the subject of a patent application.

These special disclosure requirements impose unreasonable burdens on patent applicants, subjecting valuable patent rights to great uncertainty. Under the Indian law, the failure to identify the geographical source of a biological material may be a basis for opposition or revocation proceedings. Requirements such as these pose unacceptable risks for patent applicants and undermine the incentives of the patent system to promote innovation in biotechnological inventions. Further, such requirements are not consistent with India’s obligations under the TRIPS Agreement.

The Indian Patents Act also unreasonably restricts the use of patent rights. The Act provides broad exceptions for use of patented technology by the Indian Government or third parties. It also provides extensive authority for the grant of compulsory licenses, including licenses justified only on the basis that the products falling under the patent are not manufactured in India.

The capacity of the Indian patent office to review and grant patent applications is not yet sufficient to support the industries that depend on intellectual property. Moreover, patent litigation remains rare in the Indian courts and there is a lack of experienced judicial and enforcement officials.

Moreover, India's pre-grant opposition regime has been the cause for unreasonable delays for many pharmaceutical patents. Specifically, the regime has presented a significant procedural bottle neck for timely disposal of pre-grant opposition challenges most of which are filed by generic companies.

Overall, under India's patent regime, patent rights are uncertain since there are numerous ways to challenge patents on more or less the same grounds, e.g., pre-grant opposition, post grant opposition and civil patent infringement suit.

India also has not yet implemented any meaningful protection for the data that must be generated to prove that pharmaceutical and agricultural chemical products are safe and effective.

Under Article 39.3 of the TRIPS Agreement, protection must be extended against unfair commercial use of such data by makers of generic copies of innovator products (i.e., products that must be shown for the first time to be safe and effective, or to not cause significant risk to the environment). BIO views the 2007 Reddy Report and its recognition that the present legal provisions in India do not adequately meet the spirit of TRIPS Article 39.3 as a positive development. Further, BIO views positively the suggestion in that report that India should adopt a five-year fixed data protection term during which the relevant regulatory officials will not rely upon data submitted by the originator when approving second and subsequent applications for the same product. Nonetheless, it appears that meaningful protection for this data will not be implemented in the near term. In addition, even the suggested post-transition period protection suggested in the Reddy Report is subject to numerous, and apparently wide-ranging, proposed “safeguards,” a number of which would appear to undermine the proposed protection almost entirely. Effective market exclusivity for regulated pharmaceutical and agricultural chemical products would contribute significantly to providing adequate and effective protection of intellectual property rights in India for BIO Members.

BIO continues to urge USTR to place significant emphasis on the need for India to reform its intellectual property laws to achieve full compliance with obligations under the TRIPS Agreement, in order to provide an adequate and effective level of protection for biotechnology inventions. BIO believes that India should remain on the Priority Watch List.

Indonesia

The protection of intellectual property rights in Indonesia continues to suffer from considerable gaps that raise problems for BIO Members. BIO urges USTR to retain Indonesia on the Priority Watch List.

Indonesia does not provide sufficient protection for data that must be generated to prove that pharmaceutical and agricultural chemical products are safe and effective. Article 39.3 of the TRIPS Agreement requires that protection against unfair commercial use be provided for test data required for submission to prove the safety and efficacy of new pharmaceutical and agricultural chemical products. Indonesia still does not have a law to fulfill its obligation under TRIPS Article 39.3. The introduction of effective market exclusivity for regulated pharmaceutical and agricultural chemical products would contribute significantly to providing adequate and effective protection of intellectual property rights in Indonesia for BIO Members.

Indonesia’s patent law also still has considerable gaps that deny protection to a wide range of biotechnology inventions, including transgenic plants and animals. BIO Members also report problems with counterfeit medicines, despite recent steps taken by Indonesia, including the establishment of a National Anti-counterfeiting Task Force.

BIO requests that USTR further engage Indonesia to put in a place a system that provides adequate and effective protection for intellectual property rights. We request that Indonesia be maintained on the Priority Watch List.

