Arbitration Over Litigation: An Alternative for Compulsory Licensing Disputes?

Introduction

The tension between intellectual property rights (IPR) and right to human health is one of the most politically influenced challenges in modern public international law. The central and fundamental inconsistency within this conflict is that the patent system designed for the very purpose of encouraging innovation of vital drugs, renders them inaccessible and unaffordable especially for those who need it the most, showing a direct link amongst patents, prices and public health.[1] This conflict between IPR and right to human health was noted by the HIV/AIDS crisis, causing a reduction in the price by 98% of the antiretroviral therapy by the Indian generic production.[2] This crisis illustrates the very fact that patent protections are consistently obstructing access to medicines.

The TRIPS Agreement as established by World Trade Organization (WTO) not only formalized patent protection but also ensured a vital protective mechanism for governments, namely compulsory licensing. This regulatory mechanism enables a state to set aside exclusive patent rights and mandate the production of a comparatively affordable version of medicines and vital drugs for the purpose of public health.[3] While conceptually this mechanism balances the private rights of innovator and right to human health, when it comes to reality, this mechanism fails to uphold its very purpose constrained by existing legal systems. As soon as there arises a circumstance when a developing country calls for the issuance of compulsory licensing, it is often accompanied by complicated and timely litigation process which is biased towards influential patent holders. This research essentially uncovers the question, whether national courts that are overloaded with pending matters and limited technical capability resolve these immediate disputes or does there exist an alternative forum for addressing these disputes in a better manner?

Litigation as an offensive tool: the problem with the current framework

In various developing countries, the process of issuance of compulsory licensing is overflowing with legal and political barriers. Country specific patent statutes, which are drafted under the obligations imposed by TRIPS Agreement, has led to creation of procedures that are “cumbrous” and “excessively legalistic”.[4] These complex and multilayered procedures support and aid dominant patent holders to readily exploit the law and the process of litigation, efficiently delaying the public health measure equipped by the government.⁴ While this can be misinterpreted to be a speculative risk, it does not seem to be the case. According to India’s pre-1970 patent law, it has been observed that the current framework is rarely effective and can discourage generic producers to even apply for the issuance of compulsory licensing due to the fear of being trapped under highly costly legal proceedings.⁴

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The political pressure behind the disputes related to IPR and right to human health, is a result of policy driven project initiated by developed nations, especially the United States. The risk of one-sided trade restrictions under “Special 301” law enforced this “technological protectionism”.[5] This is reality rather than a theoretical illusion, as in the case of South Africa attempting to source accessible and affordable HIV/AIDS medicines towards the end of the 1990s which clearly illustrates the political pressure faced by the developing countries. While South Africa’s 1997 Medicines Act enables issuance of compulsory licensing and parallel importation, it still faced lawsuits from 39 pharmaceutical companies along with substantial political coercion from the U.S. government, thus placing the country under the Special 301 watch list.⁵ South Africa was cleared off the radar due to extensive international campaign by NGOs leading to the lawsuit being withdrawn.⁵ This action clearly illustrates how this favorable outcome was only attained through participating in the political domain and not in the courtroom.⁵

Arbitration as the embodiment of efficiency and neutrality

The challenges faced using litigation as the forum for addressing these disputes can be overturned by international arbitration which serves as a convincing alternative. International arbitration is usually related to investor-state disputes but it’s core elements can be used to create a balanced and nuanced forum for addressing conflicts surrounding compulsory licensing. Firstly, patent protection conflicts include complicated legal, financial and technological questions that are exceeding the expertise of the generalist judges. Arbitration, however, allows for the appointment of the arbitrators based on their expertise in areas like public health, economics and patent law.[6] Secondly, the litigation process always holds the risk of delay and appeal, thus jeopardizing public health outcomes. On the other hand, Arbitration provides binding awards that are often pronounced in a faster and swift manner.[7]

Thirdly, developing countries often face hardships in identifying a neutral forum when facing powerful MNCs. International arbitration upholds neutrality, effectiveness and enforceability, thus serves as the most apt forum for addressing cross border disputes.[8] Arbitration may not overcome the political affairs, but it still serves effective as compared to national court proceedings in resolving immediate political pressures and trade retaliation disputes.

