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Just prior to the last election campaign, there was a big debate about patent evergreening, in which IP academics and patent lawyers around the country nearly had heart attacks as Opposition leader Latham and PM Howard debated the finer points of patent law in the heated atmosphere of Parliament. Too much excitement!

Part of the debate was about whether provisions in AUSFTA, requiring linking of marketing approval mechanisms for drugs (ie, the Therapeutic Goods Administration processes) and patents would cause or contribute to or enable ‘evergreening’. Latham coined the immortal phrasing ‘bodgy patents’ to explain this.

Well, I know this is all water under the bridge now. But I think it’s worth point out that now that the US has a democrat-dominated Congress, there are some changes happening in trade policy. Specifically, for the agreements still awaiting Congressional approval (Peru, Colombia, Panama, Korea), there’s been an agreement reached between USTR and the Democrats in Congress to change the FTA text – specifically, to introduce more flexibility in the patent provisions (as well as some labor/environmental stuff).

You mean all that angst was for nothing?

Here’s the background. For a long time, Democrats in particular (who tend to be more anti-free trade) have been pushing for the inclusion of environmental and labor standards in bilateral trade agreements – on the basis that without such standards, the US is not on a level playing field (good US companies with good labor standards cannot compete with Mexican companies with low labor standards). In early March 2007, an influential group of democrats (Tom Allen, Henry Waxman, inter alia) wrote to the USTR (Susan Schwab) expressing their concerns over the recent US FTAs which ‘appear to undermine’ the commitment to the Doha Declaration. On March 27, 2007, the Congressional Democratic leaders unveiled a set of policy principles that they want incorporated into both pending free trade agreements (FTAs), and the US’ broader trade agenda. The democrats wanted provisions in the FTAs:

1. requiring countries to adopt, maintain and enforce basic international labour standards in their domestic laws and practice, not merely ‘enforce their own laws’;
2. promote sustainable development and combat global warming by requiring countries to implement and enforce common multilateral environmental agreements [MEAs].
3. ‘re-establishing a fair balance’ between promoting access to medicine and patent rights.

The timing of the statement was critical, because at the time, the Peru, Panama, and Colombia FTAs were pending before Congress; Korea too had been concluded in early February 2007. The Bush administration had until the end of March to notify Congress that it intended to submit already-negotiated FTAs for a straight yes-or-no vote without the possibility of amendments, as permitted under its ‘trade promotion authority’ (TPA) mandate. This would be just in time for a mandatory 90-day review period before TPA expires at the end of June. The final text of any agreement to be voted on by Congress must be finalised by the end of June.

Announcement of the Democrat stance led to negotiations between administration and the Democrat members of Congress, particularly members of the key committees (the committee on Ways & Means and the Subcommittee on Trade). On 10 May, Members of Congress and the USTR announced that they had reached agreement on the path forward for congressional consideration of the FTAs with Colombia, Peru, Panama, and Korea. The provisions agreed are available, and when it comes to labor they require things like freedom of association, collective bargaining, elimination of forced labor, abolition of child labor, and the elimination of discrimination in employment. They also specify a series of multilateral environmental agreements which the parties must adopt and implement – implementation is subject to the dispute settlement chapter, so that there is inconsistency with the FTA if they fail to comply with the environmental treaties. for Peru, there is a specific provision on logging that has to be added.

The changes to IP can be found here. Basically, the aim is ‘to incorporate certain additional flexibilities … aimed at further ensuring that developing country free trade agreement partners are able to achieve the best possible balance between fostering innovation in, and promoting access to, life-saving medicines’. Three of the changes apply only to developing countries (ie Peru, Colombia, Panama, but not Korea). They are:

1. The flexibility to apply protection to test data for pharmaceuticals only for so long as the test data is protected in the US (provided they grant approval within 6 months of receiving an application) (developing countries only)
2. Allowing the country to choose whether to extend patent terms to compensate for processing delays (replaying ‘shall’ with ‘may’) (developing countries only)
3. Flexibility in the marketing approval-patent linkage (developing countries only)
4. Allowing countries to implement exceptions to rules on test data (data exclusivity) if necessary to protect public health;
   Recognition in the text (not just a side letter) that nothing interferes with the Doha Declaration.

One interesting point is that the ‘flexibility in marketing approval-patent linkage’ looks like it might even be modelled on the way that Australia implemented AUSFTA: a country that doesn’t want a strong patent-marketing approval link can just make sure that patent owners receive some notification when marketing approval is sought. That is basically how Australia did it, and is the reason we were able to say we weren’t introducing the US system.

PhRMA have been somewhat restrained in their criticism, although expressing concern in a press release. According to a story in the Wall Street Journal (Sarah Lueck, ‘In Trade Deal, A Shift on Generics’, Wall Street Journal, May 17 2007 page A4) a key reason is that the pharmaceutical industry is more Republican friendly, and now face a much more hostile Congress, in this and other areas. Other commentators have noted that PhRMA may have decided that the shift by the Democrats was mostly about Labor and Environment issues in the trade agreements; it wasn’t going to be held back by IP issues (ie, this was one battle they couldn’t win).

What happens now?

The idea is that the USTR is going back to the FTA partners (Peru, Colombia, Panama, Korea) to put these amendments to them. The IP ones are good presumably, but the labor/environmental ones might generate some protests one would think. End June is the key date here. The President has to sign the agreements by then, when his TPA expires. The President can still go to Congress to approve the agreement post end-June.

for more on all this, see the CPTech website.

It may be cold comfort here in Australia that flexibility in IP in US FTAs is now being talked about. The flexibilities being talked about apply mostly to developing countries also. But I do think it’s really interesting that the way Australia ended up handling the patent-marketing linkage has been turned into a flexibility being explicitly granted to other countries. And it makes me wonder about other areas where maybe more flexibility should have been obtained in AUSFTA Ch 17.