2.1. WTO/TRIPS for public health

Although public health might not appear to be one of its key concerns, the WTO has kept it in focus. Setting ‘to raise standards of living’ as one of its objectives, the WTO regime must be concerned with public health as a core aspect of this goal.Footnote ¹³ ‘[W]ith its competence well established over trade in products and services’, as Jackson suggests, the WTO indeed ‘has considerable relevance to health issues’.Footnote ¹⁴ Through dealing with ‘product safety and health related to foodstuffs and animal health’ in the Sanitary and Phytosanitary (SPS) Agreement and by ‘creat[ing] norms relating to product standards in other types of goods’ in the text on Technical Barriers to Trade (TBT), the WTO's role in health is evident.Footnote ¹⁵ According to GATT 1994, WTO members are free to adopt or enforce measures ‘necessary to protect human, animal or plant life or health’ in a manner consistent with WTO requirements.Footnote ¹⁶ Therefore, promoting public health is indeed one of the WTO's imperatives.

Among other WTO agreements, the TRIPS Agreement is institutionally structured to play a prominent role in relation to public health under the WTO framework. TRIPS’ Preamble states that members desire ‘to establish a mutually supportive relationship’ between the WTO and the World Intellectual Property Organization (WIPO), and other relevant international organizations.Footnote ¹⁷ This was considered to include ‘urging greater cooperation with UNCTAD, the World Health Organization (WHO) and other institutions that pursue broad developmental interests’.Footnote ¹⁸ The TRIPS’ ‘greater cooperation’ with the WHO of course provides a significant international framework for addressing public health issues.

Indeed, the TRIPS Agreement makes indirect or direct references to public health in the provisions illustrating exhaustion, compulsory licensing, and TRIPS principles. As to exhaustion of rights, the TRIPS Agreement states that nothing in the TRIPS Agreement ‘shall be used to address the issue of the exhaustion of intellectual property rights’.Footnote ¹⁹ The purpose of this provision, according to the 2001 Doha Declaration, ‘is to leave each member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4’.Footnote ²⁰ Parallel imports under this doctrine ‘may prevent market segmentation and price discrimination by titleholders on a regional or international scale’, which is ‘of particular importance in the health sector’.Footnote ²¹ TRIPS’ liberal perspective towards exhaustion therefore gives flexibility to national governments to establish relevant mechanisms to address public health concerns.

Moreover, the TRIPS Agreement implicitly touches the issue of public health in its regulation of the compulsory licensing practice. According to the Agreement, members are free to authorize any third parties or to permit government the ‘use of the subject matter of a patent without the authorization of the right holder’ if certain conditions are met.Footnote ²² The conditions include limiting it to domestic use and adequate remuneration paid.Footnote ²³ Commonly known as the compulsory licensing clause, this provision clarifies the conditions for the grant of compulsory licenses and allows members to address public health concerns through restraining the exercise of those private rights residing in the grants of patents.Footnote ²⁴

In addition to the indirect reference, the TRIPS Agreement makes direct reference to public health when it identifies its principles. Intellectual property protection and enforcement, as the TRIPS Agreement indicates, ‘should contribute to . . . the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare’.Footnote ²⁵ Under this objective, the TRIPS Agreement states:

In this provision, the TRIPS Agreement clearly sets protection of ‘public health and nutrition’ as one of the fundamental principles of the regime. Similar to the way the General Exception provision Article XX functions in relation to the rest of the GATT 1994, Article 8.1 is about external exceptions and limitations ‘that concern the use of rights, not the rights themselves’ throughout the TRIPS Agreement.Footnote ²⁷ As the Panel in EC – Trademarks and Geographical Indications suggested, TRIPS’ negative, instead of positive, rights granting feature ‘inherently grants Members freedom to pursue legitimate public policy objectives’ and many of such measures to attain those public policy objectives ‘do not require an exception under the TRIPS Agreement’.Footnote ²⁸

Accordingly, to ‘protect public health’ would be one of the justifications of general exceptions to intellectual property rights as long as it was in a manner consistent with the TRIPS Agreement. For the issue of patentable subject matter for example, the TRIPS Agreement thus allows members to exclude certain inventions from patentability for the purpose of offering protection to ‘human, animal or plant life or health’.Footnote ²⁹ Therefore, the objectives and principles as expressed in Articles 7 and 8.1 of the TRIPS Agreement clearly accommodate the interests of public health and should not be interpreted lightly.Footnote ³⁰ In fact, it has also been similarly reiterated in the Doha Declaration, that ‘each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles’.Footnote ³¹ The WTO panel's practice too confirmed this. In its discussion of the limiting conditions of adopting the patent right exceptions prescribed in Article 30 of the TRIPS Agreement, the Panel in Canada – Pharmaceutical Patents states that, when examining the limiting conditions, ‘[b]oth the goals and the limitations stated in Articles 7 and 8.1 must obviously be borne in mind’.Footnote ³²

However, the WTO in general or the TRIPS in particular may care about public health, yet might not provide enough assurance to promoting public health. There thus exists a tension between the international trading framework and domestic mechanism addressing public health concerns. As seen in the SPS Agreement revealed by Jackson for example, there is a tension in the WTO framework between reconciling ‘international goals of liberalizing trade and thus requiring scientific evidence of potential harm (to avoid barriers that are really due to protectionist motives)’ with each member's ‘sovereign right to determine the level of risk which should be tolerated in its society’.Footnote ³³ Similarly as pointed out by the Appellate Body in Brazil – Retreaded Tyres, the general exception for health protection under GATT 1994 ‘illustrates the tensions that may exist between, on the one hand, international trade and, on the other hand, public health and environmental concerns’.Footnote ³⁴ The tension between international trade and public health is particularly relevant to the debates surrounding the compulsory licensing issue in the TRIPS framework.

