Unfair competition and the financing of public-knowledge goods: the ...

Journal of Intellectual Property Law & Practice, 2008, Vol. 3, No. 9

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Unfair competition and the financing of public-knowledge goods: the problem of test data protection Antony Taubman*

Generating public goods through private interest

Key issues † Protection for test data is a vital component of the

The protean character of test data Government regulations,1 imposed for compelling public policy reasons—integrity of health, food, and the environment—prevent certain products from being put on the market without approval: broadly, these regulations govern pharmaceuticals, medical devices, veterinary chemicals, and agricultural chemicals, such as pesticides and herbicides. Approval typically depends on the review of certain defined forms of empirical data about the safety, efficacy, toxicity, and environmental impact of new chemicals (eg a new pharmaceutical compound) and of known chemicals when used for new purposes (eg a pesticide used for the first time on a niche crop). Sometimes the fact of approval in one jurisdiction is recognized in other jurisdictions; more generally, the same data are often used in different jurisdictions. These ‘test data’ (a general term used in this paper for data resulting from clinical trials of drugs and tests of agricultural chemicals) greatly benefit society, being indispensable for the due regulation of pharmaceuticals and other chemicals. Their integral public policy function gives these data the flavour of public goods, even where private interests and rights are involved in their production and use. From the stricter perspective of the theory of financing public goods,2 these data are collective consumption goods or public goods in the sense of being nonrivalrous (when one applicant relies on a dossier of test data to get a product approved, it does not exhaust that data and preclude other applicants seeking approval on the basis of the same data) and potentially non-excludable (this article discusses the contested question of whether and how legal mechanisms should *

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This article offers the author’s tentative views only; no view expressed here should be attributed to WIPO, its Member States, or its Secretariat. Email: [email protected] For example, Australia, Therapeutic Goods Legislation Amendment Act 1998 (No. 34, 1998); Directive 98/8 concerning the placing of biocidal The Author (2008). Published by Oxford University Press. All rights reserved.

pipeline that delivers new products to the public in areas of fundamental public policy interest. † Test data have a mixed legal status as public infor-

mation goods that are often privately financed, opposing public interest in access to data with the need for robust incentives for risky investment. † Analysis of the key international texts has recently

been influenced by their status as outcomes of trade negotiations, but greater attention is needed to crafting effective domestic forms of protection that promote the desired utilitarian outcomes as the essential act of treaty implementation.

enable data originators to exclude competitors from access to or use of test data, but in the absence of legal intervention it is difficult to exclude access to information used in public regulatory processes). The information content of test data can be viewed (and regulated) at several levels: (i) as empirical information about the physical properties of chemical substances; (ii) as information that test data establish a substance as safe, acceptably non-toxic, sufficiently efficacious, etc.; (iii) as information that the substance is approved for use by a certain regulator on the basis of test data submitted. It is clearly easier to exclude access to information at level (i) than at levels (ii) or (iii), and a rival product may be approved without direct reference to level (i) at all, an unavoidable complication that gives regulation of rights and interests in test data an additional challenge.

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products on the market; Directive 2004/27 amending Directive 2001/83 on the Community code relating to medicinal products for human use; US Federal Food, Drug, and Cosmetic Act 21 USCS §355 New drugs. P Samuelson, ‘The pure theory of public expenditure’ (1954) 36 Rev. Econ. Stat. 387.

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As national systems of regulation and international networks develop,3 the general trajectory of regulation and of norm-setting has progressed from protection of data as such (i), to cover also the regulatory assessments made (ii), and the fact of registration or approval in the same jurisdiction or elsewhere (iii). Similarly, the form of protection has expanded beyond simple confidentiality of data. Some laws and bilateral treaties have the effect of requiring forms of exclusivity over information at levels (i), (ii), and (iii), protecting not merely information as such, but also the fact of regulatory approval on the basis of data, in effect as a form of commercial use of those data.4 But this expansion of protection is increasingly actively contested, in a debate that continues to focus on international and tradenegotiation dimensions rather than on the intricacies and practical needs of these essential areas of domestic regulation. International standards for data protection are notably set out in the WTO TRIPs Agreement,5 which ostensibly provides for ‘effective and expeditious procedures for the multilateral prevention and settlement of disputes between governments’, and draw on the Paris Convention,6 and a subsequent overlay of bilateral and regional norm-setting. These standards have effectively transferred the policy debate from a domestic regulatory question to an international tradenegotiation context, but without decisively settling the major policy issues that confront governments, or providing anything but the broadest positive guidance to domestic policymakers. The simplest way into analysis of this controversy is to recognize that the same sets of test data are perceived strikingly differently. Test data are viewed by 3

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See, eg, ‘OECD Governments’ Approaches to the Protection of Proprietary Rights and Confidential Business Information in Pesticide Registration, Series on Pesticides No. 6, ENV/MC/CHEM(98)20 (OECD Environmental Health and Safety Publications, 11 September 1998), an initiative ‘to identify procedures that will facilitate the exchange of pesticide data review reports among countries while ensuring appropriate protection of proprietary rights and CBI. The exchange of reports is essential . . . to help countries co-operate in the assessment of pesticides and share the burden of the registration and re-registration of pesticides’ (at 7). For example, the United States-Singapore Free Trade Agreements requires parties not to ‘permit third parties not having the consent of the party providing the information to market the same or a similar product on the basis of the approval granted to the party submitting such information [for defined periods]’ (Art 16.8(1)) and also provides a period of exclusivity of authorization ‘[i]f a Party provides a means of granting approval . . . on the basis of the grant of an approval for marketing of the same or similar product in another country’ (Art 16.8(2)). The World Trade Organization (‘WTO’) Agreement on Trade Related Aspects of Intellectual Property Rights (1995) (‘TRIPs’); TRIPs articles are cited here in the format ‘TRIPs 7’. Paris Convention for the Protection of Industrial Property 1967 (‘Paris’); Paris articles are cited here in the format ‘Paris 10bis’.


different actors as public information goods, in view of their vital regulatory function, and potentially as global public goods;7 or as private proprietary data,8 given their largely private-funded origins. These contested categorizations or perceptions of test data are not trivial, and neither has exclusive claim to legitimacy: they represent different views on the legitimacy

Significant legal consequences may arise from different categorizations of test data and priority attached to the different public and private interests that overlap in the production of test data which is produced in part through private investment but to serve the public interest in sound regulatory outcomes. Significant legal consequences may arise from different categorizations of test data: when in 1983, the OECD Council adopted a non-binding recommendation9 on protection of proprietary rights over test data, Australia abstained from voting10 in view of a background of concern over the constitutional implications of data being viewed as property, with consequences for government use of the data. These categories are therefore contested: an early soft-law international instrument originally called on governments to ‘protect the proprietary rights to use of data’,11 an explicit call that was not renewed in the 2002 (and post-TRIPs) revision of the code,12 to the evident dissatisfaction of industry interests.13 A strong statement of the proprietary nature was articulated in earlier guidelines: 7

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JH Reichman, ‘The International Legal Status of Undisclosed Clinical Trial Data: From Private to Public Goods?’ in P Roffe, G Tansey and D Vivas-Eugui (eds), Negotiating Health: Intellectual Property and Access to Medicines (Earthscan Publications, London, 2006). For example, European Federation of Pharmaceutical Industries and Associations, Position Paper: TRIPs Article 39.3 (Protection Of Undisclosed Data), Brussels, 2000. Recommendation of the Council concerning the Protection of Proprietary Rights to Data submitted in Notifications of New Chemicals, adopted 26 July 1983, OECD document C(83)96/Final. See also ‘OECD Governments’ Approaches to the Protection of Proprietary Rights and Confidential Business Information in Pesticide Registration, OECD Series on Pesticides Number 6 (Paris, 15 September 1998). International Code of Conduct on the Distribution and Use of Pesticides, FAO Council Resolution 10/85 (adopted 28 November 1985). International Code of Conduct on the Distribution and Use of Pesticides (Revised Version), FAO Council Resolution 1/123 (adopted 1 November 2002). ‘In this revised Code, the provision for the protection of proprietary data has been deleted. However, this does not alter the industry position that proprietary rights should be protected and CropLife will continue to pursue data protection in other appropriate forums.’, CropLife International, Guide for Industry on the Implementation of the FAO Code of Conduct on the Distribution and Use of Pesticides (Brussels, 2004), at 4.