Israel

Israel continues to fail to provide adequate and effective legal protection for biotechnology inventions.

Accordingly, BIO requests that USTR maintain Israel as a Priority Watch List country.

Israel’s regime for protection of data submitted by the originator of a new drug to support its application to market the drug remains inconsistent with international standards. The linkage of the exclusivity period (5.5 years) to the earliest registration in any of a list of “recognized countries” substantially reduces the protection available for U.S. companies in Israel.

Compounding the problem, significant delays in the registration process for innovative products further erode the exclusivity period.

In addition, the laws relating to patent term extension are burdensome and severely restrict the ability to obtain the extensions needed to compensate innovators for the loss of exclusivity due to the lengthy research and development periods and delays in the approvals process. Moreover, such extensions, where available, are significantly limited, as extensions of the patent term are linked to the shortest extension given in one of a number of reference countries. Israel has not corrected these matters despite years of engagement by the United States. Israel continues to fall well short of international standards, particularly those adopted by most member countries of the Organization for Economic Cooperation and Development (OECD), to which Israel hopes to accede in the near term.

Israel’s pre-grant opposition regime for patents also continues to be of serious concern to BIO Members. While we understand that Israel has taken certain actions in an attempt to address some of the most egregious abuses of the opposition procedure, the patent statute nonetheless continues to provide that any person may file an opposition against any pending application within three months after the application is published. The U.S. government has long recognized that such pre-grant opposition proceedings have the potential to cause significant harm to U.S. applicants. Domestic entities in Israel have a long history of using pre-grant oppositions to delay or deny the grant of patents for the deserving inventions of foreign interests.

Moreover, early in 2010, the Government of Israel published a Memorandum regarding a proposal for an amendment to the Patents Law regarding Publication of Patent Applications.

The proposal is aimed at allowing the publication of patent applications within a period of 18 months from the priority filing date. BIO supports the concept of timely publication of patent applications within such a period, which is similar to publication periods used in other major patent offices. Unfortunately, the proposal in the Memorandum also includes a series of additional amendments that would narrow and excessively restrict the ability of the owners to obtain adequate and effective protection in Israel. For example, there are proposals that would change existing Israeli law to restrict the ability to amend the application after publication, to limit the ability to obtain certain remedies for infringement that are not consistent with existing Israeli laws, and to apply these changes retroactively to applications that have already been filed.

These changes, which are not consistent with many other jurisdictions including the United States, raise significant concerns.

Israel is a modern, technologically-advanced country and is looking to become a member of the OECD. It enjoys preferential access to the U.S. market for pharmaceutical products made by its domestic industry. Israeli interests routinely procure U.S. patents, litigate them in U.S. courts, and generally benefit from adequate and effective intellectual property protection under U.S. law. The failure of Israel to provide comparable protection for U.S. interests in Israel improperly and significantly distorts the trade in biotechnology products between the United States and Israel.

BIO considers that these policies warrant continued close scrutiny by USTR and urges USTR to maintain Israel on the Priority Watch List.

WATCH LIST

Canada

BIO Members recognize that Canada has implemented positive regulatory changes in recent years, namely data exclusivity regulations granting eight years of data protection with an additional six-month period for pediatric studies that recognize the importance of intellectual property protection. However, the inability to procure patents for transgenic plant and animals and certain inequitable features of the Canada Patented Medicines Notice of Compliance (PM NOC) regulations raise concerns for BIO Members operating in Canada. In that light, BIO requests that USTR maintain Canada on the Watch List.

The Patented Medicines (Notice of Compliance) Regulations (PM NOC Regulations) of Canada remain of concern to BIO Members. Simply summarized, patent owners are required to list their patents in the Patent Register established under the PM NOC Regulations, which is a Canadian counterpart to the U.S. Hatch-Waxman Act. If a patent is listed by Health Canada and the generic drug company seeks approval prior to expiry, then the generic drug entity must file a Notice of Allegation (NOA) for each patent listed.

