IP Issues in India: EU-India Free Trade Agreement

KanikaSatyan, Student of Law, Symbiosis Law School, Pune

ABSTRACT

India adopted the Liberalization Privatization and Globalization Policy in the year 1991 as part of the Economic Reform Policy. The adoption of these policies changed the entire economic scenario in the country paving way for more foreign investments, export etc. In furtherance of the same efforts, India entered into multiple free trade agreements, agreements of economic cooperation and bilateral trade agreements with several countries. India has been in talks with the European Union to enter into such a free trade agreement since 7 years now; however no positive consensus has been reached yet. Intellectual property protection and enforcement is, among the many key regimes which has been discussed immensely but no conclusion has been arrived at.

India has rejected many of the recommendations made by EU as they are said to exceed India’s TRIPS obligations with respect to data exclusivity on pharmaceuticals and drugs. Their demands in relation to geographical indicators are also in the nature of creating monopoly.There are also provisions on transfer of technology and parallel imports thatclearlyfavour the EU. There is a need for negotiations, to set out clearly the terms and conditions of such an agreement. This paper would thus, in brief,look through the lens on the pros and cons of adoption of such an agreement and also comment on the feasibility and practicability of it.

INTRODUCTION

India is rightfully termed as one of the emerging economic super powers in the country. Though its trade regimes has expanded manifold after the Economic Reform Policy of 1991, its regulatory environment is still rigid as compared to other countries. India is ranked 134thamong 189 countries in the rank of ease of doing business1. This itself indicates the restrictive nature of India’s trade policies. This restrictive regime, in the recent times has hampered India’s trade with many countries including the European Union.

The European Union has always been an important trade partner for India. EU investment stock in India grew substantially reaching €41.8 billion in 2012. The value of EU-India trade grew from €28.6 billion in 2003 to €72.7 billion in 20132. The Bilateral Trade and Investment Agreement (BTIA) also commonly known as Free Trade Agreement between the European Union and India was initiated to develop the trade relations between the countries and carry out trade with fewer barriers.This also meant increase in the competitiveness of Indian products in the European Union.

The parameters for an ambitious FTA were set out in the report of the EU-India High Level Trade Group in October 2006 and the discussions started in 2007. However, even after around 20 rounds of discussion, there has been no definitive conclusion that has been arrived at.Among all the chapters that have been discussed at length and breadth and that have been negotiated since the past years, the IP chapter has been the most controversial one. The reason being: Entering into a FTA agreement would mean stricter and a strong intellectual property regime. Some of the demands made by EU are not in harmony with the Indian IP laws and could lead to an IPR regime that goes beyond what is mandated under TRIPS3. Therefore, on one hand, entering into an agreement may bring in economic and trade benefits and on the other it may totally overturn the Indian IP regime.A balance to this needs be figured out.

The specific Intellectual Property Issues have been discussed in detail below:

THE DEBATE ON PHARMACEUTICAL DRUGS

One of key reasons behind the infamous tug of war for power between developed and developing countries, in the recent times, has been regarding patent protection for medicines invented by the inventor companies. This drug pricing issue has lead to a lot of dispute in global world. India is popularly known as the ‘pharmacy of the developing world’. It, upholding its moral obligation to provide cheap access to medicines to its huge and majorly below the poverty line population, is the biggest producer and exporter of cheap generic medicines. India’s Patent Law regime under Section 3[d]4grants protection to a generic company to make low cost copy cat versions of drug of the original drugs which is originally invented in developed nations like US, EU etc. This provision was widely criticized for hampering the growth of new innovations, especially in the field of pharmaceuticals. In addition to this, in the year 2013 the Apex Court in India delivered the judgment in the case of Novartis v. Union of India5which in specific allowed Indian generic companies to make low cost copies of ‘Gleevec’ produced by Novartis and denied the latter’s application for patent extension.This decision was also criticized worldwide as now the generic companies could produce the same drug at one tenth the cost of the original drug while the innovator companies lost the market of the same in many countries.