Antony Taubman . The problem of test data protection

All data submitted by a company in su pport of its request for registration of its product should be treated as proprietary and should neither be divulged nor used to evaluate a petition submitted by another applicant, unless by agreement with the owner of the data or unless a period of proprietary rights to the data has expired. The synthesis of new materials and procurement of data on safety and efficacy essential for registration will have taken commercial companies many years and will have been very expensive. The results obtained are as much the property of the company that produced them as is the plant used to manufacture the product. Therefore, it would be unjust for registration authorities to use, for the benefit of industrial competitors, data submitted to them in good faith. Each applicant should be required to produce full supporting data, either by doing the work himself or by licence from the owner of the data. Apart from the injustice of allowing competitors to benefit from the use of data to which they have no right, the consequences of such an action would be to discourage, because it is unrewarding, the research and development required for the production of new pesticides which are needed, for example, for the control of new or difficult pests or to overcome resistance.14

The art of financing public goods Financing the production of regulatory data as collective consumption goods is normally undertaken by a combination of government regulation and private interest. How to produce, then manage, these public information goods is both a regulatory challenge domestically and a contentious trade issue internationally. By design or by default, it generally falls to firms bringing chemicals to market to generate these data, at their cost, for regulators then to assess, with no guarantee that a profitable and approved product will eventuate (the majority of candidate products failing to reach the market). In turn, competitors have an interest in using or referring to these same data for the regulatory approval of their own directly competing products, saving themselves the expense of generating parallel data. Firms are, therefore, required to fund not merely the regulation of their own products but a large part of 14 Addendum II, Guidelines for the Registration and Control of Pesticides (FAO, Rome, 1988); this passage is quoted as an historical example only to exemplify one point of view, and it should be noted that more recent FAO guidance on this issue omits any reference to the proprietary character of test data—see note 12 and related discussion immediately above. 15 In principle, as the above discussion points out (note 14, above), generic followers may independently generate their own test data at their own cost, but the duplicative conduct of tests and parallel regulatory review of test data would lead to inefficient allocation of resources, as well as raising ethical objections: the EU Biocides Directive (91/414/EEC) provides for exceptions to the right of exclusivity in view of concerns that ‘resources devoted to the conduct of tests on vertebrate animals should

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the cost of regulating their competitors’,15 absorbing also the costs of failed trials. One response is to call for direct public funding of clinical trials for pharmaceuticals;16 other proposals would establish structured cost-sharing arrangements;17 generally, proposals for reform would detach the financing of regulatory processes from the market in finished, approved products. But in the absence of such interventions, governments look to the downstream marketplace to generate the incentives to pull compounds through the tests that regulatory authorities mandate. In practice, the incentives offered do not include direct financing of production of test data, being limited to expectations of commercial benefit in the event that the product under scrutiny is made available to the market, a commercial benefit that would need to factor in the uncertain risk profile attached to product development. Thus, the question resolves to how private incentives—whether well defined levels of remuneration or less tangible benefits from the exercise of exclusive rights over data—are best deployed to generate public goods—conceiving the relevant ‘public good’ at several levels of abstraction: (i) in the relatively concrete form of information as such, (ii) as the practical availability of approved safe and reliable products; or (iii) as the higher-order public good of equity in the dissemination of beneficial technologies. The ultimate policy goal is not the simple generation of test data, which is only an intermediate or instrumental public good, since higherorder public goods of more direct benefit to the public may be more important – practical access to safe, cleaner, and more effective new technologies.

A contested policy arena To the extent that private funds are required to fund clinical trials and field tests and to compile test data for regulatory use, and legislation for its protection aims to optimize both private incentives to produce data and the public benefit from its use, the protection of such data is a ‘perfect storm’ for analysis of the law, policy, and politics of IP. It counterpoises privately funded not be dissipated’ and that unnecessary animal testing would be unethical, in which case competitors instead have access to test data subject to payment of compensation, in this instance propounding an ethical basis for converting an exclusivity regime to a compensatory liability one. 16 T Lewis, J Reichman, and A So, ‘The Case for Public Funding and Public Oversight of Clinical Trials’, The Economists’ Voice 4 2007: Art 3; see also J McNeil, M Nelson, and A Tonkin, ‘Public funding of large-scale clinical trials in Australia’, MJA 2003; 179: 519 –520. 17 ‘A Cost Sharing Model to Protect Investments in Pharmaceutical Test Data’, CPTech Policy Brief No. 1 (2006), at: http://www.cptech.org/ publications/policybrief-no1-cost-sharing.pdf.

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mechanisms for producing public goods against claims for public interest in access to information,18 within and beyond the commercial sphere; international negotiations over the terms of trade for knowledge resources, and the uneven distinctions between exclusive proprietary rights over information and liability regimes pivoting on an entitlement to equitable remuneration. The issue has a strong international, specifically north –south, dimension, and an abrasive traderelated aspect: most developed countries have relatively strong levels of protection, more or less guided by well defined and objective domestic policy interests, while developing countries typically have not introduced distinct test data protection of their own volition, but they are under considerable pressure from their richer trading partners to do so, largely through the incorporation of TRIPs within the WTO single package and more recently through bilateral trade negotiations. Reflecting the interest in the leading developed economies to see such protection applied globally, TRIPs introduced obligations to protect regulatory data19 into the international IP legal framework. Ostensibly, at least, the conceptual root of this new form of IP mechanism20 in the general Paris obligation to ‘provide effective protection’ against acts of unfair competition.21 TRIPs put the issue squarely on the agenda, creating strong expectations of effective protection of regulatory data, but did not reconcile the differing

views of the appropriate scope of protection that emerged during the TRIPs negotiations. The explicit identification of TRIPs 39.3 test data protection as a means of ‘ensuring effective protection against unfair competition’ as provided in Paris 10bis effectively refocuses on Paris, to the questions of (i) how TRIPs negotiations and subsequent jurisprudence can or should be read back into interpreting Paris qua Paris; and (ii) how Paris acquis can and should flavour the interpretation of TRIPs provisions. This seemingly abstract question of treaty interpretation may be crucial in practical dispute settlement over the mandated scope of test data protection under TRIPs. Commentators differ significantly on this point: one cites Paris text to restrict significantly the scope of TRIPs obligations;22 another urges an effective disjunction between Paris 10bis and TRIPs 39.3, limiting the first to suppressing consumer misrepresentation and defining the second as a distinct IP mechanism.23 Adding to this interpretive instability, after TRIPs was concluded, an array of bilateral agreements24 elaborated standards for regulatory data protection, addressing—in the view of proponents of strong protection—perceived gaps or shortfalls in the TRIPs standards, in particular by extending the scope of chemicals covered and providing for explicit periods of data exclusivity. These same developments are viewed by opponents of data exclusivity or proprietary rights

18 An early case establishing the public interest in access to regulatory data as trumping claims of proprietary rights of information is Corn Products Refining Co v Eddy, 249 US 427 (a state regulation required the percentage of each ingredient to be stated on the label of proprietary foods; when this regulation was applied to corn syrup made according to secret know-how and sold under a distinctive brand, it was not taking of property without due process of law since the producer’s entitlement to maintain secrecy of proprietary information was subject to the right of state to require the nature of product to be fairly set forth, in exercising its police power and promoting fair dealing). 19 TRIPs 39 provides ‘1. In the course of ensuring effective protection against unfair competition as provided in [Paris 10bis], [WTO] Members shall protect . . . data submitted to governments or governmental agencies in accordance with paragraph 3. . . . 3. 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’. 20 Although controversy rages as to whether test data protection is an exclusive right, a simple entitlement to equitable remuneration or an entitlement only to restrain improper disclosure of data, TRIPs clearly specifies test data protection as a form of IP (Art 1.1), just as Paris identifies suppression of unfair competition as an element of industrial property. Without prejudice to the question of whether data protection is a proprietary right, this is a useful corrective concerning the nature of IP as conceived in international treaties, underscoring that IP mechanisms

need not function solely through the grant of exclusive or proprietary rights. Paris 10bis. TRIPs 39.3 ‘develops and does not add to [Paris 10bis] . . . It only incorporates examples of the general principle contained in [Paris 10bis (2)]’, C Correa, Trade Related Aspects of Intellectual Property Rights (Oxford, 2007), at 383 (emphasis in the original); this interpretation is then used to argue that TRIPs 39.3 does not restrain use by government regulators, since this would be beyond the scope of regulation of commercial relationships, which the author argues to be the focus of Paris 10bis. Nuno Pires de Carvalho. For example, United States-Australia Free Trade Agreement, 18 May 2004; United States and Singapore Free Trade Agreement, Art 16.8, 6 May 2003, United States and Chile, Free Trade Agreement, Art 17.10.1, 3 April 2003; United States and Morocco Free Trade Agreement; Jordan—United States Free Trade Agreement, Art 4.22; North American Free Trade Agreement (17 December 1992), 107 Stat. 2057, 32 ILM 605 (1993), Art 1711; United States and Sri Lanka Agreement on the Protection and Enforcement of Intellectual Property Rights, Art 2(e)(iv)(2), 20 September 1991, TIAS No. 12,436; United States and Ecuador Agreement On Intellectual Property Rights, Art 8(4)(b), 15 October 1993, TIAS No. 12,679; United States and Laos, Agreement On Trade Relations, ch. II, Art 20; United States and Cambodia, Agreement On Trade Relations And Intellectual Property Rights Protection, US-Cambodia, Art. 19(5)(B), 4 October 1996; United States and Vietnam, Agreement On Trade Relations, ch. II, Art 9(6), 13 July 2000, Central America Free Trade Agreement, Draft Free Trade Area Of The Americas, Ch. XX, §B(2)(j)(1.2), 21 November 2003.

