DISPUTE SETTLEMENT

BODY UNDER TRIPS

 INTRODUCTION

 Dispute settlement is a major feature of the WTO legal system. The World Trade
Organisation (WTO) is an international body that was established for the control of
international trade relations. According to the WTO itself, the organisation deals with
the ‘rules of trade between nations at a global or near-global level’.

 The WTO was created by the ‘Agreement Establishing the World Trade
Organisation’ (also known as the WTO Agreement), which also includes the
Agreement on Trade – Related Aspects of Intellectual Property Rights (‘TRIPs’
Agreement),the minimum standards that member countries need to implement as
part of their local laws for the protection of intellectual property4, and obliges them to
ensure that specified enforcement procedures are available under local laws so as to
permit effective action against any act of infringement of intellectual property rights.

 it also allows for nations to suspend any such rights by way of authorised legal
sanctions as a trade remedy under Part V. The suspension of obligations under the
TRIPs Agreement has been thought to be of particular interest to developing
countries in disputes against developed countries, since it is viewed as a great
leveraging power for bringing members to the consultation table and pressurising
them into compliance with adverse rulings.
 TRIPS is the body, open to all Members of the WTO, that has
responsibility for the administration of the TRIPS Agreement,
in particular for monitoring the operation of the Agreement.
The Council also constitutes a forum for consultations on any
problems relating to TRIPS arising between Members as well
as for clarifying and interpreting provisions of the TRIPS
Agreement. The aim is, whenever possible, to resolve
differences between Members without the need for formal
recourse to dispute settlement.
 Article 63.1. The TRIPS Agreement promotes transparency by requiring
Members to publish laws and regulations and final judicial decisions and
administrative rulings of general application made effective by a Member
pertaining to the subject matter of the Agreement. Relevant bilateral and
other agreements must also be published.

 Article 63.2 requires Members to notify relevant laws and regulations to

the Council for TRIPS in order to assist the Council in its review of the
operation of the Agreement. This is also designed to promote
transparency. Module I discussed these procedures in detail.

 Article 63.3. It requires each Member to be prepared to supply, in

response to a written request from another Member, information on its
relevant laws and regulations, decisions of general application, and
bilateral agreements. A Member, having reason to believe that a specific
judicial decision, administrative ruling or bilateral agreement affects its
rights under the TRIPS Agreement, may also request in writing to be
given access to or be informed in sufficient detail of such material.
 TRIPS Agreement is that it provides an operational system for
the settlement of disputes between governments of Members
about compliance with their respective obligations relating to
intellectual property rights.

 Monitoring of compliance in the TRIPS Council is done in two

main ways.
I. First is that the TRIPS Council is a body in which any
Member can raise any issue relating to compliance with the
TRIPS Agreement by other parties.
II. second approach to monitoring compliance is a systematic
examination of each Member's national implementing
legislation by the other Members, involving the notification
and a review of the legislation of Members.
 Article 64.1 of the TRIPS Agreement provides that Articles XXII
and XXIII of the General Agreement on Tariffs and Trade 1994
("GATT 1994"), as elaborated and applied by the Dispute
Settlement Understanding ("DSU"), shall apply to consultations
and the settlement of disputes under the TRIPS Agreement.

 Only Member governments can initiate and participate in the

dispute settlement procedure in the WTO and such complaints
can only be directed at other Member governments, due to the
intergovernmental nature of the WTO.
 Private parties whose rights and interests are affected by
implementation of the WTO agreements have no standing in
WTO procedures, but must rely on their government to bring or
defend an action, or to intervene as a so-called third party.
 Article XXIII.1 of GATT 1994 provides for three grounds for
complaints:
I. the failure of another Member to carry out its obligations under
WTO Agreements;
II. the application by another Member of any measure, whether or
not it conflicts with the provisions under those agreements; or
III. the existence of any other situation.

 Violation complaints: which are concerning an alleged failure by

another Member to carry out its obligations under WTO
agreements, including the TRIPS Agreement.

 Nonviolation complaints". a government's ability to bring a

dispute to the WTO, based on loss of an expected benefit caused
by another Member's actions — even if no WTO Agreement or
commitment has actually been violated.
 the aim of non-violation complaints is to help preserve the balance of
benefits struck during multilateral negotiations, recognizing that it is not
possible or desirable to seek to regulate all government measures that
may affect the value of such benefits.

