FINDING A FOREST THROUGH THE TREES: GEORGIA-PACIFIC AS GUIDANCE FOR ARBITRATION OF INTERNATIONAL COMPULSORY LICENSING DISPUTES.

• Author: McKenzie, Karen

Introduction I. Balancing Equities: Patent Holders vs. third World Consumers II. The History of Compulsory Licensing III. Enforcement IV. Georgia-Pacific Framework for Compulsory licensing Disputes Conclusion Introduction

According to the United States Patent Act, a patent holder is granted exclusivity for twenty years. (1) Within this bundle of exclusive rights is the right to make, use, offer for sale, sell, or import into the United States. (2) In addition, it provides for the exclusive right to license the use of a named and described invention. (3) However, the exception to these rights is compulsory licensing. (4) Compulsory licensing operates when government authorities license a patent, under certain conditions, without the patent holder's permission. (5) On the international stage, the original authority is the Paris Convention for the Protection of Industrial Property (the "Paris Convention"), which protects patents filed in a foreign country where the patented product or process is marketed and sold. (6)

"The Paris Convention has been revised from time to time.... Each of the revision conferences, starting with the Brussels Conference in 1900, ended with the adoption of a revised Act of the Paris Convention." (7) With a few exceptions, (8) all those earlier Acts are still current and form the legal basis of the Trade Related Aspects of Intellectual Property ("TRIPS") Agreement. (9) The World Trade Organization (the "WTO") adopted the Declaration on the TRIPS Agreement and Public Health (the "Doha Declaration") in 2001, which reaffirmed compulsory licensing as a way to combat global public health issues of access to medicines in low- and middle-income countries ("LMICs"). (10) Notably, India and China have been late additions to the early agreements but extremely punctual in adopting the Doha Declaration, which allows broader compulsory licensing. (11)

This paper will examine the challenges of international compulsory licensing by examining the issue historically and legally as well as offer possible solutions. Thus, this paper will explore the challenge of balancing corporate interests against the affordability and availability of pharmaceuticals by focusing on discrete situations in developing countries, the history of compulsory licensing, and how the World Health Organization (the "WHO") and the WTO have attempted to tackle these challenges through compulsory licensing, and it will suggest a possible framework for use in arbitration, which balances equities through a Georgia-Pacific analysis.

Part I discusses the equities of patent owners versus consumers who live in developing countries. Part II discusses the history of compulsory licensing. Part III reviews some of the WTO's attempts to settle international disputes, along with the financial implications of settlement with individual countries on a case-by-case basis. Part IV examines how Georgia-Pacific (12) can be used as a guide for arbitration in international patent disputes in compulsory licensing as applied to some discrete compulsory licensing cases.

1. Balancing Equities: Patent Holders vs. Third World Consumers

   The affordability and availability of pharmaceuticals are often viewed, and generally framed, as one of supply and demand; yet the issue is much more complicated than that. (13) The cost of bringing a single drug to market is staggering. (14) The cost to bring one new drug to market is now estimated at more than 2.6 billion dollars. (15) Most companies seek to recoup these research and development expenses after a drug becomes successful in the marketplace. (16) This success also has to offset the expenses of complex double-blind clinical trials, the greater focus on chronic and degenerative diseases, and test-seeking to demonstrate comparative drug effectiveness data. (17) In addition to these costs, the cost of drugs that are unsuccessful must also be figured into the analysis. (18)

   In stark contrast to corporate billions spent on pharmaceutical development are individual consumers in impoverished developing and third-world countries with limited resources to spend on medicines. (19) In LMICs, up to 90% of the population pays for medicine on an out-of-pocket basis; it is the largest household expense after food. (20) The burden is especially great for a family needing treatment for several conditions at the same time. For example, using the lowest priced generic medicines would take at least 17 days' wages for the lowest paid, unskilled government worker to purchase medicine for a child with asthma, or an adult with diabetes, or an adult with a peptic ulcer. (21) When one examines utilizing treatment with an innovative brand, it would require 106 days' salary for a month's worth of treatment. (22)