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as illegitimate TRIPs-plus encumbrances. Most WTO members have implemented some form of data protection regime at the national level, in line with their TRIPs obligations to do so, but differing on key aspects.

Within this regulatory diversity, three distinct forms of data protection can be discerned, roughly corresponding to three ways of interpreting the TRIPs standards in practice Within this regulatory diversity, three distinct forms of data protection can be discerned, roughly corresponding to three ways of interpreting the TRIPs standards in practice: (i) Data exclusivity or proprietary rights. Protection against unfair commercial use of data entails at a minimum a fixed period of exclusive rights over the data, so that the originator can prevent competitors from using or relying to their data when seeking regulatory approval for their competing products. Any use of regulatory data unauthorized by its originator is deemed unfair during the period of exclusive protection (which, unlike trade secret protection, is never of unlimited duration). A period of data exclusivity is present in many developed country laws, often followed by a period of non-exclusive protection. (ii) Compensatory regime. The originator cannot prevent others from using or referring to the data, but is entitled to receive from competitors a share of the costs of its production. Equitable financial compensation is sufficient to remedy the ‘unfairness’ of a competitor’s use of or benefit from the data during the relevant period. Periods of compensated third-party access or benefit are also provided for in developed country laws. (iii) Direct data protection only. Undisclosed data are to be protected from unauthorized disclosure, but the protection against unfair commercial use of data is limited to data acquired by dishonest means, and no obligation exists to provide for exclusivity or compensation. ‘Unfairness’ is limited to the means of access to the data, or use of the data directly by a competitor—not by the regulator. 25 TRIPs 27.1.

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Towards the root of the regulatory needs Much controversy and analysis of these issues and the formal legal options available to governments occur downstream and in international or bilateral contexts, often at a distant remove from the core context of the practice of regulation. Officials inherit established positions on the issue when taking up a new post, and may complete their job rotation defending or asserting those positions, coming no closer to being provided with the analytical tools required for objective review of their options. Policymakers must pare away the downstream debate and discussion to find the root of the policy challenge. For instance, test data protection is at times characterized as a form of ‘double protection’, based on the argument that patent protection is already available for pharmaceutical and agricultural chemical products.25 Yet a clear conceptual distinction exists between patent protection, which in principle recognizes the underlying invention, and test data protection which responds more directly to the economics of funding non-inventive but resource-intensive regulatory trials. Regulatory overlap exists between the two spheres, such as extensions of patent term to account for the duration (if not directly the cost) of regulatory approval processes and exceptions to patent rights to enable generic competitors to seek regulatory approval, and they should not be considered in isolation from one another. But between patents and data protection the essential object of protection, the incentive mechanism and the purpose of the legislative intervention are discrete and fundamentally different; in practice, a controlling patent and the regulatory test data may be funded and held by different parties altogether, and there is public interest in the diversity of incentives and of the actors motivated by those incentives. The debate over data protection also pivots on the distinction between direct access to and more indirect ‘use’ of test data: this distinction is critical in analysing data protection as much of a generic follower’s commercial benefit (free-riding on the investment of the data originator) can arise not from directly accessing the data but from the regulatory body separately referring to the data (or even the bare fact of approval of the original product) in considering the generic application for approval; the data could remain strictly confidential, even opaque to the generic producer. One way of characterizing the divide over data protection is to ask whether a regulator’s use of or refer-

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ence to an original regulatory dossier to approve a generic product can amount to unfair commercial use of the data by the generic applicant. This distinction also addresses the dilemmas that arise in the use of market incentives to produce public-knowledge goods: if the only protection available for test data is confidentiality (not direct constraints against commercial benefits from third parties), this may create a perverse incentive for secrecy over data that the public interest plainly requires to be more accessible. For this reason, regulators may argue for data exclusivity over strict confidentiality,26 not because of uncritical regulatory capture by industry lobbyists but because of the public interest in greater access to a broader base of toxicity data. A system of providing incentives for test data solely by guaranteeing their confidentiality may run contrary to the public interest in free access to and third-party analysis of data.27 Driven in part by the focused lobbying of specific industry interests,28 the development of data protection

While there is intense debate about the appropriate scope of and legitimacy of data protection, the absence of protection would create a manifest free-rider problem with deleterious impact on the public interest. was not simply—as sometimes caricatured—the capitulation of legislators to industry demands, but represented attempts to create pragmatic mechanisms for financing specific public goods and to respond to the market failure represented by reluctance to develop such data, to share it with regulators and other public interest users, and ultimately to bring new products to the market:29 While there is intense debate about the appropriate scope of and legitimacy of data protection, the absence of protection would create a manifest free-rider problem with deleterious impact on the public interest. This effect may be felt less directly for new chemical 26 Author’s experience in domestic policy processes, for instance concerning environmental regulators’ interest in access to as broad a base of toxicity and residue data as possible. 27 For a recent example, based on data extracted under freedom of information regulations but also on clinical trial data published directly by firms, see I Kirsch, BJ Deacon, TB Huedo-Medina, A Scoboria, TJ Moore, et al. (2008) Initial severity and antidepressant benefits: a metaanalysis of data submitted to the Food and Drug Administration. PLoS Med 5: e45. doi:10.1371/journal.pmed.0050045. 28 Croplife International, Position Paper on the Protection of Safety and Efficacy Data for Existing and New Crop Protection Chemicals (Brussels, 2004); International Federation of Pharmaceutical Manufacturers


entities (more susceptible of underlying patent protection) than for useful new applications of known chemicals, when the free-rider effect can be stark (as when a new generation of environmentally friendly agricultural chemicals is extended from major crops to niche crops, or for pædiatric formulations of established pharmaceuticals). For new applications of known chemicals, in the absence of any advantage to the data originator it may be irrational for a producer to invest substantial sums in the production of test data if a competitor could immediately enter the same market with a cost advantage exactly defined by the cost of production of the test data; the smaller the market and the higher the cost of data protection the more stark the disincentive would be—but some small markets may be socially valuable. For this reason, one of the earliest legislated forms of sui generis test data protection, in the United States, was for drugs for orphan diseases;30 this followed the findings of a congressional committee that there was typically no patent protection available and no rationale to invest in clinical trials.31 In view of the pragmatic quality of trade negotiations and domestic lobbying on data protection, and the shaping of their outcomes in the form of treaty language and national legislation, a coherent legal doctrine governing data protection is difficult to determine. Protection is unusually closely focused on specific forms of protected subject matter and on specific incentive structures, reinforcing its sui generis and practical character. Yet the debate has reached a political plane and a pitch of intensity such that greater clarity about the legal framework for protection is needed, as legislators look for more sustainable and domestically defensible approaches to data protection32 than the textual formulae imported from trade negotiations. Rather than distilling principles from the political or polemical plane—taking lobbying and criticism of lobbying at face value—an objective doctrinal framework would most likely have to be ‘reverse-engineered’ or ‘retrofitted’ to give coherence to the congeries of standards and laws that have been developed over several decades in an increasing number of jurisdictions.

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Associations, Encouragement of New Clinical Drug Development: The Role of Data Exclusivity (Geneva, 2000). Avcare, ‘Test Data Protection’ for Agvet Regulatory Data—Underpinning Solutions for the Future (Canberra, 2000). Orphan Drug Act, §2(a) (codified at 21 USC §360cc (2003)). United States Congress, HR Rep. No. 97-840, pt 1, at 7 (1982), to accompany HR 5238; further, see HR Rep. No. 99-153, at 3 (1985), to accompany HR 2290 (1985). K Srinivas, ‘Test Data Protection, Data Exclusivity and TRIPs: What Options for India’, Working Paper Version 1.0, 2006, available from [email protected].


There are further practical reasons to study test data protection. The intense policy ‘storm’, has been charted,33 tentatively navigated both in international dispute settlement34 and negotiation,35 and considered by domestic courts,36 but little attention is paid to its ‘perfection’ as an object lesson in the broader dynamics of IP policymaking. As an object lesson in crafting a new and essentially discrete form of IP protection, data protection is uniquely well defined in terms of its subject matter, the economic and industrial dynamics, and the specificity of the problem it is intended to solve: a valuable clinical trial in itself.

