1. No category

Nagoya University
Graduate School of Law
Doctoral Dissertation
How to Comply with the TRIPS and WTO Law
The New Challenges to Vietnam’s Patent Legislation from
WTO dispute settlement practice
Name: Pham Hong Quat
Name of course: Doctoral Program for Professionals
Student ID No: 430303106
Main Academic Advisor: Professor SABURI Haruo
Sub-academic Advisors: Professors SUZUKI Masabumi, OBATA Kaoru
Submission: December 2006
Publication: April 2007
(Available at Nagoya University Center Library and Nagoya Law School Library)
© Pham Hong Quat
Introduction
I. Vietnam and its intricacy in compliance with the TRIPS and WTO law
The question of bringing the national legislation into compliance with World Trade
Organization (“WTO”) law is one of the hot issues being at the debate among the legislators
and the policy makers in Vietnam. Having applied for the accession to the WTO since the
beginning of 1995, the government of Vietnam is urging an active national action program for
the purpose of bringing the national legislation into compliance with WTO law. As a
developing country being in the transitional period from a centralized planning economy into
an oriented market economy, among the others, the concern of the national policy makers
extends much to the issues that are regarded being “new” to the traditional national policy
makers and law practitioners. The rule of the WTO on the matter of intellectual property
protection is a typical example in such perception. The study and discussion on the WTO
rulings in Vietnam have not been popular in the community of the law scholars and
practitioners.
Vietnam is also coping with the problems generally happened to the developing countries in
the progress of making the national legislation consistent with WTO law, such as the lack of
information, the insufficiency in the legal expertise and the immature of the technical and
social conditions. The affect of these facts is evident in the legislation on the protection and
enforcement of intellectual property rights. Almost the bureaucrats and the public are
unfamiliar with the concepts of intellectual property protection and enforcement introduced
by the TRIPS. In despite of that, the legislation of Vietnam in the field of intellectual property
has experienced a remarkable progress. For the last decade, a large volume of the new laws
and regulations were enacted in the careful consideration of the requirements of WTO law,
especially those elaborated in the Agreement of Trade-Related Aspects of Intellectual
Property Rights (“TRIPS”).
At present, the draft of a code of intellectual property is preparing at the great effort of the
government in strengthening the national legislation for its compliance with the TRIPS and
WTO law. The drafters expect that the enactment of the new law will deal with all problems
existent in the current national legislation on intellectual property, which is likely to become
the source of disputes with the trading partners when Vietnam enters the playing field of the
WTO. Otherwise, the legislators and the public present their concern about the affect of the
new intellectual property law on the competitive capacity of the infant domestic industry and
the indispensable demands of the public interest. Such concern gives rise to the hard-line
view of the government that Vietnam would not intend to enter the WTO “at any cost”. This
view supports the idea that there is no need to make a big change in the current statutory acts.
Rather, the government may issue the relevant regulations or instructions to implement the
requirements of the WTO, when necessary.
Concerning the legislation on patents, in particular, the new law drafting members and most
of the commentators believe that the current national legislation is satisfactory with the
intrusive requirements of the TRIPS, including the incorporated provisions of the Paris
Convention on Protection of Industrial Property (“Paris Convention”). The way that the
drafting members and the commentators follow to identify the irrelevance of the current
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2
legislation is making the comparison between the textual language of the TRIPS and the
relevance of the national regulations. The same manner has been done in making the national
legislation consistent to the provisions of the Paris Convention. There appear some problems
arisen from the preparation of the new law draft and the assessment of the current legislation
in such a view.
The conception of sovereignty and compliance with WTO law in general, with the TRIPS in
particular, should be perceived in the development of international economic law.
Accordingly, national sovereignty may be eroded in certain aspects, including the restriction
of legislative freedom to fulfill the obligations under WTO law. In this perspective, the TRIPS
place the constraints on domestic legislation to the extent much more intensive than what the
Paris Convention does. The rulings of the WTO panels over TRIPS-related disputes reveal
that conformity with the TRIPS practically requires the national legislation to comply with
not only the rules worded in the textual provisions of the TRIPS, but also the specific rules
and disciplines developed from the GATT and WTO practice. The interpretation of the TRIPS
provisions under the GATT jurisprudence imposes the more restrictive constraints on national
legislation, on one hand. The obligations under the substantive provisions of the Paris
Convention themselves are substantively changed as they are incorporated into the TRIPS and
the WTO system, on the other hand.
The review of the national legislation for the purpose of securing the conformity with the
TRIPS should take these elements into account. The preparation of the new law draft will be
more efficient when the drafters and the legislators come up with a common understanding on
the constraints that WTO law and the TRIPS place upon the national legislation in dealing
with the issues of intellectual property protection. For a comprehensive and practical
perception of this matter, it is worth having an investigation into both the provisions of the
TRIPS and the rulings of the WTO panels on the TRIPS-related disputes in the WTO dispute
settlement practice.
The analysis of the WTO panel rulings reveals that the application of the GATT jurisprudence
in the interpretation of the TRIPS provisions produces the constitutive constraints on domestic
legislation in compliance with the TRIPS and WTO law. Particularly, the affect of such
constraints become greater before the challenges to legislation “as such” against an allegedly
TRIPS-violated domestic law in the TRIPS implementing practice. It is noted that in the
assessment of conformity with the TRIPS and WTO law, domestic legislation needs to be
taken in consideration of the principles of WTO jurisprudence developed by the WTO panels.
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3
II. New challenges from WTO jurisprudence in compliance with the TRIPS
1. The extension of GATT to the “incorporated” the Paris Convention
The Paris Convention on the Protection of Industrial Property1 (“Paris Convention”) exists as
a primary international treaty on intellectual property protection in the World Intellectual
Property Organization (“WIPO”) framework. Although the convention provides an
international regime for industrial property protection in the broadest meaning, 2 the decisive
reason leading to the establishment of the convention was attributable to the demand for
protection of inventions for foreigners, triggered by the development of international industry
and trade.3 In the context of the divergence of national patent laws in patent protection, the
mandate for no encroaching on the domestic legislation of the participants made the Paris
Convention negotiations successful.4
Respecting the existent domestic legislation of the member countries regarding patent
protection is the foundation of the national treatment principle provided to patents is regarded
as a fundamental principle constituting the backbone of the Paris Convention.5 The national
treatment and the rules of substantive law regarding the industrial property protection formed
the main framework of the Paris Convention.6 Not straying from the rationale of the principle
of national treatment, the substantive rules leaves a considerable freedom to national laws of
the Paris Union members to legislate the industrial property protection pursuant to their own
preferences and interests.7
The conclusion of the Agreement on Trade-Related Aspects of Intellectual Property Rights
(“TRIPS”) at the end of the General Agreement on Tariffs and Trade (“GATT”) negotiations
in the Uruguay Round was the result of the movement of intellectual negotiations from the
WIPO forum to the GATT forum. 8 The TRIPS was included into the international trade
system of the World Trade Organization (“WTO”) when existing as an annex of the WTO
1
See Paris Convention for Protection of Industrial Property of March 20, 1883, as revised at Brussels on
December 14, 1900, at Washington on June 2, 1911, at The Hague on November 6, 1925, at London on
June 2, 1934, at Lisbon on October 31, 1958, and at Stockholm on July 14, 1967, available at
http://www.wipo.int/clea/docs/en/wo/wo020en.htm [hereafter “Paris Convention”].
2
Id. art. 1(3). This article states:
“Industrial property shall be understood in the broadest sense and shall apply
not only to industry and commerce proper, but likewise to agricultural and
extractive industries and to all manufactured or natural products, for example,
wines, grain, tobacco leaf, fruit, cattle, minerals, mineral waters, beer, flowers,
and flour.”
3
See Alfredo Ilardi and Michael Blakeney, International Encyclopaedia of Intellectual Property Treaties
(Oxford University Press, 2004), part I, pp. 22-23.
4
See Friedrich-Karl Beier, ‘One Hundred Years of International Cooperation – The Role of the Paris Convention
in the Past, Present and Future’, International Review of Industrial Property and Copyright Law (Vol. 15, 1984),
p. 8.
5
Id. at 9.
6
See G.H.C. Bodenhausen, Guide to the application of the Paris Convention for the protection of industrial
property (BIRPI, 1969), pp.12-13.
7
Id. at 13.
8
See Addulqawi A.Yhsuf, ‘TRIPs: Background, Principles and General Provisions’, in Intellectual Property and
International Trade: The TRIPs Agreement (eds. Carlos M. Correa and Addulqawi A.Yhsuf) (Kluwer Law
International, 1998) p.8.
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4
Agreement.9 The TRIPS incorporates the main substantive provisions of the pre-existing
treaties on intellectual property, including those of the Paris Convention. 10 Articles 1.3 and 2.1
of TRIPS bring the main principles and substantive provisions of the Paris Convention into
the TRIPS regulation, and accordingly, the WTO system. 11 Consequently, the implementation
of the obligations under the principles and provisions of the “incorporated” Paris Convention
is subject to the supervision of the Dispute Settlement Body and the WTO dispute settlement
procedures and rules.12 The panels and the Appellate Body of the WTO have some
opportunities to interpret the particular provisions of the TRIPS and the “incorporated” Paris
Convention in the examination of the consistency of the relevant domestic law. 13 Under the
GATT principles and the TRIPS norms, this paper will discuss how WTO jurisprudence
places the practical challenges to national legislation in the intellectual property protection,
particularly in the patent protection.
Surprisingly, the analysis of the findings of the panels and the Appellate Body reveals that the
GATT standards are applied to examine not only the obligations under the national treatment
and MFN treatment of TRIPS, but also those under the national treatment of the
“incorporated” Paris Convention. The intrusive extension of the GATT standards to the
practice of TRIPS and the “incorporated” Paris Convention is perceived as a great challenge
to the domestic legislation of the WTO Members in the patent protection. Such an extension
of the GATT effect gives rise to the obligations under the substantive provisions of the Paris
Convention as incorporated into the WTO system.
In the relation to the “incorporated” Paris Convention, Article 2.1 of TRIPS says that the
WTO Members must comply with the substantive provisions of the Paris Convention as if
they implement the TRIPS obligations. In the practice of dispute settlement, the WTO panels
and the Appellate Body clarified another aspect of this provision. That is, the WTO Members
must comply their implementation of the “incorporated” Paris Convention to the principles
and relevant provisions of TRIPS. This implication shows the prevailing effect of TRIPS
provisions over the “incorporated” Paris Convention provisions. The surveillance of TRIPS
principles over the “incorporated” Paris Convention and the cumulative application of TRIPS
and GATT principles are perceived as new challenges from WTO jurisprudence to national
legislation in compliance with the TRIPS and WTO law.
Clarifying the disputed provisions in the TRIPS implementation, the recently developed
rulings of the WTO panels and the Appellate Body introduced a new approach in
understanding the nature and scope of the national treatment of the “incorporated” Paris
Convention. Accordingly, the national treatment GATT standards were in measuring the
9
See Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, GATT Doc.
MTN/FA/Add.1 (December 15, 1993).
10
See Trade-Related Aspects of Intellectual Property Rights Agreement [hereafter “TRIPS”], available at
http://www.wto.int/english/docs_e/legal_e/27-trips.doc.
11
See Appellate Body Report, US-Section 211 Omnibus Appropriations Act of 1988 [hereafter “US-Section 211
Omnibus”], WT/DS176/R (2 January 2002), para. 125.
12
Id. at 238.
13
See Olivier Cattaneo, ‘The Interpretation of the TRIPS Agreement Considerations for the WTO Panels and
Appellate Body’, The Journal of World Intellectual Property (Vol.3, 2000), p. 630. See also Daniel J. Gervais,
The TRIPS Agreement after Seattle Implementation and Dispute Settlement Issues, The Journal of World
Intellectual Property (Vol.3, 2000), p. 510.
© Pham Hong Quat
5
national treatment provisions of the TRIPS and the Paris Convention. Consequently, WTO
jurisprudence places the new constraints on the national legislation of the WTO Members in
regulating the patent protection.
2. The surveillance of GATT rules in the TRIPS practice
The prevalence of the GATT disciplines in interpreting the national treatment and mostfavored-nation (“MFN”) principles and norms of the TRIPS gives rise to the burdensome of
the TRIPS obligations. The provisions on the objectives and the principles inscribed in the
TRIPS do not help reducing the strictness of compliance with the TRIPS, due to their
ineffectiveness under the rulings of the WTO panels. The recently developed examination
standards in WTO jurisprudence regarding the intellectual property protection constitute the
new challenges to national legislation in compliance with the TRIPS and WTO law.
The rulings of the WTO panels and the Appellate Body recently developed in the practice of
settlement of the dispute involving intellectual property protection reflect the more and more
restrictive approach in examining the inconsistency of the relevant domestic law to WTO law.
The unavailability of an effective implementing mechanism in a domestic legislation may be
regarded a WTO violation because WTO law requires domestic law to secure positively its
WTO obligations. The inconsistency of a discretionary legislation can no longer be exempted
from the charge of WTO violation as it could be under the regime of GATT 1947. The
intrusive examination and explanation of the WTO panels and the Appellate Body on the
particular domestic regulations in the recent TRIPS related cases are also understood as the
newly developed challenges for effecting national law on the intellectual property protection
in the WTO framework.
The WTO panels and the Appellate Body in recent TRIPS related cases also created the
specific terminologies of standards examination in dealing with the challenges of legislation
“as such” and the actual application of legislation. Developed from the practice of the national
treatment of GATT,14 the conception of “extra hurdle” created by the Appellate Body in a
TRIPS related case is applied frequently in the different circumstances of the disputes in
implementing TRIPS. Also, the development in the panel rulings on the “actual implications”
is a real challenge to both statutory language and the practical application of a domestic law.
The development of the panel rulings in this aspect is considered a new constraint of WTO
jurisprudence regarding intellectual property protection.
Applying the perception of the constraints of WTO jurisprudence in the examination of the
current legislation of Vietnam, it is explored various hidden problems in the national patent
regime. Different from the general admission that Vietnam patent legislation has been fully
qualified and complied with TRIPS and WTO law, some problems appear existent in the
current national patent regulations. In the view of the recently developed rulings of the panels
and the Appellate Body, such kinds of problems would be likely to subject to the findings of
the WTO inconsistency. Under WTO jurisprudence, the elimination of the TRIPS inconsistent
provisions in the domestic patent regulations should be made in both the statutory language
and the implementing mechanism of the relevant domestic law.
14
The term “GATT” refers generally to GATT 1947 and GATT 1994, whose texts are available at
http://www.wto.org.
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6
The examination of the draft of the new law on intellectual property law of Vietnam in the
light of the new challenges of WTO jurisprudence identifies certain problems inherited from
the current legislation on the patent protection. The purpose of compliance with the TRIPS
and WTO law requires the exclusion of inconsistent provisions from the present version of the
new law draft and from its implementing regulations.
3. WTO jurisprudence and international exhaustion of patent rights
The question of legality of international exhaustion of patent rights under Article 4bis of the
Paris Convention and Article 6 of the TRIPS invited much debate. Should national legislation
be subject to any constraints from the “incorporated” Paris Convention, the TRIPS and GATT
1994? Theoretically, various constraints are supposedly available in such regulations from
different views. However, the recent development of the TRIPS and WTO jurisprudence
regarding the intellectual property protection provided certain grounds that might help to
eliminate some, and otherwise, to consolidate some of those. The national legislation
nevertheless should take into accounts the likely challenges from WTO jurisprudence in the
practice of application of international exhaustion of patent rights.
Although the TRIPS excluded the issue of exhaustion of rights from the TRIPS dispute
settlement procedures, the likely challenges to national legislation in dealing with the issue of
exhaustion of rights appear existent in the WTO framework. In the context of negotiations for
the accession to the WTO, Vietnam is spending great efforts to bring the national legislation
into compliance with the TRIPS and WTO law. The identification of the practical challenges
and requirements from WTO jurisprudence regarding the intellectual property protection
would contribute to the works being going on in Vietnam for the conforming the intellectual
property legislation to the TRIPS regulation and WTO law.
Seeking the appropriate justification for the allowance of parallel importation of patented
products, the recently developed judgment of the Supreme Court of Japan provided an
empirical reasoning relying on the current circumstances of international trade. The judgment
of the Supreme Court on this issue introduced some arguments that might be the helpful
reference for Vietnam to settle the relevant debate in the drafting of the new intellectual
property law. The experience of Japan might provide some suggestions for clarifying the
reasoning and justification for parallel importation of patented products. However, it needs to
be taken into consideration the adoption of the conditional approach in the allowing parallel
importation of patented products. Alternatively, the active role of the government in
controlling and promoting the parallel importation of patented products in the selected areas
or circumstances may be a more effective solution in the practice of Vietnam.
The paper includes four main contents. The first content refers to the general conception of
sovereignty and freedom of legislation in the WTO framework and the difference in the
conception of legislative freedom under the Paris Convention and the TRIPS regulation. This
content is presented in Chapter one.
The second content addresses the question of what are the new challenges from WTO
jurisprudence to national legislation regarding the intellectual property protection. For this
purpose, Chapter two discusses the challenges from the change in the nature and scope of the
© Pham Hong Quat
7
Paris Convention as incorporated into the WTO system. Chapter three examines the
challenges from the application of GATT standards and the new developed disciplines of
WTO jurisprudence in securing compliance with the TRIPS.
The third content serves the review of the law and practice of Vietnam on the patent
protection under the new challenges from WTO jurisprudence. Accordingly, Chapter four
examines the current regulations on the patent protection for identifying the hidden problems
of the national legislation. Chapter five discusses the problems still existent and unsettled in
the draft of new law on intellectual property of Vietnam, particularly the problem of
exhaustion of patent rights.
The last content discusses on the legality of international exhaustion of patent rights under
WTO law and the constraint of WTO jurisprudence regarding this issue. Concerning this
content, Chapter six explores the practical constraints and challenges from WTO
jurisprudence regarding the issue of exhaustion of patent rights to seek some implication for
the case of Vietnam. This chapter also examines national practices with the focus on the
practice of Japan concerning the issue of exhaustion of patent rights, for seeking an
appropriate suggestion on the way to adopt the principle of international exhaustion of patent
rights in Vietnam.
© Pham Hong Quat
8
Abstracts
The new challenges from WTO jurisprudence regarding the intellectual property protection
would place more burdensome on national legislation in compliance with the TRIPS. The
challenges generated from the surveillance of the principle and the substantive provisions of
TRIPS, WTO rules and the change in the national treatment principle of the “incorporated”
Paris Convention. The recently developed rulings of the WTO panels and the Appellate Body
on the inconsistency of relevant domestic law with the TRIPS provisions confirms the
extension of GATT standard principles to the practice of TRIPS and the “incorporated” Paris
Convention.
Not only is the nature of the national treatment obligation under the “incorporated” Paris
Convention changed as a consequence of the GATT standards being applied to the TRIPS
principles, but also the scope of this obligation is extended together with the change in the
rule of assimilation when it functions in the WTO system. The application of the rule of antidiscrimination and the requirements for the availability and security of a legal basis in
implementing the substantive provisions of TRIPS places constraints on the national
legislation of WTO Members. The specific rulings developed from the TRIPS related disputes
on the compliance of domestic law to WTO law pose challenges to domestic legislation in
securing the TRIPS obligations under the WTO framework.
In light of the recently developed rulings of the WTO panels, the current legislation of
Vietnam reserves hidden problems that would likely be subject to the challenges of WTO law
inconsistency. The same situation exists in the language of the draft of the new intellectual
property law. It is necessary to eliminate the discriminatory elements from the statutory
language of the new law and from its implemented regulations to be in compliance with the
TRIPS and WTO law. It is also advised for the new law to contain certain open provisions to
make the national legislation compatible with the “incorporated” Paris Convention. The
internal and external requirements of the national legal system urge clarification of the
legality and justification of parallel importation of patented products in the language of the
new law and in its implementing regulations.
The development of WTO jurisprudence regarding intellectual property provides some
grounds to clarify the disputed issues concerning exhaustion of patent rights under the TRIPS
regulation. The recent development of national practices of some WTO Members provides
different arguments on the permission or the prohibition of parallel importation of patented
products. The reasoning in favor of international trade allowing conditionally parallel
importation of patented products is a specific experience of Japan. It is advised that the
legislators and judges of Vietnam may refer to the justification and the reasoning of Japanese
judges for allowing parallel importation of patented products. However, it needs to take into
accounts the conditional clauses in the circumstances of Vietnam. The Government control is
suggested as an alternative solution.