   According to the WHO, generic medicines can range from 1.9 to 3.5 times the International Reference Price (the "IRP"), while in India, for example, essential medicines cost between 1.6 to 2.3 days' wages for the lowest-paid government worker--and 80% of the population earns less than this wage. (23) In these countries, medicine accounts for 20% to 60% of health spending compared to 18% in countries with more advanced economic development. (24) This means that for over 90% of the population in developing countries, medicine is no longer affordable, and the cost is a major burden on government budgets. (25)

   In India, for example, the cost of asthma medicine can amount to nearly three days' wages for a government worker. (26) However, as previously mentioned, most of the population earns less than an average government worker. (27) In terms of availability, Beclomethasone (28) and Salbutamol (29) were available in only 25% to 30% of the public health care facilities in only one of the five Indian states included in the study. (30) The price of these medications was 0.74 and 0.56 times higher than the IRP. (31)

   When it comes to an integrated delivery system, like an inhaler, the availability of asthma medicine continues to plummet. In India, the availability of inhalers was poor in the private sector of four of the states studied, with some as low as only 10% of the private facilities having access to inhalers. (32) Moreover, when it comes to price, Beclomethasone was 0.87 to 1.49 times higher than the IRP, and Salbutamol was 0.86 to 1.12 times higher than the IRP. (33) Thus, essential medicines for asthma, which are used daily and on a long-term basis, are unaffordable. (34) Finally, in the public sector, where low-income populations seek treatment, "[s]teroid inhalers were not [as] readily available [as] in the private sector." (35) Thus, essential asthma medicines were either unaffordable for the majority of the population (36) and/or largely unavailable for the low-income population. (37) Consequently, it becomes difficult to strike a balance between pharmaceutical companies' interests in their patents--and related income streams that fund new research and development--and individual countries' public health concerns exacerbated by the weaknesses within their economies. For these reasons, an enormous tension exists between the rights of the international patent holder and the public health needs within developing and third-world countries.

2. The History of Compulsory Licensing

   Meanwhile, the subject of compulsory licensing has rarely surfaced in the United States in association with pharmaceutical patents. (38) This is largely due to the public interest, property rights, and the perception that it would impact future research and development. (39) Some have argued that corporate interests in the United States outweigh individual interests. Lobbying by large corporations generally overshadows individual and small-group lobbying efforts by consumers. (40) However, on an international level, due to the large disparity in cost and unavailability, developing countries are seeking compulsory licenses of pharmaceuticals. (41) This disparity between the cost and availability of pharmaceuticals was never more apparent than during the AIDS epidemic in Sub-Saharan Africa, like Kenya, for example. (42) At that time, the WTO called compulsory licensing and access to AIDS medications a pressing public health issue. (43) In fact, other countries like Canada temporarily manufactured some AIDS and anti-malaria medicines in response to this public health issue and exported them to African countries under a compulsory licensing scheme. (44) The program was later rescinded. (45)

   Many impoverished third-world countries have made compelling cases for the expansion of compulsory licensing as a public health initiative. (46) The past ten years have seen the introduction of several initiatives to support countries in managing pharmaceutical prices. (47) However, it was felt that special consideration was needed in low-income and developing countries, in which the pharmaceutical sector was less regulated. (48)

   Eventually, a committee of countries was formed at the WTO Ministerial Conference to address the issue over a period of several years. (49) This committee of countries, working under the auspices of the WTO, determined that the public health issues in the countries seeking a compulsory license is of greater importance than the rights of an individual corporate patent holder. (50) Countries such as India, Canada, Mexico, Qatar, and several Sub-Saharan countries, and even China, have been seeking compulsory licenses. (51) Each of these countries has been lobbying the WTO to expand the compulsory licensing on several classes of pharmaceuticals. (52)

   By 2001, via the Doha Declaration, a compulsory licensing exception was allowed under the TRIPS Agreement--provided that certain procedures and conditions were fulfilled. (53) These criteria are the following: (1) a generic copy of a drug is produced mainly for the domestic market of that country; (2) it should not be made for export; (3) used for a pressing public health need or emergency...