Conceptual and contextual review Conceptual and contextual review Conceptually, clinical trials and field testing formalize37 the empirical testing of useful compounds and extracts that has been gradually been elaborated as a scientific discipline,38 but has been undertaken in various forms since pre-history.39 Knowledge about safe and efficacious doses of natural extracts is a valued form of traditional knowledge (TK); in some traditional contexts, access to such knowledge is restricted to recognized community members and is held, used, and transmitted exclusively by them. This more specific and applied traditional medical knowledge may be more

33 For example, C Correa, ‘Unfair Competition Under The TRIPs Agreement: Protection of Data Submitted for the Registration of Pharmaceuticals’ 3 Chi. J. Int’l L. 69; G Lee Skillington, and EM Solovy, ‘The Protection of Test and Other Data Required by Article 39.3 of the TRIPs Agreement’ 24 Nw. J. Int’l L. Bus. 1; R Dinca, ‘The Bermuda Triangle of Pharmaceutical Law: Is Data Protection a Lost Ship?’ (2005) 8 Journal of World Intellectual Property 517; M Bronckers and P Ondrusek, ‘Protection of regulatory data in the EU and WTO law: the example of REACH’ (2005) 8 Journal of World Intellectual Property 579; AX Fellmeth, ‘Secrecy, Monopoly, and Access to Pharmaceuticals in International Trade Law: Protection Of Marketing Approval Data under the TRIPs Agreement’ (2004) 45 Harv. Int’l L.J. 443; V Junod, ‘Drug marketing exclusivity under United States and European Union Law’ (2004) 59 Food Drug L. J. 479; JR Sanjuan ‘US and EU Protection of Pharmaceutical Test Data’, CPTech Discussion Paper No. 1, 2006; and A Weisfeld, ‘How Much Intellectual Property Protection do the Newest (and Coolest) Biotechnologies Get Internationally?’ (2006) 6 Chi. J. Int’l L. 833. 34 Notification of Mutually Agreed Solution According to the Conditions Set Forth in the Agreement (Argentina—Patent Protection for Pharmaceuticals and Test Data Protection for Agricultural Chemicals, WT/ DS171 and Argentina—Certain Measures on the Protection of Patents and Test Data, WT/DS196), WT/DS171/3,WT/DS196/4, IP/D/18/Add.1, IP/D/ 22/Add.1 (20 June 2002). 35 Submission to the TRIPs Council by the African Group, Barbados, Bolivia, Brazil, Cuba, Dominican Republic, Ecuador, Honduras, India, Indonesia, Jamaica, Pakistan, Paraguay, Philippines, Peru, Sri Lanka, Thailand, and Venezuela, IP/C/W/296 (29 June 2001). 36 Bayer, Inc. v Canada (Attorney Gen.) [1999] 243 NR 170, 173 (Fed. Ct.) (Can.); Bristol-Myers Squibb Co. v Canada (Attorney General) [2005] 1

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valuable and closely held than the bare knowledge that a compound or a natural extract has, in principle, some beneficial pharmacological activity. Many standard ethnobotanical resources simply list the general area of activity without recording the efficacious and safe dosology; some cases of claimed ‘biopiracy’ entail researchers identifying safe and effective dosage forms or regimes for purportedly new applications of traditionally well-known therapeutic agents.40 Similarly, traditional agricultural knowledge includes detailed knowledge about fertilizer and pesticidal properties of natural and refined products, and contested claims of derivative innovation or biopiracy concern empirical trials that establish effective extracts and application regimes based on traditional pesticides.41 The recent industrialization and centralization of chemical and pharmaceutical production mask the deep empirical roots of these disciplines in TK systems. This background highlights the key distinction in this debate between the inventive determination that a compound has certain pharmaceutical or pesticidal properties in principle, and the establishment that a certain form of actual use is safe, efficacious, and can consistently be reproduced on an industrial scale: the patent recognizes the inventive content of a new technology; the regulatory data provide subsequent objective reassurance that the new technology is safe and effective.

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SCR 533, 2005 SCC 26; Regina v The Licensing Authority Established by the Medicines Act 1968, ex parte Generics (UK) Ltd, Case C-368/96, 1998 ECR I-7967 [1999] 2 CMLR 181 (1998). It was only in 1948 that the Medical Research Council undertook the first clinical trial of a drug with randomized, double-blind testing and the use of control groups, in assessing the streptomycin as a treatment for pulmonary tuberculosis. R Twyman, ‘A brief history of clinical trials’, 22 September 2004, at http:// genome.wellcome.ac.uk/doc%5Fwtd020948.html, suggests that the first recorded instance of a clinical trial was the Old Testament account of how the prophet Daniel adopted ‘a diet of pulses and water instead of the meat and wine recommended by King Nebuchadnezzar II’. For example, the use of control groups in the trials of citrus fruits and other candidate dietary supplements by James Lind in his research on treatments for scurvy in the mid 18th Century. In a classic instance of managing scarcity, which resonates with today’s debates about access to medicines, it took many decades for his clear findings to be acted upon in practice and regular rations to be made available to British seamen as a prophylactic against scurvy, due to the high cost at that time of orange and lemon juice. For example, experiments 1 and 2 and case histories 1 and 2, US Patent 5401504, Use of Turmeric in Wound Healing, granted 23 March 1995 (although the patent’s claims were not restricted to the disclosed forms of administration of the healing agent; the patent was invalidated on reexamination). For example, Decision T 0416/01—3.3.2 of the EPO Technical Board of Appeal (8 March 2005), Thermo Trilogy Corporation, et al. v Aelvoet, Magda, MEP, The Green Group in the European Parliament, et al.

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While the format, objective, and mechanisms for production of these two bodies of knowledge are generally distinct, there are conceptual42 and practical43 linkages: proving efficacy is arguably a subset of the patent law requirement for utility, while safety is arguably cognate with ordre public in patent law.44 The necessarily heavy regulatory overlay, especially in the pharmaceutical and agricultural chemical industries, accentuates and amplifies this distinction between two key inflections on the innovation pipeline—the demonstration of a new scientific insight, such as a certain pesticidal effect, and the distinct determination that it can be deployed in practice safely, effectively, and predictably. Contemporary innovation patterns, and the diversification of innovation inputs, highlight this distinction and clarify that these two phases may require distinct incentives, infrastructure, and other resources: ‘research-based’ pharmaceutical companies increasingly function more to integrate the resources required to take products through the regulatory pipeline, rather than to generate the initial patentable insight, which may be undertaken by niche firms or public institutions.45 Regulations on drugs and agricultural chemicals are a form of exclusion from the public domain: the public is excluded from free use of the regulated material on the basis of a calculation that the social cost of this restricted access is outweighed by the public goods (assurance of safe and effective drugs and chemicals) generated by this exclusion. This form of exclusion, therefore, has parallels to IP mechanisms. In both cases, the public is prevented from freely using knowledge because a specific exclusion is judged to be more effective in producing public goods, for overall social benefit, than would be promoted by unconstrained use by any party. And test data protection is intimately linked to both forms of exclusion: regulatory restrictions on chemicals and proprietary rights over knowledge about these chemicals. It provides an IP incentive 42 cf, India, The Patents (Amendment) Act 2005 No. 15 of 2005, excluding from patentability ‘(d) the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.’ 43 Typically, patents for pharmaceuticals or pesticides will include the result of empirical tests, sufficient for a claim for full disclosure and utility, but not adequate to reassure regulators of the safety, efficacy, and environmental impact of the chemicals concerned. See above, note 40. 44 TRIPs, Art 27.2. 45 A topical example is Tamiflu, the subject of US patent no. 5763483, for a ‘novel carbocyclic compound’, held by Gilead Sciences, developed and commercialized by Roche under licence from Gilead. 46 J Reichman, ‘Of Green Tulips and Legal Kudzu: Repackaging Rights in Subpatentable Innovation’ (2000) 53 Vanderbilt Law Review 1753.