While this debate was still afresh, the EU in it’s FTA proposal, not only demanded data exclusivity for pharmaceutical inventions but also demanded that its companies have the power to demand the freezing of bank accounts & seizure of properties of generic companies on the mere allegation of patent infringement & to drag third parties like treatment providers Sinto litigation6. This raised controversy as this demand not only was in contrast with the ratio laid down by the Supreme Court in the Novartis case but also fundamentally meant that adopting this would lead to curtailment of the independence and the discretionary powers of the Indian judiciary7. Many of these are against the provisions of TRIPS.

However, grey area lies as the EU has now officially stated that they do not want data exclusivity .Yet they continue to pressurize India for the same. The ambiguity regarding this has not been sorted out yet and thus it is essential to discuss the effects of such anenforcement also. Further, there is concern that even if this demand has withdrawn, such withdrawal may not ensure that supply of cheap medicines in India and beyond is not affected. The FTA will more than likely sanction European investors to challenge Indian regulation at internationalarbitration tribunals -with a track record of favouring the investor-by claiming that their IPRs have been affected8.

India is therefore at a crossroad where on one hand it has cheap and regular access to essential medicines and on the other hand a prospective trading future with the European Union. This crucial decision would decide the fate of the EU India Free Trade Agreement.

DATA EXCLUSIVITY – THE CORRESPONDING AMBIGUITY

Data exclusivity (DE) or exclusivity of registration data is the period of non-reliance and non-disclosure that is provided to new chemical entities, pharmaceutical compositions, and agrochemical registration data or test data. Data exclusivity provides the originator with rights to preclude third parties from relying on the data to obtain marketing approval for a specific period of time9. This has also been advocated in WTO’s agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) under Article 39[3]10. If this is enforced this will prevent the generic pharmaceutical companies to refer the data for a period of up to 10 years. The only solution would be for the generic manufacturer to repeat the drug trials that the originator has done. This could prove to be really expensive.

In Europe, data and market exclusivity is already allowed on medicinal products.Though India is a signatory to TRIPS, it does not have any express laws on data exclusivity. Therefore, it is uncertain as to what would be the effects of such an agreement on the Indian Patent Act, 1970. This makes it even more unclear as to whether this indicates that EU may want a legislative change to incorporate these changes.

NATIONAL EFFECTS

In addition, these provisions have contravening effects both on a national and on an international scale. In India, The Constitution of the country is held to be supreme. Right to health has been read into Article 21 of the constitution which envisages the right to life. Furthermore underArticle 4711of the Constitution, the State has the responsibility to provide public health and the non-availability of cheaper medicines in the country due to patented medicines would hinder such a process.

In the case of Mohd Ahmed v. Union of India12, the above said has also been upheld .The Court in this case held that “Every person has a fundamental right to quality health care — that is affordable, accessible and compassionate13. By virtue of Article 21 of the Constitution, the State is under a legal obligation to ensure access to life saving drugs to patients. A reasonable and equitable access to life saving medicines is critical to promoting and protecting the right to health. This means that Government must at the bare minimum ensure that individuals have access to essential medicines. Availability of a very expensive drug virtually makes it inaccessible14. In the opinion of this Court, no government can wriggle out of its core obligation of ensuring the right of access to health facilities for vulnerable and marginalized section of society15.”

In this case, though the Court did not expressly deal with the topic of IP in cases of drugs , it however invoked the constitutional right to health in a case where the driver of inaccessibility is the regime of intellectual property and  laid the foundations of a jurisprudence that has been gaining ground in many countries: the constitutionalisation of IP law16. The Court thus made it clear that the Constitution is relevant and emphasized on balancing of rights of the creator and the public. Thus, in all essence, on a national level, adoption of the EU claims for data exclusivity or other methods of ensuring monopoly in the production of pharmaceutical drugs, may fundamentally reverse the IP laws, undermine the Constitution and may deny justice to the people of India.

INTERNATIONAL EFFECTS–GOING BEYOND TRIPS OBLIGATION?