2.2. The TRIPS Amendment's public health ‘flexibility’

Although there were some disagreements between developed and developing members in regards to bringing intellectual property rights into the trading regime in the Uruguay Round Negotiation, TRIPS’ conclusion indicated the success of the ‘US-led effort’ in overcoming developing members’ concerns over public health.Footnote ³⁵ However, during TRIPS’ post-Uruguay implementation, developing countries’ concerns in the Uruguay Round were soon being realized, and ‘[t]he TRIPS Agreement would in fact be invoked to prevent them from addressing their public health needs’.Footnote ³⁶ Developing countries’ concerns evolved over the years and Zimbabwe's request on behalf of the African Group at a TRIPS Council meeting in 2001 triggered discussion on access to medicines, which eventually led to the 2001 Doha Declaration.Footnote ³⁷

The 2001 Doha Declaration is ‘a significant milestone’ addressing developing country concerns regarding access to medicines and TRIPS.Footnote ³⁸ According to the Declaration, the TRIPS Agreement ‘does not and should not prevent members from taking measures to protect public health’, rather ‘can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all’.Footnote ³⁹ Most importantly, the Declaration states:

TRIPS’ perspective towards compulsory licensing as reflected in the Doha Declaration remains quite ‘conservative’. According to the Doha Declaration, each WTO member ‘has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted’.Footnote ⁴¹ This seems to indicate that the compulsory licensing domain falls completely within the domestic government's authority. Similarly, as to what constitutes national emergency or extreme urgency, the Doha Declaration states that each member has the complete right of determination.Footnote ⁴² So far there remains a delicate international-domestic balance: while members’ right of resorting to compulsory licensing is justified under international framework, how intellectual property rights are treated for public health considerations and under what circumstances remain issues of domestic law. This international-domestic balance as to compulsory licensing is consistent with the Paris Convention that permits compulsory licensing yet neither limits the grant of compulsory licenses nor establishes any right to remuneration on behalf of patent right holders, rather leaves them solely to domestic authorities.Footnote ⁴³

The delicate balance soon came to an end when the international trading regime details treatments of intellectual property rights under TRIPS’ 2003 Waiver and then the 2005 Amendment. In August 2003, the WTO General Council came to a decision on the implementation of this instruction of the Ministerial Conference, the TRIPS Waiver.Footnote ⁴⁴ Under the TRIPS Waiver, if any member grants a compulsory license to produce pharmaceutical products for the purpose of exporting to any least-developed country member or any other member ‘has insufficient or no manufacturing capacities in the pharmaceutical sector for the product(s) in question’, the TRIPS obligation of limiting compulsory licensing products to domestic use will be waived.Footnote ⁴⁵ Under this TRIPS Waiver system, the ‘adequate remuneration’ that the exporting member paid will need to ‘tak[e] into account the economic value to the importing member of the use that has been authorized in the exporting member’.Footnote ⁴⁶ At the same time, the TRIPS obligation of the importing member to pay the right holders adequate remuneration will be waived.Footnote ⁴⁷ By shifting remuneration claim from both importing and exporting members to exporting member only, the TRIPS Waiver therefore steps into the domestic realm of private rights treatment. While the Declaration bears significant ‘interpretative value’ yet does not change the TRIPS Agreement, the Waiver ‘necessitated a far more “drastic” legal solution that would allow members to do something that was not allowed under the TRIPS Agreement’.Footnote ⁴⁸ The delicate international-domestic balance in the Doha Declaration is thus broken.

The TRIPS Waiver establishes a detailed and complex mechanism to ‘facilitate’ public health flexibility. First of all, the Waiver has a limited scope of application as it, in general, applies only to patented pharmaceutical products ‘needed to address the public health problems as recognized in paragraph 1 of the [Doha] Declaration’.Footnote ⁴⁹ This text is actually a compromise after going through fierce debates between developing and developed countries – the US in particular – as to the scope-of-diseases issue, i.e., whether the Waiver should only be applicable to a list of diseases or not.Footnote ⁵⁰ Although it has now been generally recognized that the disease scope of the Waiver is flexible,Footnote ⁵¹ Canada, as the first developed country to use this Waiver for export, prescribed a list of limited pharmaceutical products eligible for export under license in its legislation to implement the Waiver.Footnote ⁵² Secondly, the Waiver limits the scope of benefited countries as it confines eligible importing countries to least developed countries and any other country that ‘has established that it has insufficient or no manufacturing capacities in the pharmaceutical sector for the product(s) in question’.Footnote ⁵³ It is worth mentioning here that the limited country scope of importing members was to ‘compensate’ for the failure to limit the scope of diseases and ‘interest in limiting the prospective importing countries was consistent with a general interest in limiting the use of the [waiver] system’.Footnote ⁵⁴ Thirdly, the Waiver established a detailed procedure to regulate any member's use of the system as an importer. A member must satisfy certain procedural requirements, including submitting a one-time notification to the TRIPS Council of its interest, and the ‘insufficient or no manufacturing capacity’ determination made.Footnote ⁵⁵ Moreover, the assessment on manufacturing capacity must be based on ‘a product-by-product’ basis rather than on a sectoral basis.Footnote ⁵⁶ Fourthly, the use of the waiver system is subject to good faith and transparency checks. According to the statement of the Chairman of the Council for TRIPS, the waiver system ‘should be used in good faith to protect public health and, without prejudice to paragraph 6 of the [Doha] Decision, not be an instrument to pursue industrial or commercial policy objectives’.Footnote ⁵⁷

Undoubtedly, the TRIPS Waiver attempted to offer a solution to public health crises. As Abbott suggests, the TRIPS Waiver ‘represents a success for developing countries in the pursuit of their public health agenda at the WTO’.Footnote ⁵⁸ Later on in December 2005, the WTO General Council agreed to make health flexibility permanent by incorporating the TRIPS Waiver into the TRIPS regime through an amendment.Footnote ⁵⁹ According to this decision, the Protocol Amending the TRIPS Agreement will insert Article 31bis after Article 31 and insert an explanatory Annex to the TRIPS Agreement after Article 73.Footnote ⁶⁰ The Protocol prohibits reservations and originally was open for acceptance by members until 1 December 2007.Footnote ⁶¹ The deadline for member acceptance was extended five times and the latest General Council decision of 30 November 2015 extended the acceptance deadline to 31 December 2017.Footnote ⁶² So far there are 93 – including 28 EU member states – out of 162 WTO members that have accepted the Protocol.Footnote ⁶³ As the current acceptance is still far below the two-thirds majority as required under the WTO Agreement to bring an amendment into effect in the absence of a consensus, the Protocol is still not in effect.Footnote ⁶⁴