to generate the empirical data required to make a systematic judgment that the regulatory exclusion on the protected material can be eased to allow its use in welldefined applications. There is an evident need to establish an effective system for producing this socially valuable data that would also settle the corrosive trade disputes that are provoked by unresolved expectations of effective protection and conflicting ideas of appropriate competitive relations between data originators and generic data users. This issue offers insights into the dynamics of international IP policymaking: † it is a unique test-case for the use of exclusions and liability rules to produce well-defined categories of knowledge as public goods or collective consumption goods; † it exemplifies the emergence of a hybrid form of IP protection over a distinct category of information— illustrating the rationale, dynamics, and doctrinal assumptions that apply, highlighting the competing doctrines of proprietary rights and non-proprietary liability rules,46 and in transgressing the uncertain line between IP as a ius excluendi and entitlements to equitable benefits or remuneration, probing the ‘property’ or ‘proprietary’ aspect of IP as against its place in the broader law of civil liability. † it poses a significant interpretative challenge, being subject to broad international provisions, found in two multilateral treaties,47 which ostensibly settle the rules to be followed in international law but leave considerable scope for contention, since the TRIPs negotiators rejected proposals for explicit data exclusivity for determined periods:48 in a case of constructive ambiguity, developing country negotiators felt that the more general language accommodated their concerns to see no obligation for data exclusivity,49 while developed country negotiators reassured 47 TRIPs 39 and Paris 10bis. 48 The negotiators considered, but did not accept, at least three firm proposals for explicit data exclusivity for defined periods: European Community, Draft Agreement on the Trade-Related Aspects of Intellectual Property Rights, MTN.GNG/NG11/W/68 (29 March 1990) (proposed Annex II, Part 2G, Art 28); United States, Draft Agreement on the Trade-Related Aspects of Intellectual Property Rights, MTN.GNG/ NG11/W/70 (11 May 1990) (proposed Annex J, Part 2G, Art 33); and Switzerland, Draft Amendment to the General Agreement on Tariffs and Trade for the Protection of Trade-Related Intellectual Property Rights, MTN.GNG/NG11/W/73 (14 May 1990) (proposed Part V, Section 2G, Art 243). 49 Communication from Argentina, Brazil, Chile, China, Colombia, Cuba, Egypt, India, Nigeria, Peru, Tanzania, and Uruguay, MTN.GNG/NG11/ W/71 (14 May 1990); see also J Watal, Intellectual Property Rights in the WTO and Developing Countries (2001), at 144.


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themselves that the general provision did require non-reliance on regulatory data for a fixed period;50 the standard of protection has since been elaborated diversely in numerous bilateral agreements, creating interpretative and doctrinal uncertainty; † it exemplifies the contingent, ad hoc quality of IP rulemaking. Without the imposition of tighter regulatory procedures from the 1960s51 and the creation of new fields of technology,52 no claim to such protection of data qua data would have emerged. Legislators have created new proprietary rights, reacting to a dynamic regulatory environment, developments in technology53 and innovation processes.54 These in turn evolve public expectations and commercial practices, which influence the perceived equities concerning access to information and the subjective conceptions of ‘honest commercial practices’ or ‘unfair commercial use’—illustrating the tension between the settlement of these concepts according to a rule of reason approach,55 and a pragmatic result-oriented approach;56 † the unresolved character of TRIPs 39.3 highlights how international policy analysis can descend into agonistic wrangling over legalistic interpretation rather than addressing how in practice to optimize the engagement of private interest to produce public goods; † situating the rationale for protection within the wider doctrine of ‘unfair competition’ exemplifies the synergy and conflict between competition policy and IP protection, and creates an uncertain choice of rule of reason versus per se determinations regarding acts of unfair competition;57 it also asks whether Paris-type unfair competition should be limited to objectively dishonest acts or even to consumer deception only, or

should include acts of unjust enrichment, where commercial benefit is derived in a manner perceived as unfair even in the absence of fraud or dishonesty; † given the relevance for other jurisdictions of data prepared for the regulatory requirements of one jurisdiction,58 it raises the prospect of cross-subsidization in the production of public goods between different countries—the trade implications of spillovers into other jurisdictions from incentives for public goods production in one jurisdiction, a question central to the dynamics of the negotiations for TRIPs; † the generation and protection of regulatory data raise bioethics issues and a case study in how IP forms of protection must be moderated by bioethics and human rights concerns, in particular regarding prior informed consent59 (and whether consent to participate in research reaches through to commercial use of derived data), and restrictions on unnecessary testing of humans and other vertebrates that may constrain data protection,60 as well as the wider question of how a society’s ethical standards should be applied in judging acts of unfair competition;61 † while all IP mechanisms must take their place within a regulatory and policy environment, in this instance there is an explicit need to accommodate competing regulatory agendas and to reconcile distinct legal instruments, including at the international level, given the overlap of data protection with regulation of pesticides,62 of the environment, and of human health, and the policy interest in promoting access to data on the properties of regulated chemicals.

50 J Gorlin, An Analysis of the Pharmaceutical-Related Provisions of the TRIPs Agreement (1999), 48. 51 A consequence, in part, of the thalidomide and DDT scandals. 52 For example, the creation of genetically modified crops. 53 A Langley, ‘Engineered Drugs Open New Issue of Regulation as Patents Expire’ New York Times, 9 August 2003. 54 J von Braun and MP Pugatch, ‘The changing face of the pharmaceutical industry and intellectual property rights’ (September 2005) 8 Journal of World Intellectual Property 599, especially 613 –618. 55 Leaving national courts or other authorities to assess case by case whether particular use is unfair or dishonest. 56 For example, in defining precise categories of information and predetermined time lines for exclusive use and compensated third-party use. 57 Bodenhausen’s commentary suggests a rule of reason approach, greatly inflected by national legal and even cultural factors; see Bodenhausen, above, at fn 76. 58 JT O’Reilly, ‘Implications of International Drug Approval Systems on Confidentiality of Business Secrets in the US Pharmaceutical Industry’ (1998) 53 Food Drug L. J. 123.

59 Unesco, Universal Declaration on Bioethics and Human Rights (October 2005), Art 6. 60 Biocides Directive, fn 15 above, Art 13 (providing for mandatory negotiations on data-sharing for testing on vertebrate animals, a bioethical basis for an alternative to data exclusivity). 61 S Ladas, Patents Trademarks and Related Rights: National and International Protection 1685 (Cambridge, 1975): ‘Morality, which is the source of the law of unfair competition, is a simple notion in theory only. In fact it reflects customs and habits anchored in the spirit of a particular community. There is no clearly objective standard of feeling, instincts, or attitudes toward a certain conduct. Therefore, specific prescriptions involving uniform evaluation of certain acts are extremely difficult’. 62 For example, the 2002 revision of the FAO International Code of Conduct on the Distribution and Use of Pesticides requires governments to ‘facilitate the exchange of information between regulatory authorities to strengthen cooperative efforts. The information to be exchanged should include: . . . scientific, technical, economic, regulatory and legal information concerning pesticides including toxicological, environmental and safety data’ (9.1.2).

Settling the doctrinal basis of regulatory data protection has important flow-on effects for other policymaking

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processes, depending on whether unfair competition is strictly limited to dishonest practices or broadened to cover inequitable commercial gain. This uncertainty also reveals the cultural assumptions and calculation of self-interest within international IP debates. Given the roots of clinical testing in traditional medicine systems, claims of unfair competition in the use of test data have a neat symmetry with claims of misappropriation of TK—developed countries mostly favour a broad conception of misappropriation in the first debate,63 but resist it for TK; and developing countries generally take the opposite position.64


to generate the required public goods, as an exercise in utilitarian policymaking? Should the conception of unfairness be broadened to accommodate broader claims of ‘sweat of the brow’68 or Lockean property entitlements, or should it be calibrated strictly to meet the utilitarian requirements of society? In other words, does optimizing the utilitarian consequences of data protection provide a guarantee of fairness, or is there a residual inherent entitlement on the part of the data originator to ‘property rights’ over the data?

This complex web of issues leads to the following core questions: (a) if data protection is to promote the production of public goods, how to determine the priority of such ‘public goods’ considered at three levels: (i) the regulatory data itself, viewing knowledge as the exemplary public good,65 (ii) the actual availability of safe and effective innovative products, closest in conception to the classical concept of public goods as collective consumption goods,66 and (iii) the higher-order public good of equity of access to and benefits from the data?67 (b) what is the appropriate interplay between (i) the international regimes that fix rules for national legal and administrative systems to comply with, and thus aim to settle trade disputation and (ii) national regulatory mechanisms aimed more directly at the optimal production of such public goods through appropriate domestic regulation? (c) should data protection rules recognize claims of inherent exclusive rights, an ‘unjust enrichment’ or unfair competition approach, or be limited to empirically based exclusions that are sufficient only

The international dimension is prominent in this debate for two interrelated reasons: (i) effective protection has consistently been identified as a trade interest and has, therefore, been forcibly introduced into international trade negotiations; (ii) for many countries this is entirely, conceptually, a new area of government regulation,69 and the nature of international obligations takes on a predominant, indeed excessive influence, in shaping domestic outcomes. Rather than viewing the issue as a domestic policy process for the production of public goods, reconciling and balancing competing interests, it is customary to view the issue as one of balancing externally imposed standards against domestic interests.70 The ‘balance’ in policymaking is between the claims imposed by trade agreements and openness of access to data; regulatory data are seen in effect as a non-rivalrous commodity, and the public interest is served if the price of access is reduced, a static view of regulatory data which disregard the economics and equities of the dynamics of data production. The contentious procedural and political background of this issue71 inevitably means that claims for strengthened regulatory data protection lack the legitimacy that is needed for welfare—enhancing lawmaking and politically sustainable compliance with international standards.72 Restoring the intuitive sense of

63 F Emmert, ‘Intellectual Property in the Uruguay Round—Negotiating Strategies of the Western Industrialized Countries’ (1990) 11 Mich. J. Int’l L. 1317, 1383. 64 For example, Correa—‘Protection of Traditional Knowledge’, Quaker Office (Geneva); Group of Countries of Latin America and the Caribbean (GRULAC), Traditional Knowledge and the Need to Give it Adequate Intellectual Property Protection, WIPO/GRTKF/IC/1/5 (16 March 2001); see the critical account of J Chen, ‘There’s No Such Thing As Biopiracy . . . and It’s a Good Thing Too’ 37 McGeorge L. Rev. 1, 25. 65 JE Stiglitz, Knowledge as a Global Public Good, available at http://www. worldbank .org/knowledge/chiefecon/articles/undpk2/. 66 P Samuelson, ‘The pure theory of public expenditure’ (1954) 36 Rev. Econ. Stat. 387, 388. 67 Regarding higher-order public goods, see AS Taubman, ‘Saving the Village: Conserving Jurisprudential Diversity in the International Protection of Traditional Knowledge’, in KE Maskus and JH Reichman, (eds), International Public Goods and Transfer of Technology under a Globalized Intellectual Property Regime (Cambridge, 2005), 521, 547.