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9
Chapter One
Sovereignty and Freedom of Legislation under WTO Jurisprudence
I. Sovereignty and WTO law
1. Loss of sovereignty
The issue of sovereignty under WTO law causes a great debate among the scholars and
national policy makers, particularly in the United States and the European countries. 15 There
are different views on the matter of sovereignty in relation with the institutional aspects and
the dispute settlement mechanism of the WTO.16 Some proponents alleged that the
participation of the WTO would lead to the loss of sovereignty of the members in the
legislative freedom and in the determination of the internal policies pursuing the specific
national interests.17
The concern was that, on one hand, the WTO requires WTO Members to conform their
domestic legislation to WTO law, including regulations that may be irrelevant to the national
interests and preferences.18 On the other hand, domestic law of a WTO Member may be
subject to the assessment of a WTO panel upon a challenge from any other Member. 19 A
WTO panel may find that the relevant domestic law inconsistent with WTO law and that the
related Member being in violation of a WTO obligation. 20 Accordingly, the WTO mandates
the related Member to make the necessary change in the domestic legislation as far as it
assures the fulfillment of the related WTO Member’s obligation. 21 Some complained the super
power handing over the WTO Dispute Settlement Body in interpreting WTO law.22
15
See John H. Jackson, ‘The Great 1994 Sovereignty Debate: United States acceptance and implementation of
the Uruguay Round results’, in The Jurisprudence of GATT and the WTO Insights on treaty law and economic
relations (Cambridge University Press, 2000), p. 367. See also Ernst-Ulrich Petersmann, ‘European and
International Constitutional Law: Time for Promoting “Cosmopolitan Democracy” in the WTO’, in The EU and
the WTO Legal and Constitutional Issues, (eds. Grainne De Burca and Joanne Scott) (Oxford-Portland Oregon,
2001), p. 97.
16
See generally, Kal Raustiala, ‘Rethinking The Sovereignty Debate In International Economic Law’, Journal of
International Economic Law (Vol. 5, 2002), pp. 842-856.
17
Id. at 845. See also David Palmeter, ‘National Sovereignty and the World Trade Organization’, The Journal of
World Intellectual Property (Vol. 4, 2001), p. 77; Gary Lyde Hufbauer, ‘International Economic Law In Times
That Are Stressful’, Journal of International Economic Law (Vol. 5, 2002), p.16.
18
See Jagdish Bhagwati, ‘The Agenda of The WTO’ in Challenges to The New World Trade Organization, eds.,
Pitou Van Dijck and Gerrit Faber (Kluwer Law International, 1996), pp. 37, 42. See also Alice Enders, The Role
of The WTO In Minimum Standards’, in Challenges to The New World Trade Organization (eds. Pitou Van
Dijck and Gerrit Faber) (Kluwer Law International, 1996), p. 71.
19
See Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System International Law, International
Organizations and Dispute Settlement (Kluwer Law International, 1997), p. 181. See also John H. Jackson, The
World Trade Organization Constitution and Jurisprudence (The Royal Institute of International Affairs, 1998),
pp. 74, 75.
20
See John H. Jackson, supra note 19, at 78, 82.
21
See Chi Carmody, ‘Remedies And Conformity Under The WTO Agreement’, Journal of International
Economic Law (Vol. 5, 2002), pp. 317-319.
22
See Meinhard Hilf, ‘Power, Rules And Principles – Which Orientation For WTO/GATT Law’, Journal of
International Economic Law (Vol. 5, 2002), pp. 129-130. See also Allan Rosas, ‘Joinder of Parties And Third
Party Intervention in WTO Dispute Settlement’, in Improving WTO Dispute Settlement Procedures: Issues &
© Pham Hong Quat
10
2. Strengthening of sovereignty
The supporters to the WTO raised some arguments for the integrity of the Members’
sovereignty when they decide to enter and work in the WTO framework. 23 The denotation of
sovereignty amounts to two aspects, that is, the internal and external relations. 24 A sovereign
state retains the ultimate competence in regulating all matters of the internal relationships
concerning its belongings, including its residents.25 The WTO does not at any rate interfere
with the sovereignty of a Member in deciding the matters of its internal relationships. 26 The
sovereign state also holds the supreme power that is delegated from its residents in
determining the external relationships of the state. 27 The state may freely decide to join or
withdraw from the WTO after consideration of its rules.
When the state agrees to join the WTO, it agrees to accept and comply with WTO law. 28
Because the WTO stands for a multilateral system pursuing the fairness and the liberalization
of international trade, the external relation of one Member need to be regulated in the case it
involves a discriminatory action against any other. 29 The compliance with WTO law of the
Members is the good way to assure the overall effect that benefits them all in the end. 30 In this
view, some even argued that the WTO did not threaten but strengthened the sovereignty of the
WTO Members.31 The argument relied on the fact of increasing interdependence among the
countries in the world economic development.32 The fact that the threatening of the unilateral
measures applied in the bilateral trade relationships gave rise to the good effect of a
multilateral system.33 In this regards, it was argued that the traditional conception of
sovereignty was out of date. The new concept of sovereignty is perceived in the coming
challenges to the international trade globalization.34 The instruction of the new conception of
Lessons From the Practice of Other International Courts & Tribunals, ed. Friedl Weiss (Cameron May, 2001),
pp. 77-78; Donald M. McRae, ‘The WTO in International Law: Tradition Continued or New Frontier’, Journal
of International Economic Law (2000), pp. 29-30.
23
See Kal Raustiala, supra note 16, at 856, 864.
24
Id. at 845. See also John H. Jackson, supra note 19, at 102; Patrick A. Messerlin, ‘Three variations on ‘The
Future of The WTO’, Journal of International Economic Law (Vol. 8, 2005), p. 300.
25
See Kal Raustiala, supra note 16, at 846.
26
Id. at 860.
27
Id. at 867-868.
28
Id. at 848.
29
See John H. Jackson, The World Trading System Law and Policy of International Economic Relations (The
MIT Press Cambridge, Massachusetts, London, England, 1989), p. 134. See also Michael J. Trebilcok and
Robert Howse, The Regulation of International Trade (3rded.) (Routledge Taylor & Francis Group, 2005), pp.
51-53.
30
See Peter Van Den Bossche, The Law and Policy of the World Trade Organization Text, Cases and Materials
(Cambridge, 2005), pp. 22-23. See also Christopher Arup, The New World Trade Organization Agreements
Globalizing Law Through Services and Intellectual Property (Cambridge University Press, 2000), p. 43.
31
See Kal Raustiala, supra note 16, at 863, 875.
32
Id. at 857-858.
33
See Abram Chayes, Antonia Handler Chayes, The New Sovereignty (Harvard University Press, 1995), pp. 103106; J.-G. Castel, Extraterritoriality in International Trade Canada and United States of America Practices
Compared, (Butterworths, 1988), pp.22-24. See also Michael J. Trebilcok and Robert Howse, supra note 29, at
406-410; Gregory C. Shaffer, Defending Interests Public-Private Partnerships in WTO Litigation (Brookings
Institution Press, 2003), p. 51.
34
See John H. Jackson, ‘International Economic Law in Times That are Interesting’, Journal of International
Economic Law (Vol. 3, 200), pp. 10-11. See also Kal Raustiala, supra note 16, at 858.
© Pham Hong Quat
11
sovereignty relates to the performance of state governance in the increasing significance of
global governance.35
3. Erosion of sovereignty
The prevailing view is that when many “players” expect to join a “club” with a common rule
for maintaining a “level playing field” which provides the opportunities for everyone, the
sovereignty of each needs to be eroded to certain extent to implement its obligations under the
common rule.36 The WTO is designed as a supranational organization with the “rule-oriented”
working mechanism.37 The conception of sovereignty therefore relates to the allocation of
power in the vertical relation between the WTO Members and the WTO institution. 38
Generally, the extent of sovereignty that national states shifted to a supranational organization
would correspond to the extent of affects that the relevant treaty placing on national law.39
Where an agreement of the WTO Agreement has indirect effect on the domestic legislation of
a Member, the legislative freedom of that Member would be less constrained by the
agreement due to that Member may choosing the way to transform the WTO norms into the
domestic law.40 Generally, the agreements covered by the WTO Agreement produce the
indirect effect on domestic legislation in the implementing practice of the Members.41
35
See John H. Jackson, supra note 34, at 10.
See John H. Jackson, supra note 29, at 17. See also John H. Jackson, supra note 19, at 77.
37
See John H. Jackson, supra note 19, at 97-98.
38
Id. at 102.
39
See Peter Van Den Bossche, supra note 30, at 68-69.
40
Id. See also T. Cottier and K. Chefer, ‘The Relationship Between World Trade Organization Law, National
Law and Regional Law’, Journal of International Economic Law (Vol. 1, 1998), p. 93.
41
See Robert E. Hudec, ‘The Legal Status of GATT In The Domestic Law of The United States’, in European
Community and GATT (eds. Meinhard Hilf, Francis G. Jacobs, Ernst-Ulrich Petersmann) (Kluwer Deventer/The
Netherlands, 1986), p. 209; Meinhard Hilf, ‘The Application of GATT Within the Member States of the
European Community, with Special Reference to the Federal Republic of Germany’, in European Community
and GATT (eds. Meinhard Hilf, Francis G. Jacobs, Ernst-Ulrich Petersmann) (Kluwer Deventer/The
Netherlands, 1986), p. 175; Adres Moncaya Hase, ‘The Application and Interpretation of the Agreement on
Trade-Related Aspects of Intellectual Property Rights’, in Intellectual Property and International Trade: The
TRIPs Agreement (eds. Carlos M. Corea, Abdulquawi A. Yusyf) (Kluwer Law International, 1998), p. 140. See
also Panel Report, United States-Sections 301-310 of the Trade Act of 1974, WT/DS152/R (22 December 1999)
[hereafter “United States-Section 301”], para. 7.72. The Panel found:
“Under the doctrine of direct effect, which has been found to exist most
notably in the legal order of the EC but also in certain free trade area
agreements, obligations addressed to States are construed as creating legally
enforceable rights and obligations for individuals. Neither the GATT nor the
WTO has so far been interpreted by GATT/WTO institutions as a legal order
producing direct effect. Following this approach, the GATT/WTO did not
create a new legal order the subjects of which comprise both contracting
parties or Members and their nationals.” (Footnote omitted)
36
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II. Compliance under WTO Jurisprudence
1. Panel rulings
The compliance with WTO law of a domestic law is expressed not only in the statutory
language but also in its practical effect and actual application. A challenge of a domestic
legislation “as such” may lead to a panel ruling on the inconsistency of the legislation with
WTO law.42 Different from the dispute settlement regime under GATT 1947, the ruleoriented dispute settlement procedures under the WTO system contain the significant change
in the manner to give effect to the ruling of a WTO panel. 43 The negative consensus
mechanism seems to allow a panel report to be automatically adopted with the consent of at
least one winning party to the dispute. 44 This feature certainly produces greater pressure on
the implementation and compliance with the WTO panel rulings.45
Although the requirement of compliance with WTO law becomes stricter than that posed by
its predecessor - GATT 1947, the ruling of a WTO panel on a WTO-inconsistent domestic
law does not preclude the optional possibility of the related Member to keep the relevant
domestic law unchanged, and at the same time, opt for an alternative compliance measure
available under that mechanism.46 The issues of compliance with WTO law and the panel
rulings and the sovereignty of the WTO Members invited a tensional debate. 47 There are
different views on the legal effect of the panel rulings and the optional compliance measures
under the WTO settlement dispute procedures.48 In the position of a developing country
42
See Matthias Oesch, Standards of Review in WTO Dispute Resolution (Oxford University Press, 2003), pp.
188-189.
43
See Ernst-Ulrich Petersmann, supra note 19, at 177. See also John H. Jackson, supra note 19, at 72.
44
See Ernst-Ulrich Petersmann, supra note 19, at 185.
45
Id. at 191-192.
46
Id. at 192. See also John H. Jackson, supra note 19, at 96.
47
Typically, the debate between Judith H. Bello and John H. Jackson with respect to the binding effect of the
WTO panel rulings. See Judith H. Bello, ‘The WTO Dispute Settlement Understanding: Less is More’,
American Journal of International Law (Vol. 90, 1996), pp. 416-418; John H. Jackson, ‘The WTO Dispute
Settlement Understanding – Misunderstanding of the Nature of Legal Obligation’, American Journal of
International Law (Vol. 91, 1997), pp. 60-64.
48
E.g., Judith H. Bello suggested that the WTO substantially improved the GATT rules for settling disputes, but
in fact, it is only the result of the bargain among the sovereign member states. In her opinion, even with an
effective ruling or recommendation of a panel, a member in question is quite possible to freely select one of
three choices. First, it may come into compliance with the ruling by withdrawing the offending measure or
rectifying the relevant omission. Second, it may maintain the offending measure or determine not to rectify the
relevant omission but, instead, provide compensatory benefits to restore the balance of negotiated concessions.
Third, it may choose to make no change in its law or measures and also refuse to provide compensation, and,
instead, suffer likely retaliation against its exports, which is authorized by the WTO for the purpose of restoring
the balance of negotiated concessions. Accordingly, it could be understood that a ruling of a panel is only a
suggestion of one way for settling disputes. It has not legal binding effect, and the members in question remain
fully their sovereignty to decide whether to obey such a ruling or not. Therefore the role of an international panel
under the Dispute Settlement Understanding (“DSU”) seems unremarkable toward the sovereign national
governments. And she comes to a further thinking that this scenario truly created the balance to maintain
political support for the WTO Agreement by members. See Judith H. Bello, ‘The WTO Dispute Settlement
Understanding: Less is More’, American Journal of International Law (Vol. 90, 1996), pp. 416-418. By contrast,
John H. Jackson argued that a final panel ruling is legally binding upon the parties in question. And that
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13
member, however, the optional possibility given to them seems to be meaningless in reality.
For example, the maintenance of the situation that a domestic law is in incompliance with
WTO law often requires a high cost of compensation. The developing country members must
choose the way to bring the WTO-inconsistent domestic law into compliance with WTO law
pursuant to the rulings of a WTO panel, rather than opt for the payment of compensation. 49
The other alternative in terms of retaliatory measures appears difficult and impractical for the
developing country members to exploit because their disadvantageous position in the market
competitive capacity.50 Virtually, the WTO settlement dispute mechanism place more
constraints on the domestic legislation of the developing country members than that it poses
on the domestic legislation of the developed country members.51
2. Deference to national law
There was comment that the Appellate Body and the panels in some cases went beyond their
delegated authority in examining the relevant domestic law.52 Accordingly, the Appellate
Body and the panels should have to give more deference to the national law of the Members
in interpreting the WTO obligations and assessing the relevant domestic law. 53 The avocation
responded that the panels and the Appellate Body do not provide the authoritative
interpretation, but clarify the unclear obligations provided by WTO law. Its duty is to assure
the uniformity and coherence in the clarification of the obligations of all Members under the
different regulations of the WTO system. 54 However, an analysis of the WTO dispute
compensation or retaliation is also a kind of measures included in the ruling implementing procedure under the
DSU. Compensation and retaliation should not be considered as the optional alternatives to obeying a panel
ruling. It could not be understood in the meaning that the parties concerned are possible freely to take the choice
of obedience or disobedience. Otherwise, the compensation or retaliation is a sort of preventive or standby
measure. Such measures are respectively applicable only in the case of a member in question did not implement
timely measures as required by the ruling concerned. The legally binding effect of panel reports has recognized
for a long development history of the GATT. The GATT contracting parties were treating the results of an
adopted panel report as legally binding. In fact, the reports often recommended a member state to bring its
practice into conformity with its legal obligations under the GATT. He argued that when adopted, a panel report
was treated as binding; especially this was made rather clearly in the provisions of the Tokyo Round
Understanding. See John H. Jackson, ‘The WTO Dispute Settlement Understanding – Misunderstanding of the
Nature of Legal Obligation’, American Journal of International Law (Vol. 91, 1997), pp. 60-64.
49
See Tshimanga Kongolo, ‘The WTO Dispute Settlement Mechanism TRIPs Rulings and the Developing
Countries’, The Journal of World Intellectual Property (Vol. 4, 2001), pp. 262-263.
50
Id.
51
See Chi Carmody, supra note 21, at 324-325.
52
See Joost Pauwelyn, ‘Does the WTO Stand for “Deference to” or “Interference with” National Health
Authorities When Applying the Agreement on Sanitary and Phytosanitary Measures (SPS Agreement)?’, in The
Role of the Judge in International Trade Regulation Experience and Lessons for the WTO, (The World Trade
Forum Vol. 4, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 175.
53
See Claus-Dieter Ehlermann and Nicolas Lockhart, ‘Standard of Review in WTO Law’, Journal of
International Economic Law (Vol. 7, 2004), p. 491. See also Gary N. Horlick, ‘Deference-and Responsibility-by
WTO “Judges”’, The Role of the Judge in International Trade Regulation Experience and Lessons for the WTO,
(The World Trade Forum Vol. 4, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan
Press, 2003), p. 133.
54
See William J. Davey, ‘Has the WTO Dispute Settlement System Exceeded Its Authority? A Consideration of
Deference Shown by the System to Member Government Decisions and Its Use of Issue-Avoidance
Techniques’, The Role of the Judge in International Trade Regulation Experience and Lessons for the WTO,
(The World Trade Forum Vol.4, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan
Press, 2003), p. 43.
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14
settlement practice shows that the panels and the Appellate Body are in the tendency of
rendering the “de novo” assessment in interpreting the WTO obligations of the parties to the
disputes.55 It was indicated that in certain cases the panels and the Appellate Body did not
give much deference to the national legislation of the WTO Member in the explanation and
assessment of the relevant domestic law for determining its compliance with WTO law.56
3. Challenges to developing countries
Beyond the affect of the GATT rulings on the internal policies and domestic regulations on
the developing countries,57 the WTO rulings extends the broad impact of WTO law on the
domestic legislation of developing countries in different areas.58 Despite the criticisms coming
from different aspects, the number of disputes brought before the WTO panels is increasing in
relation to various agreements covered by the WTO Agreement. 59 The WTO panels and the
Appellate Body expressed their powerful capacity in dealing with the disputes among the
WTO Members. Though it is going with criticisms, WTO jurisprudence is extending its
impact to national jurisdiction in different areas.60
Apart from the concern of sovereignty in compliance with WTO law, the implementing
practice of the TRIPS invited specific claims on the constraints imposed on the domestic
legislation of the WTO Members, especially the developing countries. 61 By the TRIPS, WTO
law extended the GATT principles and WTO jurisdiction to the substantive norms for the
protection of intellectual property rights of the private parties 62 rather than the negative rules
against the government measures as provided in the GATT. 63 As both the WTO Agreement
55
See Matthias Oesch, supra note 42, at 206. See also Claus-Dieter Ehlermann and Nicolas Lockhart, ‘Standard
of Review in WTO Law’, Journal of International Economic Law (Vol. 7, 2004), p. 491.
56
See Olivier Cattaneo, supra note 13, at 652.
57
See Robert E. Hudec, Developing Countries in the GATT Legal System (Gower, 1987), pp. 166-75.
58
See A. V. Deardorff, ‘Should Patent Protection be Extended to all Developing Countries?’, in The World
Trading System Critical Perspectives on the World Economy (ed. Robert Howse), p. 35. See also Michael J.
Trebilcok and Robert Howse, supra note 29, at 417.
59
See John Jackson, ‘The Changing Fundamentals of International Law and Ten Years of The WTO’, Journal of
International Economic Law (Vol. 8, 2005), p. 5.
60
Id. at 6, 11.
61
See Dara Williams, ‘Developing TRIPs Jurisprudence The First Six Year and Beyond’, The Journal of World
Intellectual Property (Vol. 4, 2001), p.177. See also Martin Khor, ‘Rethinking Intellectual Property Rights and
TRIPS’, in Global Intellectual Property Rights Knowledge, Access and Development (ed. Peter Drahos and Ruth
Mayne) (Oxfam, 2002), p. 205.
62
See Karen D. Lee and Silke von Lewinski, ‘The Settlement of International Disputes in the Field of Intellectual
Property’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights
(II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and
International Patent, Copyright and Competition Law, Munich, 1996), p. 311 (discussing the extension of WTO
jurisdiction to private rights).
63
See Ernst-Ulrich Petersmann, ‘From Negative to Positive Integration in the WTO: The TRIPS Agreement and
the WTO Constitution’, in Intellectual Property: Trade, Competition, and Sustainable Development (World
Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Minchigan Press, 2003),
21. See also Christopher Arup, The New World Trade Organization Agreements Globalizing Law Through
Services and Intellectual Property, (Cambridge University Press, 2000), p. 12; J. H. Reichman, ‘Universal
Minimum Standards of Intellectual Property Protection under the TRIPs Component of the WTO Agreement’, in
Intellectual Property and International Trade: The TRIPs Agreement (ed. Carlos M. Corea, Abdulquawi A.
Yusyf) (Kluwer Law International, 1998), p. 21; Adres Moncaya Hase, supra note 41, at 128.