The public health flexibilities reflected in the TRIPS Waiver and Amendment were warmly welcomed at the very beginning. More recent assessments, however, ‘have been more equivocal’.Footnote ⁶⁵ The TRIPS Waiver ‘has not been as successful as the WTO had hoped’.Footnote ⁶⁶ There is actually only one successful case under the TRIPS Waiver system by Rwanda in importing TriAvir, a combination AIDS drug from Canada around 2007.Footnote ⁶⁷ Some suggest that the TRIPS Waiver system is far from adequate to tackle current public health crisis of the Ebola epidemic outbreak.Footnote ⁶⁸ The ineffectiveness or even failure of the TRIPS Waiver and Amendment leads us to the issue of the dynamics between compulsory licensing and public health, in particular the nature of TRIPS’ compulsory licensing system. Moreover, breaking the international-domestic balance by allowing the WTO regime to handle ‘private’ intellectual property rights as to compulsory licensing that originally regulated solely by domestic regime, the TRIPS Amendment faces theoretical challenges in international law.Footnote ⁶⁹

3.1. The private rights dilemma and TRIPS’ philosophical paradox

As the analysis above indicates, TRIPS’ treatment of intellectual property rights in compulsory licensing shifts over time. From Doha Declaration to TRIPS Amendment, the classic international-domestic balance was transcended as TRIPS’ international compulsory licensing mechanism steps into issues of procedure, condition and remuneration of pharmaceutical patents that were solely regulated within domestic realm before. We are thus led to the question as to the nature of intellectual property rights under the TRIPS framework.

The TRIPS Agreement indeed spells out its intellectual property philosophy clearly. As to the nature of intellectual property rights, the Preamble of the TRIPS Agreement states that WTO members recognize that ‘intellectual property rights are private rights’.Footnote ⁷⁰ TRIPS’ reference to ‘private rights’ was incorporated into the Agreement at the insistence of the Hong Kong delegation during the TRIPS Agreement negotiations.Footnote ⁷¹ Indeed, in as early as the 1989 submission to the Group of Negotiation on Goods (GATT), the Hong Kong delegation suggested that ‘emphasis should be placed on civil remedies (as distinct from criminal and administrative remedies) on the grounds that intellectual property rights are primarily private rights’.Footnote ⁷² As to the question of the types of procedures to be provided, Hong Kong suggested:

Undoubtedly, the Hong Kong delegation's purpose of referencing to private rights was to clarify that the enforcement of intellectual property rights is the responsibility of private rights holders rather than of governments. Moreover, this enforcement responsibility shifting effect is well reflected in the TRIPS Agreement. The ‘common feature’ of the Sections in Part III of the TRIPS Agreement in resting the responsibility of initiating various protection procedures on private right holders, for example, indicates well ‘the nature of intellectual property rights as private rights’.Footnote ⁷⁴

Recognizing intellectual property rights as private rights not only shifts the responsibility of enforcement to private rights holders from the governments, but also at the same time creates a barring effect against unwanted government actions. This is because the private right nature means that limits are set on third parties and even public authorities, preventing them from engaging in illegitimate infringement, which also reveals the negative right nature of intellectual property rights. In its examination of the nature of exclusive right conferred under Article 16.1 in EC – Trademarks and Geographical Indications, the Panel suggested that it is an exclusive right that ‘belongs to the owner of the registered trademark alone, who may exercise it to prevent certain uses by “all third parties” not having the owner's consent’.Footnote ⁷⁵ The Panel further confirmed that Article 16.1 ‘only provides for a negative right to prevent all third parties from using signs in certain circumstances’.Footnote ⁷⁶ Therefore, the Panel suggested that ‘the TRIPS Agreement does not generally provide for the grant of positive rights to exploit or use certain subject matter, but rather provides for the grant of negative rights to prevent certain acts’.Footnote ⁷⁷ The private right barring effect, however, has been eroded as TRIPS’ 2003 Waiver and 2005 Amendment stepped into detailing compulsory licensing treatments of private-rights-natured pharmaceuticals that originally fall into the domestic law domain.Footnote ⁷⁸ This erosion further creates a legitimacy issue of the TRIPS Waiver and Amendment in international law.Footnote ⁷⁹

The erosion of private right's barring effect further reveals the paradox of TRIPS’ intellectual property philosophy. In addition to its recognition of intellectual property rights as private and negative rights, the TRIPS Agreement also emphasizes intellectual property rights’ public implications. Indeed, TRIPS’ philosophy is to achieve a balance between rights and obligations in intellectual property rights protection. The TRIPS Agreement states its objective clearly:

For this purpose of balancing rights and obligations, the TRIPS Agreement allows members to adopt measures ‘necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development’, and measures to prevent right holders’ intellectual property rights abuse or anti-competition practices, as long as these measures are TRIPS consistent.Footnote ⁸¹ It is for this purpose of balancing rights with obligations that the TRIPS Agreement provides various exceptions and limitations to the exclusive rights conferred by a copyright, trademark, industrial design, or patent respectively.Footnote ⁸²

However, intellectual property rights’ private right nature and public interest implications do not necessarily reconcile well. Research has shown that the TRIPS is always caught in a paradoxical tension between the protection of private rights and the accommodation of public interests.Footnote ⁸³ In fact, the private right nature might put intellectual property right protection in conflict with third party interests or even public interests. When this kind of situation arises, where to draw the line of balance between the private right holders’ interests and interests of others becomes a significant issue. In China – Intellectual Property Rights, when China invoked the sovereign exception under Article 17 of the Berne Convention to justify its denial of copyright protection to illegal and unconstitutional publications, the Panel rejected China's claim. The Panel suggested:

As the only case touching on the tension between private rights and public interests in the context of the TRIPS Agreement, this case carries significant weight in the WTO's jurisprudence as to TRIPS’ objectives and principles, the balance of rights and obligations in particular. By emphasizing the private rights recital of the TRIPS preamble over the Berne Convention's sovereign exception (incorporated into TRIPS through Art. 9), the WTO Panel shows preference to private rights considerations in the tension between private rights and public interests. Tipping the balance towards private rights may overshadow TRIPS’ objectives and principles in Articles 7 and 8 that are supposed to guide the reading of each provision of the TRIPS Agreement.Footnote ⁸⁵ This tipping of the balance in favour of private rights is as problematic as the 2005 Amendment's breaking private right's barring effect, as both fail to maintain the balance of rights and obligations. It might be more desirable if the Panel could exercise its judicial self-restraint on the issue, as how to limit private rights for public interest within a given country is a constitutional issue that falls into domestic law. Further examination next on the nature and context of compulsory licensing indicates that TRIPS’ philosophy paradox reveals itself in the confusion of taking account of the legitimate interests of third parties in exceptions to various intellectual property rights. While exceptions to trademarks, patents, and industrial designs should take into account the legitimate interests of third parties, exceptions to copyrights are not required to do so in the TRIPS Agreement. TRIPS’ intellectual property philosophy paradox, as will be revealed in the sections next, developed at TRIPS’ founding moment, is indeed its birth defect.