68 Cf, the reference in TRIPs Art 39.3 to ‘other data, the origination of which involves a considerable effort’. 69 ‘Only a few countries had developed rules on the matter before the negotiation of TRIPs.’ KR Srinivas, Test Data Protection, Data Exclusivity and TRIPs: What Options for India? (10 September 2006). 70 ‘Health movements and NGOs are concerned about the introduction of test in India and its impact on manufacture and sale of generic drugs. But India is obliged to give effect to the provisions of TRIPs in this issue. The challenge before the Indian government is how it will balance its commitments under TRIPs with the demands from generic manufacturers and others.’ KR Srinivas, note 69 above, 1 – 2g. 71 P Drahos, ‘Developing Countries and International Intellectual Property Standard-Setting’ (2002) 5 J. World Intell. Prop. 765; SK Sell, ‘TRIPs and the Access to Medicines Campaign’ (2002) 20 Wis. Int’l L. J. 481. 72 PM Gerhart, ‘Reflections: beyond compliance theory—TRIPs as a substantive issue’ 32 Case W. Res. J. Int’l L. 2007 357, 361– 362: ‘[D]ialogue about the substantive validity of a standard—about why the measure is justified on some metric of welfare or rights –is an important

The central issues


fairness implicit in ‘unfair competition’, and reframing the issue as a means of establishing the optimal funding of vital public goods, would restructure the debate in a more productive and equitable manner, and move from compliance with standards as a zerosum game towards a welfare maximizing process.

Construing TRIPs Because of this contested regulatory space, the TRIPs provisions retain a central position in determining legislative options for data protection; the call for policy flexibility is expressed in terms of complying with a minimalist reading of TRIPs, on the assumption that this maximizes domestic benefit.73 While several interpretative questions demand consideration, this analysis focuses on the TRIPs requirement that data be protected against ‘unfair commercial use’,74 as an element of giving effect to a broader obligation to suppress ‘unfair competition’.75 The Paris conception of ‘unfair competition’ is more strongly rooted in business ethics and honest practices than in restraints on free-riding or unjust enrichment76 and a strict competition policy approach would be more bluntly utilitarian, focused on maintaining a sound competitive environment geared to overall social welfare. Regulatory data protection spans both conceptions of socially valuable competition— requiring that generic competitors deal fairly with data generated by originator firms, but also encouraging a legitimate competitive environment so that monopoly rents on socially valuable products such as new drugs and pesticides are not extended without limit, and the benefits of competition can be brought to bear to bring products earlier to the market and to contain prices. To keep perspective, TRIPs should be viewed only as an international agreement between trading partners on ‘trade related’ aspects of IP, not as a kind of model domestic law. Thus, the domestic regulator must not

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element in compliance, perhaps one as important as procedural legitimacy.’ K Timmermans, The impact of data exclusivity on access to medicines, 1st Forum on Intellectual Property Rights and Public Health, Manila, October 2005. TRIPs 39.3. TRIPs 39.1, referring to Paris 10bis. The classic exposition of 10bis, given by Professor Bodenhausen, stresses the ethical dimension, rooted in the values of different societies: ‘What is to be understood by “competition” will be determined in each country according to its own concepts: countries may extend the notion of acts of unfair competition to acts which are not competitive in a narrow sense. . . Any act of competition will have to be considered unfair if it is contrary to honest practices in industrial or commercial matters. This criterion is not limited to honest practices existing in the country where protection against unfair competition is sought. The judicial or administrative authorities of such country will therefore also have to take into account

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allow a cut-and-paste of TRIPs text to supplant domestic crafting of the suitable policy framework. A maximal or minimal reading of TRIPs text (as a single paragraph within an international treaty) is inherently unlikely to be the best choice for any country; the TRIPs

TRIPs first articulates and then enforces ostensibly objective standards defining a trading nation’s expectations about access to IP protection for its nationals in foreign markets. text ultimately should serve as a defence against a bilateral challenge of policy choices, rather than being pressed into service as a stand-alone policy choice. What then is the proper context for TRIPs? TRIPs first articulates and then enforces ostensibly objective standards defining a trading nation’s expectations about access to IP protection for its nationals in foreign markets. Along these lines, one might view the TRIPs regime as a means of defining and reconciling legitimate expectations77 of a fair competitive relationship in international trade,78 in particular, in knowledge-rich trade such as innovative pharmaceuticals and agricultural chemicals for which the baseline expectation of a fair relationship between competitors goes beyond simple competition on the price of goods and the avoidance of consumer deception. This admittedly heterodox reading would render TRIPs conceptually coherent with the mainstream of trade law, in contrast with a conventional approach that would continue to situate TRIPs as exogenous to true trade law. Strictly speaking, the cause of action in TRIPs dispute settlement is not non-compliance with substantive standards but the nullification or impairment of an expected benefit;79 logically, non-compliance with TRIPs standards is simply one prima facie form of nulhonest practices established in international trade. If a judicial or administrative authority of the country where protection is sought finds that an act complained of is contrary to honest practices in industrial or commercial matters, it will be obliged to hold such act to be an act of unfair competition and to apply the sanctions and remedies provided by its national law. A wide variety of acts may correspond to the above criteria’. GHC Bodenhausen, Guide to the Application of the Paris Convention for the Protection of Industrial Property, as Revised at Stockholm in 1967 (1968), at 144. 77 See C Carmody, ‘WTO Obligations as Collective’ (2006) European Journal of International Law 17, 419, 421: WTO obligations are ‘about expectations concerning the trade-related behaviour of governments’. 78 See the panel report in Japan—Film (WT/DS44/R) on the role of dispute settlement in recognizing a ‘competitive relationship’. 79 TRIPs 64.1, invoking GATT Arts XXII and XXIII as the basis of the cause of action in dispute settlement.

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lification and impairment,80 a presumption that is admittedly difficult to overcome, but nonetheless conceptually distinct from a cause of action defined as non-compliance. TRIPs there functions to preserve expectations regarding the fair or legitimate competitive relationship between competitors. Thus, the seemingly exotic references to unfair competition in TRIPs/Paris, and the uneasy tension between Paris ideas of ‘fair competition’ and open competition in trade law, can be reconciled if we adopt a central normative goal for TRIPs within the WTO the maintenance of a legitimate competitive relationship between commercial actors, taking into account the intangible content of trade. It is surely required of regulatory data protection to ensure that competition does not destroy any incentive to generate the data without which new products cannot come to market—and it is plain that if I can immediately follow you to the market, relying on your data, but at no cost to me, it would be irrational of you to invest in the creation of the data in the first place, as you would have a competitive edge over me exactly measured by the cost of the data (and potentially the data earlier produced for products that failed in clinical trials or field tests). But regulation should equally ensure that beneficial competition continues, and regulatory data protection does not deliver burdensome monopoly rents. Further, since test data are public information goods in their own right (the information is inherently valuable), as well as being instrumental in the generation of other public goods (the practical and equitable availability of welfare-enhancing products), bare confidentiality may be insufficient. The objective of IP protection, as articulated by TRIPs, unites the promotion of social utility with the notion of an equitable balance of rights and obligations.81 This objective yokes together legitimate commercial opportunities for competitors with the competitive dynamics required to produce public goods. Data protection is, therefore, a focused practical instance of policymaking aimed both at granting a fair opportunity to bring new products to the market without competitive disadvantage, and at promoting public welfare in the form of practically available new products and new applications.