The NOA provides the grounds under which the generic drug company asserts the patent is non-infringed or invalid. The patent holder has 45 days in which to consider the allegations and, if the patent holder disagrees, then it must file an action seeking an order prohibiting the Health Minister from granting a market authorization to the generic drug company because the allegations of invalidity or non-infringement are unjustified. On initiating the application, the patent holder immediately receives a 24-month injunction. This application for an order for prohibition is a summary proceeding with limited procedural safeguards to effectuate intellectual property enforcement.

However, aspects of this proceeding are limited against the patent holder and should be modified to ensure adequate and effective protection for patent holders. For example:

·         A generic drug company is not required to address patents listed after the generic Abbreviated New Drug Submission (ANDS) is filed. For example, the effective date for a patent listing is the date of listing by the Minister of Health, rather than the date of submission of the listing, which unfairly places the penalty of the administrative delay in listing on the pharmaceutical patent holder. The difference between submission of a patent and actual listing can take months or even more than a year due to administrative delays. Thus, an aggressive filing by the generic company can obviate the PM NOC regulations entirely. The Canadian government should provide the benefit of the PM NOC regulations to any properly submitted patent irrespective of the generic ANDS submission date or at least as of the date of submission for listing by the patent holder.

·         The patent holder is the applicant in any application seeking an order of prohibition. As such, the courts have held that the patent holder carries the burden to prove that the allegations of invalidity and non-infringement are unjustified. This has the practical effect of forcing the patent holder to prove its patent is valid, obviating the presumption of validity recognized under Canadian law. Furthermore, the summary proceeding does not allow for discovery and provides no means to compel the production of relevant material other than the requirement for the generic to produce relevant sections of its ANDS and product samples if on file with the Minister.

·         The patent holder generally does not have a right of appeal if it is not successful in the first instance, while the generic drug company does. This is highly inequitable. Once the order of prohibition is denied, Health Canada issues the approval (Notice of Compliance or NOC) to the generic drug company and the automatic 24-month injunction is ended. So, for the patent holder, the first instance summary proceeding for the order of prohibition is the only proceeding available to enforce the patent in a manner that maintains product exclusivity.

If the patent holder must pursue an action for infringement (e.g., due to a dismissal of a PM NOC proceeding), an interlocutory injunction to maintain its rights, and particularly, to prevent market entry of the generic product, rarely succeeds under Canadian law even when there is compelling evidence of infringement and validity.

Patents

Canadian patent law still prohibits the patenting of higher life forms, including transgenic plants and animals, which denies patent protection to a wide array of valuable biotechnology inventions. In addition, Canada does not provide for patent term restoration or extensions to compensate for regulatory delays in the approval of new biopharmaceutical products. These items further limit intellectual property protection critical for BIO Members in Canada.

BIO Members have also reported a recent line of Canadian Federal Court cases, in the area of “selection” patents, which appear to establish a heightened disclosure requirement for patents relating to biopharmaceutical inventions. These cases are not consistent with the requirements for similar inventions in other major patenting jurisdictions and appear to place a significant number of important patents for biopharmaceutical invention in jeopardy.

Data Protection

Canada provides data protection to prevent unfair commercial use of regulatory data through its 2006 regulations implementing eight years of data protection. The 2006 regulations are a profound step forward in improving Canada’s intellectual property regime and attracting investment by the biopharmaceutical industry. However, these regulations are now subject to legal challenge, which could undermine this protection and warrants further monitoring.

Although the law was upheld by the Federal Court in 2009, our understanding is that the decision of the court has now been appealed.

BIO Members encourage USTR to work with Canada in order to assist in providing a patent regime, data protection, and means for enforcing these rights in a manner that is supportive of adequate and effective protection of intellectual property rights.

Preliminary Injunctions

BIO Members have expressed concerns regarding the view of Canadian courts that preliminary injunctions should be denied where damages are fully compensable. This undermines the central right of a patent – i.e., the right to exclude others from exploiting the invention – and denies patent owners adequate and effective protection for their intellectual property. This is particularly problematic in Canada where patent cases have been known to endure lengthy pendencies of many years.