3.2. The nature and context of TRIPS compulsory licensing

While intellectual property rights are recognized as private rights, compulsory licensing is incorporated into the TRIPS regime as one of the exceptions and limitations to intellectual property rights. According to Article 30 of the TRIPS Agreement, members may balance a patent's exclusive rights with certain exceptions. However, TRIPS requires that these exceptions ‘do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties’.Footnote ⁸⁶ Within this context, compulsory licensing is permitted – though not directly mentioned – under Article 31 of the TRIPS Agreement. The TRIPS Agreement itself does not spell out ‘compulsory licensing’ exactly. Rather, it states, if a member ‘allows for other use of the subject matter of a patent without the authorization of the right holder’, requirements like limiting to domestic use and paying adequate remuneration to the right holder should be observed.Footnote ⁸⁷ According to the Panel in Canada – Pharmaceutical Patents, Articles 30 and 31 ‘are linked together’ and ‘both provisions permit exceptions to patent rights subject to certain mandatory conditions’.Footnote ⁸⁸

Compulsory licensing being one of the exceptions and limitations to patent rights provides us with a fundamental framework to examine the nature and boundary of the compulsory licensing regime in TRIPS. The jurisprudence of the exceptions and limitations to various intellectual property rights under TRIPS, and the origin of the patent exceptions in TRIPS in particular, sheds light on the issue. Similar to exceptions to patent rights provided in Article 30, TRIPS regime also provides exceptions to copyrights in Article 13, exceptions to trademark rights in Article 17, and exceptions to industrial designs in Article 26(2) of the TRIPS Agreement. According to the Panel in Canada – Pharmaceutical Patents, the general provision of Article 30 of the TRIPS Agreement ‘was obviously based on the text of Article 9(2) of the Berne Convention’ that deals with copyright exceptions in reproduction of copyright work without permission.Footnote ⁸⁹ The text of the Berne Convention, on which Article 30 was modeled, reads as follows:

Most importantly, as the Panel in Canada – Pharmaceutical Patents rightly pointed out, other exceptions to copyright, trademark, and industrial design in the TRIPS Agreement share the same origin of Article 9(2) of the Berne Convention.Footnote ⁹¹ Moreover, the Panel also noticed that the Berne text was incorporated into Article 30 of the TRIPS Agreement with certain changes.Footnote ⁹² In addition to the final condition of the ‘legitimate interests’ of right holder in Berne text, the TRIPS’ text added that account must also be taken of ‘the legitimate interests of third parties’.Footnote ⁹³ As in exceptions to patent rights, exceptions to trademark rights and industrial designs both added a requirement of account being taken of ‘the legitimate interests of third parties’ in addition to legitimate interests of right holders.Footnote ⁹⁴ In the context of TRIPS, legitimate interests are ‘used to help define the scope of an intellectual property right or rights by helping to ascertain the nature of the rights and carve out the exceptions to what is expressly stated to be a right or rights’.Footnote ⁹⁵ As for the exceptions to trademark rights for example, the TRIPS Agreement states:

However, as for the exceptions to copyright, the TRIPS Agreement closely adopts the text of the Article 9(2) of the Berne Convention and makes no reference to any account of the legitimate interests of third parties.Footnote ⁹⁷ The absence of the reference to the account of legitimate interests of third parties makes it distinctive from the trademark, industrial design and patent exceptions in TRIPS regime. Absent any documentation of the TRIPS negotiations or any WTO jurisprudence to explain the distinction, it is almost impossible to understand what significant implications WTO negotiators intended to attach to this distinction. However, this distinction cannot be a mistake and must mean something, as has been emphasized by the Appellate Body in US – Gasoline stating that any ‘interpretation must give meaning and effect to all the terms of a treaty’.Footnote ⁹⁸ A reasonable interpretation of this distinction would at least mean that there are different limitations and exception to copyright and patent rights, and that the legitimate interests of third parties are present as a limitation to right holder's exclusive rights in patent rights but not copyrights.

According to the Panel in Canada – Pharmaceutical Patents, ‘legitimate interests’ are different from ‘legal interests’ as third parties ‘are by definition parties who have no legal rights at all’ in being able to accomplish the tasks excluded by patent rights.Footnote ⁹⁹ The term ‘legitimate interests’ therefore ‘must be defined in the way that it is often used in legal discourse – as a normative claim calling for protection of interests that are “justifiable” in the sense that they are supported by relevant public policies or other social norms’.Footnote ¹⁰⁰ The Panel thus suggests that the reference to ‘legitimate interests of third parties’ indicates that the term ‘legitimate interests’ should be ‘construed as a concept broader than legal interests’.Footnote ¹⁰¹ As for ‘third parties’, unfortunately, there is not much jurisprudence in this context. The available interpretation can only be found in relation to trademark exceptions. In EC — Trademarks and Geographical Indications, the Panel considered that ‘third parties’ include consumers:

In the same context, ‘third parties’ in the context of Article 17 of the TRIPS Agreement include persons using a geographical indication (GI) in accordance with a GI registration.Footnote ¹⁰³

The above search for the origin of TRIPS’ patent exceptions carries several significant implications. First, there is an important discrepancy as to TRIPS’ intellectual property exception regime. The legitimate interests of third parties should be taken into account in exceptions to trademarks, patents, and industrial designs but not in exceptions to copyrights. Second, the legitimate interests – normative claims which are not of legal interest yet broader than legal interests justifiable by ‘relevant public policies or other social norms’ – of third parties can serve as a limitation to check and balance with the legal interests of right holders. Moreover, third parties could be consumers or users of relevant intellectual property rights. Third, although compulsory licensing as exception justifies legitimate interests of third parties to limit private rights, TRIPS Agreement says nothing about how to limit these private rights. Essentially, limitation of private rights is a constitutional issue falling into the domain of domestic law.