© Pham Hong Quat
15
and the TRIPS require the Members to take the positive action in bringing their domestic laws
and regulations into compliance with WTO law and the TRIPS provisions, 64 the norms with
high standards of intellectual property protection set forth in the TRIPS would create high
pressure on the domestic legislation of the Members. The situation of TRIPS-inconsistency is
popular as to national laws of both developed and developing countries.65
The developing countries now are suffering the pressure in the negotiations on bilateral
agreements regarding the so-called “TRIPS-plus” or “WTO-plus”. 66 The lack of information
sources and the poor conditions of technical and human resources made the professional
research and education on WTO law and jurisprudence in the developing countries very
limited. That is a significant factor affected the capacity of these countries in the TRIPS
implementation.67 The difficulty of the developing countries led to the call for the
improvement of the WTO dispute settlement regime to provide more flexibility and favorable
conditions in compliance with the TRIPS.68 It was called for the more “activist” of panels in
their interpretation of the TRIPS, taking into account the TRIPS exceptions and the principles
of the pre-existing treaties on intellectual property. 69 There was also the suggestion for a more
deference given to national laws of the developing countries in the panel assessment of
domestic law under the TRIPS for their incompatible conditions in compliance with the
TRIPS.70
4. Compliance with the TRIPS
For the unique features of the TRIPS, the interpretation of this agreement is regarded the
difficult work from various aspects. The difficulty stays behind the contradiction in the
rationale of the TRIPS, which stands for the greater protection of monopoly and the rationale
of the GATT, which stands for the freer trade in goods. 71 The interpretation of the TRIPS also
relates to the interpretation of the pre-existing treaties on intellectual property, which exist
and work under the system of the WIPO for a long before incorporating into the TRIPS. 72 The
assessment of compliance with the TRIPS often requires the examination of domestic law
concerning intellectual property protection and enforcement. This task seems not easy for the
divergence in the traditional grounds of national legal systems in dealing with the issue of
intellectual property. When a Member transforms the TRIPS norms into the national
64
See WTO Agreement, art. XI:4 and the TRIPS, art. 1.
See Paul Vandoren, ‘The TRIPs Agreement: A Rising Star?’, The Journal of World Intellectual Property (Vol.
4, 2001), p. 30; Tshimanga Kongolo, supra note 49, at 262-263.
66
See Peter Drahos, ’BITs and BIPs Bilateralism in Intellectual Property’, The Journal of World Intellectual
Property (Vol. 4, 2001), p. 793. See also Mohammed El-Said, ‘The Road from TRIPS-Minus, to TRIPS, to
TRIPS-plus Implications of IPRs for the Arab World, The Journal of World Intellectual Property (Vol. 4, 2001),
p. 57.
67
Tshimanga Kongolo, supra note 49, at 260-261.
68
Id. at 270.
69
See Olivier Cattaneo, supra note 13, at 679. See also Carlos Correa, ‘The WTO Dispute Settlement
Mechanism TRIPS Rulings and the Developing Countries’, The Journal of World Intellectual Property (Vol. 4,
2001), p. 253.
70
Carlos Correa, ‘The WTO Dispute Settlement Mechanism TRIPS Rulings and the Developing Countries’, The
Journal of World Intellectual Property (Vol. 4, 2001), p. 254.
71
Id. at 238.
See Olivier Cattaneo, supra note 13, at 631.
72
Id. See also Carlos Correa, supra note 70, at 253.
65
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legislation, it certainly needs to strike the balance between compliance with the TRIPS and
the public interest.73
Some commentators suggested that the interpretation of the TRIPS made by the WTO panels
and the Appellate Body is of “constructionist”, namely, it relies strictly on the words of the
agreement.74 It was noted that, at least in one case, the Appellate Body rejected the
interpretation of the panel for the reason that such interpretation went beyond the language of
the TRIPS.75 Despite of that, there existed a criticism that the TRIPS interpretation of the
panels and the Appellate Body was incoherent and instable over the cases, which affected the
legitimacy of the TRIPS under WTO jurisprudence. 76 There was a claim that the panels and
the Appellate Body gave the partial deference to the relevant domestic laws in certain cases,
and consequently, the domestic legislation of the developing countries suffered more
suppression in compliance with the TRIPS.77
The difficulty of the developing countries led to the proposal of improving the WTO dispute
settlement regime for the more favorable conditions given to them in compliance with the
TRIPS.78 It was called for the more “activist” attitude of panels in their interpretation of the
TRIPS, in consideration of the TRIPS exceptions and the principles of the pre-existing treaties
on intellectual property. 79 There was also a suggestion for the more deference given to
national law of developing countries in the panel assessment of domestic law under the
TRIPS, taking into account their incompatible conditions in compliance with the TRIPS.80
73
See Peter Draho, Developing Countries and International Intellectual Property Standard-Setting, The Journal
of World Intellectual Property (Vol. 5, 2002), p. 766.
74
See Jerome H. Reichman, ‘The TRIPs Agreement Comes of Age: Conflict or Cooperation in the PostTransitional Phase?’, in Intellectual Property: Trade, Competition, and Sustainable Development (The World
Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p.
118. See also Dara Williams, ‘Developing Trips Jurisprudence’, The Journal of World Intellectual Property
(Vol. 4, 2001), p. 208.
75
See Appellate Body Report, India-Patent Protection for Pharmaceutical and Agricultural Chemical Products,
WT/DS50/AB/R (19 December 1997) [hereafter “India-Patent”], paras. 36, 45.
76
See Daya Shanker, ‘Legitimacy and the TRIPS Agreement’, The Journal of World Intellectual Property (Vol.
6, 2003), pp. 188-189.
77
Id. at 177.
78
See Tshimanga Kongolo, supra note 49, at 270.
79
See Olivier Cattaneo, supra note 13, at 679. See also Carlos Correa, supra note 70, at 253.
80
Carlos Correa, supra note 70, at 254.
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5. Challenges from WTO jurisprudence
Notwithstanding the political considerations of the panels needed in rendering their rulings
over particular cases,81 there exist some practical grounds to believe that the TRIPS
obligations are getting more burdensome as to the developing countries since the surveillance
of the GATT disciplines in securing compliance with the TRIPS. 82 Regardless of the absence
of a chapeau provision in TRIPS as it exists in GATT, the GATT practice disciplines are
strictly adopted in the interpretation of the TRIPS without any modification. The GATT
practice disciplines are also applied in securing the obligations under the Paris Convention as
incorporated into the TRIPS. This causes the substantial change in the nature of the
obligations under the incorporated Paris Convention. Otherwise, the objectives and principles
inscribed in the text of the TRIPS appear no practical effect in the TRIPS implementation.
Certainly, the surveillance the GATT disciplines in securing the TRIPS would place more
constraints on the domestic legislation of the developing countries. The rulings of the panels
and the Appellate Body over the recent TRIPS disputes also revealed some new examination
standards, which were applied in examining the consistency of the relevant domestic law with
the TRIPS regulation. Such newly developed examination standards together with the strict
requirements of WTO law would be the additional challenges to national legislation in
compliance with TRIPS. These challenges will be discussed in the subsequent chapters.
Before exploring the question of how the GATT and the WTO jurisprudence places the
practical challenges to the national legislation of the WTO Members in compliance with the
TRIPS, it is worth having an understanding on the issue of freedom of legislation under the
regulations of the Paris Convention and the TRIPS. The discussion bellow will examine this
issue in the development from the Paris Convention to the TRIPS, or the movement of
intellectual property attention from the WIPO framework to the WTO framework. The main
principles and substantive rules regulating national legislation regarding the patent protection
under each treaty are of the focus.
81
See Thomas Cottier and Petros C. Mavroidis, ‘Concluding Remark’, in The Role of the Judge in International
Trade Regulation Experience and Lessons for the WTO, (The World Trade Forum Vol. 4, eds. Thomas Cottier
and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 353. See also Matthias Oesch, supra note
42, at 31.
82
The panel rulings in some recent TRIPS cases substantiate this point, which will be discussed in the following
chapters.
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18
Chapter two
Freedom of legislation under the Paris Convention and the TRIPS regulation
II. Freedom of legislation under the Paris Convention
1. The same treatment as to advantages
The Paris Convention is the primary international treaty on protection of industrial property,
including patents trademarks and the other objects of industrial property rights. 83 The first
international congress to discuss the issue of international protection for inventions was the
Vienna Congress in 1873 held on the occasion of the Vienna International Exposition. 84 The
congress adopted a number of resolutions, one of which stated the fundamental principles to
be applied in the national legislation of the “civilized nations” in the protection of patents.
National legislation was required, among others, to provide patent protection to foreigners and
apply the principle of the independence of national in the protection of patents. 85 These
principles served as the primary mandate for the subsequent negotiating conferences. 86 After
three conferences held in Paris in 1878, 1880 and 1883, the Act of the Paris Convention on
the Protection of Industrial Property was virtually adopted on 20 March 1883 87.And it became
the first multilateral intellectual property convention. The Convention was regarded as a
model for subsequent international intellectual property agreements in certain aspects,
including the principles of national treatment and priority, the establishment of an open
83
Article 1(2) of the Paris Convention provides that the following objects of industrial property rights be under
its regulation: patents, utility models, industrial designs, trademarks, service marks, trade names, indications of
source or appellations of origins, and the repression of unfair competition. See the Paris Convention, art.1(2).
84
An important fact prior to the Vienna International Exposition 1873 was that the threat of a boycott of the
event by US inventors and manufactures since the Austrian Patent Law did not provide satisfactory protection
for foreign inventors. The Austro-Hungarian Government then enacted a special law for provisional protection
of articles introduced at the Vienna Exposition. However, the US Government insisted on the Austro-Hungarian
Government dealing with the problem of protection for foreign inventors through mutual treaty stipulations
rather than through temporary national enactments. The above-mentioned events led to the Vienna Congress of
1873 on the occasion of the Vienna International Exposition to discuss an international solution to the question
of patent reform. The participants included representatives from 18 countries: Germany, Austria, Belgium,
Brazil, Canada, Denmark, France, Greece, Hungary, India, Italy, Japan, Russia, Netherlands, Sweden,
Switzerland, UK, and USA. See e.g., article in Scientific American dated 23 December 1871, reproduced in
USA, Congressional Papers, Papers Relating to the Foreign Relations of the United States, 1872, 42nd Cong., 3rd
Sess., H of R, Ex Docs VI, part 1, pp. 48-49, quoted by Alfredo Ilardi and Michael Blakeney, in International
Encyclopaedia of Intellectual Property Treaties (Oxford University Press, 2004), p.23.
85
The first resolution of the congress declared the “reasons” to justify the demand of protection of inventions in
the national legislation of the civilized nations. The second resolution set forth the basic principles on which an
“effective and useful patent law should be based”. Among others, these principles required that “a patent should
not be refused to a foreigner” and the application of independence of nationality. See T.Webster, Vienna
Universal Exhibition 1973: Report on the International Patent Congress (UK, Parliamentary Papers, 1874), 399
at 343-344, 350-351, quoted by Alfredo Ilardi and Michael Blakeney, supra note 84, at pp.24-25.
86
Although the Vienna Congress was an unofficial meeting, it placed the patent issue on the international
diplomatic agenda and provided a negotiating basis for the Paris Conferences of 1878, 1880 and 1883. See
Alfredo Ilardi and Michael Blakeney, supra note 84, at p.25.
87
For more details of the process of the Paris Conferences and the adoption of the Paris Convention 1883, see
Alfredo Ilardi and Michael Blakeney, supra note 84, at 25-31.
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Union,88 and the possibility of revision and the extension of membership. 89 The Convention
was subject to several revisions by the diplomatic conferences, however, the member states
are free to decide whether to join the new versions or not.
At the time of negotiations of the Convention, the situation of national legislation regarding
industrial property protection was very different in the member states. Some countries did not
have legislation of patent protection. 90 Some others granted very limited or no protection for
trademarks and industrial designs. 91 Since there was a diversity of national laws, from the
very beginning, the mandate for negotiating the national treatment provision was that the
Convention should not aim at unifying national patent laws, nor trespass on the domestic
legislation of the Union countries.92 The option for the preparation of the national treatment
provision were that the Convention should respect the internal legislation of the Union
countries and restrict itself to the obligations regarding national treatment of foreigners in
patent protection.93 The concern was that the obligation to provide national treatment to
foreigners when great differences existed in national patent laws would certainly result in
inequality among the members in the provision of patent protection. 94 This gave rise to the
proposals on the reciprocal applicability of national treatment. However, those proposals were
withdrawn in the end and the Convention affirmed that its principle of national treatment be
applied independently by each member without reciprocity. 95 Regardless of the differences
and imbalances in the domestic legislation of the members regarding patent protection, the
88
The Convention establishes a Union for the protection of industrial property, including the countries to which
the Convention applies. See the Paris Convention, supra note 1, art.1(1).
89
See Alfredo Ilardi and Michael Blakeney, supra note 84, at 31.
90
See Friedrich-Karl Beier, ‘One Hundred Years of International Cooperation – The Role of the Paris
Convention in the Past, Present and Future’, International Review of Industrial Property and Copyright Law
(Vol. 15, 1984), p. 8 (for examples, Switzerland and Netherlands had no legislation for patent protection).
91
Id.
92
Id. at 8, 9.
93
In the very first negotiating session for the Paris Convention in 1880, where the concept of national treatment
was first introduced as an initial basis to form the convention, it was admitted that the Conference could not
achieve a complete international treaty of industrial property because of the difficulty of unifying national laws.
The Conference was to strive to find the means to constitute a union which, without encroaching on domestic
legislation, would assure national treatment and lay down a number of uniform general principles. In the
negotiations, the idea inserted in the initial draft of the convention was that the convention would have to respect
the internal legislation of all contracting parties as much as possible, and to restrict itself to an obligation to
extend national treatment to foreigners, quoted in Comments of the United States on the Reply of the World
Intellectual Property Organization To the Panel’s Letter, September 28, 2004, p.2, available at
http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute_Settlement/WTO/Dispute_Sett
lement_Listings/asset_upload_file664_5560.pdf.
94
E.g., regardless of the lack of a patent protection regime under the national laws of certain countries, nationals
of these countries were still able to benefit from national treatment in the patent protection of other members of
the Union, quoted in Comments of the United States on the Reply of the World Intellectual Property
Organization To the Panel’s Letter, supra note 93.
95
In the course of discussions, the national treatment obligation was clarified by the deletion of the word
“reciproquement” from the original draft, quoted in Comments of the United States on the Reply of the World
Intellectual Property Organization To the Panel’s Letter, supra note 93. In subsequent revisions, several
proposals to include a reciprocity element in the obligation found no support and were withdrawn. Id. See also
G.H.C. Bodenhausen, Guide to the application of the Paris Convention for the protection of industrial property
(BIRPI, 1969), p.29.
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Convention required a member to provide the same treatment to nationals of other countries
as it gives to its own nationals in patent protection.96
The Convention provides for the principle of national treatment. The basis rule implied in this
principle is that the nationals of each Union country shall enjoy in all other Union countries
the advantages that their respective laws grant, or may grant in the future, to their own
nationals in the protection of industrial property.97 Furthermore, the principle of national
treatment of the Convention extends to the so-called “assimilation with nationals”. 98 The
Convention also requires that nationals of a country outside the Union who are domiciled or
have real and effective industrial or commercial establishments in the territory of one country
of the Union must also be treated in the same manner as that given to nationals of the Union
countries.99
The Convention sets forth an important reservation to the principle of national treatment. This
provision reserves “expressly” the provisions of the laws of the Union countries relating to
judicial and administrative procedures and to jurisdiction, and to the designation of an address
for service or the appointment of an agent.100 Accordingly, the national law of a Union
country is allowed to reserve the discrimination against nationals of other member countries
as to the aforesaid procedural matters in the industrial property protection. 101 It was noted that
the reservation of procedural discrimination in the national laws of the member countries was
introduced and adopted at very early stage of the Convention negotiations.102
Under Article 2(1) of the Convention, the requirement of the “same treatment” of the
Convention as to nationals of the other Member is applicable only to the “advantages” that the
respective law of a given Member “now” grants or “may hereafter” grant to its own nationals.
It is argued that the provision of national treatment of the Convention, on the face of it, does
not oblige the Members to protect inventions or grant patent rights. 103 There is no word in this
provision requiring the Members to introduce in their domestic legislation a legal regime of
patent protection. A Member, therefore, may decline to grant patent rights to foreigners in
regards of inventions in all or in certain fields of technology, provided that it also does the
same to the nationals of its own.104 A foreigner may not claim a patent for his invention of
pharmaceutical, for example, when the national patent law of the related Member precludes
generally the inventions in this field from the patentability. For that feature, it was suggested
that the provision of national treatment did not restrain the Members from taking the de facto
discrimination against foreigners in the patent protection.105
96
See the Paris Convention, supra note 1, art. 2(1). See also G.H.C. Bodenhausen, supra note 95, at 29.
See the Paris Convention, supra note 1, art. 2(1).
98
See G.H.C. Bodenhausen, supra note 95, at 12.
99
See the Paris Convention, supra note 1, art. 3.
100
Id. art. 2(3).
101
See G.H.C. Bodenhausen, supra note 95, at 32. See also WIPO Intellectual Property Handbook: Policy, Law
and Use (WIPO, 2004), p. 243.
102
See G.H.C. Bodenhausen, supra note 95, at 32.
103
See Nuno Pires de Carvalho, The TRIPS Regime of Patent Rights (Kluwer Law International, 2002), p. 65.
104
Id. See also Ituku Elangi Botoy, ‘From the Paris Convention to the TRIPS Agreement A One Hundred-andTwelve-Year Transitional Period for the Industrialized Countries’, The Journal of World Intellectual Property
(Vol. 7, 2004), p. 120.
97
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Since the lack of mandatory obligation in the patent protection and the non-reciprocity in the
application of national treatment, the Convention stands for the so-called asymmetry of
national patent laws.106 Namely, the Convention does not prevent a difference in the
standards of patent protection existent in the national laws of the Union countries. 107 National
laws may decide on the patentability of inventions, the conditions for the patent grant and
determine the content, scope and term of patent protection.108 Otherwise, the Members may
formulate their national legislation to different strategies in using the patent system as a tool
to achieve specific public policy objectives, 109 for examples, for promoting technology
transfer and foreign direct investment, or only for protecting domestic industries against the
competition of foreign industries.110 The lack of reciprocity and the territorial nature of
protection are regarded as a substantial weakness of the principle of national treatment of the
Convention. The national treatment principle does not mandate the uniformity of protection
nor require an equal level of protection in all Union countries. The same invention or
trademark may be protected in various Union countries according to different systems and
rules.111
Concerning the procedural matters, Article 2(1) of the Convention contains a conditional
clause of the principle of national treatment. This clause says that foreigners must “observe
the formalities and conditions imposed upon nationals”. 112 As indicated in the practice, there
exist different kinds of procedural requirements in the national laws of the Members that
constitute the discrimination against foreigners.113 The discriminatory requirements are
located in both judicial and administrative procedures relating to the protection and
enforcement of industrial property rights.114
It is alleged that the principle of national treatment of the Convention in fact did not discipline
the discriminatory practices in the industrial property protection. Otherwise, the provision on
national treatment leaves the country members a leeway to provide or reserve the differences
and, sometimes, the discriminatory treatments against foreigners in the patent protection. 115
Accordingly, there was no legal obstacle to the country members in determining the variety of
105
See Robert Howse, The Regulation of International Trade (3rded.) (Routledge Taylor & Francis Group, 2005),
p. 403; Hanns Ullrich, ‘Technology Protection According to TRIPs: Principles and Problems’, in From GATT to
TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18,
Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent,
Copyright and Competition Law, Munich, 1996), pp. 367-368.
106
See Nuno Pires de Carvalho, supra note 103, at 66.
107
See Friedrich-Karl Beier, supra note 90, at 9.
108
Id. at 11.
109
See Hanns Ullrich, supra note 105, at 367. See also Nuno Pires de Carvalho, supra note 103, at 66.
110
See Nuno Pires de Carvalho, supra note 103, at 66. See also Ituku Elangi Botoy, supra note 104, at 120.
111
See Friedrich-Karl Beier, supra note 90, at 11.
112
See the Paris Convention, supra note 1, art. 2(3).
113
See G.H.C. Bodenhausen, supra note 95, at 32. See also M. J. Trebilcock and Robert Howse, supra note 29, at
404.
114
See M. J. Trebilcock and R. Howse, ‘Trade-related Intellectual Property (TRIPs)’, in The World Trading
System Critical Perspectives on the World Economy (ed. Robert Howse) (Routledge London and New York,
1998), p. 58.
115
See M. J. Trebilcock and Robert Howse, supra note 29, at 404. See also M. J. Trebilcock and R. Howse,
supra note 114, at 58.
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sovereign policies regarding promotion of technology and competition under the
Convention.116
2. Rules of substantive law
The Convention contains the provisions requiring and permitting the Members to legislate
specific matters in the field of industrial property. For examples, Article 4 (D) requires and
allows the Members to regulate the particular matters relating to the right of priority. Article
5A (2) grants the Members the right to legislate against abuses which might result from the
exercise of the exclusive rights conferred by a patent. Article 5bis (2) grants the Members the
right of restoration of patents which have lapsed by reason of non-payment of fees. Article 11
requires the Members to grant temporary protection to patentable inventions, utility models,
industrial designs and trademarks, in respect of goods exhibited at official or officially
recognized international exhibitions held in the territory of any of them. 117 While the
permitting provisions reserves to the large extent the rights of the Members in regulating the
particular matters relating the protection of industrial property objects. The requiring
provisions are subject to the loose implementing provision of Article 25 as discussed below.
Virtually, the provisions leave the Members the remarkable freedom to legislate the protection
of industrial property.