TRIPs standards for regulatory data protection, ideally conceived as policy tools but also objectively read as legal texts, can therefore be construed as requiring whatever it takes to ensure a fair competitive relationship between data originators and good faith generic follow-on users, which also secures overall public welfare gains. But in reframing the question this way, we beg the question of the measure of fairness in the competitive relationship. Is fairness to be measured case-by-case by the application of the rule of reason, or by per se rules? A law that stipulates that data shall be given protection by exclusive rights for 5 years, then subject to compensatory remuneration, is a per se finding that competitors’ reliance on regulatory data within 5 years is unfair, though becoming fair after five years if appropriate compensation is paid. The approaches taken in national laws82 are already too diverse to establish a harmonized and uncontroversial per se rule of this nature. The rules applied differ significantly between agricultural chemicals and pharmaceuticals, making clear how per se perceptions of fairness differ even between industry sectors within the same jurisdiction.

80 WTO Dispute Settlement Understanding, Art 3.8: infringement of obligations under, inter alia, TRIPs, ‘is considered prima facie to constitute a case of nullification or impairment’. 81 TRIPs 7: ‘The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.’

82 Not surveyed here due to shortage of space. 83 TRIPs 39.3. 84 These include United-States—Singapore Free Trade Agreement, signed on 6 May 2003; United States—Chile Free Trade Agreement, signed on 6 June 2003; United States—Central American and Dominican Republic Free Trade Agreement, sign on 17 December 2003 (CAFTA); United States—Australia Free Trade Agreement, signed on 18 May 2004; United States—Morocco Free Trade Agreement, signed on 2 March 2004.

Navigating regional agreements The diversity of norm-setting at national and bilateral levels suggests first that WTO members appear to differ on the interpretation of the concept of protection of test data against unfair commercial use,83 and secondly that the details of protection standards (scope of subject matter, duration of protection, and nature of exclusive rights) are settled—as is much domestic legislation—at a pragmatic rather than abstract level. Even without considering the complexity of national legislative approaches, a measure of the contingent quality of ‘fairness’ in regulatory data protection is the diverse approach exhibited in the many bilateral and regional agreements (RTAs) concluded since TRIPs that deal with data exclusivity. The more precise formulations of test data protection expressed in recent RTAs84 have been a point of contention among critics


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of bilateral processes,85 as the implementation of data protection standards beyond the benchmark established in TRIPs is assumed by many critical commentators to complicate or impede access to pharmaceuticals and thus to frustrate public health objectives.86 Most RTAs that refer to test data protection provide for limited terms of data exclusivity, but set different terms for pharmaceuticals and for agricultural chemicals,87 underscoring the point that these two sectors tend to resolve the question of unfair commercial use differently. RTAs are concluded very much with an eye on TRIPs, provoking the question of whether they (i) create a de facto higher international standard (or are at least intended to), (ii) amount to an informal interpretation of TRIPs, or (iii) are limited to the bilateral or regional context. The texts themselves send mixed messages. One RTA88 restates TRIPs 39.3 without elucidating what is meant by ‘unfair commercial use’, defining the scope of protected material to include ‘evidence of approval in another country’: in other words, protection extends to the fact of approval elsewhere.89 A footnote defines ‘new chemical entities’ (also the TRIPs standard) as including ‘protection for new uses for old chemical entities for a period of three years’, though presumably this is not intended as a gloss on this term in a TRIPs context. Several RTAs90 provide for protection relating to a ‘new pharmaceutical or agricultural chemical product’, apparently broader in scope than TRIPs protection which refers only to products ‘which utilize new chemical entities’. They require exclusivity over the information itself, as well as over reference to the approval of the product in other countries, 5 years for pharmaceuticals and 10 for agricultural chemicals. One of these91 requires 3 years protection for new clinical trial data and evidence of prior approval for pharmaceutical products, but excludes bioequivalence information. Another92 sets a time limit of 5 years to seek product approval after approval in the first territory,

presumably to promote timely access to new products. A further measure93 provides a grandfathering clause for different forms of data protection that were in place on the date of TRIPs ‘implementation’ (presumably distinct from its entry into force), but this measure concerns ‘products not involving new chemical entities’, which are not covered by TRIPs in any event, leaving unclear the implications (if any) for a reading of TRIPs standards as such. Several RTAs are subject to understandings or side letters that explicitly safeguard public health measures, adding to their interpretative context, if not their binding content. Additional side letters confirm that this guarantee applies to data protection, for instance by specifying that RTA obligations ‘do not affect a Party’s ability to take necessary measures to protect public health by promoting access to medicines for all’.94 A further side letter confirmed that this guarantee applied to data protection in particular,95 a measure of the political sensitivity and potential interpretative uncertainty of this growing body of jurisprudence on data protection. If a WTO dispute settlement panel were asked to interpret TRIPs 39.3, how might it take account of this array of regional norm-setting? Past panels have backed their interpretation of TRIPs by surveying a selection of domestic laws96 as indirect evidence of WTO members’ practice, using such sources to validate the approach they take to TRIPs interpretation, while formally disclaiming that this is subsequent state practice in the formal sense (which it cannot be97). It is also unlikely that the TRIPs text would be amended to take account of normative developments in RTAs, though the possibility of some informal jurisprudential influence remains high. The choices by domestic legislators should be given due weight and recognition as acts in themselves of practical treaty interpretation.98 However, a strict reading of the rules of treaty interpretation would

85 For example P Drahos, ‘BITs and BIPs: Bilateralism in Intellectual Property’ (2001) 4 J. World Intell. Prop. 791. 86 For example J-F Morin, ‘Tripping Up TRIPs Debates: IP and Health in Bilateral Agreements’ (2006) International Journal of Intellectual Property Management 1, at www.inderscience.com/IJEP. 87 For example, Singapore-US FTA Art 16.8: ‘at least five years from the date of approval for a pharmaceutical product and ten years from the date of approval for an agricultural chemical’. 88 Jordan US FTA Art 4. 22. 89 Cf, the three levels of information identified in the Introduction, above. 90 CAFTA, Art 15.10 1 a; Morocco-US, Art 15.10: Measures Related To Certain Regulated Products; Peru-US, Art 16.10: Measures Related to Certain Regulated Products; Australia—US; Singapore-US Art 16.8: Certain Regulated Products. 91 Morocco US, Art 15.10: Measures Related To Certain Regulated Products.

92 93 94 95

Peru-US Art 16.10: Measures Related to Certain Regulated Products. Singapore US; fn 16-14. US-Peru, Understandings Regarding Certain Public Health Measures. Susan Schwab, Deputy United States Trade Representative to The Honorable Pablo de la Flor, Vice Minister of Foreign Trade and Tourism, draft dated 6 January 2006. 96 See Canada—Pharmaceutical Patents, WTO Doc WT/DS114/R (17 March 2000) [7.80] (Report of the Panel). 97 The Vienna Convention on the Law of Treaties (1980), in codifying the customary rules of treaty interpretation, limits state practice that is relevant for interpretation to ‘any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation’ (Art 31.3 (b)). 98 For an extended discussion, see AS Taubman, ‘Nobility of interpretation: Equity, retrospectivity and collectivity in implementing new norms for

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entail that domestic or regional legislative choices cannot be used as substantive sources of law in interpreting TRIPs provisions: such approach risks complete circularity, since a defendant could cite the contested legislative choice as persuasive evidence of subsequent

The choices by domestic legislators should be given due weight and recognition as acts in themselves of practical treaty interpretation. state practice. At best, domestic and regional choices provide informal guidance, and may indirectly validate or reinforce the discrete interpretive decisions made by panels and the AB. When RTAs apparently aim to interpret or apply TRIPs provisions, panels may be called to give at least informal recognition to RTAs, especially when these appear to present a pattern of an accumulation of choices by WTO members. Could a panel therefore draw on bilateral and regional norm-setting to discern a pattern of protection against ‘unfair commercial use’ of data? When, if ever, would an accumulation of regional settlements upon these issues establish a sufficient body of state practice to influence a panel to adopt a more precise determination of ‘unfair commercial use’? While there has been a pronounced trend towards explicit requirements for data exclusivity, this has not been universal and it has been actively contested internationally; panels have expressed their reluctance to encroach on unresolved policy matters.99 The upsurge in bilateral norm-setting could hardly be held to be evidence of an ironclad consensus among WTO members on this point. The intense political debate over data protection would deter a panel from taking sides;100 but would a panel not be influenced in its reading of TRIPs by this accumulation of subsequent legal development? While no view is expressed here on this contentious point, past practice suggests that panels would not consciously confirm that options remained open under the sparse text of TRIPs 39.3. The picture is complicated by the fact that some bilateral standards explicitly performers’ rights’ (Spring 2005) 12 Journal of Intellectual Property Law 351. 99 For example, the Canada—Pharmaceuticals panel when addressing compensatory patent term extensions observed that ‘the issue itself was of relatively recent standing, and the community of governments was obviously still divided over the merits of such claims. . .. The Panel believed that Article 30’s “legitimate interests” concept should not be used to decide, through adjudication, a normative policy issue that is still obviously a matter of unresolved political debate’, Canada—Patent


protect subject matter broader in scope than TRIPs (such as new products not utilizing new chemical entities), fudging any attempt to read back such normsetting into the TRIPs text. Unless panels turn a blind eye to their international context, bilateral normsetting has made the assessment101 of ‘unfair commercial use’ under TRIPs more complex, ignoring such broader norm-setting activity while stepping back from endorsing one line of development. The same facts could be used to argue both that WTO Members were increasingly recognizing data exclusivity as the required form of protection and that policy remained in flux. This complex, dynamic picture illuminates how international dispute settlement on issues of fundamental public policy and debate is inherently limited and cannot supplant the role of domestic legislators. The domestic legislator should be perceived as an active participant within the interpretative community that sets the practical bounds to the treaty’s impact. The closer interpretation cleaves to underlying principles of balance and equity, and the more it seeks to carry them out directly, the more robust will be the legal defence of treaty obligations. Also, interpretation will likely be more influential when a policymaker is considering legislative choices under a treaty as a positive contribution to international interpretative discourse, thus restoring a degree of nobility to this most important and consequential act of treaty interpretation, the crafting of laws that directly determine equitable outcomes.102