As the legitimate interests of third parties serving as the foundation of exceptions to intellectual property rights are claims justifiable by ‘relevant public policies or other social norms’, the legitimate interests of third parties and public concerns should at least be consistent if not identical with each other. As the Panel pointed out in Canada – Pharmaceutical Patents, the scope and conditions of the patent exceptions ‘must be examined with particular care’, and ‘[b]oth the goals and the limitations stated in Articles 7 and 8.1 must obviously be borne in mind’.Footnote ¹⁰⁴ In the same way public concerns check and balance with private intellectual property rights as prescribed in Articles 7 and 8.1, the legitimate interests of third parties serve as exceptions to various intellectual property rights. It is therefore not surprising to see that confusion as to the jurisprudence of the legitimate third party interests in compulsory licensing clearly reveals TRIPS’ private right philosophy paradox. Indeed, as the section next will indicates, they are sharing the same root of TRIPS’ birth defect.

3.3 The birth defect of the TRIPS agreement

The root of TRIPS’ philosophy paradox and compulsory licensing's jurisprudential confusion as to third party interests can be traced back to the founding moment of the TRIPS regime. Before the introduction of intellectual property rights into the international trading framework through the TRIPS Agreement, intellectual property was still the domain of specialists and intellectual property right producers.Footnote ¹⁰⁵ TRIPS’ incorporation of intellectual property into the international trading framework ‘elicited great concern over its pervasive role in people's lives and in society in general’.Footnote ¹⁰⁶ This incorporation reveals serious international contentions and divides regarding protection between the developed and developing countries. The intellectual property rights divide between the North and the South is evident in TRIPS negotiation, in particular during the process of the formulation of the Preamble and the Objectives and Principles provisions of the TRIPS Agreement.

TRIPS negotiation started at the GATT Ministerial Conference at Punta del Este, Uruguay in September 1986, a critical moment ‘when the negotiations between developed and less-developed countries over the revision of the Paris Convention were deadlocked at WIPO’.Footnote ¹⁰⁷ Before the Uruguay Round, in the 1970s in particular, developing countries focused very much on establishing new rules on a New International Economic Order (NIEO) that depended on greater access to technology protected by intellectual property rights in developed countries. Developed countries, however, have been very much concerned with the WIPO system's failure to provide effective protections to the interests of their technology-based and expressive industries.Footnote ¹⁰⁸ As one of the principle ‘new area’ negotiations in the Uruguay Round, the incorporation of intellectual property rights into international trade was quite controversial and opinions were divided between developing and developed countries.Footnote ¹⁰⁹

The negotiation process of the TRIPS clearly indicates the contentions around intellectual property rights protection between the developed and developing countries. While the draft legal text from developed countries including the EC, the US, Japan, Switzerland, and Australia – the “A” text – emphasizes the domestic enforcement and the applicability of GATT dispute settlement mechanism to TRIPS disputes, a dozen developing countries proposed another legal text – the “B” text – with a focus on maintaining flexibility to implement economic and social development objectives.Footnote ¹¹⁰ At the very beginning of the negotiation, developed countries and a few developing countries were only expecting a Tokyo Round type ‘code’ to be incorporated into the GATT framework. The US proposal submitted to the Group of Negotiation on Goods (GATT) in 1988 for example, suggests as one of the objectives to ‘[e]ncourage non-signatory governments to adopt and enforce the agreed standards for protection of intellectual property and join the [GATT] agreement’.Footnote ¹¹¹ In relation to revision and amendment of the GATT, the US proposed an open mechanism that is able to accommodate future consensus on improved protection for new forms of technology and creativity.Footnote ¹¹²

India, however, submitted a detailed paper indicating a developing country perspective in sharp contrast with US proposal.Footnote ¹¹³ India suggested that only the restrictive and anti-competitive practices of the intellectual property right owners ‘can be considered to be trade-related because they alone distort or impede international trade’.Footnote ¹¹⁴ India therefore suggested that, according to the mandates from the Trade Negotiation Committee, the negotiation on trade-related aspects of intellectual property rights:

Therefore, India concluded that ‘[i]t would . . . not be appropriate to establish within the framework of the General Agreement on Tariffs and Trade any new rules and disciplines pertaining to standards and principles concerning the availability, scope and use of intellectual property rights’.Footnote ¹¹⁶ However, due to the threats of sanctions and implicit dismantling of the GATT, as well as concessions offered by developed countries in other areas like agriculture and textiles, ‘the resistance of developing countries was overcome’.Footnote ¹¹⁷ The final result of the Uruguay Round mirrored the A text and ‘embodied norms that had been accepted by industrialized countries’, and developing countries’ concerns ‘were reflected in large part in two provisions—Articles 7 and 8 [of the TRIPS Agreement]’.Footnote ¹¹⁸

The negotiating process of the compulsory licensing provision Article 31 in TRIPS perfectly reflects this dynamics. Prior to TRIPS, compulsory licensing was indeed a common practice internationally.Footnote ¹¹⁹ The Paris Convention, for example, explicitly states that each country ‘shall have the right to take legislative measures providing for the grant of compulsory licenses’.Footnote ¹²⁰ The negotiation revising the Paris Convention broke down in 1982, ‘in significant part because of competing demands concerning compulsory licensing’ between developing countries’ NIEO demands for technology sharing and developed countries’ demands for stronger protection of proprietary interests of patents.Footnote ¹²¹ India's submission in 1989, for example, proposed a compulsory licensing regime that covers licensing for non-working, and licenses of rights relating to food, medicine, and agricultural chemicals.Footnote ¹²² It is worth mentioning that the Paris Convention expressly allows compulsory licensing if patents fail to work locally.Footnote ¹²³ However, the final result of the compulsory licensing negotiation reflected developed countries’ interests and the compulsory licensing on grounds of non-working was taken out.Footnote ¹²⁴

