TRIPS Article 31bis: Regional Trade Agreements and Compulsory Licensing

Quick answer

TRIPS Article 31bis facilitates the export of pharmaceutical products produced under compulsory licences to eligible importing members, including those within certain regional trade agreements. This provision eases patent restrictions to improve access to medicines while ensuring remuneration to patent holders ^[1].

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Key takeaways

• Article 31bis allows compulsory licensing for pharmaceutical exports to eligible importing members without applying usual patent restrictions under Article 31(f) of TRIPS ^[1:1].
• Adequate remuneration must be paid in the exporting Member, considering the economic value to the importing Member ^[1:2].
• Developing and least-developed countries in regional trade agreements (RTAs) can export to each other under special conditions to address shared health problems ^[1:3].
• Patent rights remain territorial, and measures taken under Article 31bis are protected from challenge under GATT dispute provisions ^[1:4].
• EU businesses involved in exporting or importing pharmaceuticals under compulsory licences must comply with the specific procedural and documentation requirements set by the relevant national authorities ^[1:5].

Scope of TRIPS Article 31bis for EU Businesses

Article 31bis of the TRIPS Agreement amends the original Article 31 to address the challenges faced by countries lacking sufficient manufacturing capacity to produce pharmaceutical products domestically. It establishes a system under which an exporting Member State can grant a compulsory licence to produce and export pharmaceutical products to an eligible importing Member without being subject to the usual restrictions under Article 31(f) of TRIPS ^[1:6].

For EU businesses, this means that when operating within the EU single market, which is a customs union and a single regulatory space, the export of pharmaceuticals under compulsory licences must respect the conditions of Article 31bis. This includes confirming that the importing country is eligible under the system and ensuring that the export complies with the terms set out in the Annex to the TRIPS Agreement. The EU Member State granting the compulsory licence must ensure that adequate remuneration is paid to the patent holder, reflecting the economic value of the use authorised ^[1:7].

The system is designed to facilitate access to medicines for countries that cannot produce them domestically, while maintaining respect for patent rights and ensuring fair compensation. EU companies involved in manufacturing or exporting pharmaceuticals under compulsory licences must coordinate with the relevant national competent authority to ensure compliance with these obligations.

Exporting Pharmaceutical Products Under Compulsory Licences

Under Article 31bis, an exporting Member may grant a compulsory licence specifically for the production and export of pharmaceutical products to an eligible importing Member. This licence exempts the exporting Member from the obligation under Article 31(f) that normally restricts exports of products made under compulsory licences to the domestic market only ^[1:8].

In practice, EU exporters must:

• Obtain a compulsory licence from the competent authority in the exporting Member State.
• Ensure the licence specifies that the production is for export to an eligible importing Member.
• Pay adequate remuneration to the patent holder, considering the economic value to the importing Member.
• Comply with documentation and notification requirements as set out in the Annex to the TRIPS Agreement.

The licence must also clearly state the quantities and pharmaceutical products covered, and the exporting Member must notify the WTO of the grant of the licence and the terms of the export ^[1:9].

This system allows EU pharmaceutical manufacturers to contribute to global public health by exporting medicines under compulsory licences to countries in need, while respecting the legal framework established by TRIPS.

Special Provisions for Developing and Least-Developed Countries in RTAs

Article 31bis includes a specific provision recognising the role of regional trade agreements (RTAs) involving developing and least-developed countries. Where such countries are parties to an RTA that meets the criteria of Article XXIV of GATT 1994 and the Decision of 28 November 1979 on Differential and More Favourable Treatment, reciprocity and fuller participation of developing countries, the obligation under Article 31(f) does not apply to the extent necessary to enable pharmaceutical products produced or imported under a compulsory licence to be exported to other developing or least-developed country parties to the same RTA that share the health problem in question ^[1:10].

This provision aims to harness economies of scale, enhance purchasing power, and facilitate local production within such regional trade agreements. It enables a more flexible and efficient distribution of medicines among countries facing similar health challenges.

For EU businesses, this means that when dealing with pharmaceutical exports to developing or least-developed countries within an RTA framework, the usual patent restrictions may be relaxed to allow intra-regional exports under compulsory licences. However, this does not affect the territorial nature of patent rights, which remain respected.

Understanding the specific RTA memberships and their composition regarding least-developed countries is essential for compliance and to maximise the benefits of this provision.

Impact on Patent Rights and Remuneration Obligations

While Article 31bis facilitates compulsory licensing and export of pharmaceuticals, it maintains important safeguards for patent holders. The obligation to pay adequate remuneration to the patent holder remains, with the amount to be determined by the exporting Member, taking into account the economic value of the use authorised to the importing Member ^[1:11].