 A "situation" complaint is understood to cover any situation that

results in nullification or impairment of benefits, not necessarily through
a specific government measure, but this concept has never been
analysed in WTO and GATT dispute settlement.
 The dispute settlement process has three main
phases:
I. consultations between the parties;
II. adjudication by panels and, if either party appeals
a panel ruling, by the Appellate Body; and
III. adoption of panel/appellate reports(s) and
implementation of the ruling, which includes the
possibility of countermeasures in the event of
failure by the losing party to implement the ruling.
 Consultations
(good offices, conciliation, mediation)

If no solution after 60 days:

Establishment of panel (normally 3 members) by DSB

Hearing of the parties: written and oral submissions

15-26 weeks after establishment of panel:

interim report (facts & panel’s findings and conclusions).

5 weeks later: final panel report circulated to parties;

after 3 more weeks to all Members (DSB)
 Within 60 days70 after circulation:

No appeal Appeal to Appellate Body ( = standing organ,

limited to legal issues)

Adoption by DSB After another 60-90 days:circulation of report to

DSB

Within 30 days: adoption by DSB

30 days after adoption:

Notification by Member concerned of its intention
to implement the DSB’s ruling.

In case of doubt as to WTO consistency of

implementation measure: establishment of
“compliance panel” (in general original panel).
After 90 days:Report to be circulated to DSB

If not implemented after a “reasonable period of

time” (in general not more than 15 months)
 If not implemented after a “reasonable period of
time” (in general not more than 15 months)

Within 20 days after lapse of “reasonable

period”: Negotiations of compensation

If no agreement: request of complainant to DSB

for authorization to suspend concessions on a
certain level

If no arbitration Arbitration (on proposed level of suspension; in

general by original panel or arbitrator

Within 30 days from lapse of Within 30 days from lapse of

“reasonable period”(for implementation) “reasonable period”(for implementation)