On an international level, the effects of the same would be catastrophic.The negotiators from both sides have not found means to balance the patent rights which the EU demands in respect to the right to access essential medicines which is also well founded under the International Law by the World Health Organisation. This move is favouring corporate interests of pharmaceutical giants at a risk to the health of not only the people in India, but also other developing countries which import cheap medicines from India.WTO upholding the importance of public health hasin the Doha round given primacy to public health over private intellectual property17. Hence such data exclusivity or extended patent protection may be in contravention to the discussion of the Doha rounds.

Apart from the same, the most significant point that needs to be analyzed is whether adopting the provisions of the FTA would mean going beyond India’s TRIPS obligations. The TRIPS Agreements allows that if the medicine is chemically the same, then there is no need to prove again that the generic version is safe and effective because it works the same way and so the applicant can rely on the tests carried out by the originator company18. However, by the way of these bilateral agreements the developed countries like EU are compelling the developing countries like India to assume even more stringent IP obligations than those required in TRIPS19and thus indirectly enforcing the TRIPS Plus agreements. The TRIPS Plus effectively means that any intellectual property agreement negotiated subsequently to TRIPS among and /or involving the WTO members can only create higher standards .The TRIPS Plus concept covers both those activities aimed at increasing the level of protection given to right holders beyond that is given in the TRIPS and those measures aimed at reducing the effectiveness or scope of limitations on rights and exceptions20.

Article 2.1 of the EU-India draft FTA indicates that ‘this chapter shall complement and further specify the rights and obligations between the Parties beyond those under the TRIPS Agreement and other international treaties in the field of intellectual property to which they are parties’. Hence, the intention to exceed the TRIPS standards is explicit. This approach ignores that India, notwithstanding its recent economic performance and the expansion of its research and development capabilities, is the home to one of the largest populations of poor people in the world21. Such strong IP protection, atleast in a country like India could only result in impracticability on the part of the majority of the population to access medicines.

The   ‘Objectives’ of the IPRs chapter inthe proposed FTA overlook the differences in the levels of development of India and theEU and this is the principal reason why the negotiations have been going on since the past 7 years22. Thus, adopting the demands of EU may create ripples all over the world, creating a disharmony in Indian as well as international laws.

India is not the only country which is pressurized for a stricter IP regime, in anticipation of a good trade relation with developing countries like USA and EU. Even the Mercosur  (Argentina , Brazil , Paraguay and Uruguay) and many of the other countries have been under pressure because of  the consistent demands of the developing countries for the same , in return for a free trade agreement with them. This can now be said to be a world wide phenomena where the more and more countries are forced to comply to TRIPS Plus where in fact they are signatories to TRIPS.

With respect to the EU India FTA there is a lot of ambiguity as to what exactly are the demands of the EU. Clarity and certainty to the same,needs to be figured out before accepting the proposal for free trade.

THE IP ENFORCEMENT MEASURES

The IPR Chapter under the FTA is not only limited to protection of IP rights but also focuses on its enforcement. Several measures are undertaken by them for the same .One of EU’s demandsin this area is to introduce the mandatory use of court injunctions, or court orders. This would mean that when a patent or trademark dispute emerges between a generic and a patent-holding company, the generic manufacturer would have to halt production even before a case for infringement has been heard in court. The courts would therefore not be allowed to balance the constitutionally-enshrinedright to health and the access to medicines against the economic harm and compensation due to the rights holder if the case is proved23. The European Union is also said to enforce IP by adopting various border measures that stop the flow of generic medicines. There have been cases of stoppage of medicines in the European ports on the assumption that there was a patent infringement .The European Customs Regulation Council is now said to impose these regulations on India24.

All these demands need to carefully analyzed and negotiated by India, before signing the agreement.

CORRESPONDING INVESTMENT PROVISIONS

Apart from these there are some corresponding Investment provisions that need to be analyzed as these could disrupt the IP provisions and have several effects on IP holders and their rights.