If a compulsory licence is also granted in the importing Member for the same products, that Member is exempted from paying remuneration under Article 31(h) for those products, provided remuneration has been paid in the exporting Member ^[1:12].

The territorial nature of patent rights is explicitly preserved, meaning that the compulsory licence granted in one Member does not affect patent rights in another Member outside the scope of the licence.

Furthermore, measures taken in accordance with Article 31bis and its Annex cannot be challenged under dispute settlement provisions of the GATT 1994, providing legal certainty for Members and businesses operating under this system ^[1:13].

EU businesses must ensure that remuneration is properly calculated and paid and that the scope of the compulsory licence is strictly adhered to, to avoid infringement of patent rights and potential disputes.

Safeguarding Public Health Flexibilities

Article 31bis is designed to support public health objectives by enabling access to affordable medicines while balancing patent rights. It operates alongside other TRIPS flexibilities reaffirmed by the Doha Declaration on the TRIPS Agreement and Public Health, which EU Members respect ^[1:14].

The Article explicitly states that it is without prejudice to other rights, obligations, and flexibilities under TRIPS, including those related to public health. This means that EU businesses can rely on these flexibilities when involved in compulsory licensing and export of pharmaceuticals, provided they comply with the procedural requirements.

The system also recognises the importance of addressing shared health problems within regional trade agreements, facilitating cooperation among developing and least-developed countries.

EU companies should be aware of these flexibilities and how they interact with national laws and EU regulations to ensure that their activities contribute to public health goals without infringing intellectual property rights.

Compliance Considerations for EU Exporters and Importers

EU businesses involved in exporting or importing pharmaceuticals under compulsory licences must navigate a complex regulatory landscape to remain compliant with Article 31bis and related provisions.

Key compliance considerations include:

• Verifying the eligibility of the importing Member under the Article 31bis system.
• Ensuring that the compulsory licence is granted by the competent authority in the exporting Member State and covers the intended export.
• Calculating and paying adequate remuneration to the patent holder in the exporting Member.
• Maintaining detailed documentation of the quantities, products, and terms of the licence.
• Notifying the WTO and relevant national authorities as required.
• Understanding the implications of regional trade agreements when exporting to developing or least-developed countries within such agreements.
• Monitoring the scope of the licence to avoid unauthorised use or diversion of pharmaceutical products.

The relevant national competent authorities in the EU Member States are responsible for granting compulsory licences and overseeing compliance with Article 31bis. Businesses should engage proactively with these authorities to ensure all procedural and substantive requirements are met.

Failure to comply can lead to legal challenges, reputational damage, and disruption of supply chains. Therefore, a thorough understanding of Article 31bis and its application within the EU context is essential for pharmaceutical exporters and importers.

Next steps

1. Confirm whether your pharmaceutical products fall under the scope of compulsory licensing under Article 31bis and identify the relevant patent rights involved.
2. Verify the eligibility of the importing Member, including whether it is part of a qualifying regional trade agreement for special provisions.
3. Obtain the compulsory licence from the competent authority in the exporting EU Member State, ensuring it specifies export to the eligible importing Member.
4. Calculate and arrange for adequate remuneration to the patent holder, documenting the basis for the amount paid.
5. Prepare and submit all required notifications and supporting documentation to the relevant national authorities and the WTO.

FAQ

What do you mean by regional trade agreements?
Regional trade agreements (RTAs) are treaties between two or more countries within a specific region that facilitate trade by reducing tariffs and other barriers. Under TRIPS Article 31bis, RTAs involving developing or least-developed countries can enable more flexible compulsory licensing arrangements for pharmaceutical products ^[1:15].

What is the difference between RTA and FTA?
An RTA is a broader category of trade agreements that may include customs unions or common markets, while a Free Trade Agreement (FTA) specifically focuses on reducing tariffs and trade barriers between the parties. Article 31bis refers to RTAs as defined under Article XXIV of GATT 1994, which includes FTAs and customs unions ^[1:16].

What is an example of a regional trade agreement?
Examples of RTAs include the African Continental Free Trade Area (AfCFTA) and the Association of Southeast Asian Nations (ASEAN) Free Trade Area. These agreements may include developing and least-developed countries that benefit from the special provisions of Article 31bis ^[1:17].

Who is an eligible importing member under TRIPS Article 31bis?
An eligible importing Member is a WTO Member that has notified the TRIPS Council of its intention to use the system established by Article 31bis to import pharmaceutical products produced under compulsory licences. This includes developing and least-developed countries with insufficient or no manufacturing capacities in the pharmaceutical sector ^[1:18].

Sources

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1. Protocol amending the TRIPS Agreement, Article 31