The Convention also contains a group of provisions stipulating the rules of substantive law in
the industrial property protection,118 which regulate the rights and obligations of private
parties. The provisions of this kind could be found in the number of articles. For examples:
the definition of industrial property in Article 4; the right of priority in Article 4; the
independence of patents in Article 4bis; the right of inventor to be mentioned on the patent in
Article 4ter; the limitation of the possibilities of refusal and annulment of patents in Article
4quater; the regulation of the obligation to exploit patents; trademarks, etc. in Article 5 (with
the exception of Article 5(A)(2) providing for the right of the Members to legislate against the
abuses of exclusive patent rights); the period of grace for the payment of maintenance fees in
Article 5bis(1); the exemption, under certain circumstances, from infringement of patents in
Article 5ter; the rights of the patentee in respect of a process of manufacture in Article
5quater; the conditions of registration and independence of trademarks in Article 6; etc.119
In the sense that the above-mentioned provisions set out the rules regulating rights and
obligations of private parties in the industrial property protection, they have a significant
effect on the domestic legislation of the Members. Depending on the constitutional provisions
of the Members, these provisions may influence directly or indirectly the administrative and
judicial decision of the Members in dealing with a relevant situation. Where the constitutional
provisions of a Member recognizes and permits the direct application of the provisions of an
international treaty, which are considered self-executing, these rules may be directly applied
116
See Hanns Ullrich, supra note 105, at 368.
For understanding on the history and detailed contents of these provisions, see G.H.C. Bodenhausen, supra
note 95.
118
See Friedrich-Karl Beier, supra note 90, at 8.
119
There exist some more provisions concerning the substantive protection of trademarks, trade names, industrial
designs, geographical indications and the prevention of unfair competition contained in the Paris Convention. In
more details, see G.H.C. Bodenhausen, supra note 95.
117
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in handling the cases without any further intervention by the national legislator. 120 Otherwise,
these provisions need to be introduced into the domestic legislation of a Member to be
applicable to private parties where its constitutional provisions so require. In any case, the
Convention obliges the Union countries to respect the common rules of substantive law
regarding the industrial property protection. 121 However, the Convention leaves a considerable
freedom to the Union countries in legislating specific issues concerning the particular
industrial proper subject matters.122
Though the common rules regarding the industrial property protection provided in the
Convention are of great significance, these rules are very limited in their scope and leave
considerable freedom to the Union countries to legislate the particular issues of the industrial
property protection pursuant to their interests and preferences. 123 The framers of the
Convention recognized the rules of national legislation regarding industrial property rights for
the concern of the Union countries regarding the impairment of domestic market and legal
certainty.124 With regard to patents, the Convention gives entirely freedom to the Union
countries in determining the patentable subject-matters, the patentability of products and
processes, the criteria of patentability, the term of patent protection, the rights conferred to the
patentees, etc.125
Regarding patents, the most important rules in practice are concentrated in Article 4 of the
Convention regarding the right of priority. 126 Besides, the rule on independence of patents
under Article 4bis requires the patents granted in member countries to their nationals or
residents to be treated as independent of patents obtained for the same invention in other
120
Annette Kur, ‘TRIPs and Trademark Law’, in From GATT to TRIPs – The Agreement on Trade –Related
Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The
Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), p. 93
(for instance in Germany).
121
See Friedrich-Karl Beier, supra note 90, at 11, 12.
122
See generally, G.H.C. Bodenhausen, supra note 95. For the practice of application, see Annette Kur, supra
note 120, at 93; Roland Knnaak, The Protection of Geographical Indications According to the TRIPs Agreement,
in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies
eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International
Patent, Copyright and Competition Law, Munich, 1996), p. 119-120; Annette Kur, ‘TRIPs and Design
Protection’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights
(II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and
International Patent, Copyright and Competition Law, Munich, 1996), pp. 144-145; Rudolf Krasser, ‘The
Protection of Trade Secrets in the TRIPs Agreement’, in From GATT to TRIPs – The Agreement on Trade –
Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard
Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law,
Munich, 1996), p. 216.
123
See G.H.C. Bodenhausen, supra note 95, at 15. See also Joseph Straus, ‘Implications of the TRIPS Agreement
in the Field of Patent Law’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual
Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute
for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), p. 171.
124
See Friedrich-Karl Beier, ‘One Hundred Years of International Cooperation – The Role of the Paris
Convention in the Past, Present and Future’, International Review of Industrial Property and Copyright Law
(Vol. 15, 1984), p. 8.
125
See Joseph Straus, supra note 123, at 172-173. See also Hanns Ullrich, supra note 105, at 367.
126
See Joseph Straus, supra note 123, at 172.
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countries.127 This rule is regarded as the principle of mutual independence of patents generally
applicable to the grant of patents, including those for the same inventions and the different
inventions granted in different countries.128 The principle requires the Union countries to
consider their patents independent of other patents obtained for the same invention, even if
those patents are granted in the countries outside the Union.
The principle of patent independence is to be understood in the broadest sense. 129
Accordingly, the grant of a patent for a given invention in one country does not oblige any
other member country to grant a patent for the same invention. 130 The principle also requires
that a Union country cannot refuse, invalidate or terminate a patent on the ground that the
corresponding patent for the same invention has been refused or invalidated or terminated in
any other country.131 However, the principle does not provide any specific rule with respect to
granting patents to inventions or conferring certain rights to patentees. In this respect, the
Convention does not restrain the member countries from providing different levels of
protection to inventions and patents in different fields of technology. 132 The Union countries
may set up different grounds for determining and calculating the term of patent protection,
provided that the equal duration should be given to the patents granted with the claim of the
right of priority and those granted without the claim of the right of priority. 133
In consideration of the limitations specified in Articles 4quarter and 5(A), the Union
countries may introduce into their national laws different grounds for refusal, invocation,
invalidation and termination as to patents. The prevailing argument in favor of the principle of
independence of patents is that national laws and administrative and judicial practices on the
patent protection are quite different from country to country. 134 In this respect, the principle of
patent independent does not oblige the Union countries to eliminate the difference and the
discrimination permissible under the principle of national treatment of the Convention.135
Another example is the rule on the obligation of exploitation of patents and compulsory
licenses provided in Article 5(A) of the Convention. Article (A)(1) requires that importation
by the patentee into the country, where the patent has been granted, of articles covered by the
patent and manufactured in any of the member countries will not entail forfeiture of the
127
See the Paris Convention, supra note 1, art. 4bis.
See the Paris Convention, supra note 1, art. 4bis(2). See also G.H.C. Bodenhausen, supra note 95, at 62;
WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245.
129
See the Paris Convention, supra note 1, art. 4bis(2). See also WIPO Intellectual Property Handbook: Policy,
Law and Use, supra note 101, at 245.
130
See G.H.C. Bodenhausen, supra note 95, at 62. See also the Paris Convention, supra note 1, art. 4bis(2). See
also WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245.
131
See the Paris Convention, supra note 1, art. 4bis(2). See also G.H.C. Bodenhausen, supra note 95, at 62;
WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245.
132
See Friedrich-Karl Beier, supra note 90, at 10.
133
See the Paris Convention, supra note 1, art. 4bis(5). See also WIPO Intellectual Property Handbook: Policy,
Law and Use, supra note 101, at 245. See G.H.C. Bodenhausen, supra note 95, at 63. See Joseph Straus, supra
note 123, at 172.
134
See the Paris Convention, supra note 1, art. 4bis(5). See also WIPO Intellectual Property Handbook: Policy,
Law and Use, supra note 101, at 245.
135
Provided that the requirement of equal duration for patents granted with and without the right of priority. See
WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245, 246.
128
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patent.136 Accordingly, the Members may not apply the measures to terminate a patent,
whether such measures are made in the terms of forfeiture, revocation, repeal or annulment,
on the ground of importation of patented articles by the patentee. 137 However, the provision
leaves the member countries the freedom to regulate the importation of patented articles by
other means and in other circumstances than those stated in the above-mentioned provision.
Different from the viewpoint that this article is no longer relevant to the current problems of
national legislation,138 it is argued that it is still significant to national legislation in some
cases. For example, national legislation would be free to decide other measures having effect
to prevent importation of patented articles, such as administrative sanctions, fines or
suspension of rights, etc.139
Article 5(A)(2) states that each member country shall have the right to take the legislative
measures providing for the grant of compulsory licenses to prevent the abuses which might
result from the exercise of the exclusive rights conferred by the patents, e.g., failure to work
or insufficient working.140 The argument for this provision relates to the expectation of
domestic exploitation of the granted patents, rather than only grant of the right to the
patentees to block the working of the invention or to monopolize importation of patented
articles into the country granting the patents.141 Otherwise, the domestic exploitation of a
patent in the country granting the patent needs to be considered in various aspects, including
the relevant economic conditions and the question of time. The provision on compulsory
licenses strikes the balance between those considerations. It provides the member countries
with the right to legislate against the abuses of the exclusive rights conferred by the patents by
the regulation of compulsory licenses.142
Such regulation should be subject to the rule mentioned in Articles 5(A) (4). The rule
regarding compulsory licenses in this article refers to a certain limitations to the national
legislation of the Members. For examples, compulsory licenses for non-working or
insufficient working of the invention may not be requested before the expiration of a certain
period as from the filing date of the patent application or the granting date of the patent. 143
The compulsory license for non-working or insufficient working shall be a non-exclusive
license shall not be transferable, unless the compulsory license is transferred together with the
part of the enterprise or the goodwill that exploits such license. 144 The reasoning for these
limitations is to prevent a compulsory licensee from getting the benefits that go beyond the
136
See the Paris Convention, supra note 1, art. 5(A)(1).
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 246. See also G.H.C.
Bodenhausen, supra note 95, at 69; Joseph Straus, supra note 123, at 173.
138
See Joseph Straus, supra note 123, at 173.
139
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 246. See also G.H.C.
Bodenhausen, supra note 95, at 69.
140
See the Paris Convention, supra note 1, arts. 5(A)(2) and (4).
141
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also G.H.C.
Bodenhausen, supra note 95, at 70.
142
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also G.H.C.
Bodenhausen, supra note 95, at 71.
143
Compulsory licenses against a patent cannot be granted before the lapse of the prescribed period, namely,
three years from the date of granting the patent or four years from the date of filing the patent application. See
the Paris Convention, supra note 1, arts. 5(A)(4).
144
See the Paris Convention, supra note 1, arts. 5(A)(4). See also WIPO Intellectual Property Handbook: Policy,
Law and Use, supra note 101, at 247. See also G.H.C. Bodenhausen, supra note 95, at 72.
137
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limit justified by the purpose of the compulsory license, that is, the assurance of sufficient
working of the invention in the country granting the relevant patent.145
It is argued that the rule provided in Article 5(A) (4) applies only to compulsory licenses for
non-working or insufficient working. As for the other types of compulsory licenses, the
national legislation of the member countries is free to regulate without the binding of that
rule.146 Compulsory licenses may also be applied for reasons of the public interest, in the
situation that does not necessarily relate to the abuse of the exclusive rights by the patentees,
e.g., for the reasons of national security or public health. The granting of compulsory license
may be necessary in the case of preventing the unjustified restriction on technological
progress that comes within the term of protection of the public interest. When the exploitation
of an invention cannot be carried out without using another invention, which is often subject
to a so-called dependent patent, may justify the request of granting a compulsory license for
using the latter.147 These kinds of compulsory licenses are outside the application scope of the
limitations on the waiting time, on the non-exclusive and on non-transferable nature of
compulsory licenses.148 In this respect, the Convention gives the member countries the
freedom to legislate all types of compulsory licenses other than those for non-working and
insufficient working pursuant to their own considerations, without subjection to the rule
stipulated in Article 5(A)(4).149
In the same vein of the principle of patent independence, the rule regarding compulsory
licenses leaves remarkable freedom to the national legislation of the Union countries in
regulating the specific questions concerning the existence of patents and the exercise of patent
rights. As reflected in the provisions of the national treatment principle, the Convention
provides for the common rules in very limited scope rather than the standard norms regarding
the patent protection.150 For such purpose, the Convention leaves the national legislation of the
Union countries considerable freedom to formulate their patent laws pursuant to specific
considerations and circumstances.151
3. Reservation in dispute settlement procedure
The mechanism for settlement of disputes between the Union countries is mentioned in
Article 28 of the Convention. Article 28(1) provides for the referral of a dispute between two
or more member countries on the interpretation or application of the Convention to the
145
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also G.H.C.
Bodenhausen, supra note 95, at 73.
146
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247.
147
Id. See also Joseph Straus, supra note 123, at 173.
148
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also Joseph
Straus, supra note 123, at 173.
149
See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. However, this
possibility is eliminated by the TRIPS. The TRIPS stipulates more intensive requirements applicable to a wide
range of compulsory licenses, which are defined in the term of “other use without authorization of the right
holder”. See the TRIPS, supra note 10, art. 31.
150
It does not mean that the Paris Convention contains no certain substantive standards regarding protection of
trademarks, trade names etc. and some obligations to protect industrial design and repress unfair competition.
See Nuno Pires de Carvalho, supra note 103, at 77.
151
See Friedrich-Karl Beier, supra note 90, at 10.
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International Court of Justice, if the dispute cannot be settled by negotiation and the countries
concerned do not agree on some other method of settlement. 152 However, a Union country is
free to decide whether or not it is bound by this provision. The reservation recorded in Article
28(2) says that a member country, at the time of signature, ratification or accession, may
declare that it does not consider itself bound by the dispute settlement mentioned in Article
28(1).153 When a Union country makes that declaration, the dispute settlement provisions of
the Convention will be not applicable to any dispute between that country and any other
member country.154
The reservation on non-applicability of the dispute settlement clause, on the face of it,
undermines the effect of the dispute settlement mechanism of the Convention. In the concern
for the ineffectiveness of the judgments made by the International Court of Justice, the
dispute settlement provisions of the Convention appear ineffective in practice. In practice,
there is no case having been brought before the International Court of Justice under the
provisions of Article 28(1) of the Convention. 155 It was reasoned that the ineffectiveness of
this system is due to the general reluctance on the parts of states to take international disputes
to the courts.156 It was also the expression of the dissatisfaction with the proceedings of the
International Court of Justice.157 The ineffectiveness of the dispute settlement procedures of
the Convention in fact weakened the effect of the substantive rules provided in the
Convention and that was regarded as one of the most important reasons for the inclusion of
intellectual property in GATT.158
4. Reservation of obligations
Concerning the effect of the Convention, Article 20(2) of the Convention provides an
important reservation. This provision stipulates that any Union country may make a
declaration in its instrument of ratification or accession that its ratification or accession shall
not apply to the one of two groups of articles. 159 This reservation clause permits the Union
countries to accept only one, or on the basis of one by one, of the groups of articles stipulated
in the Stockholm Act of the Convention, which was added the procedural provisions. 160 By
152
See the Paris Convention, supra note 1, art. 28(1).
Id. art. 28(2). See also G.H.C. Bodenhausen, supra note 95, at 217.
154
See also G.H.C. Bodenhausen, supra note 95, at 217.
155
See Provisions on Enforcement in International Agreements on Intellectual Property Rights, GATT Doc.
MTN.GNG/NG11/W/18, Feb. 10, 1988 [hereafter “Compilation on Enforcement of IPRs”], at para. 42 (it was
cited from the WIPO Guide to the Rome Convention).
156
See Karen D. Lee and Silke von Lewinski, supra note 62, at 284.
157
Id. It was reported: “In fact, in the intellectual property field, no case has ever been referred to the
International Court. In any case, judgments of the Court never condemn either party; they simply pronounce on
the law, leaving the States to make of the judgment what they will.” See Compilation on Enforcement of IPRs,
supra note 155, at para. 42, cited from the WIPO Guide to the Rome Convention.
158
See Michael J. Trebilcok and Robert Howse, supra note 29, at 409. See also Karen D. Lee and Silke von
Lewinski, supra note 62, at 282.
159
See the Paris Convention, supra note 1, art. 20(1). This article provides that any country of the Union may
declare that it will not be bound by the group of articles from 1 to 12 or by the group of articles from 13 to 17 of
the Act after having been revised and added in the Revision Conference of Stockholm 1967. See G.H.C.
Bodenhausen, supra note 95, at 195.
160
For a member country excluding from its ratification or accession Articles 1 to 12 of the Stockholm Act
(adopted at the Revision Conference of Stockholm in 1967), it will be bound by the administrative provisions
153
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this reservation, the legislation of the Union countries is provided with a great flexibility in
executing the optional group of rules under the Convention. The Union countries are free to
decide on the question of whether to be bound by certain obligations under the Convention.161
Concerning the implementing obligation, Article 25 contains the statement on the
implementation obligation of the Union countries. This article refers to this obligation in the
term of a general commitment or an understanding rather than a strict requirement of
compliance with the Convention. 162 This article states that the Union countries undertake to
adopt the measure necessary to ensure the application of the Convention, “as far as” such
measure is in accordance with the constitutional provisions of the Union countries. It provides
generally that when a country deposits its instrument of ratification or accession, the country
“will be” in a position under its domestic law to give effect to the provisions of the
Convention. The article does not determine any specific time or limit of time for bringing
domestic law into compliance with the Convention. 163 This loose language provides the Union
countries with a leeway to implement the Convention.
In sum, the Paris Convention leaves considerable freedom to the Union countries to legislate
the industrial property protection in general, the patent protection in particular. In certain
aspects, the national treatment principle of the Convention does not preclude, legally and
practically, the different and discriminatory treatments existent in national law and practice
regarding the patent protection. The Convention does neither purpose to set up the substantive
norms nor oblige the Union countries to secure their obligations under the Convention
consistently and uniformly. Otherwise, it sets out the common rules of substantive law in very
limited scope regarding the industrial property protection. The Union countries are entitled to
make certain reservations regarding the Convention effect and the dispute settlement
procedure. The general commitment regarding the implementing obligation gives rise to the
flexibility of the common rules stated in the Convention.
III. Freedom of legislation under the TRIPS regulation
1. From the Paris Convention to the TRIPS
For the perspective of certain effects arising from intellectual property rights in international
trade, the TRIPS is included into the international trade system of the WTO. The
establishment of TRIPS may be generally attributed to three main factors. The first is the
stipulated in Articles 13 to 17 and Articles 18 to 30 of the Stockholm Act. In addition, where the substantive
provisions are of concern, it will continue to be bound by Articles 1 to 12 of the earlier relevant Act of the
Convention, which has been bound it before its acceptance of the Stockholm Act. Otherwise, where a member
country precludes from its ratification or accession Articles 13 to 17, it will be bound only by Articles 1 to 12
and Articles 18 to 30 of the Stockholm Act of the Convention. See the Paris Convention, supra note 1, arts. 20(2)
and (3). See also G.H.C. Bodenhausen, supra note 95, at 196.
161
It is noted that Article 2.1 of TRIPS incorporated the provisions provided in articles from 1 to 19 of the
Stockholm Act (1967) of the Paris Convention. The flexibility under the reservation made in Article 20 of the
Paris Convention is curtained in the sense that the TRIPS does not contain any provision on such kind of
reservation.
162
See the Paris Convention, supra note 1, art. 20. See also G.H.C. Bodenhausen, supra note 95, at 209.
163
The general commitment under the Paris Convention is quite different from the TRIPS, which sets forth
specifically the deadlines for bringing national legislation into compliance with the TRIPS provisions. See the
TRIPS, supra note 10, arts. 65, 66, 70.
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influence of the United States in urging to strengthen internationally the protection of
intellectual property rights and to bring them into the negotiations within the forum of GATT.
The second is the trade-offs between developed countries and developing countries, often
called the North-South debate. The third is the bargaining of trade interest in intellectual
property rights among developed countries, often called the North-North debate in the
framework of GATT negotiations at the Uruguay Round. 164
1.1 The influence of the United States
In the late 70’s and early 80’s, domestic pressure on the US government built up in the
disadvantageously international context forcing the United States to call for the strengthening
of international law on intellectual property protection. The process of revising the Paris
Convention to which the United States was a party, 165 under the auspices of WIPO was
blocked and seemed to moving in a direction to favor the interest of developing countries. 166
The US government had to seek the unilateral measures for improving the foreign markets to
respond to the pressures from their domestic IPR production industries. 167 This option was
reflected in the enactment of the Trade Act of 1984,168 which made intellectual property
protection explicitly actionable under Section 301 of the Trade Act of 1974 allowing the US
President to seek elimination of unjustifiable or unreasonable trade practices by taking action,
including retaliations by restricting imports into the US market. 169 Actually, the effect of
Section 301 was more intensive, especially in backing bilateral negotiations between the
United States and other trading partners.170
After the launch of GATT negotiations at the Uruguay Round, the United States implemented
a stronger measure to force the trading partners to improve their own laws on intellectual
property for assuring the US industries’ interests in foreign markets. The Omnibus Trade and
Competitiveness Act of 1988 contain a section so-called “Special 301”. 171 The Special 301
provides the authority and responsibility with the United States Trade Representatives
(USTR) for identifying and investigating the countries likely to be detrimental to US
economic interests due to the lack of adequate and effective systems of intellectual property
protection.172 By the Special 301, the US government may receive double advantages. On one
hand, the Special 301 responded timely to the demand of the domestic industries to improve
164
See Addulqawi A.Yhsuf, supra note 8, at 6-8. See also Michael J. Trebilcok and Robert Howse, supra note
29, at 405-410; John Croome, Reshaping the World Trading System A History of the Uruguay Round (Kluwer
Law International, 1999), pp. 109-111, 119-123, 276-277.