Similar dynamics can also be found in the process of negotiating the enforcement principles of the TRIPS Agreement. During the Uruguay Round, the establishment of detailed rules enforcing intellectual property rights was led by the EC and the US.Footnote ¹²⁵ The EC and the US texts ‘reflected the view of the business community’, and the US and the EC ‘largely imposed their own conception of the subject’.Footnote ¹²⁶ The Indian delegation expressed concerns as to the enforcement obligations’ institutional implications, in particularly to developing countries.Footnote ¹²⁷ Based on the Indian proposal, developing countries’ concerns were only reflected in Article 41.5, which allow members ‘to avoid any obligation to establish a special judicial system to enforce IPRs or to assign specific resources, but did not influence otherwise very much the outcome of the negotiations’.Footnote ¹²⁸

The successful incorporation of intellectual property rights into the WTO through the conclusion of the TRIPS Agreement to some extent recognizes the power asymmetry and legalizes the fragmentation between the developed and developing countries. This unfortunate intellectual property rights divide between the North and the South in this regard is the birth defect of the TRIPS regime within the WTO framework.Footnote ¹²⁹ Moreover, the negative implications of TRIPS’ birth defect travel beyond the intellectual property rights framework and affect the entire WTO framework. Developing countries adopted new commitments regarding intellectual property rights protection in the Uruguay Round in the expectation of getting better market access in agriculture, textiles, and other sectors.Footnote ¹³⁰ When these benefits failed to materialize, developing countries’ dissatisfaction has become one of the key factors causing the deadlock of the Doha Round negotiation.Footnote ¹³¹

The birth defect of TRIPS and the deadlock of the Doha Round negotiation have indeed been key to the failure of the 2003 TRIPS Waiver and 2005 TRIPS Amendment. As not much account of public interests and development has been taken in the TRIPS regime due to its birth defect, it is not surprising to see TRIPS’ confusion as to taking account or not of the legitimate interests of third parties in exceptions to various intellectual property rights.Footnote ¹³² TRIPS Amendment's breaking the international-domestic balance worsens compulsory licensing mechanism's ability addressing public health concerns. Expecting TRIPS to address public health concerns in the 2003 Waiver and 2005 Amendment is therefore squaring a circle in vain. This further leads us to the question of the legitimacy of the TRIPS Waiver and Amendment. As rightly pointed out by the Appellate Body in US – Gasoline that WTO agreements are ‘not to be read in clinical isolation from public international law’,Footnote ¹³³ the following examination will focus on the Waiver and Amendment's implications as to the dynamics between the WTO, members, and private rights from public international law perspective. It is submitted that the TRIPS Waiver or Amendment encounters legitimacy deficit in international law due to its unnecessary ‘disrespect’ to members’ sovereign authority in managing public health and its intrusion into affairs of private parties that should originally be domestically regulated.

4.1. Implications for members’ trade autonomy in international law

Much research attributes the failure of the 2003 Waiver and the 2005 Amendment to strong pharmaceutical lobbying against the domestic legislative change accommodating public health flexibility and to the complexity of the cumbersome procedure.Footnote ¹³⁴ Our above analysis on TRIPS’ birth defect, however, indicates that the failure might be because of the paradox of sovereign management of private rights in international trade.Footnote ¹³⁵ Indeed, in the same way the Uruguay negotiation's incorporation of intellectual property rights into GATT creates TRIPS’ birth defect, the establishment of TRIPS’ authority of compulsory licensing over private-rights-natured pharmaceutical patents inevitably leads to the Waiver's failure. The Amendment raises an important question: how can TRIPS, as a public international law regime, handle the proprietary right to remuneration in compulsory licensing while recognizing that IPRs are private rights and TRIPS grants no positive rights? The key, as has been shown in the SPS Agreement for example, is the tension between the international free trade regime and members’ sovereign rights to manage public health issues.Footnote ¹³⁶ This tension indeed reflects the basic theme of international trade law – a tension between ‘the necessity for legal rules conducive to stability and predictability, and the human need for solutions to short-term and ad hoc problems’, or simply the ‘dilemma of rule versus discretion’.Footnote ¹³⁷ To answer this question, the paper in next two sections further looks at the dynamics between government and private rights in international trade and private rights’ treatment in international law.

The balanced dynamics between the rigidity of the international regime versus the flexibility demanded from member states’ sovereign autonomy situates at the center of the tension between rule versus discretion. Therefore, checks and balances the rigidity of international rules and commitments with flexibility accommodating members’ domestic political needs is of fundamental importance to the legitimacy of international trade law.Footnote ¹³⁸ WTO rules thus ‘must strike a balance between commitments and flexibility’.Footnote ¹³⁹ The TRIPS Agreement indeed provides certain flexibility. As we mentioned above, compulsory licensing was introduced as exceptions and limitations to patent rights.Footnote ¹⁴⁰ Moreover, the TRIPS’ ‘general exceptions’ mechanism as defined in Article 8.1 provides members flexibility in intellectual property enforcement for purposes of protecting public health and facilitating social development.Footnote ¹⁴¹ By leaving members the freedom to determine the grounds for compulsory licenses and to define situations of national emergency and extreme urgency, the Doha Declaration indeed recognizes this flexibility.Footnote ¹⁴² The recognition of the flexibility was well reflected throughout TRIPS’ negotiation process. During TRIPS negotiation, the strong resistance from developing countries to the strict limits proposed by developed countries was the key reason leading to ‘any enumeration of permissible grounds’ for compulsory licensing in early negotiation text to be removed in order to give members more flexibility.Footnote ¹⁴³

However, the 2003 Waiver, as later on adopted in the 2005 Amendment, creates segmentation of compulsory licensing practice by defining ‘eligible importing Member’ and ‘exporting Member’.Footnote ¹⁴⁴ Detailed rules and procedures complicated the practicality of compulsory licensing; and waivers of the domestic use limitation and the remuneration requirement reallocated compulsory licensing administration among members.Footnote ¹⁴⁵ Members, in particular importing members, are under obligations to ‘take reasonable measures within their means’ ensuring that the use of imported products is consistent with the Waiver.Footnote ¹⁴⁶ In his comments on The US and EU viewpoints in TRIPS Waiver negotiation, Abbott suggests that there is ‘a general interest in limiting the use of the [TRIPS Waiver] system’.Footnote ¹⁴⁷ The 2003 Waiver and the 2005 Amendment, intending to provide more policy choice, turned out to significantly undermine the compulsory licensing flexibility in TRIPS and the Doha Declaration.