Regulatory barriers: can arbitration be applied to matters of sovereignty?

The core issue in applying arbitration to disputes related to compulsory licensing is due to the problem of arbitrability. Patent protections and their exceptions are under the acts of sovereign authority of the state, thus grounded in public policy. Due to this issue of compulsory licensing disputes being solely linked to public interest, such disputes can only be examined by national courts and not a panel of arbitrators.[9]

This hurdle is not absolute, an arbitral award concerning a compulsory license dispute does not necessarily need to nullify a patent for the globe entirely but rather the extent of such limitation could be among the two contesting parties, as held in the inter parties’ principle.⁹ The order as issued by the tribunal can be adapted only to specific prominent features like verifying what are the components to an adequate remuneration for patent owner under Article 31(h) of the TRIPS Agreement.⁹ Similarly, this adaptation can also be catered to analyzing the declaration of the national emergency by the government and the “reasonable commercial terms” to be offered prior to the issuance of compulsory licensing.⁹ By scrutinizing on the specialized aspects of the dispute, arbitration can evolve as an efficient mechanism of resolving compulsory licensing disputes without overriding the state’s supreme authority to protect its population.

Towards resolution: a tailored forum for dedicated issues

The TRIPS Agreement ensures that there exists legal mechanisms for compulsory licensing, however the current framework for the same is entailed with immense procedural and political barriers. Through enabling specialized global settlement framework for compulsory licensing, a true flexibility as against patent protections is rendered upon developing countries. This authoritative body should be equipped with pre-qualified arbitrators of expertise especially in factors like international law, health protection, IPR and finance. The TRIPS framework appears to be inadequate on its own and through implementing this global settlement framework and calling for hard law resolutions like legally binding treaty for public health emergencies, an imperative procedural reform is established.[10]

Through this advanced arbitral forum, national courts will not be overburdened with multiple disputes and a balance between encouraging innovation and right to human health is carried out with impact, in a fair and effective manner. Thus, the loss of lives during legal proceedings represents a cost that no system ought to accept.

Author: M. Sreenidhi, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney. 

[1] Mahima Kejriwal, "Intellectual Property Rights as Human Rights- An Analysis," 2 INDIAN J. INTEGR. RSCH. L. 1, 1-11 (2022).

[2] Subramanya Sirish Tamvada, "TRIPS and Human Rights: The Case of India," 2 JINDAL GLOBAL L. REV. 131, 131-152 (2010).

[3] Viviane Yumy Mitsuuchi Kunisawa, "THE FRAMEWORK OF TRIPS," in THE TRIPS AGREEMENT IMPLEMENTATION IN BRAZIL: PATENTS IN THE PHARMACEUTICAL AREA 23, 23-86 (2015).

[4] Sudip Chaudhuri, "TRIPS Agreement and Amendment of Patents Act in India," 37 ECON. & POL. WKLY. 3354, 3354-3360 (2002).

[5] Anna Lanoszka, "The Global Politics of Intellectual Property Rights and Pharmaceutical Drug Policies in Developing Countries," 24 INT'L POL. SCI. REV. 181, 181-197 (2003).

[6] John F. Robb, "Arbitration Procedure Compared with Court Litigation in Patent Controversies," 17 LAW & CONTEMP. PROBS. 679, 679-697 (1952).

[7] Anita Stork, "The Use of Arbitration in Copyright Disputes: IBM v. Fujitsu," 3 HIGH TECH. L.J. 241, 241-265 (1988).

[8] Andrew Myburgh And Jordi Paniagua, "Does International Commercial Arbitration Promote Foreign Direct Investment?," 59 J.L. & ECON. 597, 597-627 (2016).

[9] Wei-Hua Wu, "International Arbitration of Patent Disputes," 10 J. MARSHALL REV. INTELL. PROP. L. 384, 384-406 (2011).

[10] Chelsea Bodimeade And Felicity Deane, "Evolving theory of IP rights: promoting human rights in the Agreement on Trade-Related Aspects of Intellectual Property Rights," 18 J. INTELL. PROP. L. & PRAC. 603, 603-614 (2023).