Contingent ‘fairness’ ‘Fairness’ is a contingent matter. This is reflected in the pragmatic settlement of per se rules that vary between industry sectors and between jurisdictions, and in the blending of different periods of true exclusivity and compensatory regimes. The evidence of bilateral treatymaking alone—before considering diverse national experiences—makes it difficult to sustain any single conception of ‘unfair competition’. A sliding scale is needed, tailored to the circumstances of regulation, since neither extreme (permanent data exclusivity or a minimal form of protection against brazen theft of data Protection of Pharmaceutical Products (17 March 2000), WTO WT/DS114/ R, at 7.82 (pp. 168– 169). 100 ibid. 101 A task explicitly provided for in Notification of Mutually Agreed Solution According to the Conditions Set Forth in the Agreement (WT/DS171/3, WT/DS196/4, IP/D/18/Add.1, IP/D/22/Add.1 20 (June 2002)). 102 A Taubman, ‘Nobility of interpretation’, fn 98 above, at 424– 425.


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only) is likely to be equitable, or effective in balancing private incentive and public interest. Practical, deliverable equity requires a pragmatic settlement at some point along this scale, depending on external, contingent factors—the nature of the chemical (agricultural/ pharmaceutical; new entity or new use); scale of investment (the exertion of ‘considerable effort’103); the public interest nature of intended use (such as neglected or orphan diseases, or niche crops); the state of development of the economy concerned; and the intended regulatory use of data (‘reliance’, reference, or regulated follow-on after a lapse of time). To adopt either extreme reading of the international standards is likely to be self-defeating. Confining the scope of test data protection to the point where regulators can approve a generic follower’s application immediately on the basis of an originator’s data would create a norm and expectation that the submission of an original regulatory dossier would directly support immediate generic entry. To adopt this position is to conclude that no distinct incentive is required to generate test data and to absorb costs of failed tests, and that competitors should be free immediately and routinely to introduce follow-on products after cross-referencing the regulatory dossiers, even when parallel patent coverage is absent. This pattern would surely feed back into subsequent decisions on whether to generate future data, including for new applications of marginal commercial viability. Protection would prevent a follow-on product from entering the market on the basis of test data obtained directly from its originator through dishonest means (such as suborning an employee), the kind of ‘unfair commercial practice’ contemplated in this reading. This is an unlikely scenario in most regulatory systems, since a regulator would find it difficult to assess the basis and legal status of such data. This form of protection would also be unlikely to shape the incentive structure for the generation of test data. If protection is limited to suppressing commercially dishonest practices without providing a utilitarian incentive to generate test data, there is no apparent distinct rationale for suppressing such practices only when applied to two narrow fields of test data, in contrast with general rules against egregious theft of data. Moreover, the expectation that all data submitted could immediately benefit one’s competitors may create a perverse incentive to withhold data wherever possible, or to insist on their confidentiality, when the public interest would be served by such data being open to wider scrutiny. If this outcome is a

defensible legal reading of TRIPs standards, that fact alone does not make it good domestic policy. The imposition of absolute property rights would undercut the crucial public policy function of test data, in obstructing legitimate access to and use of data, in creating potential constitutional difficulties, and in retarding generic entry, which policymakers in general and a TRIPs panel in particular have endorsed as a legitimate policy objective.104 Trade secret protection may be unlimited, yet no-one argues for perpetual test data protection. Arguments that property rights naturally inhere in test data face two difficulties, one logical and one political-economic.

103 TRIPs 39.3.

104 Canada—Pharmaceutical Products, WT/DS114/R.

Arguments that property rights naturally inhere in test data face two difficulties, one logical and one political-economic. If absolute property rights are inherent in the generation of such test data, why should they be restricted to the narrow context of these two categories of test data, and not cover other forms of commercially useful data that require ‘considerable effort’? Test data protection is also devised and implemented in a closely focused utilitarian and pragmatic context, very closely linked to and indeed an artefact of specific regulatory mechanisms. This context would tell against claims of proprietary rights in data as worthy of recognition in their own right: in other words, if there was a ‘natural’ entitlement to property rights in such data, why should they be limited to such highly specific regulatory contexts? Limiting rights over data would also obviate duplicative testing, thus promoting social and economic utility and meeting bioethics standards. Unless rights in data were strictly bounded by objective need, they could have the unintended effect of creating a surrogate patent right over specific products, even though the formal objects of protection differ conceptually and to a large extent in practice. TRIPs/Paris treaty language is ultimately a means of governing relationships between trading partners, formalizing mutual expectations of legitimate commercial opportunities. The political and practical limitations on international rulemaking are therefore clarified by the case of test data. There is no guarantee that any international per se rule will optimize the functioning of a data protection mechanism as a means of funding the production of public information goods. Yet a fully

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open case-by-case rule-of-reason approach, without any concrete guidance, would be cumbersome and, being unpredictable, would deter essential investment in regulatory data,105 as its scope and impact could ultimately only be determined in retrospect through litigation. This suggests a need for domestic legislators to provide for clear time lines and scope of protected subject matter, rather than expressing a broad rule against unfair commercial use. To bridge between an equitable reading of the text and the utilitarian function of these provisions, the international normative layer may in essence require domestic legislators to establish a system of protection that is enough to create a sufficient stand-alone and reasonably predictable incentive to generate or to submit test data, as appropriate, which would not deter future submission of test data. Competitors’ commercial use of or benefit from regulatory data should be considered unfair and fit to be legally suppressed if it is likely systematically to deter submission and future production of such data: when the prospect of a competitor’s immediate use of or benefit from the data is sufficient to render it irrational or unprofitable to generate the data initially, on the part of the originating firm, or when any competitor’s use or benefit from test data that would, if systematically applied, deter future submissions. This conceptual basis reconciles utilitarian policymaking with legitimate claims of limited exclusive rights, because they are strictly limited by public interest, and are defensible in terms of actual public welfare, while offering data originators fair commercial opportunities. Yet this test is unlikely to be workable on its own in a functional domestic system of data protection, strengthening the practical argument for a

105 G Lee Skillington and EM Solovy, ‘The Protection of Test and Other Data Required by Article 39.3 of the TRIPs Agreement’ 24 Nw. J. Int’l L. Bus. 1, on ‘Data Protection as an Obligation of the Government’, at 21.


clear framework of expected duration and scope of protection. This broad conceptual basis offers limited detailed practical guidance: and that is perhaps as it should be, for it remains the author’s view that there is no ex cathedra substitute for the kind of empirically rooted, practical fine-tuning of policy options in this area that informed domestic policymakers and legislators need to undertake, adapting the broad principles settled under international law, applying them within the diverse legal, commercial and policy contexts of individual countries, to yield practical, functional mechanisms that systematically and reliably deliver the desired public-knowledge goods and thereby robustly serve the public. No international form of words, nor even the admirable policy desiderata behind the legal formulations adopted at the international level, will in itself provide a guarantee of actual fairness, let alone actual effectiveness in delivering the desired outcomes. This is why the true, the most authoritative interpreter of such treaty provisions as the continuing conundrum of TRIPs 39.3, is ultimately not the international pundit but the domestic policymaker, the legislator, who is responsible for constructing the regulatory machinery that will deliver—tangibly, in practice, in the real world—the balancing of actual interests and public welfare outcomes that TRIPs 7 offers in principle. Good domestic policy, effectively captured in good faith in law and regulation is a richer, more compelling form of ‘TRIPs compliance’—and finally more defensible in dispute settlement—than uncertain legalistic analysis. doi:10.1093/jiplp/jpn139