By undermining compulsory licensing flexibility, the 2003 Waiver and 2005 Amendment indeed go against the nature and scope of TRIPS’ obligations under international law. According to the TRIPS Agreement, members on the one hand ‘shall give effect to’ TRIPS’ provisions, yet on the other hand are ‘free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice’.Footnote ¹⁴⁸ Similarly, when it comes to members’ obligations regarding enforcement, the TRIPS Agreement states that members are under no obligation to change their institutions, capacity or resources distribution to law enforcement in their judicial systems.Footnote ¹⁴⁹ Under international law, while states are required to fulfil their international obligations, generally they are also ‘free as to the manner in which, domestically, they put themselves in the position to meet their international obligations’.Footnote ¹⁵⁰ The TRIPS Agreement by its nature should pay deference to national authorities’ sovereign freedom in managing critical situations of public health.

Not only they are inconsistent with the nature and scope of TRIPS’ obligations, but also the Waiver and Amendment encounter legitimacy deficit in international law. As revealed above, the disturbing difference of the Waiver and Amendment from previous TRIPS Agreement lies in detailing domestic limitation of private-rights-natured pharmaceuticals, which essentially creates a ‘direct effect’ of international law over domestic issues. The nature and scope of the TRIPS obligations as defined in Article 1 of the Agreement have been well elaborated in the rich deliberation regarding the issue of the WTO Agreement's ‘direct effect’. During the Uruguay round negotiation, the question of whether the WTO Agreement should be given direct effect attracted a great deal of attention among leading trade scholars.Footnote ¹⁵¹ Despite that, however, ‘the question of direct effect was not a subject that drew the express attention of the TRIPS negotiators, at least as reflected in the minutes of the negotiating sessions’.Footnote ¹⁵² Members’ practice varies on this issue. While Argentina accepts the direct effect, the US rejects the practice.Footnote ¹⁵³ Under US law, for example, no person ‘shall have any cause of action or defense’ under WTO covered agreements, nor can they challenge ‘any action or inaction’ by any government authorities on the ground that such action or inaction is WTO inconsistent.Footnote ¹⁵⁴ The European Union (EU) too states that the WTO Agreement, including its Annexes, by nature ‘is not susceptible to being directly invoked in Community or Member State courts’.Footnote ¹⁵⁵ It is therefore suggested that ‘[t]he most reasonable interpretation’ of TRIPS’ perspective on this issue ‘would appear to be that each Member is free to determine whether it will apply the Agreement directly, and that this will depend on its legal system and practice’.Footnote ¹⁵⁶ It in fact has been a well-established jurisprudence in international law that choices between giving international law direct effect and implementing them through transformation into national law ‘are matters for each state to determine for itself according to its own constitutional practices’.Footnote ¹⁵⁷ The nature of the WTO's direct effect jurisprudence prescribes the international regime's deference to national sovereign autonomy in international compliance.

From the jurisprudence of TRIPS's ‘general exceptions’ mechanism, to the scope and nature of the TRIPS obligation, to the WTO's direct effect jurisprudence, all appear to be calling for TRIPS’ respect to national authorities in public health management as a way of balancing the rigidity of the trading regime. Intending to provide more policy choice tackling public health crisis, TRIPS’ 2003 Waiver and 2005 Amendment conversely create segmentation of the compulsory licensing mechanism and significantly undermine the flexibility of the regime. The rigidity of the current compulsory licensing regime reflected in the 2003 Waiver and 2005 Amendment created more barriers to members’ exercise of freedom in granting compulsory licenses, and led to the failure of the Waiver's application and the Amendment's ratification. This has much to do with the birth defect of the TRIPS regime and certainly casts doubts on the legitimacy of 2003 TRIPS Waiver and 2005 TRIPS Amendment.

Further analysis below will indicate that the intrusive compulsory licensing regime as reflected in the Waiver and Amendment also intervenes in the private rights sphere that has been shielded from international intrusion in traditional international law. This intrusion into private-rights-natured pharmaceutical patents further undermines the legitimacy of TRIPS’ current compulsory licensing regime.

4.2 Implications for private rights’ treatment in international law

The Waiver and Amendment not only erode members’ trade autonomy via limiting the compulsory licensing flexibility, but also intrude into individuals’ rights by limiting a patent proprietor's right to adequate remuneration. The disrespect to members’ sovereign rights in managing public health undermines the legitimacy of TRIPS Waiver and Amendment, as it is inconsistent with the nature and scope of the TRIPS obligation and the general jurisprudence of direct effect in international law. This indeed further creates another undesirable consequence in their intrusion into proprietary rights of individuals that originally should be domestically regulated.

As the name ‘waiver’ indicates, the TRIPS Amendment waives certain original compulsory licensing requirements on both exporting and importing countries for the purpose of providing more flexibility to address public health concerns. On the one hand, the Amendment waives Article 31(f)’s requirement that exporting countries limit compulsory licensing to be used predominantly for the supply of the domestic market. On the other hand, the Amendment waives Article 31(h)’s requirement on importing countries to pay adequate remuneration to proprietors. The key of the waivers then is the shift of the proprietors’ right to remuneration from both exporting and importing countries to exporting countries only. The other provisions of the Waiver on limitation of the application scope, benefited countries, procedural requirement and good faith limitation are to facilitate this shift towards more flexibility. As the proprietor's remuneration arguably remains the same and the Waiver's impact on international trade is probably minimal. However, TRIPS’ direct regulation of private parties’ proprietor rights is highly unusual, as TRIPS exceptions should concern the use of rights only rather than the rights themselves.Footnote ¹⁵⁸ Moreover, the remuneration right shifting effect indicates that the TRIPS Amendment touches the ‘positive rights’ aspect of intellectual property,Footnote ¹⁵⁹ which runs at odds with the established jurisprudence that the negative right natured TRIPS regime does not give positive rights to use.Footnote ¹⁶⁰ The TRIPS Amendment thus raises a fundamental question: how would international law regulate private rights and could TRIPS directly touch private rights?