DSB grants authorization to suspend

concessions (until removal of inconsistent
measure or other mutually satisfactory solution)
TRIPS Dispute Settlement
Decisions
 India – Mailbox (U.S.1997)
 India - Patent Protection for Pharmaceutical and Agricultural Chemical Products(“India –
Mailbox”) was the first WTO dispute under the TRIPS Agreement that resulted in a
decision by a panel, and subsequently by the Appellate Body.
 The complaining party was the United States, which alleged that India had failed to
adequately implement TRIPS Agreement requirements under Articles 70:8 and 70:9 to
establish a so called “mailbox” to receive and preserve patent applications, and to adopt
legislation authorizing the grant of exclusive marketing rights (EMRs).
 The first part of the decision of the Appellate Body in this dispute concerned a difference
over jurisprudence with the panel. The panel said that the United States and its patent
holders had “legitimate expectations” concerning the implementation by India of a mailbox
system that would eliminate “any reasonable doubts” concerning the future grant of patents.
 The Appellate Body also said that that panel had mistakenly applied the doctrine of non-
violation nullification or impairment in formulating its approach to interpretation, and pointed
out that non-violation complaints could not yet be brought under the TRIPS Agreement.
 the proper means for interpreting the TRIPS Agreement was by application of the rules of
the Vienna Convention on the Law of Treaties, which provides that treaties shall be
interpreted based on their express terms and context, in light of their object and purpose.
India was required to comply with the terms of the TRIPS Agreement, no more, no less.
This meant that India would be required to provide a “sound legal basis” for the treatment of
mailbox applications.
 India’s claim that an administrative order allegedly given by the executive to the patent
office was an adequate means to implement the mailbox requirement. India had not
furnished the text of such an order to the Panel or Appellate Body. The Indian Patents
Act required the patent office to reject applications that concerned subject matter for
which patent protection could not be granted, including for pharmaceutical products.
There was substantial evidence that under the Indian Constitution, the statutory
Patents Act requirement to reject a patent application on subject matter grounds could
not be modified by an executive administrative order.
 The Appellate Body agreed with the Panel that India had in fact failed to provide a
sound legal basis for receiving and preserving mailbox applications. Another aspect of
the case involved India’s alleged failure to adopt legislation authorizing the grant of
EMRs.
 India argued that since no party had yet to qualify for the grant of EMRs, it had no
need for legislative authority which could be provided as the circumstances warranted.
The Appellate Body disagreed on the basis of the express text of the TRIPS Agreement
which it held to require the adoption of legislation authorizing the grant of EMRs from
the entry into force of the agreement.
 The Appellate Body also rejected a Panel determination under Article 63 of the TRIPS
Agreement that India also had failed to comply with transparency obligations. The
Appellate Body’s rejection was based solely on grounds that the Panel had permitted
the United States to add a cause of action to its complaint outside the Panel’s terms of
reference.
 Canada – Patent Term Canada
 It involved a complaint by the United States against Canada for an alleged failure to apply the
minimum twenty (20) year patent term requirement of Article 33 of the TRIPS Agreement to
patents that were granted under pre-TRIPS Agreement patent legislation. This decision
involved the interpretation of Articles 70:1 and 70:2 of the TRIPS Agreement that deal with
application of the agreement to subject matter that existed prior to its entry into force.
 Canada argued that it was not required to extend the term of patents that had been granted
under an act that applied to patents granted up until 1989 (and remained in force when Article
33 became applicable), because Article 70:1 excluded application of the TRIPS Agreement to
“acts” which occurred before the date of application.
 In Canada’s view, the grant of a patent was an “act” that occurred before Article 33 became
applicable. Canada argued that Article 70:2, which establishes obligations regarding “subject
matter existing at the date of application … and which is protected in that Member on the said
date” referred to patents granted prior to application of the agreement, but did not require
Canada specifically to undertake the act of extending the patent term, which was excluded
under Article 70:1
 . The decision of the Panel and Appellate Body in this case focused on the plain meaning of
Articles 70:1 and 70:2. Neither the Panel nor the Appellate Body found Canada’s attempt to
distinguish the act of setting out a patent term (as within Article 70:1), and the general
“existing” nature of the patented invention under Article 70:2, persuasive. The Appellate Body
found that Article 70:2 required the application of Article 33 to the term of existing patents
based on the express language of the TRIPS Agreement
 U.S. Claims Regarding Brazil’s
Compulsory Licensing Legislation
 In 2000, the United States requested consultations with Brazil under the WTO Dispute
Settlement Understanding, and other related measures, which establish a ‘local working’
requirement for the enjoyability of exclusive patent rights that can only be satisfied by the
local production and not the importation of the patented subject matter.
 Specifically, Brazil's ‘local working’ requirement stipulates that a patent shall be subject to
compulsory licensing if the subject matter of the patent is not ‘worked’ in the territory of
Brazil. Brazil then explicitly defines ‘failure to be worked’ as ‘failure to manufacture or
incomplete manufacture of the product’, or ‘failure to make full use of the patented
process’.
 The United States considers that such a requirement is inconsistent with Brazil's
obligations under Articles 27 and 28 of the TRIPS Agreement, and Article III of the GATT
1994.” The request for consultations was followed by a U.S. request for establishment of
a panel.
 The United States withdrew its complaint in this matter prior to the submission of written
pleadings by either party. However, the request for consultations illustrates that
provisions authorizing compulsory licensing for “non-work” may be subject to challenge
under Article 27 of the TRIPS Agreement.
 The Paris Convention authorizes the grant of compulsory licenses for failure to work a
patent. A major issue in a case such as that brought by the United States against Brazil
is whether Article 27:1 of the TRIPS Agreement was intended to prohibit WTO Members
from adopting and implementing local working requirements, and effectively to
 supersede the Paris Convention rule.
 The negotiating history of the TRIPS Agreement indicates that Members
differed strongly on the issue of local working. Several delegations favoured
a direct prohibition of local working requirements, but the TRIPS Agreement
did not incorporate a direct prohibition. Instead, it says that patent rights shall
be enjoyable without “discrimination” as to whether goods are locally
produced or imported.
 Under the jurisprudence of the Canada-Generic Pharmaceuticals case,
this leaves room for local working requirements adopted for bona fide (i.e.,
nondiscriminatory) purposes. A WTO Member might well argue that requiring
production of certain defence-related inventions within the national territory is
essential to national security, and therefore justifies a local working
requirement. There are no doubt other justifiable grounds for requiring local
working of a patent.
 The importance of local working was demonstrated in 2005 congressional
testimony by U.S. Secretary of Health and Human Services Leavitt regarding
U.S. preparation for a potential avian flu pandemic. He said the United
States believes that in a pandemic situation, foreign suppliers would divert
products to their own markets, and that it was essential that the United
States have its own manufacturing facilities for avian flu treatments.