Brazil

Brazil’s intellectual property regime, including the grant of a compulsory license for a patented pharmaceutical product in 2007 and other persistent deficiencies, continues to deny adequate and effective intellectual property protection for the biotechnology sector. BIO urges USTR to maintain Brazil on the Watch List.

In 2007, Brazil granted a compulsory license for SUSTIVA (efavirenz). This act raises significant concerns about whether intellectual property rights can be adequately and effectively protected in Brazil. While BIO understands the challenges that countries face in providing affordable healthcare systems, BIO Members continue to believe that the most effective solutions will result from policies that respect and encourage innovation. The granting of compulsory licenses in this manner will undermine incentives needed to develop new medicines.

The Brazilian patent law also remains a cause for concern. Brazil maintains a provision in its patent law that requires all drug patents to be approved not only by its patent office (the National Institute for Industrial Property or “INPI”), but also by the Ministry of Health (through the drug regulatory agency, “ANVISA”). Brazil therefore has imposed a special, higher and discriminatory standard for obtaining a patent on pharmaceutical technology. This higher standard is not consistent with Brazil’s obligations under the TRIPS Agreement that patents be available “without discrimination … as to field of technology.” Technology-specific conditions, such as the approval by ANVISA of drug patents that have already been found to satisfy the criteria of novelty, inventive step, and industrial applicability under Brazilian law, are inconsistent with the provisions of the TRIPS agreement.

Brazil’s pursuit of compulsory licensing as part of its trade policy as well as the continued deficiency of its patent regime with respect to pharmaceutical products deny adequate and effective intellectual property protection for BIO Members. Furthermore, we are concerned that the recently issued Executive Order 482 in response to the Brazil’s favorable WTO ruling in the cotton industry dispute with the United States will further abrogate BIO member IP rights.

The Executive Order provides for “measures to suspend concessions or other obligations of the country related to intellectual property rights and others in cases of noncompliance with multilateral obligations by a Member of the World Trade Organization – WTO.” We urge USTR to continue its engagement with Brazil to ensure that it considers the importance of IP rights in nurturing their nascent biotechnology sector as it begins to define how to implement the Executive Order.

Colombia

The Colombian patent law raises a number of matters of concern to BIO Members that warrant further monitoring. In light of the deficiencies of the law, BIO requests that Colombia be placed on the Watch List.

Andean Community Decision 486, which applies in Colombia, denies patents to inventions of “biological material, as existing in nature, or able to be separated, including the genome or germ plasm of any living thing.” This exception categorically excludes a wide array of biotechnological inventions from the patent system in Colombia. This exception is inconsistent with obligations of Colombia under the TRIPS Agreement that require patents to be made available to “any inventions … provided they are new, involve an inventive step, and are capable of industrial application.” In addition, BIO Members are systematically being denied protection in Colombia for inventions in chemical polymorphs and isolates that are routinely patented in other jurisdictions. This practice also appears to be inconsistent with the requirements of Article 27.1.

BIO also notes with concern significant delays in Colombia in the processing of patent applications for commercially valuable pharmaceutical inventions, essentially denying protection for these inventions.

Andean Decision 486 also requires that patent applications include requirements relating to the acquisition or use of genetic resources if the relevant inventions “were obtained or developed from” genetic resources. As noted above, these types of requirements cause great uncertainty over potentially valuable patent rights that result in significant risks for BIO Members. These requirements may result in the outright denial of patent protection for valuable inventions. In addition, such requirements appear to be inconsistent with Colombia’s obligations under the TRIPS Agreement.

BIO Members also have concerns relating to the recent set of government decrees relating to the health care system in Colombia. These decrees are reported to be far-reaching in nature and may have the potential to undermine the intellectual property rights of BIO Members in Colombia. These recent actions warrant further monitoring.