As the natural consequence of the direct effect jurisprudence, international regimes should refrain from intervening in individual rights within domestic affairs. This is well-established in GATT/WTO jurisprudence on the doctrine of direct effect. For example, the Panel in US – Section 301 Trade Act states:

Therefore, the GATT/WTO in general has no direct effect and consequently creates neither rights nor obligations on members’ nationals.Footnote ¹⁶² Contracting parties of GATT or members of the WTO are not in the same legal order as their nationals.

It is thus a well-established jurisprudence that the WTO in particular or international law in general neither adds nor diminishes private rights of individuals. In fact, individuals are not subjects of international law, and consequently derive no rights nor bear any obligations under international law.Footnote ¹⁶³ Long after the Westphalia era, the individual has not been the subject of international law,Footnote ¹⁶⁴ and states have been traditionally been the only subjects of international law.Footnote ¹⁶⁵ Individuals such as Heads of State or diplomatic envoys of course can enjoy certain rights and obligations according to international law, yet have not therefore become subjects of international law.Footnote ¹⁶⁶ As Jennings and Watts suggest, ‘the rights in question are enjoyed by the individuals concerned not as rights in international law but as rights derived from national law’.Footnote ¹⁶⁷ Only under national law instead of international law would individuals derive legal rights and assume legal liabilities.

Nationality jurisprudence in international law too suggests that international regime has no legitimate base of handling individual rights. Under traditional international law, nationality is the only way to link individuals into international law, and thus all the relations of individuals from different countries are summed up in the relations of countries.Footnote ¹⁶⁸ International law thus applies in relation to a natural person via his nationality of certain states through the same way that international law attributes the nationality of a state to a private company or other legal person.Footnote ¹⁶⁹ In international law, therefore, it is argued that there is a ‘doctrine of the freedom of states in matters of nationality’.Footnote ¹⁷⁰ In the Advisory Opinion of the Permanent Court concerning the Tunis and Morocco Nationality Decrees, the Court insisted that, ‘in the present state of international law, questions of nationality are, in opinion of this Court, in principle within this reserved domain’.Footnote ¹⁷¹ Serving both as the bridge and boundary between international law and domestic law, nationality not only connects individuals to international law, but also works as an important shield for individuals from international intervention. Individuals’ connection with international law through nationality is for the purpose of realizing domestic protection of individual rights in the international arena rather than establishing an international regime's domestic reach over individuals.

It has thus been well established that nationality is ‘very important for international law’.Footnote ¹⁷² Nationality not only limits international regime's intrusion into states’ sovereignty over domestic affairs, but also shields individuals from international intervention. This carries fundamental significance to our analysis, as it clearly explains why the WTO in general or the TRIPS Agreement in particular has no direct effect and creates no obligations to individuals. Home states exclusively have the right as well the obligation to protect the exercise of individual rights. In his discussion of the relationship of individuals to the state under the framework of sovereignty in the international legal system, Brand suggests that the international legal framework is a ‘two-tiered social contract’, ‘under which the individual relates to the state in domestic law, and only the state relates to the international legal order in international law’.Footnote ¹⁷³ Similarly, as the WTO is considered to be a member-driven organization, Hudec suggests that there is no basis for ‘asking the WTO to meet the legitimacy standards of an institution with powers of governance’.Footnote ¹⁷⁴ There is no justification to legitimize the international regime's directly intervening with individuals and private rights. Through detailing compulsory licensing treatments of the private-rights-natured pharmaceuticals, however, the TRIPS Waiver and Amendment contradict this jurisprudent in international law. It is in this sense, compulsory licensing or issue of TRIPS’ direct effect will need to and have to be left in the hands of national authorities.

Therefore, there is no justification for any international regime's intrusion into matters within the domestic jurisdiction of national authorities. This indeed has been one of the core doctrines of the contemporary international legal order. Under the current international legal order, countries are both the subjects and law-makers of international law at the same time. In general, there is no more superior authority above the countries.Footnote ¹⁷⁵ Therefore, ‘state consent is the foundation of international law’ and that ‘that law is binding on a state only by its consent remains an axiom of the political system, an implication of state autonomy’.Footnote ¹⁷⁶ Nonintervention therefore has become a cornerstone of international law and has been enshrined in the UN Charter:

The above reference to the jurisprudence of individuals’ status in international law bears fundamental significance to our examination of TRIPS Waiver and Amendment's legitimacy. No matter how much the WTO cares about promoting public health, TRIPS should confer no rights and create no obligations on individual right holders as to their patent rights. This confirms the fundamental nature of intellectual property rights as private and negative rights as recognized in TRIPS.Footnote ¹⁷⁸ The Paris Convention permits compulsory licensing yet neither limits the grant of compulsory licenses nor establishes any right to remuneration on behalf of patent right holders.Footnote ¹⁷⁹ The total freedom of compulsory licensing remains in the hands of domestic authorities. The TRIPS Agreement, however, establishes the right to adequate remuneration on behalf of the right holders and detailed procedural requirements for granting compulsory licenses.Footnote ¹⁸⁰ The establishment of a right to remuneration on behalf of the right holders of course runs against the established jurisprudence that the TRIPS Agreement generally confers negative rights instead of positive rights.Footnote ¹⁸¹ To make things worse, the TRIPS Waiver and Amendment, in particular the waiver of the adequate remuneration that reallocated the compensation remedy available to patent right holders,Footnote ¹⁸² crossed the line and stepped into ‘matters of domestic jurisdiction’ of national authority. TRIPS Waiver and Amendment penetrated the nationality shield safeguarding the right holders from international intervention, which undermines their legitimacy under international law.

Moreover, the compulsory licensing amendment's disrespect to members’ sovereign management of public health and intrusion into member's nationals’ proprietary rights of patents are mutually intertwined and share the same problematic heritage of TRIPS’ birth defect. The amendment's penetration into matters of domestic jurisdictions limits members’ freedom in compulsory licensing administration and disturbs individuals’ proprietary rights without much legitimate basis. The legitimacy of the compulsory licensing amendment is therefore in serious doubt, as it contradicts the nature of TRIPS obligations, the jurisprudence of the WTO Agreement's direct effect, and the jurisprudence of individuals’ status in international law.