The FTA states about an Investor to State Arbitration Mechanism.Some of the investment provisions outlined in the FTA would allow a multinational drug company to directly sue the Indian government if a company feels their IP rights are being infringed upon by governmentaction. This could happen if, for example, the government decided to regulate drug prices or override a drug patent in order to allow generic manufacturers to produce more affordable versionsof a medicine deemed important for public health. Despite this being allowed under international law through TRIPS, the company could claim the government’s action negatively impacts their ‘investment’ in the country. The investment rules proposed in the FTA would allow for companies tosue the government through secret dispute settlement panels, outside of the national court system,  which is currently unprecedented in the country25.

Moreover, the expansive definition provided to ‘investment’ has a very wide ambit which may prove to be problematic in the future. Investment is defined as “intellectual property rights, goodwill, technicalprocesses and know-how as conferred by law”. The central consequence of this is that it would grant foreign IP owners the investment protectionsset out in the investment chapter in addition to the extensive protections set forth in the IP chapter. This broadens the range of government actions that could be challenged as expropriation bycompanies or their respective governments to include actions that foreign companies claim affect their intellectual property26.

DEMANDS REGARDING GEOGRAPHICAL INDICATION

Geographical Indication is another aspect in the IP chapter that has been negotiated but no consensus has been reached. Geographical Indications of Goods are defined as that aspect of industrial property whichrefers to the geographical indication referring to a country or to a place situated therein as being the country or place of origin of that product. Typically, such a name conveys an assurance of quality and distinctiveness which is essentially attributable to the fact of its origin in that defined geographical locality, region or country27.

The EU is very determined on the recognition and protection of its 130 geographical indications (GIs). The situation on GIs is of growing concern. Despite commitments to take action, India is reluctant to enter into any additional political commitment on GIs.The EU expects that effective registration should take place before entry into force of the agreement. Without such result on GIs, the Commission considers it is not in a position to conclude negotiations. If deemed necessary, conditionality clauses will apply, i.e. the EU will make certain trade concessions conditional on GI protection upon entry into force.

The EU is demanding not only general protection of geographical indication under Article 22 but is also enforcing Article 23 of the TRIPS which provides a higher level of protection for GIs for wines and spirits (such as Champagne and Scotch Whisky).India will be expected to confirm readiness to apply administrative facilitation to the 130 applications, to notify extension of TRIPS Art 23 level of protection to any non-wine/spirit product category and to confirm readiness to work on political deliverables on GIs within the FTA28.

Focusing on a more important aspect, it has been pointed out by many that the demand for protection of geographical indicators that has been made by EU is basically a method of establishing monopoly especially in areas where it has more intellectual property29. In specific, Amul has claimed that EU has the highest number of geographical indicators(GIs) for which it is seeking ‘extra protection’ beyond the rules of the World Trade Organisation (WTO). But EU is neither willing for any GI protection to India’s Lassi or Paneer, nor is it refusing to stop the bio-piracy of India’s traditional knowledge like Ayurveda and resources like Neem.

The imminent threat to the local Indian products has also been stressed upon in the negotiations and this has been under scanner regarding the reduced import duties for EU dairy products in terms of the FTA. EU also doesn’t allow import of Indian dairy products, citing its strict sanitary and phyto-sanitary standards, which are nothing but a non-tariff barrier30. On the other handEU provides very high subsidy to dairy producers.This can lead to dumping of such subsidised product at lower rate if market access is granted to them. This will result in raising India’s imports from the EU, while EU does not allow import of Indian dairy products.This pattern has been observed with regard to the EU-South Korea FTA and EU-Singapore FTA31.

Besides this, another apprehension is with respect to the fact that the EU has a host of GIs for its various dairy products like Feta, Mozzarella, Emmentaler etc. and it is trying to extend protection of these GIs to countries outside the EU by requiring the country with which it is negotiating an FTA to protect its registered GIs.In entire EU, one can find Indian products like ‘paneer’ and ‘lassi’ being manufactured or marketed by local people. These are ethnic Indian products and India can actually claim similar GI protection32.

Thus when it comes to GI, the stance taken by EU has been somewhat hypocritical.Focusing only on the protection of its GIs, it is treating India’s GIs to be subservient to its own. This aspect needs to be negotiated suitably so as to ensure that the interests of both the nations are taken care of and one’s interest does not dominate the others.