Egypt

The Egyptian patent law prohibits patent protection for many valuable biotechnology innovations.

Inventions in the subject matter areas of organs, tissues, viable cells, natural biologic substances, and genome are expressly excluded from patentability. These are areas of subject matter that must be extended protection according to the obligations contained in the TRIPS Agreement, provided the material in question is new, involves an inventive step and is industrially applicable. While TRIPS Article 27.3 does recognize some permissible areas of exclusion from patentability, these provisions of the Egyptian patent law do not fall within the permissible exclusions. In addition, Egypt precludes the patenting of genetically-engineered plants and animals. In sum, the Egyptian law precludes patenting of a wide range of basic commercial products and processes in the biotechnology industry.

BIO requests that USTR continue to engage its Egyptian counterparts to make improvements to patent protection in Egypt and to provide for the eventual adoption of a fully TRIPS-compliant regime in that country.

Mexico

Mexico continues to inadequately implement its obligations relating to test data required by regulatory agencies to obtain marketing approval for pharmaceuticals. Mexico has obligations under TRIPS Article 39.3 to provide protection for pharmaceutical test data against “unfair commercial use,” and under the North American Free Trade Agreement (NAFTA) Article 1711 to provide a five-year protection period against reliance by subsequent applicants on the data supplied by the originator. Nevertheless, Mexico still does not provide protection consistent with these obligations. The industrial property law states that Mexican law will implement requirements under its various international obligations. However, we are not aware of any implementing regulations or practices that provide for a five-year term of non-reliance consistent with Mexico’s international obligations.

BIO Members are also concerned about the lack of adequate enforcement procedures in Mexico that undermine the ability to enforce patents on pharmaceutical products. We also remain concerned about the apparent proliferation of counterfeit medicines in Mexico and the consequent economic and public health risks.

Mexico is a member of the OECD. The data protection regime and enforcement of intellectual property rights fall far short of standards widely implemented in OECD countries. In light of these concerns, BIO requests that USTR continue to monitor events and that Mexico be retained on the Watch List.

SECTION 306

Paraguay

Paraguay continues to have great deficiencies with respect to its patent system and the protection of data supplied to regulatory agencies in support of product marketing authorizations.

BIO requests that USTR continue to monitor Paraguay under Section 306.

Paraguay’s patent examination system suffers from a great backlog that delays the grant of patent protection for valuable inventions and thereby denies the adequate and effective protection of intellectual property rights for BIO Members. Paraguay needs to identify measures to reduce its excessive backlog. Further, Paraguay remains outside of the Patent Cooperation Treaty (PCT), which facilitates the filing and examination of patent applications in 142 member countries. Acceding to this widely accepted agreement would be a positive step toward facilitating the procurement of patent protection in Paraguay for BIO Members.

Paraguay’s patent laws also do not provide for sufficient patent term extensions to fully compensate for unwarranted delays in the patent application process. The patent law in Paraguay also excludes transgenic plants and animals from patent protection, thereby further limiting the availability of meaningful protection for many valuable biotechnology innovations. Paraguay does not provide adequate protection for the data that must be generated in support of marketing authorization to prove that agricultural chemical products are safe and effective, although the Law states the obligation of safeguarding the scientific or technical information contained in the documents submitted for the registration of phytosanitary or zoosanitary products. This protection is critical to the ability of biotechnology companies to develop and commercialize such pharmaceutical and chemical products in a particular market. It is moreover an obligation of Paraguay under Article 39.3 of the TRIPS Agreement, which requires such data to be protected against “unfair commercial use.”

Persistent deficiencies in the patent and data protection regime in Paraguay raise issues in respect of Paraguay’s bilateral and international obligations and deny adequate and effective protection for the intellectual property rights of BIO Members.

Concluding Comments

BIO appreciates this opportunity to submit its views for consideration by USTR. We are prepared to work with USTR to provide additional information regarding the countries we have identified.

Sincerely,

Lila Feisee
Managing Director, Intellectual Property
Biotechnology Industry Organization