165
See Terence Postwar, GATT Uruguay Round A Negotiating History (1986-1992)(Vol. II: Commentary)
(Kluwer Law and Taxation Publishers, 1993), p. 2255.
166
Id. at 2249, 2253. See also Addulqawi A.Yhsuf, supra note 8, at 5; Michael J. Trebilcok and Robert Howse,
supra note 29, at 405; John Croome, supra note 164, at 109-110.
167
See Michael J. Trebilcok and Robert Howse, supra note 29, at 407; John Croome, supra note 164, at 111.
168
See Trade and Tariff Act of 1984, Pub. L. No. 98-573, 98 Stat. 2948 (1984).
169
In reality, the unilateral trade retaliations applicable under Section 301 were imposed on South Korea and
Brazil. See Terence P. Stewart, supra note 165, at 2256.
170
In fact, the broad undertakings on improvement of the laws on patents, trademarks and copyrights protection
were accepted by Taiwan and Singapore. See Terence P. Stewart, supra note 165, at 2256-57.
171
See Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, 1301, 102 Stat. 1107, 1164
(1988).
172
See Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418,1301, 301(b)(2) Stat. 1107
(1988).
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30
the protection of their intellectual property in foreign markets. 173 On the other hand, the US
government used the Special 301 as a big stick to give rise to the pressure on the negotiation
table as to the issue of intellectual property in the Uruguay Round, especially in response to
the obstinate trading partners among developing countries.174
In the first phase of the negotiations of 1987, the United Sates proposed suggestions calling
for the effective measures for the enforcement, the standards and norms for the adequate
protection, and the extension of international dispute settlement procedures in the intellectual
property area.175 The United States proposed that not only border measures, but also internal
enforcement remedies were necessary for effective action against the entry of infringing
goods.176 Its proposal required the significant additions to standards available in the preexisting international intellectual property conventions.177 Accordingly, the signatories should
adopt new laws and amend existing laws to provide the additional protection in line with the
proposed norms of intellectual property rights.178 Without attention to the burden that less
developed countries may suffer from those requirements, the United States argued that the
adherence to the agreement of its proposed contents would create additional rights and
obligations under GATT among the parties to the agreement, which would serve as an
incentive for other government to join.179 During the negotiations, aimed at setting intellectual
property rights under the regulation of GATT, despite the strong reaction from developing
countries, the United States insisted constantly on the broad conception of the trade-related
aspects of intellectual property rights and the connection between the TRIPS and GATT. 180
Together with pressure from the applicability of the unilateral actions, 181 the insistence of the
United States led to concessions gradually given into by developing countries during the
TRIPS negotiation.182 It was a fact that almost all developing countries preferred a multilateral
173
In December 1991 Thailand undertook to improve its law on copyrights, January 1992 China accepted to
improve its laws on IPRs, mid 1992 Taiwan committed to strengthen the enforcement of copyrights on computer
software as well as sound and video recordings. See Terence P. Stewart, supra note 165, at 2259.
174
Many criticisms on the imposition of Section 301 and Special 301 of the United States were raised in the
meetings of the Negotiating Group on TRIPS, especially on the fact of United States took a unilateral action
against Brazil for the claim concerning inadequate protection of IPRs during the Uruguay Round. See Meeting of
Negotiating Group of 17-21 October 1988, GATT Doc.MTN.GNG/NG11/10(Nov. 30, 1988), para. 27 [hereafter
“Meeting of 17-21 October 1998”]; Meeting of Negotiating Group of 3-4 July 1989, GATT
Doc.MTN.GNG/NG11/13(Aug. 16, 1989), para.4 [hereafter “Meeting of 3-4 July 1989”]; Meeting of
Negotiating Group of 12-14 July 1989, GATT Doc.MTN.GNG/NG11/14(Sep. 12, 1989), para 5 [hereafter
“Meeting of 12-14 July 1989”].
175
See Suggestion by the United States for Achieving the Negotiation Objective, GATT
Doc.No.MTN/NG11/W/14 (Oct. 20, 1987) [hereafter “Suggestion by the United States”].
176
Id.
177
The proposal required the protection for service marks to the same extent that given to trademarks, and the
protection should extended to computer programs and databases, trade secrets, semi-conductor chip design
layouts. See Suggestion by the United States, supra note 175.
178
See Suggestion by the United States, supra note 175.
179
Id.
180
See Meeting of the Negotiating Group of 28 October 1987, GATT Doc.MTN.BNG/NG11/4 (Nov.17, 1987)
[hereafter “Meeting of 28 October 1987”].
181
It was the fact that when the multilateral negotiation was going on, the United States took a unilateral action
against Brazil for the claim of inadequate protection under the patent law of this country. See Meeting of the
Negotiating Group of 17-21 October 1988, supra note 174, at 27.
182
In the beginning developing countries objected to connect both counterfeit trademarked goods and the
protection of copyrights and patent with GATT. Then, they accepted to adopt the effective border enforcement,
including measures against counterfeiting trademarked goods and pirated goods. Next, they agreed to undertake
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31
system in dealing with the complicated problems arising from intellectual property rights,
rather than directly in a bilateral way. 183 In addition to the rigid attitude in taking unilaterally
retaliations, the insistence of the United States on including a broad range of intellectual
property rights into GATT spectrum had great effects on the TRIPS negotiations. In other
words, the increasing concerns of the US industries in ensuring their interest in protecting
their intellectual property rights abroad were part of the logic implied in the establishment of
TRIPS in the framework of GATT.
1.2 The North-South tension on intellectual property
Apart from the influence of the United States, the trade-offs between developed countries and
developing countries before and during the Uruguay Round led to the subjection of
intellectual property protection and enforcement to the trade regulation of GATT. The NorthSouth tension in the multilateral trade negotiations was an important element that resulted in
the broad concessions on the issue of intellectual property at the end of the Uruguay Round. 184
The North as the main exporter of intellectual property products argued that intellectual
property is a private right that should be protected as any tangible property. 185 By contrast, as
the main importers of the intellectual property products, the South viewed intellectual
property as a public good that should be used to promote economic development. 186 This
paradox was reflected in the separate approaches to amend the pre-existing intellectual
property conventions: the former sought provisions that would protect their industries from
piracy and counterfeiting, while the later sought provisions that would stimulate economic
development and technological advancement.187 The failure of the movement to revise the
intellectual property conventions under the auspices of WIPO induced developed countries
into seeking an alternative way to assure their interests in intellectual property protection.188
the improvement of internal enforcement remedies and the extension of protection to some categories even being
in discussion in the World Intellectual Property Organization (WIPO), such as integrated circuits layout designs
and computer programs. Finally, they must accept most norms proposed by the United States, including the
subject matter not covered by any pre-existing international conventions like trade secrets. See Communication
from Argentina, Brazil, Chile, China, Colombia, Cuba, Egypt, India, Nigeria, Peru, Tanzania, Uruguay and
Pakistan, GAT Doc. MTN.GNG/NG11/W71(May 14, 1990) [hereafter “Draft Text of Developing Countries”];
Standards and Enforcement of Intellectual Property Rights, Communication from Korea, GATT
Doc.MTN.GNG/W/48(Oct. 26, 1989) [hereafter “Submission of Korea”]; Standards for Trade-Related
Intellectual Property Rights, Submission from Hong Kong, GATT Doc.MTN.GNG/NG11/51(Nov. 29, 1989)
[hereafter “Submission of Hong Kong for Protection”]; Enforcement of Intellectual Property Rights, Submission
from Australia, GATT Doc.MTN.GNG/NG11/W53(Dec.6, 1989) [hereafter “Submission of Australia”];
Enforcement
of
Intellectual
Property
Rights,
Submission
from
Hong
Kong,
GATT
Doc.MTN.GNG/NG11/W/54(Dec. 7, 1989) [hereafter “Submission of Hong Kong for Enforcement”]; the TRIPS
supra note 10, art.39.
183
See Meeting of Negotiation Group of 11, 12 and 14 December 1989, GATT Doc.MTN.GNG/NG11/17(Jan.
23, 1990) [hereafter Meeting of 11, 12 and 14 December 1989], para.10.
184
See Carlos M. Correa, Intellectual Property Rights, the WTO and Developing Countries: The TRIPs
Agreement and Policy Options (Zed Books Third World Network 2000), p. 3; Addulqawi A.Yhsuf, supra note 8,
at 9.
185
See Terence P. Stewart, supra note 165, at 2255.
186
Id. See also John Croome, supra note 164, at 110.
187
See Terence P. Stewart, supra note 165, at 2255. See also John Croome, supra note 164 at 111.
188
See John Croome, supra note 164, at 112. See also Michael J. Trebilcok and Robert Howse, supra note 29, at
409;
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32
Initiated by the United States, developed countries found that GATT was the appropriate
forum for them to realize their expectations to improve the enforcement and protection of
intellectual property rights.189 In the preparatory process for the Uruguay Round, the
suggestions produced by the United States were soon consented to by Japan, whose view of
inclusion of a broader program on intellectual property was not limited to counterfeit goods. 190
In contrast, developing countries were of the opinion that not only counterfeit trademarked
goods went beyond the jurisdiction of GATT, but also that the extension of GATT to
substantive provisions on intellectual property protection was impossible. 191 In despite of that,
the mandate for the new negotiation round still included the issue of intellectual property.192
1.3. From the WIPO forum to the GATT forum
The negotiation on intellectual property was known as one of the most contentious and
important elements of the Uruguay Round.193 The North argued that the revenue of their
industries was lost due to not only the practice of counterfeiting, but also inadequate
intellectual property protection.194 Therefore, they insisted constantly that the adequate
protection and effective enforcement of the intellectual property rights should obligate all
parties to GATT, and the enforcement should be improved in both the border measures and
internal procedures, the dispute settlement regime of GATT, instead of the ineffective dispute
settlement under the WIPO system, should be applied to settle the intellectual property rights
related disputes.195
By contrast, the South sought to restrict the scope of the negotiations and opposed the
connection of intellectual property to GATT and the setting standards of protection, or the
raise of the level of protection. 196 They concerned that their access to modern technology
might be prevented from the excessive protection of intellectual property rights, since the
elaboration of new and more rigid standards for intellectual property would benefit
189
See Terence P. Stewart, supra note 165, at 2259. See also John Croome, supra note 164, at 113; Michael J.
Trebilcok and Robert Howse, supra note 29, at 409.
190
Significantly, the Swiss-Colombian compromise proposal, presented the views of forty delegations, was in
line with the suggestions of the United States. See Preparatory Committee, Record of Discussion of 17-20
March 1982, GATT PRE.COM(86)SR/3(Apr. 11, 1986), para. 12; Preparatory Committee, Record of
Discussion of 8-31 July 1986, GATT Doc.PRE.COM(86)SR/3(Aug. 26, 1986) [hereafter “Preparatory
Committee, Record of 8-31 July 1986”] paras. 11-12; Preparatory Committee Draft Ministerial Meeting,
Revision, GATT Doc. PRE.COM(86)W/47/Rev.2(July 30, 1986) )[hereafter “Preparatory Committee, Draft of
July 1986”].
191
Brazil was of the view that intellectual property protection was a “non-GATT issue”. India emphasized that
the protection of intellectual property was “outside the competence of GATT”. Argentina added that WIPO, not
GATT, was the appropriate forum for the resolution of intellectual property disputes. See Preparatory
Committee, supra note 190.
192
See Preparatory Committee, supra note 190, at 11-12; Preparatory Committee Draft Ministerial Meeting,
supra note 190; Ministerial Declaration on the Uruguay Round, GATT Doc.MIN.DEC (Sept. 20, 1986).
193
See Jim Keon, ‘Intellectual Property Rules for Trademarks and Geographical Indications: Important Parts of
the New World Trade Order’, Intellectual Property and International Trade: The TRIPs Agreement (Kluwer
Law International, 1998), p.165.
194
See Meeting of the Negotiating Group of 10 June 1987, GATT Doc.MTN.GNG/NG11/2(June 23, 1987)
[hereafter “Meeting of 10June 1987”]. See also Meeting of 28 October 1987, supra note 180.
195
See
Compilation
of
Written
Submissions
and
Oral
Statements,
Revision,
GATT
Doc.MTN.GNG/NG11/W/12/Rev.1(Feb. 5, 1988) [hereafter “Compilation of Submissions of 5 February 1988,
Revision”].
196
See Preparatory Committee, Record of 18-31 July 1986, supra note 190.
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33
technological-advanced countries, at the expense of developing countries that used technology
as an irreplaceable tool in the development process.197 It was also claimed that their own
social and development needs were more or equally as important as the interests of the owners
of the intellectual property rights, therefore, the balance should be striking between the
exclusive rights conferred upon owner of intellectual property rights and his obligations to the
developmental needs of society.198
In connection to GATT, the South argued that because intellectual property protection in
nature is the protection of monopoly rights, it could not be regarded as an instrument for the
promotion of international trade.199 In such a perspective, developing countries were
reasonable in questioning the judicial adequacy of GATT and arguing that the proper forum
for debate of intellectual property must only be the WIPO.200
1.4. The cross-linkage of negotiations
The access to the market of developed countries was an important element for developing
countries considering the concessions on intellectual property. 201 Especially, the chairman of
the negotiating group on intellectual property in the second round produced the initiative of
linking the negotiation on each subject matter of intellectual property with the negotiation on
the other responding area, for examples, the linkage between negotiations on agriculture and
geographical indications, textiles and trademarks, and industrial designs and enforcement. 202
In the context of a packaged multilateral discussion, the technique of cross-linking negotiation
seemed an effective method to speed up the progress of the negotiation on intellectual
property. As a result, the North and the South had reached the agreement on intellectual
property at the end of the second round, irrespective of the hot disputes having not ended until
the final stage of the TRIPS negotiations in late 1992.203
The difference in the national interests among developing countries themselves seemed also a
reason for facilitating the negotiation progress on intellectual property. Since the increase of
level in protection of intellectual property rights appeared also to benefit to some extent the
197
See Meeting of 17-21 October 1988, supra note 181, at 9.
Id. See also Meeting of Negotiating Group of 30 October-2 November 1989, GATT
Doc.MTN.GNG/NG11/16(Dec. 4, 1989) [hereafter Meeting of 30 October 1989], paras. 14,15.
199
See Meeting of 30 October 1989, supra note 183, at 9; Meeting of 12-14 July 1989, supra note 174, at 5.
Furthermore, even supposed that inadequacies and excesses of intellectual property protection might cause some
advert trade effects, this did not necessarily mean they should be discussed under GATT, because it was true that
many of practices identified had trade effects. If GATT were to deal with all issues having trade effects, there
would be virtually no limit to the scope of GATT’s activities. See Meeting of Negotiating Group of 23
September 1987, GATT Doc.MTN.GNG/NG11/3(Oct. 8, 1987)[hereafter “Meeting of 23 September 1987”],
para. 5.
200
See Preparatory Committee, Record of 8-31 July 1986, supra note 32, at 11-12; Preparatory Committee,
Draft of July 1986, supra note 32; Ministerial Declaration on the Uruguay Round, GATT Doc. .MIN.DEC
(Sept. 20, 1986).
201
See Meeting of 3-4 July 1989, supra note 15, at 5; Meeting of Negotiating Group of 11-13 September 1989,
GATT Doc.MTN.GNG/NG11/15(Oct. 26, 1989)[hereafter Meeting of 11-13 September 1989], para. 44; Meeting
of Negotiating Group of 10-21 September 1990, GATT Doc.MTN.GNG/NG11/25(Oct. 8, 1990)[hereafter
“Meeting of 10-21 September 1990”], para. 8.
202
See Terence P. Stewart, supra note 165, at 2280;
203
Id. at 2286.
198
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34
growing industries in the industrializing countries,204 in addition to the pressure from the
unilateral action of the United States, the various national interests induced these countries to
raise the proposals in light of the suggestions of the developed countries. 205 That provided a
comfortable room for the argument of setting standards for protection and enforcement of
intellectual property under the framework of GATT.
In short, the North-South trade-offs in the context of the “packaged” multilateral negotiation,
in which market access was employed as a bargaining chip for the more intensive protection
of intellectual property rights, were the important reasons leading to the success of TRIPS.
The pressure of strengthening of intellectual property protection from the North, added by the
ambitious expectation of some growing industrializing countries, and the concern over market
access of the South reflected other logical reasons implied in the establishment of TRIPS.
1.5. The North-North bargains at the expense of the South
The focus of the negotiation on intellectual property in the later phase of the Uruguay Round
shifted from the North-South debate to the North-North debate due to the disagreement on the
particular contents of intellectual property protection.206 The North-North discussions on the
criteria of protection of intellectual property rights led to the wording of the substantive
provisions included in the TRIPS. Accordingly, almost the contents of those provisions were
the result of the bargains among the leading developed countries in different areas of
intellectual property. Consequently, various norms of intellectual property at high level of
protection were adopted in the TRIPS, covering generally copyrights, related rights, patents,
trademarks, geographical indications and some other objects. Significantly, the TRIPS obliges
the developing countries to secure the obligations on the high standard protection of
intellectual property rights to the same extent to those applicable to the developed countries.
In sum, the establishment of TRIPS under the umbrella of GATT was the consequence of the
great impact by the United States in its attempt at improving the international law on
intellectual property protection for their industry interest in intellectual property rights. It is
also the result of the North-South trade-offs concerning the trade interests in IPR products and
those in the agriculture and textile industries. As the main producers and exporters of
technology, the North expected to extend the scope of protection and strengthen the
enforcement of intellectual property rights. The South needed market access for their
agriculture and textile products. This became the bargaining chip for developed countries to
increase their intellectual property protection standards.207 In total, the South had to pay a high
204
See Addulqawi A.Yhsuf, supra note 8, at 4.
This could be seen in the fact that when most of developing countries expected to apply the principle of
freedom in level protection and urged the discussion of protection standards in WIPO, South Korea proposed a
setting of standards for protection: “patents should be granted for products and processes… include chemical and
pharmaceutical products and micro-organisms… The term of patent should not exceed 20 years from filing”. See
Submission of Korea, supra note 182; Submission of Hong Kong for Protection, supra note 182. Furthermore,
when the opposition to setting standards for internal enforcement was raised by most of developing countries,
the proposal of Hong Kong called for setting strict standards for both border and internal enforcement . See
Submission of Hong Kong for Enforcement, supra note 182. See also Meeting of 11,12 and 14 December 1989,
supra note 183, at 51.
206
See Terence P. Stewart, supra note 165, at 2287.
207
See J. H. Reichman, Universal Minimum Standards of intellectual Property Protection under the TRIPs
Component of the WTO Agreement, [Intellectual Property and international Trade: The TRIPs Agreement]
205
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35
price in the acceptance of almost all demands on intellectual property rights from the North.
Furthermore, the TRIPS was virtually founded on the compromise of the different interests in
the North. The combination of selected national rules on IPR protection and enforcement
being in force in some countries in the North became the obligatory international standards
for intellectual property rights upon the South. These events elucidate the factual reasons
behind the development from the Paris Convention into the TRIPS, or the movement of the
substantial intellectual property contents from the WIPO system into the GATT framework.
Certainly, the perception of sovereignty and freedom of legislation regarding intellectual
property of the developing countries under the TRIPS regulation needs to be grounded on this
important understanding.
2. Not less favorable treatment and minimum standards
2.1. Adoption of GATT-standards principles into the TRIPS
During the TRIPS negotiations, there were different arguments on the applicability of GATT
principles. Some insisted that the basic principles of GATT, such as the principles of MFN
and national treatment, could be applicable to intellectual property rights with some
adaptations, and should form the important part of the TRIPS. 208 By contrast, others argued
that among the generally recognized basic principles of GATT such as MFN, national
treatment, protection through tariffs, stable basis for trade, transparency, and differential and
more favorable treatment of developing countries, only the latter two principles were relevant
for intellectual property rights.209 Most of those were inapplicable to intellectual property
rights because GATT sought to freer trade and fair competition whereas the essence of the
intellectual property system was its monopolistic and restrictive character. It was emphasized
that the basic principles enshrined in the main intellectual property conventions such as the
Paris Convention and Berne Convention were freedom on scope and level of protection,
national treatment, balance of rights and obligations, primacy of public interests, nonreciprocity and independent protection.210 However, the basic principles of GATT such as
MFN, national treatment, and transparency were virtually adopted into TRIPS in the end.
2.2. Not less favorable treatment
During the TRIPS negotiations, there was an argument for the application of the GATT
national treatment to intellectual property rights. This argument based on the legal grounds
that Article III.4 of GATT concerned all laws, regulations and requirements affecting the
internal sale, offering sale, purchase, transportation, distribution or use of goods. 211 The
reasoning of this argument was that there was no need to make the distinction between the
national treatment principles as applied to goods and to persons. In many cases, the equal
treatment of goods required equal treatment of persons, since it was often not be possible to
(Kluwer Law International 1998), p.23.
208
See Meeting of 11-13 September 1989, supra note 201, at 9.
209
Id. at 3.
210
Id.
211
Id. at 9.