TRANSFER OF TECHNOLOGY

In the matter of transfer of technology the provisions have not been designed in a fair and reasonable manner. Article 3.1 of the draft EU-India FTA limits itself to the Parties’ ‘exchange of views and information on their domestic and international policies affecting transfer of technology’ and to the creation of an ‘enabling environment for technology transfer in the host countries, including issues such as the relevant legal framework and development of human capital’.

Provisions like these are in the nature of putting burden only on India for creating the appropriateconditions for the transfer of technology to occur, without any substantial obligationon the EU33. Again, these put forward only the EU’s interests at a pedestal, while the entire burden is put on India. As seen, most of the provisions of this FTA are in favour of EU and apart from trade with less barriers it getting several other benefits.These require immense discussion, so as to find out a way to implement them in a balanced manner.

PARALLEL IMPORTS

There is also a contrast in the provisions in the FTA regarding Parallel imports and provisions for the same under the TRIPS. While article 4 of the EU-India draft FTA seems to confirm the Parties’ right to provide forparallel imports (under the principle known as ‘exhaustion of rights’),the final proviso(‘subject to the provision of the TRIPS Agreement’) raises some concerns, since article 6of the Agreement exempts exhaustion, as contemplated under national laws, from anychallenge under the WTO dispute settlement mechanism. The referred to final provisoseems to subordinate each Party’s right to establish its ‘own regime for exhaustion’ tounspecified provisions of the Agreement, in contradiction with the broad exemptionconferred under article 6 of the Agreement, subject only to the provisions of Articles 3 and 4 thereof34.

OTHER ASPECTS

Apart from these aspects that are very important to strike the deal between EU and India there are many other factors that may lead to certain other small discrepancies. For eg: India is not a signatory to many of the international conventions on IPR. Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention), nor the more recent WIPO Copyrights Treaty and the WIPO Performances and Phonograms Treaty. Thus in future there may arise problems due to these discrepancies in ratification. There is certain disagreement also on the term of copyright between the EU and India. EU has suggested counting of the statutory 50 year term of copyright from a different date. This may create certain disruptions in the trade between them in future. Several other differences like the above said exist. There is need for negotiators on both sides to carefully analyse and they go forward with the FTA.

CONCLUSION

This Free Trade Agreement with European Union is going to open up several boundaries and barriers that earlier acted as a trade disruption between the countries. The benefits that India will receive economically cannot be stressed upon further. However, at the present scenario, more than the benefits India needs to focus upon negotiating with the EU for provisions that would lead to mutual benefit of both the trade partners.This is because many of the provisions, in specific relating to transfer of technology and parallel imports are clearly seen to be supporting EU’s IP needs. The same is the case with Geographical Indication .Last but not the least, a unanimous decision is to be taken on the question of access of cheap medicines .This has been controversial not only for this agreement but also worldwide. Leaving everything apart , most importantly it is necessary to see that a deal is made between both the countries soon. It has already taken 7 years .It is time to strike a deal.