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36
grant national treatment for imported goods without doing so for foreign nationals. 212 For such
reasons, the transposition of national treatment from GATT into the TRIPS was possible.213
In contrast, another argument said that national treatment of GATT was inapplicable to
intellectual property rights, because this treatment of GATT aimed at preventing
discrimination between imported products and domestically produced products, while the
national treatment included in intellectual property conventions aimed at preventing
discrimination between nationals and foreigners in protection of intellectual property rights. 214
This argument referred to two aspects of the rationale for the application of national treatment
concept in intellectual property conventions. First, it recognized that the differences in
national intellectual property laws could remain. Second, it implied that protection of
intellectual property for foreigners in a country was not accorded on the basis of reciprocity. 215
Another point of the argument is that the national treatment in the intellectual property
conventions was applied together with the non-reciprocity principle, while GATT admitted
the material reciprocity in goods.216 That point supported the view that the national treatment
principle of GATT was inapplicable to regulate the issue of intellectual property rights.
In despite of that, the language of the national treatment principle under Article III: 4 of
GATT was transformed into TRIPS. Article 3.1 of the TRIPS requires each Member to accord
to the nationals of other Members treatment “no less favorable than” that it accords to its own
nationals regarding the intellectual property protection. The GATT standard national
treatment adopted in TRIPS is extended to both adequate protection and effective
enforcement of intellectual property rights, which was out of the area of application of
national treatment in the pre-existing intellectual property conventions, including the Paris
Convention.217
With regards to the contents of the TRIPS national treatment, the obligations under Article 3.1
is provided in the context of Article 1.3 of the TRIPS. 218 This article requires that the
Members shall accord to the nationals of other Members “the treatment provided for in this
Agreement”. Accordingly, the national treatment in TRIPS is subject to the limitation of
Article 1.3, that is, all minimum standards fixed in TRIPS should accord to foreigners,
regardless of whether those are provided for nationals. This means that, in any case, the
interests of foreigners in intellectual property rights are fully ensured, at the equivalent level
of, or higher standards of adequate protection and effective enforcement stimulated in
TRIPS.219 Different from the Paris Convention, a national legislation under the TRIPS may
not justify, for example, the decline of the patent protection in regards of pharmaceuticals for
foreigners for the reason that it does the same to its nationals. 220 By the mandatory
requirement of the minimum standards, the TRIPS draws clearly the minimum limit to the
212
Id.
Id. at 13.
214
See Meeting of 3-4 July 1989, supra note 201, at 9.
215
Id.
216
See Meeting of 11-13 September 1989, supra note 201, at 22.
217
The Paris Convention does not provide what are the contents of rights conferred by a patent and how the
patentee can exercise those rights.
218
See the TRIPS, arts. 1.3, 3.1. See also Nuno Pires de Carvalho, spa note 103, at 66.
219
See Abdulqawi A. Yusuf, supra note 8, at 16.
220
See Nuno Pires de Carvalho, supra note 103, at 76.
213
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37
legislation of the Members in providing treatment to foreigners. In this respect, the TRIPS
national treatment requires the national legislation of the WTO Members to adopt a higher
level of protection in comparison with the national treatment of the Paris Convention.
Different from the requirement of Article 2(1) of the Paris Convention as to the “same
treatment” regarding the “advantages” that national legislation currently grants or may
afterward grant to nationals, Article 3.1 of the TRIPS requires that, in any case, a treatment
“not less favourable than” that accords to nationals must be given to foreigners.221 As denoted
in the term “not less favourable than”, Article 3.1 of the TRIPS obliges the Members to
observe the national treatment obligations in the light of the national treatment provided in
Article III:4 of GATT. Accordingly, both de jure and de facto discrimination against
foreigners in the intellectual property protection, except for the exceptions provided in Article
3.2 of the TRIPS is required to be excluded from the national legislation of the Members.222
Article 3.2 of the TRIPS provides for the exceptions to the national treatment obligations
under Article 3.1, which repeats the exceptions contained in Article 2(3) of the Paris
Convention.223 Article 3.2 allows the Members to make available the exceptions to the
national treatment in relation to judicial and administrative procedures, including the
designation of an address for service or the appointment of an agent within the jurisdiction of
a Member. However, these exceptions are not “reserved expressly” as worded in the Paris
Convention. Otherwise, they must be subject to the some limitations. Article 3.2 of the TRIPS
requires that such exceptions are permissible only where they are necessary to secure
compliance with relevant national laws and regulations, which are not inconsistent with the
provisions of this Agreement.224 Moreover, the application of such exceptions is also subject
to the general rules of GATT.225 As stipulated in Article 3.2 of the TRIPS, the relevant
practices cannot be applied in a manner, which would constitute a disguised restriction on
trade. It is noted that the Article XX of GATT 1994 contains the similar language. 226 In this
221
There are different views on the compatibility of the national treatment in the text of the TRIPS and the
national treatment in the text of the Paris Convention. One perceived that if the national treatment of the TRIPS
was interpreted only as a language reflecting a minimum standard character of the agreement, there would be no
difference between the two texts, in the sense that the Paris Convention can also be interpreted as a minimum
standard agreement. See Carlos M. Correa, ‘Patent Rights’, in Intellectual Property and International Trade:
The TRIPs Agreement (Kluwer Law International, 1998) p. 190. Other reasoned that the provision on the
national treatment under the Paris Convention is different from that under the TRIPS. This explains the reason
why Articles 2.1 2.2 of the TRIPS refer to different sections of the TRIPS in providing the relation of the TRIPS
and the Paris Convention (for avoidance of the conflict in applying the principle provisions of the two texts. See
Nuno Pires de Carvalho, supra note 103, at 74. In the WTO dispute settlement practice, there are also different
views regarding this issue. The Appellate Body interpreted the national treatment of the TRIPS in light of the
GATT disciplines and applied the same requirement to the national treatment of the Paris Convention. The panel
in another case is of opinion that these principles are not the same. This point will be discussed in Chapter 3 of
this paper.
222
This point will be discussed in the following chapter.
223
See the TRIPS, supra note 10, art. 3.2, and the Paris Convention, supra note 1, art. 2(3).
224
The exceptions is applicable “only where such exceptions necessary to secure compliance with laws and
regulations which are not inconsistent with the provisions of this Agreement“ are shall be “not applied
225
The exceptions shall be “not applied in a manner which constitute a disguised restriction on trade”. See the
TRIPS, supra note 10, art. 3.2.
226
See GATT 1994, supra note 14, art. XX. This article provides:
“Subject to the requirement that such measures are not applied in a manner
which would constitute a means of arbitrary or unjustifiable discrimination
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regards, the express reservation under the Article 2(3) of the Paris Convention, as
incorporated into the TRIPS, is subject to the limitations from the TRIPS provisions and
GATT rules.227
2.3. Nondiscrimination and MFN
During the TRIPS negotiations, there was the argument that the non-discrimination principle
but not the MFN principle 228 embodied in GATT could be applicable to the protection of
intellectual property rights, since GATT principles related to goods and rules on intellectual
property rights that related to persons.229 The MFN of GATT was also inapplicable in the
enforcement of intellectual property rights because it concerned governmental measures at the
border affecting international trade in goods. Whereas, in the case of intellectual property
rights, except the issue of counterfeiting related to the use of border measures in controlling
counterfeit imported goods, the concern was protection of the intangible rights of private
parties within national boundaries.230 The national treatment provisions of intellectual
property conventions applied to persons and not to products would appear to have been
considered adequate to prevent undesirable discrimination, therefore the question of a rule
forbidding discrimination between foreign nationals in protection of intellectual property
rights had not been raised.231
It was also argued that the MFN of GATT applied only to products. The buyers and sellers of
goods in question are the beneficiaries but not the objects of the application of the MFN of
GATT.232 The MFN of GATT applied to goods was logically irrelevant to intellectual
property rights, a kind of private rights always attached with persons. It was the fact that
because of the differentiation in the object and nature of regulation on intellectual property
protection, the MFN had been not appeared in any pre-existing intellectual property
between countries where the same conditions prevail, or a disguised
restriction on international trade, nothing in this Agreement shall be
construed to prevent the adoption or enforcement by any contracting party of
measures:
(…)
(d)
necessary to secure compliance with laws or regulations
which are not inconsistent with the provisions of this Agreement, including
those relating to customs enforcement, the enforcement of monopolies
operated under paragraph 4 of Article II and Article XVII, the protection of
patents, trade marks and copyrights, and the prevention of deceptive
practices;” (Emphasis added)
227
See Daniel Gervais, The TRIPS Agreement Drafting History And Analysis (London Sweet & Maxwell, 2 nd ed.
2003), p. 101.
228
See Meeting of 11-13 September 1989, supra note 201, at 12. In the practice of TRIPS, as discussed in
Chapter 3, there appears no disctintion in the conception and application of these terms. The standards of no less
favorable treatment in examining the compliance with the TRIPS national treatment obligations are also applied
to measuring the compliance with the TRIPS MFN obligations of the WTO Members.
229
See Meeting of 11-13 September 1989, supra note 201, at 9.
230
Id. at 11.
231
According to the explanation of the representative of WIPO at the Negotiating Group on TRIPS, see Meeting
of Negotiating Group of 5-6 January 1990, GATT Doc.MTN.GNG/NG11/18(Feb. 27, 1990) [hereafter “Meeting
of 5-6 January 1990”], para.21.
232
Id.
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conventions.233 Otherwise, some argued for the applicability of the MFN of GATT into
TRIPS. It was suggested that with some adaptations GATT principles would be relevant to
intellectual property rights.234 In the legal percepts, rights always attached to persons and not
to goods, even in GATT, where rights were attached to sellers and buyers of goods and not to
the goods themselves, therefore there was no distinction between GATT principles and the
rules on intellectual property rights.235 However, after the trade-offs under the pressure from
the North, in despite of the irrelevance broadly perceived, the unconditional MFN principle of
GATT was included in TRIPS with a list of exceptions.236
With regards to the contents of the TRIPS MFN principle, Article 4 of the TRIPS provides
that a Member shall accord immediately and unconditionally to the nationals of all other
Members any advantage, favor, privilege or immunity that it grants to the nationals of any
other country regarding the protection of intellectual property. The MFN provision under
Article 4 of the TRIPS is read in the context of the national treatment principle provision in
Article 3.1 of the TRIPS. 237 Article 3.1 of the TRIPS requires a WTO Member to accord to
foreigners the treatment “not less favorable than” that it gives to its own nationals. Therefore,
that Member may accord to foreigners the treatment more favorable than that it gives to its
own nationals. In such a case, the MFN principle obliges that Member to extend “immediately
and unconditionally” such more favorable treatment to all nationals of other WTO Members.
It is noted that the obligations under the MFN principle must be observed when a Member
gives the more favorable treatment to the nationals of any other country, but not any other
Member. It means that the MFN principle also applies to advantages, favors, privileges and
immunities granted to nationals of countries that are not WTO Members.238
Article 4 of the TRIPS stipulates a range of exceptions to the MFN obligations. As stated in
Article 4.d, the MFN principle will not apply to the advantage, favor, privilege or immunity
deriving from international agreements related to the protection of intellectual property which
entered into force prior to the entry into force of the WTO Agreement. However, this
exception must observe the conditions that such earlier international agreements must be
notified to the Council for TRIPS, and that they do not constitute an arbitrary or unjustifiable
discrimination against nationals of other Members. Accordingly, any favorable treatment
generated from a bilateral agreement between a Member and any other country regarding the
intellectual property protection that goes into force after the effective date of the WTO
Agreement or is not notified to the Council for TRIPS, shall be subject to the MFN
obligations under Article 4 of the TRIPS.
In this respect, the MFN obligations would create much pressure on the national legislation of
the WTO Members in the arrangement of bilateral agreements regarding the intellectual
property protection. This situation is quite different from that existed under the Paris
Convention framework. Article 19 of the Paris Convention states expressly that the countries
of the Paris Union reserve the right to make separately between themselves special
233
Id.
See Meeting of 11-13 September 1989, supra note 201, at 9.
235
Id.
236
See TRIPs Agreement, supra note 10, art. 4.
237
See J. H. Reichman, supra note 207, at 25.
238
See the TRIPS, supra note 10, art. 4. See also Nuno Pires de Carvalho, supra note 103, at 86.
234
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agreements regarding the industrial property protection, as far as these agreements do not
contravene the provisions of the Convention. 239 Accordingly, the Union countries are free in
arrangement of bilateral agreements regarding industrial property protection, which may
provide for the greater protection in comparison with that set forth in the Paris Convention.240
It is also noted that, in securing the MFN obligations under Article 4, the application of the
principle of transparency under Article 63.3 of the TRIPS may be in the relevance. 241 Article
63.3 allows a Member, when having reason to believe that a specific judicial decision or
administrative ruling or bilateral agreement in the area of intellectual property rights affects
its rights under the TRIPS Agreement, to request in writing to be given access to or be
informed in sufficient detail of such judicial decision or administrative ruling or bilateral
agreements.242 For that requirement, the transparency principle gives rise to the burden of the
MFN obligations on the national legislation of the WTO Members.
3. Statements on objectives and principles
After the long insistence of developing countries, some specific principles applied to
intellectual property rights existing in intellectual property conventions, such as the public
interest principle, the balance of rights and obligations were included in the TRIPS. 243 Articles
7 and 8 provide for the objectives and the principles, respectively, which are applicable to the
intellectual property protection. It is argued that although the provisions in Article 7 and 8 are
titled “objectives” and “principles”, they are only the specific objectives and principles of the
intellectual property protection and enforcement in general. They do not imply the main
objectives and principles of the TRIPS Agreement, which are rather referred to in the
provisions in the preamble and Articles 3 and 4.
3.1. Public interest
In the negotiation of the TRIPS, it was suggested that the public interest principle was a
fundamental basis of intellectual property right system. 244 Thereby, the exclusive rights
conferred on the right owner should be made in the balance to secure the public interest. This
principle based on the ground that the intellectual property conventions based on to grant the
freedom in determining the level of intellectual property protection in line with the situation
of each country.
By contrast, the opponent view was that the public interest of all countries was best served by
providing for higher levels and more effective protection of intellectual property and thus
eliminating trade distortions.245 It was up to each country to determine what its public interest
needs were, but it should be assumed that international obligations in respect to the nationals
and products of other countries might also serve public interest needs.246 Therefore, the
239
See the Paris Convention, supra note 1, art. 19.
See G.H.C. Bodenhausen, supra note 95, at 193.
241
See the TRIPS, supra note 10, art. 4. See also Nuno Pires de Carvalho, supra note 103, at 88.
242
See the TRIPS, supra note 10, art. 63.3.
243
See Daniel Gervais, supra note 227, at 117, 118.
244
See Meeting of 11-13 September 1989, supra note 201, para.18.
245
See Meeting of 11-13 September 1989, supra note 201, para.19.
246
Id.
240
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concept of public interest should be viewed in the large perspective, rather than from the view
allowing unilaterally determined exceptions to international disciplines. 247 In other words, the
public interest, in the broad view, should not necessarily go along with the freedom in level
protection, otherwise, need to be subject to the internationally specified limitation. 248 For a
balance, the principle of public interest was adopted in TRIPS with the control of the
consistency test, which was added following the insistence of the developed countries.249
Article 8.1 of the TRIPS provides that the WTO Members, in formulating or amending their
laws and regulations, may adopt measures necessary to protect public health and nutrition,
and to promote the public interest in the sectors that are vital importance to their socioeconomic and technological development.250 However, the last phrase of this provision put a
lock to the application of such measures. It requires that any measure for such purposes must
be “consistent with the provisions of this Agreement.” Certainly, the consistency test places
the significant limitation on the freedom of national legislation in applying any measure by
invoking the principles mentioned in Article 8.1 of the TRIPS.251
3.2. Balance of rights and obligations
In the TRIPS negotiations, it was argued that the principle of the balance of rights and
obligations required that obligations had to be undertaken by intellectual property right
owners in return for the exclusive rights conferred on them, and allowed governments to take
certain remedial measures in the case of non-fulfillment of these obligations so that the
intellectual property rights could promote industrial creativity to the benefit of society in
general.252 This principle was generally recognized in pre-existing intellectual property
conventions in national laws of many countries.253 The acceptance of this principle was aimed
at assuring the access of developing countries to modern technology, eliminating non-use,
misuse or abusive use of intellectual property rights, especially with a view to avoiding trade
distortions, and allowing the flexibility in the intellectual property protection for the public
interest and the developmental and technological needs of developing countries. Therefore,
the principle of balance of rights and obligations should be formulated in the form of
obligations on the IPR owners and the State Members of the TRIPS. 254 It was also suggested
that the TRIPS should take into account the application of the GATT principle securing a
balance of rights and obligations among the parties.255 In that view, the balance should be
247
Id.
Id.
249
See Daniel Gervais, supra note 227, at 117, 118. Abdulqawi A. Yusuf, supra note 8, at 13.
250
It was reasoned that this article is limited by provisions in Article 27 of the TRIPS. Accordingly, Article 8.1
will not stand for any exclusion other than those provided in Article 27.3 of the TRIPS. See Michael Blakeney,
Trade Related Aspects of Intellectual Property Rights: A Concise Guide to the TRIPS Agreement (London
Sweet & Maxwell, 1996), p. 43.
251
See Daniel Gervais, supra note 227. See also Abdulqawi A. Yusuf, supra note 8, at 13.
252
See Meeting of 11-13 September 1989, supra note 201, para.20.
253
Id.
254
Id.
255
Id. at 21.
248
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considered not only to specific aspects of TRIPS but also within the TRIPS area and Uruguay
Round negotiations as a whole.
As a result of the North-South trade-offs, the principle of balance of rights and obligations
was enumerated in TRIPS with some limitations. Article 8.2 of TRIPS allows the application
of appropriate measures to prevent the abuse of intellectual property rights and the practices
distorted trade or adversely affected the international transfer of technology. 256 However, as in
the case of the principle of public interest, the application of the principle of balance of rights
and obligations was adopted with the lock of the consistency test. As worded in Article 8.2,
any measure taken under the umbrella of this article must be “consistent with” the provisions
of the TRIPS Agreement. Moreover, to which extent a practice is regarded “unreasonably”
restraining trade or “adversely” affecting the international transfer of technology, and to
which extent a national response against such practice is regarded an appropriate measure are
ambiguous questions under this article.257 These unclear conditions leave room for the
interpretation but, otherwise, give rise to the difficulty in the application of the principle of
balance of rights and obligations.
4. Norms and restrictive rules
The TRIPS incorporates the Paris Convention and explicitly aims at supplementing the
protection of industrial property rights. The “Paris-plus” included in TRIPS is regarded as an
international standard patent protection system, 258 which in fact reflects the practices of the
developed countries.259 The TRIPS follows the approach of setting norms for the protection of
intellectual property rights. It sets down the protection criteria for a series of intellectual
property objects, including patents, trademarks, geographical indications, industrial designs,
topographies, and undisclosed information. These norms may be found in a number of
provisions of the TRIPS. Concerning patents, for examples, Article 27 provides for patentable
subject matters, Article 28 stipulates the rights conferred by a patent, Article 33 determines
the term of patent protection, etc. The TRIPS defines clearly the normative criteria for
protection of patents, which had not been addressed in the Paris Convention. The basic
criteria of patentability, protection and duration of patent set forth in TRIPS are regarded as
the notable achievements scored by developed countries in elevating and harmonizing
minimum standards of patent protection, and this could not be done within the spectrum of the
Paris Convention.260
The TRIPS provisions on the norms, in certain aspects, still leave a limited freedom to
national legislation to regulate the specific issues. However, these norms bind national
legislation with the more restrictive rules. For example, Article 27.1 defines generally three
patentability criteria of inventions, namely, novelty, inventive step, and industrial application,
and leaves national legislation the freedom to legislate the detailed requirements of such
256
This principle is also reflected in the provisions on the control of anti-competitive practices in contractual
licenses, the obligation of disclosure of invention, the possibility of granting compulsory licensing to nonworking patents, the obligation of technical assistance. See TRIPs Agreement, arts. 40, 29, 31.b, 67.
257
See Abdulqawi A. Yusuf, supra note 8, at 14.
258
See Carlos McCrea, supra note 221, at 189.
259
See J. H. Reichman, supra note 207, at 54.
260
Id. at 50.
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criteria.261 However, this article requires that, in any case, national legislation must obey the
rule of non-discrimination in the patent protection. In this respect, the TRIPS norms restrain
much the freedom of national legislation left by the Paris Convention regarding the patent
protection. The following discussion will analyze this question in more details.
4.1. Patentable subject matters
Article 27.1 of TRIPS provides that patents “shall be available for any inventions, whether
products or processes, in all field of technology”. A further security is also added in this
provision: “patents shall be available and patent rights enjoyable without discrimination as to
(…) the field of technology.” This provision is known as a major achievement of the
industrialized countries and, on other hand, the greatest concession made by developing
countries during the Uruguay Round.262 Under the system of the Paris Convention, national
laws of the developing countries may not confer the protection of patent in some fields,
especially pharmaceutical products, which are part of the exclusion from patentability. 263
Among other considerations, the public interest in health affairs, the price of medicines and
the accessibility to the pharmaceutical technology were the main reasons for the opposition of
developing countries to the patent protection for pharmaceutical products. 264 However, under
the provision of Article 27.1 of the TRIPS, national legislation can no longer justify such kind
of exclusion from patentability since the requirement of non-discrimination regarding the
field of technology of invention.
Patentability is also subject to the requirement of non-discrimination against the place of
invention. Pursuant to Article 27.1 of TRIPS: “patents shall be available … without
discrimination as to the place of invention”. Accordingly, any discrimination concerning the
priority date of the patent applications made by nationals and foreigners, for example, is
contradict to the requirement of non-discrimination as to the place of invention. This type of
discrimination was the target of the claims during the Uruguay Round, which had existed in
the national law of the United States, a signatory to the Paris Convention.265
However, the norms of patentability allow for some exceptions. The concept of order public
under Article 27.2 of TRIP is regarded as one of the grounds for the permissible exclusion
from patentability. It was reasoned that this concept is perceived in a narrower meaning than
“public order” or “public interest”, and mainly refers to security reasons and the inventions of
inhumanity.266 Article 27.2 of TRIPS adopted partly the language of Article 4quarter of the
Paris Convention in its last sentence for the general conditionality of the exclusion of
patentability.267 Accordingly, the exclusion cannot be made merely because the domestic law
prohibits the exploitation. However, Article 4quater of the Paris Convention refers the
broader terms, which are not only related to the granting of a patent, but also to its subsequent
invalidation, in cases of restrictions or limitations resulting from domestic law.268
261
See Carlos M. Correa, supra 184, at 51.
See Carlos M. Correa, supra note 221, at 191.
263
See Compilation of WIPO of 15 September 1988, Revision 1, supra note 195, at Appendix VII.
264
See Carlos McCrea, supra note 221, at 192.
265
See J. H. Reichman, supra note 207, at note 42, p.50.
266
See Carlos McCrea, supra note 221, at 192-193.
267
See the TRIPS, art. 27.3, and the Paris Convention, art. 4quater.
268
See the Paris Convention, supra note 4, art. 4quater.
262
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Additionally, Article 27.3 of TRIPS refers to the exclusion of methods for the treatment of
humans and animals from patentability, which is regarded as not covering the apparatus used
for diagnostics or treatment or to products like “diagnostic kits”.269
It is noted that while the Paris Convention does not mention patentability and particular
exclusions from patentability, the TRIPS enumerates the concrete criteria of these contents.
Different from the situation under the Paris Convention, national laws under the TRIPS are
required to conform to the specific criteria regarding patent protection. To this point, the
TRIPS reduces much freedom left by the Paris Convention to national legislation regarding
the patent protection.
4.2. Rights and obligations of patentee
The provision in the last sentence in Article 27.1 of TRIPS, which refers to the requirement of
non-discrimination as to imported products or locally produced products, is currently in
debate. One view is that the right to supply imports according to this provision overrides the
obligation to work patents locally under Article 5A of the Paris Convention. 270 The other
opinion argues that, since this provision does not specify whose products it refers to, those
made by the patent holder or by the patent infringers, when the patent confers only negative
rights in accordance with Article 28.1 of TRIPS, the patent rights can be exercised with
regard to the latter, and if it is the case, this provision would not prohibit the local production
obligation of the patentee.271 The right answer to this question awaits the interpretation of the
WTO panels that may be come in future. It is reasoned that the interpretation of exempting
the local production obligation seems more suitable with the general context of
negotiations.272 In this understanding, in favor of the patent holders, TRIPS has restricted the
possibility of granting compulsory patent licensing on the ground of a non-working patent
recognized by the Paris Convention, even that this point was strongly resisted by developing
countries during the Uruguay Round.273
With regard to the rights conferred by a patent, Article 28.1.b of TRIPS particularly provides
for the exclusive rights of the right holder of the product patent, including the right to supply
the market with imports of the patented products. The protection of a patent process is
extended to the product “obtained directly by that process” under Article 28.2.b of TRIPS.
Together with the reversal of burden of proof, this extension of protection is the important
strengthening point of patent rights derived from the process inventions. 274 Admittedly, all of
these contents of the patent protection are certainly outside of the regulation scope of the Paris
Convention.
269
See Carlos McCrea, supra note 221, at 194.
See J. H. Reichman, supra note 207, at 51.
271
Following this kind of interpretation, the new patent law of Brazil includes a local working obligation. See
Carlos McCrea, supra note 221, at 203.
272
See Carlos McCrea, supra note 184, at 203.
273
See Meeting of Negotiating Group of 2, 4 and 5 April 1990, GATT Doc.MTN.GNG/NG11/20(April. 24,
1990) [“hereafter Meeting of 2,4,5 April 1990”], para. 31.
274
See Carlos McCrea, supra note 184, at 205.
270
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4.3. Criteria of exceptions and limitations of exclusive rights
While the Paris Convention does not provide the criteria of exceptions but leave them to
national legislation, the TRIPS provide the limited exceptions from the exclusive rights
conferred on the patent holders in Article 30, which imported substantially the words of
Article 9.2 of the Berne Convention.275 Different from Article 13 of TRIPS which provides for
the “limitations and exceptions” to the exclusive rights conferred on the copyright and related
rights holders, Article 30 of TRIPS refers only to “exceptions” to the exclusive rights derived
from the patent rights. The limitations to the patent rights are admittedly implied in the
provisions on compulsory licensing, which are mentioned generally in Article 8 and
particularly in Article 31 of TRIPS. 276 The TRIPS mentions the limitations to exclusive patent
rights in the term “other use without authorization of the right holder” 277 in Article 31 rather
than “compulsory licenses” as provided in Article 5(A) of the Paris Convention. Accordingly,
the requirements set forth in Article 31 aimed at different types of compulsory licenses. The
applicability scope of this article is broader than that of the rule provided in Article 5(A) (4)
of the Paris Convention, which are only applicable to the type of compulsory licenses for nonworking or insufficient working patents. Accordingly, all types of the use without
authorization of the right holder other than the exceptions mentioned in Article 30 of the
TRIPS is subject to the rule of Article 31 of the TRIPS. Regarding the contents of the rule,
Article 31 of TRIPS elaborates the stricter requirement in comparison with that under Article
5(A) (4) of the Paris Convention.
4.4. Minimum standard of the term of protection
Unlike the Paris Convention in leaving totally the question of the term of patent protection to
national legislation to decide, the TRIPS provides clearly in Article 33 that the term of patent
protection available shall not end before the expiration of a period of twenty years counted
from the filing date. This provision is one of the major successes of the developed countries
during the Uruguay Round in internationalizing their practices of patent protection. 278 There
was the long controversy on how to implement the obligation under Article 33 in relation with
Article 70 of TRIPS, which provides for the limitation and the extension of the TRIPS effect
in the protection of the existing subject matters. 279 The debate resulted in the disputes on the
national patent law of a WTO Member regarding the term of protection for the patents
granted before the effective date of the TRIPS. 280 The WTO panels and the Appellate Body
clarified that the provision of Article 33 is also applicable to the patented inventions granted
275
See the TRIPS, supra note 10, art. 30, and the Berne Convention, art. 9.2.
See TRIPS, supra note 10, arts. 8, 31. See also J. H. Reichman, supra note 207, at 33-35.
277
This expression is used in the relation with the conception of exceptions provided in Article 30. See footnote 7
to Article 31 of the TRIPS.
278
See J. H. Reichman, supra note 207, at 30.
279
See Carlos McCrea, supra note 221 at 219.
280
See Panel Report, Canada-Term of Patent Protection, WT/DS170/R, 5 May 2000 [hereafter “Panel Report,
Canada-Patent, Complaint by US”].
276
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before the effective date of the TRIPS,281 which are regarded falling within the definition of
existing subject matters under Article 70.2 of TRIPS.282
5. Limitations of the special and differential treatment
The principle of special and differential treatment for development is generally recognized in
pre-existing international intellectual property conventions, including the Paris Convention.283
This principle was linked to the ideals of freedom in the scope and level of protection and the
balance of rights and obligations to allow developing countries to set up a system of IPR
protection depending on their level of development.284 The TRIPS follows the different
approach. TRIPS obliges all Members, irrespective of their degree of economic development,
to implement the “minimum” standards of IPR protection at the same level. 285 What could be
regarded the differential treatment is only the provision of the limited transitional periods. The
determined transitional periods set out in Articles 65, 66 of TRIPS aimed at permitting the
developing and the least-developed countries the delay in establishing the protection of
intellectual property rights in some sensitive areas, including pharmaceutical and agricultural
chemical products.286 However, the implementation of such kind of differential treatment is
bound by the obligations regarding the protection of existing subject matters stipulated in
Articles 70.8 and 70.9 of TRIPS.287
6. Enforcement of rights
6.1. Enforcement obligations
The pre-existing international intellectual property conventions leave the questions of
enforcement to the domestic legislation of member States.288 Some of them contain a number
of provisions dealing with the remedies against infringement. However, they do not impose
the compulsory obligation to incorporate those remedies into the national laws of the member
states, nor provide particular sanctions and remedies of enforcement. Article 9 of the Paris
Convention requires three specific types of remedy against goods unlawfully bearing a
trademark or a trade name: seizure on importation; seizure in the country where the unlawful
affixation occurred or in the country into which the goods have been imported; and
prohibition of importation,289 but does not make the incorporation of such remedies into
281
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.56; Appellate Report, Canada-Term
of Patent Protection, WT/DS170/AB/R, 11 August 2000 [hereafter “Appellate Report Canada-Patent,
Complaint by US”], at 79.
282
See Panel Report, Canada-Patent, Complaint by US, supra note 203, at 6.3, 6.41, 6.56; Appellate Body
Report, Canada-Patent, Complaint by US, supra note 281, at 65, 69.
283
See Meeting of Negotiating Group of 11-13 September 1989, supra note 208, at 15-17.
284
Id.
285
See J. H. Reichman, supra note 207, at 30. See also Jim Keon, supra note 193, at 166-67.
286
See Carlos McCrea, supra note 221, at 220.
287
See Panel Report, India- Patent Protection for Pharmaceutical and Agricultural Chemical Products,
WT/DS50/R, 5 September 1997 [hereafter “Panel Report, India-Patent, Complaint by US”, at 7.55, 7.57.
Appellate Body Report, India- Patent Protection for Pharmaceutical and Agricultural Chemical Products,
WT/DS50/AB/R, 19 December 1997 [hereafter Appellate Body Report, India–Patent, Complaint by US”] at 82;
See Panel Report, India-Patent Protection for Pharmaceutical and Agricultural Chemical Products,
WT/DS79/R, 24 August 1998 [hereafter “Panel Report, India-Patent, Complaint by EC”] at 7.64, 7.73.
288
See Compilation on Enforcement of IPRs, supra note 155, Section I(ii).
289
See the Paris Convention, supra note 1, at art.9(1),(2).
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national law compulsory and provides that “until such time as the legislation is modified
accordingly”, the actions and remedies available to nationals shall apply. 290 The clause of
“until such time…” is subject to explanation that these words express a simple wish that the
Union countries adopt legislation according to the proposed remedies, but that they do not
impose any obligation on the Union countries.291
The obligation to seize counterfeit goods on importation is not compulsory because a
country’s legislation might not permit seizure on importation, which is recognized by this
Article.292 This provision is further explained: “the domestic legislation of the country
concerned will determine at whose request seizure will take place. The words ‘a natural of a
legal entity’ do not by themselves imply an obligation to admit requests by federations or
associations of interested persons.”293 Similarly, Articles 10, 10bis, 10ter of the Paris
Convention do not oblige member States to introduce special legislation against unfair
competition, nor give any details concerning the actions and remedies in terms of appropriate,
legal and effective remedies against counterfeiting and unlawful acts, and therefore, “in most
countries, it will hardly be possible to assure effective protection against unfair competition
by means other than legislation.”294
TRIPS imposes the compulsory obligations of enforcement on the members and elaborated
particular enforcement measures, remedies and procedures, which is quite different from the
situation of the pre-existing international intellectual property conventions mentioned above.
Article 41 of TRIPS provides four fundamental principles of the enforcement provisions.
First, the specified procedures must “permit effective action” against present and future acts
of infringement and be incorporated into the national legislation to become available in the
domestic laws of the member states.295 Secondly, the relevant judicial and administrative
procedures must be fair and equitable and not unnecessarily complicated, costly, burdensome,
or likely to cause unwarranted delays. 296 Thirdly, courts and administrative bodies dealing
with the particular cases must base their decisions on evidence that must be available to all
parties, and these decisions shall preferably be in writing and reasoned. 297 Fourthly, member
states must provide some form of appellate review for decisions made by administrative or
judicial bodies of first instance. 298 In fact, these provisions are the favor or bias given to the
rules currently prevailing in the commercial laws of some English-speaking countries.299
290
Id. art.9(6). See also Compilation on Enforcement of IPRs, supra note 155, at para.16.
This explanation was supported by the Drafting Commission of the General Commission of the 1925
Revision Conference of The Hague on the Paris Convention. See Compilation on Enforcement of IPRs, supra
note 155, at para.17.
292
See the Paris Convention, supra note 1, at art.9(5); Compilation on Enforcement of IPRs, supra note 155, at
para.16; Memorandum of the International Bureau of WIPO on Protection Against Counterfeiting, PAC/CE/II/2,
para.18.
293
See the Paris Convention, supra note 1, at art.9(3); Compilation on Enforcement of IPRs, supra note 155, at
para.18.
294
See Compilation on Enforcement of IPRs, supra note 155, at paras. 19-22 .
295
See TRIPS Agreement, supra note 10, at art.41(1).
296
Id. art. 41(2).
297
Id. art.41(3).
298
Id. art.41(4).
299
See J. H. Reichman, supra note 207, at 72.
291
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Under these general principles, articles 42-49 of TRIPS particularize the civil and
administrative procedures and remedies in consistent with the general obligations of Article
41. It is admitted that these detailed provisions elaborate on the concept of fair and equitable
procedures, including procedures for the discovery of evidence that are a characteristic feature
of US law, 300 and they allow for default judgments in proper circumstances. 301 The WTO
Members are also obliged to make injunctions formally available to aggrieved right holders,
except in cases that specifically concern the infringement of patented inventions or innocent
infringers of other IPRs.302 The WTO Members must empower local judicial authorities to
order compensatory damages, expenses and attorneys’ fees and the lost profits or liquidated
damages in appropriate case.303 Courts must have authority to dispose of infringing goods
outside the channels of commerce, or destroy infringing goods or equipment likely to
contribute to the production of infringing goods, and must not normally release counterfeit
trademark goods into the channels of commerce even after removal of the offending marks. 304
The judicial authorities must have authority to require claimants to indemnify parties who are
wrongly or subjected abusively to any of the provided procedures.305 The preliminary
injunctions to prevent future infringements and to preserve relevant evidence must also be
available within the authority of the judicial authorities.306
Counterfeiting and piracy are concretely defined and distinguished from the general
infringements to be applied in the “Special Requirements Related to Border Measures” 307
elaborated in articles 51-60 of the TRIPS. The right holders must have the right to take legal
action to compel the domestic customs authorities to suspend the release of imported goods
into free circulation whenever the complainants have valid grounds for suspecting that the
items in question are counterfeit trademarks or pirated copyright goods.308 The proceedings
for filing application, providing security or equivalent assurance, obtaining the notice of
suspension, and the duration of suspension are provided in details. 309 The indemnification of
the importer and of the owner of the goods for any injury caused to them by the wrongful
detention of goods, the right of inspection and information given to the right holders, must be
available in national legislation.310 The competent national authorities may act ex officio to
suspend the release of goods in respect of which the prima facie evidence of infringement is
available.311 The imposition of the strict border control measures on imports of counterfeit
goods is perceived as “a safety valve” in case the enforcement at the source has been
ineffective.312 Furthermore, the TRIPS imposes a requirement in response of internal
procedures against the counterfeiting upon the WTO Members. Accordingly, the criminal
procedures and penalties must also be available for at least cases of willful trademark
300
Id. at 73.
See TRIPS Agreement, supra note 10, at art.43(2)
302
Id. art.44.
303
Id. art.45.a
304
Id. art.46.
305
Id. art.48.
306
See TRIPS Agreement, supra note 10, at art.50.
307
Id. art.51
308
Id. art.51.
309
Id. arts.52, 53, 54.
310
Id. arts.56, 57.
311
Id. art.58.
312
See J. H. Reichman, supra note 207, at 75.
301
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counterfeiting or copyright piracy on a commercial scale. 313 Finally, different from the preexisting conventions, TRIPS gives rise to the significance of the obligations concerning
enforcement, at least equivalent to that given to the obligations concerning legislation.314
6.2. Enforcement supervision
While it had not been addressed in the pre-existing international intellectual property
conventions, the transparency principle transformed from GATT into TRIPS is conceived as
an ancillary provision for supervising the enforcement obligations.315
The transparency provisions facilitate the implementation of the enforcement provisions by
requiring transparency with regard to the relevant laws and judicial decisions, which must be
published or made publicly available, and by empowering the Council for TRIPS to obtain the
laws, regulations and judicial decisions and administrative rulings concerning the subject
matter of the agreement, including enforcement.316
The effect of the transparency principle on the enforcement obligations is reinforced by the
requirement of establishment of contact points in the administrations of the member states
with a view to exchanging information on trade in infringing goods. 317 Furthermore, the
requirement of local authorities to perform in the proper way the procedures and formalities
concerning the acquisition and maintenance of intellectual property rights is deemed to
provide support to the implementation of the enforcement standards set out by the TRIPS.318
It is a fact that under the Paris Convention no organization with the authority of monitoring
the enforcement of intellectual property rights had been established. The situation is different
in TRIPS by the establishment of the Council for TRIPS which is empowered to monitor the
operation of the Agreement and “in particular, Member’s compliance with their obligations”
through providing the opportunity of consultations, including efforts to mediate disputes. 319
Moreover, the power of the Council for TRIPS is also expressed in the provision of authority
to examine the scope and modalities for complaints of the types of nullification or impairment
and “situation” as provided in Articles XXIII:1(b) and (c) of GATT. 320 The authority for
reviewing the implementation of the Agreement after the expiration of the transitional period
is also provided with the Council for TRIPS. The power vested in the Council for TRIPS is
313
See TRIPS Agreement, supra note 10, at 61.
This point was somehow verified by the panel in the case of US-Copyright:
“In our view, such argumentation could be abused as a justification of any exception or limitation since right
holders could never reasonably expect remuneration for uses which are not covered by exclusive rights provided
in national legislation. Logically, no conflict with normal exploitation could be construed. The same would apply
where a low level of exercise of an exclusive right would be due to lack of effective or affordable means of
enforcement of that right.” See Panel Report, United Sates-Section 110(5) of the US Copyright Act, WTO Doc.
WT/DS160/R (15 June 2000) [hereafter “Panel Report, US-Copyright”] at 6.198.
315
See TRIPS Agreement, supra note 10, art.63. See also J. H. Reichman, supra note 207, at 76.
316
See TRIPS Agreement, supra note 10, art.63.
317
Id. art.69.
318
Id. art.62.
319
See TRIPS Agreement, supra note 10, art. 68.
320
Id. art.64.3.
314
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admitted, among other things, for ensuring the effective implementation of enforcement
provisions elaborated in TRIPS.321
7. Application of WTO dispute settlement mechanism
7.1. WTO jurisdiction over intellectual property rights
Article 64 of the TRIPS provides that the WTO dispute settlement regime shall be applied to
deal with the disputes under this Agreement. 322 Accordingly, the Dispute Settlement Body
(“DSB”) which is established to administer the execution of dispute settlement provisions of
the WTO agreements, including the TRIPS, shall have the authority to establish panels, adopt
reports of panels and appellate bodies, maintain surveillance of implementation of rulings and
recommendations and authorize suspension of concessions and other obligations covered by
the agreement concerned.323A non-consultable dispute concerning the TRIPS provisions
would be subject to the findings of a panel and an appellate body established by the DSB. 324
The panels are provided the authority to make an assessment of the matter in the dispute in
both the facts of the case, and the applicability of, and conformity with, the relevant covered
agreements, and make the other findings for assisting the DSB in making the
recommendations or giving the rulings provided for in the covered agreements. 325 An
appellate body has the authority to hear appeals from panel case. However, the review
jurisdiction of the appellate body is limited in the issues of law covered in the panel reports
and legal interpretations developed by the panel, not extended to assessing the facts of the
case.326 In fact, the panels and appellate bodies have dealt with a number of cases concerning
TRIPS as mentioned in the previous sections.
No provision on the possibility of making a reservation to the dispute settlement provisions in
the type of that provided in the Paris Convention. 327 Although Article 72 of TRIPS permits the
possibility of reservations, this provision is almost nullified by the accompanied condition
that these reservations may not enter in respect of any of the provisions of this agreement
without the consent of the other WTO Members. 328 The recourse to the DSB for settling the
non-consultable disputes under this agreement is an obligatory provision, which is bound to
all WTO Members.
7.2. Specified dispute settlement procedures
The dispute settlement proceedings under the Dispute Settlement Understanding (“DSU”) are
formulated in such a manner to make the process of dispute settlement more effective. The
most important improvement could be seen in the application of the so-called “negative
321
See J. H. Reichman, supra note 207, at 76-79.
See TRIPS Agreement, supra note 10, art. 64.