  1. World Bank’s Ease of Doing Business Index , June 2013 []
  2. Countries and Regions, European Commission ,Trade Policies ,available at http://ec.europa.eu/trade/policy/countries-and-regions/countries/india/ last accessed on July 15, 2015 []
  3. Patralekha Chatterjee , Leaked India Chapter of India – EU FTA shows TRIPS Plus Pitfalls for India  – Experts say ,Intellectual Property Watch , 12/03/2013 available at http://www.ip-watch.org/2013/03/12/leaked-ip-chapter-of-india-eu-fta-shows-trips-plus-pitfalls-for-india-expert-says/last accessed on July 15, 2015 []
  4. After the 2005 Amendment []
  5. Civil Appeal No. 2706-2716 of 2013 []
  6. Attack on Affordable medicines continues in EU-India Trade Negotiations, April 11,2013 available at http://infojustice.org/archives/29287 last accessed on July 16, 2015 []
  7. Ibid []
  8. SumanModwel and Surendra Singh, The EU-FTA Negotiations :Leading to an agreement or disagreement?, Observer Research Foundation Occasional Paper 32 , February 2012 []
  9. Jaya Bhatnagar and Vidisha Garg , India : Data Exclusivity,  21 May 2009 , available at www.mondaq.com last accessed on July 16, 2015 []
  10. Article 39(3) of TRIPS states that “Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.” []
  11. Article 47 of the Constitution “Duty of the State to raise the level of nutrition and the standard of living and to improve  public health”. []
  12. W.P(C) 7279/2013 []
  13. Paragraph 59 of the Judgment []
  14. Paragraph 68 of the Judgment []
  15. Paragraph 69 of the Judgment []
  16. Indian Constitutional Law and Philosophy , Delhi High Court rules on Article 21 and access to medicines ,April 17,2014 , available at https://indconlawphil.wordpress.com/2014/04/17/delhi-high-court-rules-on-article-21-and-access-to-medicine/ last accessed on July 16, 2015 []
  17. Ellen F.M ‘T Hoen , TRIPS Pharmaceutical Patents and Access to Essential Medicines : Seattle, Doha and Beyond, 23/06/2003 available at https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CCwQFjAC&url=http%3A%2F%2Fwww.who.int%2Fintellectualproperty%2Ftopics%2Fip%2FtHoen.pdf&ei=8ThLVKH3OYmF8gXlvYKQBg&usg=AFQjCNE54Ln4iwPZVDhg8ajNdSOHLafApA&bvm=bv.77880786,d.dGc&cad=rja last accessed on July 16, 2015 []
  18. Sanya Reid Smith , TRIPS Plus Bilateral agreements- A threat to Public Health,available at www.twinside.org last accessed on July 16, 2015 []
  19. Ibid []
  20. Sisule F Musungu and Graham Dutfield , Multilateral agreements and TRIPS Plus World :The WIPO ,TRIPS Issues Paper 3 , available at http://www.iprsonline.org/ictsd/docs/WIPO_Musungu_Dutfield.pdf last accessed on July 16, 2015 []
  21. About 30%of India’s population is before the poverty line []
  22. Carlos M Correa, Negotiation of Free Trade Agreement European Union India : Will India accept the TRIPS plus protection? ,University of Buenos Aires , June 2009 []
  23. Medecins Sans Frontieres , The Truth Behind the Spin :How the Europe –India Free Trade Agreement will harm access to medicines ,November 4,2010 available at http://www.doctorswithoutborders.org/news-stories/briefing-document/truth-behind-spin-how-europe-india-free-trade-agreement-will-harm last accessed on July 16, 2015 []
  24. Ibid []
  25. Access Campaign, How an FTA between the EU and India could threaten access to affordable medicines, available at http://www.msfaccess.org/content/how-fta-between-eu-and-india-could-threaten-access-affordable-medicines last accessed on July 16, 2015 []
  26. The Intellectual Property and Investment Chapters of EU – India FTA :Implications for health, Briefing Note May 2011 []
  27. Geographical Indications Registry , available at http://ipindia.nic.in/girindia/ last accessed on July 16, 2015 []
  28. India – EU: Where is Europe’s Trade Agenda headed? ,27/02/2012 , available on www.euroactiv.com last accessed on July 16, 2015 []
  29. Shramana Ganguly,Amul calls for a relook at EU India Free Trade Agreement , The Economic Times ,March 27,2013 ,available at http://articles.economictimes.indiatimes.com/2013-03-27/news/38041233_1_dairy-farmers-eu-india-free-trade-agreement-dairy-products last accessed on July 15, 2015 []
  30. Ibid []
  31. Grover Law , EU India FTA draws flak over Geographical Indication Issue , April- May 2013Edition []
  32. Ibid []
  33. Carlos M Correa ,Negotiation of Free Trade Agreement European Union India : Will India accept the TRIPS plus protection? ,University of Buenos Aires , June 2009 []
  34. Ibid []

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