323
See WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (1994), available at
http://www.wto.org. [hereafter “DSU”], art 2.
324
Id. art.4 (7).
325
Id. art.11.
326
Id. arts17(1), (7).
327
See the TRIPS, supra note 10, art. 64.
328
Id. art. 72.
322
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consensus”329 principle in adopting panel reports and appellate body reports. 330 Additionally,
the time limits for the consultations, panel procedures, and procedures for appellate review
and DSB decisions are provided in detail.331
The procedures for the surveillance of implementation of recommendations and rulings of the
DSB are elaborated in a particular time-schedule.332 The arbitration procedures are also
available for facilitating the compliance with the recommendations and rulings of the DSB.333
Finally, the compensation and the suspension of concessions are particularly provided as the
supplementary measures to ensure the effective implementation of rulings. 334 All such
restrictive procedures are contemplated for overcoming the delays in the establishment of
panels, the blockage in adopting panel reports and the non-compliance with the dispute
settlement rulings, which is where the problems existed in the GATT 1947 dispute settlement
system.335
Assumedly, the well-defined and rigid WTO dispute settlement procedures binding TRIPS, in
addition to the particularly described “minimum standards” of IPR protection and
enforcement, seem to constrain further the freedom at level of intellectual property protection,
which was enjoyable in the pre-existing Paris Convention. Such restrictions are applicable to
the intellectual property protection under the surveillance of GATT rules.
Conclusion
The examination of the regulations under the Paris Convention and the TRIPS shows that the
fundamental difference between these two covenants. For the connection of the TRIPS to
GATT, the great change in the concept of sovereignty and freedom of legislation regarding
the protection of intellectual property rights needs to be changed. While the Paris Convention
provides the common rules of the substantive law regarding the industrial property protection,
the TRIPS elaborates specific standards for the protection of particular subject matters.
Particularly, the national legislation of the WTO Members must comply with the minimum
standards and criteria of patent protection that are specified in the text of the TRIPS.
The movement of the intellectual property attention from the WIPO framework to the WTO
framework resulted in the transformation of the GATT principles into the TRIPS. Strict rules
against the non-discrimination of the trade in goods were adapted to the intellectual property
protection. Under WTO jurisprudence national legislation would certainly be subject to the
pressure different from that exists under WIPO framework in performance of national polices
regarding intellectual property protection.
329
See Ernst-Ulrich Petersmann, ‘International Trade Law and the GATT/WTO Dispute Settlement System
1948-1996: An Introduction’, International Trade Law and the GATT/WTO Dispute Settlement System (Kluwer
Law International, 1997), p.21.
330
See DSU, supra note 323, arts.16(4), 17(14).
331
Id. arts.4, 12, 17(9), 20.
332
Id. art.21.
333
Id. arts.21, 25.
334
Id. art. 22. See also Asif H. Qureshi, The World Trade Organization: implementing international trade norms
(Manchester University Press, 1996), p.105.
335
See Ernst-Ulrich Petersmann, supra note 329, at 53-54.
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As stated in the text of the TRIPS, the TRIPS incorporated the substantive provisions of the
Paris Convention. How such provisions are incorporated into the WTO system and how they
could work in the WTO framework? These questions will be discussed in the next chapter.
The discussion is expected to explore the practical challenges of WTO jurisprudence to
national legislation in compliance with the TRIPS obligations, including those under the
incorporated Paris Convention.
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Chapter Three
New Challenges from WTO jurisprudence to
the “Incorporated” Paris Convention
As stated in the language of Article 2.1 of TRIPS, “in respect of Parts II, III and IV” of the
TRIPS, WTO Members must “comply with” the substantive provisions of the Paris
Convention.336 Accordingly, the TRIPS incorporates the substantive provisions of the Paris
Convention. The question is how the substantive provisions of the Paris Convention are
incorporated in the TRIPS. Should all obligations under the referred articles of the Paris
Convention and those under the context attached to them automatically become the TRIPS
obligations? Should the obligations under the incorporated provisions “comply with” the
principles and the norms of TRIPS? Which will prevail where there is a difference between
the former and the latter? These questions are not clear in the language of the TRIPS. In fact,
some disputes occurred among the WTO Members in understanding the term “incorporation”
and in implementing the obligations under “incorporated” provisions. The panels and the
Appellate Body have some chances to clarify the above questions in certain TRIPS related
disputes. The discussion in Part I bellow will analyze the panel findings in the relevant
aspects to see the appropriate answer for the question of how the incorporation should be,
pursuant to the panel rulings. Subsequently, Part II will deal with the question of how to
implement the obligations under the incorporated provisions in the WTO framework. The
discussion is expected to identify the practical challenges from the incorporated Paris
Convention that national legislation needs to take into account in compliance with the TRIPS.
I. Incorporation of the Paris Convention into the TRIPS
1. Incorporation of the contents and context
(United States-Section 110(5) of the US Copyright Act) 337
The fact is that Section 110(5) of the US copyright Act of 1976, amended by the Fairness in
Music Licensing Act of 1988, contains provisions on the limitations of the exclusive rights of
the owner of copyright in respect of certain performances and displays (the right of
performance).338 Section 110(5)(A) provides for the “home style exemption” in response to a
communication of a transmission embodying a performance or display of a work by the
public reception of the transmission on a single receiving apparatus of a kind commonly used
in private homes.339 This provision is to exempt from copyright liability anyone who merely
turns on in a public place an ordinary radio or television receiving apparatus, which is of a
kind being commonly sold for private use. 340 Section 110(5)(B) provides for the “business
exemption” in respect of a communication by an establishment of a transmission or
336
See the TRIPS, supra note 10, art. 2.1 of TRIPS provides: “In respect of Parts II, III and IV of this
Agreement, Members shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967).”
337
See Panel Report, United Sates-Section 110(5) of the US Copyright Act, WTO Doc. WT/DS160/R (15 June
2000) [hereafter “Panel Report, US - Section 110(5) Copyright Act”].
338
Id. at 2.1.
339
Id. at 2.3, 2.4.
340
Id. at 2.5.
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retransmission embodying a performance or display of a non-dramatic musical work. 341 Its
purpose is to provide an exemption for a small commercial establishment from copyright
liability to the extent of the kind of right of performance mentioned above.342
The European Communities (“EC”) argued that Article 13 of the TRIPS was only applicable
to exclusive rights newly introduced under the TRIPS, but not to rights conferred under
articles 1 to 21 of the Berne Convention 343 which are incorporated in the TRIPS (except for
Article 6bis on moral right).344 The argument of the EC was supported by the provisions of
Article 2.2 of the TRIPS and Article 20 of the Berne Convention, which could be interpreted
as a prohibition on any derogation from existing standards of protection under the Berne
Convention.345 In this way, the doctrine of “minor exceptions” was applicable under the Berne
Convention,346 but not applicable within the context of Article 13 of TRIPS. 347 Moreover, the
minor exceptions were the pre-existing exemptions limited to the public performance of
works for some non-commercial purpose such as religious ceremonies, military bands and the
needs of child and adult education.348 For such arguments, the EC claimed that the exemptions
provided in Section 110(5) of the US Copyright Act were a violation of the US obligations
under TRIPS, and these measures caused a prejudice to the legitimate rights of copyright
owners, thus nullifying and impairing the rights of the EC. 349 European Community alleged
that Subparagraphs (A) and (B) of Section 110(5) of the US Copyright Act violated the US
obligations under Article 9.1 of the TRIPS together with Articles 11bis(1)(iii) and 11bis(1)(ii)
of the Berne Convention.350
In a rebuttal, the United Sates argued that the exemptions provided in Article 13 of the TRIPS
applied to all provisions relating to copyright in the TRIPS, including the provisions on rights
conferred under articles 1 through 21 of the Berne Convention. 351 Therefore, the doctrine of
minor exceptions was applicable in the context of Article 13, including those provisions of the
Berne Convention incorporated therein.352 Additionally, the minor exceptions were not
exhausted and not limited to non-commercial purposes. 353 Accordingly, the United States
contended that the exemptions provided in Section 110(5) of the US Copyright Act fell within
the limitations and exceptions of copyright covered by Article 13 of the TRIPS, which allows
members of the TRIPS to place minor exceptions permitted by the Berne Convention on the
341
Id. at 2.3, 2.8.
Id. at 2.9.
343
The Berne Convention for the Protection of Literary and Artistic Works incorporated by Article 9.1 of TRIPS
refers to the Paris Act of this Convention of 24 July 1971. See Article 9.1 and footnote 2 of Article 3.1, TRIPS.
The text of the incorporated provisions of this Convention is reproduced in Agreement on Trade-Related Aspects
of Intellectual Property Rights, WIPO Publication No. 223(E) (WIPO 1986).
344
See Panel Report US – Section 110(5) Copyright Act, supra note 337, at 6.34.
345
Id.
346
See Existence, Scope and Form of Generally Internationally Accepted and Applied Standards/Norms For the
Protection of Intellectual Property, GATT Doc.MTN.GNG/NG11/W/24/Rev.1(Sept. 15, 1988), Part II.4(i),
p.18.
347
See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.34, 6.36.
348
Id. at 6.36.
349
Id. at 3.1.
350
Id. at 6.1.
351
Id. at 6.35.
352
Id. at 6.35, 637.
353
Id. at 6.37.
342
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exclusive rights of copyright owners.354 The United States contended that Section 110(5) of
the US Copyright Act was consistent with its obligations under the TRIPS, and both
Subparagraphs (A) and (B) of Section 110(5) of the US Copyright Act met the standards of
Article 13 of the TRIPS and the substantive provisions of the Berne Convention incorporated
into the TRIPS.355
The question in the dispute was to what extent does the TRIPS incorporates the substantive
provisions of the Berne Convention, or whether the TRIPS incorporates all the context of the
incorporated provisions of the Berne Convention. This question is significant because it
would identify the rationale for determining the scope of exceptions under the TRIPS, and
whether such rationale justifies the exemptions provided in Section 110(5) of the US
Copyright Act.356
Generally, the United Sates argued for the application of the minor exceptions doctrine under
the TRIPS, because this doctrine is part of the context of the Berne Convention that is
incorporated into TRIPS.357 The argument of the United States referred to the following
particular points: (i) the minor exceptions doctrine is a basis for the interpretation of Article
13 of the TRIPS. Article 13 of the TRIPS clarifies and provides the standard for the
application of the minor exceptions doctrine under the Berne Convention;358 (ii) the minor
exceptions doctrine is non-exhaustive, not required to be non-commercial, and not limited to
the specific examples mentioned in the reports of the conferences on the Berne Convention.
The minor exceptions doctrine constitutes the state practice of the Berne Union members 359
and the subsequent developments of the Berne Convention, including the WIPO Copyright
Treaty 1996;360
On the contrary, the EC argued for the non-application of the minor exceptions doctrine under
TRIPS because TRIPS does not incorporate the context of the substantive provisions of the
Berne Convention.361 The argument of the EC relied on the following reasons: (i) the minor
exceptions doctrine is not applicable in the interpretation of Article 13 of the TRIPS because
of the unclear scope and legal status of this doctrine. It goes beyond the scope of
incorporation of the TRIPS in regard to the substantive provisions of the Berne Convention, 362
or alternatively, if Article 13 of the TRIPS is applied to the incorporated substantive
provisions of the Berne Convention and the minor exceptions doctrine is applicable in the
interpretation of Article 13 of the TRIPS, Article 13 should be confined within the scope of
354
Id. at 3.3.
Id. at 6.2.
356
The Panel determined that:
“Consequently, the core question before this Panel is which of the exceptions
under the TRIPS Agreement invoked are relevant to this dispute and whether
the conditions for their invocation are met so as to justify the exemptions
under subparagraphs (A) and (B) of Section 110(5) of the US Copyright Act.”
See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.29.
357
Id at 6.30; 6.33; 6.35.
358
Id. at 6.30; 6.33; 6.35.
359
Id. at 6.37, 6.56.
360
Id. at 6.67.
361
Id. at 6.36, 6.56.
362
Id. at 6.36.
355
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the pre-existing limitations under the minor exceptions doctrine; 363 (ii) the minor exceptions
doctrine is exhaustive, applicable to the non-commercial and limited to those pre-existing
exceptions that existed in national legislation prior to the Stockholm Diplomatic Conference
of 1967.364
The findings of the Panel were first of all based on an examination of the negotiating history
of the Berne Convention concerning the minor exceptions doctrine. The doctrine refers to the
permissible exceptions to the exclusive rights conferred by Articles 11, 11bis, 13 and 14 of
the Berne Convention.365 The concept of minor exceptions came from the so-called minor
reservations recognized and stated in the reports of the Berne Convention revision
conferences: the Brussels Diplomatic Conference of 1948 and the Stockholm Conference of
1967.366 The exceptions regarded “minor” and stated in the reports of the Berne Convention
revision conferences include the exceptions allowed for religious ceremonies, military bands
and the needs of education and popularization.367 In state practice, the exceptions for noncommercial, religious, charitable and educational purposes are often allowed.368
Next, the Panel examined the legal status of the minor exceptions doctrine under the Berne
Convention based on Article 31(2) of the Vienna Convention. 369 The Panel found that the
minor exceptions doctrine is part of the “context” of Article 11bis (1) of the Berne
Convention,370 because it was introduced simultaneously with the adoption of Article 11bis
(1) and closely related to the substance of the amendment of the Berne Convention, which
was formally adopted by the Berne Union members. 371 Based on Article 31(3) of the Vienna
Convention,372 the Panel found that the practice of national copyright laws of the Berne Union
363
Id. at 6.36, 6.56.
Id. at 6.36.
365
Id. at footnote 58.
366
Id. at 6.49, 6.52, 6.54.
367
Id. at footnotes 61, 64, para.6.57.
368
Id. at footnote 67.
369
Id. at paras. 6.44, 6.45. Article 31(2)(a) of Vienna Convention on the Law of Treaties provides:
“2. The context for the purpose of the interpretation of a treaty shall comprise,
in addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all parties in
connexion with the conclusion of the treaty”
The text of this Convention is available at http://www.un.org/law/ilc/texts/treaties.htm.
370
On this point, the Panel stated that:
“When ascertaining the legal status of the minor exceptions doctrine (…) We
therefore conclude that an agreement within the meaning of Article 31(2)(a)
of the Vienna Convention between all the parties on the possibility to provide
minor exceptions was made in connection with the conclusion of a revision of
the Convention introducing additional exclusive rights, including those
contained in Articles 11bis(1)(iii) and 11(1)(ii), to which these limitations
were to apply, and that this agreement is relevant as context for interpreting
these Articles.” (Footnotes omitted and emphasis added).
See Panel Report, US – Section 110(5) Copyright Act, supra note 337 at 6.53.
371
Id. at 6.53, 6.54.
372
Articles 31(3) of Vienna Convention on the Law of Treaties provides that together with the context,
any subsequent agreement, subsequent practice, or any relevant rules of international law applicable
between the parties, shall be taken into account for the purposes of interpretation. See Vienna
Convention on the Law of Treaties, supra note 369, art. 31(3).
364
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members as well as of the WTO Members concerning the application of minor exceptions
doctrine should be a basis for interpretation of Article 11bis(1) of the Berne Convention.373
Accordingly, the application of the minor exceptions doctrine should not necessarily be
limited to the pre-existing exemptions, but extended to the subsequent practice.374
In conclusion, the argument of the Panel was in favor of the US argument, which allowed for
the adoption of the minor exceptions doctrine in interpretation of Article 13 of the TRIPS.
The particular points supporting this argument included: (i) both substantive provisions,
including Article 11bis(1), of the Berne Convention and the context related thereto, including
the minor exceptions doctrine,375 are incorporated in the TRIPS by provision of Article 9.1 of
the TRIPS,376 because Article 9.1 of the TRIPS does not specify any exclusion to the
incorporation of this doctrine,377 and (ii) the preparatory documents of the TRIPS during the
GATT Uruguay Round supported the application of the minor doctrine to the TRIPS; 378 and
(iii) the WIPO Copyright Treaty that was adopted at a Diplomatic Conference in 1996 is
regarded as a subsequent development of the minor exceptions doctrine to be a basis for
interpretation of Article 13 of the TRIPS.379 Based on the adoption of the minor exception
373
See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.55
Id. at 6.55, 6.88, 6.70.
375
The Panel stated:
“Having concluded that the minor exceptions doctrine forms part of the
"context" of, at least, Articles 11bis and 11 of the Berne Convention (1971) by
virtue of an agreement within the meaning of Article 31(2)(a) of the Vienna
Convention, which was made between the Berne Union members in
connection with the conclusion of the respective amendments to that
Convention, we next address the second step of our analysis outlined above.
This second step deals with the question whether or not the minor exceptions
doctrine has been incorporated into the TRIPS Agreement, by virtue of its
Article 9.1, together with Articles 1-21 of the Berne Convention (1971) as part
of the Berne acquis.” (Footnote omitted and emphasis added)
See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.60.
376
The Panel made this finding in the absence of an explicit provision on this issue in Article 9.1 of TRIPS:
“We note that the express wording of Article 9.1 of the TRIPS Agreement
neither establishes nor excludes such incorporation into the Agreement of the
minor exceptions doctrine as it applies to Articles 11, 11bis, 11ter, 13 and 14
of the Berne Convention (1971).” (Emphasis added)
See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.61.
377
The Panel stated the reasoning on this point as follows:
“There is no indication in the wording of the TRIPS Agreement that Articles
11 and 11bis have been incorporated into the TRIPS Agreement by its Article
9.1 without bringing with them the possibility of providing minor exceptions to
the respective exclusive rights. If that incorporation should have covered only
the text of Articles 1–21 of the Berne Convention (1971), but not the entire
Berne acquis relating to these articles, Article 9.1 of the TRIPS Agreement
would have explicitly so provided.” (Emphasis added)
“Thus we conclude that, in the absence of any express exclusion in Article 9.1
of the TRIPS Agreement, the incorporation of Articles 11 and 11bis of the
Berne Convention (1971) into the Agreement includes the entire acquis of
these provisions, including the possibility of providing minor exceptions to the
respective exclusive rights.” (Emphasis added)
See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.62, 6.63.
378
Id., at 6.64, 6.65.
379
Id. at 6.67.
374
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doctrine in interpretation of Article 13 of the TRIPS, the Panel found that the minor
exceptions doctrine is incorporated into the TRIPS as the context of Article 11bis (1) of the
Berne Convention.380
It is clear that the finding of the Panel in this case certifies the incorporation of the TRIPS in
respect of the substantive provisions of the Berne Convention 381 together with the context and
subsequent practices attached to it. Regardless of the justification of the findings in regard to
the TRIPS members who are not members of the Berne Convention, 382 it could be affirmed
that the Panel gives effect to the incorporation of TRIPS in the broad sense, including the
contents and context of the incorporated provisions. By the same token, by the language of
Articles 2.1 and 2.2 of the TRIPS,383 it is plausible for the assumption that the TRIPS
incorporates entirely the substantive provisions of the Paris Convention together with their
context and subsequent practices. Consequently, WTO Members should comply with not only
the obligations under the plain language of the incorporated provisions, but also those coming
from the context adherent to such provisions, regardless of whether they are at the same time
the members of the related pre-exiting treaty or not.
380
The Panel found that:
“In the light of the foregoing analysis, we conclude that the context of Articles
11 and 11bis of the Berne Convention (1971) comprises, within the meaning
of Article 31(2)(a) of the Vienna Convention, the possibility of providing
minor exceptions to the exclusive rights in question. This minor exceptions
doctrine has been incorporated into the TRIPS Agreement, by virtue of its
Article 9.1, together with these provisions of the Berne Convention (1971).
Therefore, the doctrine is relevant as forming part of the context of Articles
11(1)(ii) and 11bis(1)(iii) of the Berne Convention (1971) as incorporated
into the TRIPS Agreement.”
See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.92.
381
Except for the provision on moral rights as provided by Article 9.1 of TRIPS. See Panel Report, US – Section
110(5) Copyright Act, supra note 337, at para.6.62 and footnote 79.
382
It seems to be unreasonable for the TRIPS members who are not members of any of the incorporated preexisting treaties to bear the obligations coming from the context and practice of the related pre-existing treaty
besides the obligations directly coming from the contents of the incorporated substantive provisions. However,
the findings of the Panel in this case obliges all of the TRIPS members to conform to the context and subsequent
practices of the incorporated pre-existing treaties.
383
Provisions of Article 2.1 of TRIPS are similar to the language of Article 9.1 of TRIPS, which provide for the
incorporation of the substantive provisions of the Berne Convention and those of the Paris Convention,
respectively, without any derogation of obligations under the incorporated treaties. See the TRIPS, supra note
10. arts. 2.1, 9.1.
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2. Incorporating beyond the TRIPS negotiating history
(United States - Section 211 Omnibus Appropriations Act 1998) 384
This dispute happened over the provisions of Section 211 of the Omnibus Appropriation Act
(“OAA”) of 1998 of the United States regulating the trademarks, trade names, commercial
names that are the same as or substantially similar to those used in connection with business
or assets that were confiscated by the Cuban Government on or after 1 January 1959. 385
Particularly, Section 211(a)(1) of OAA prohibits the transaction or payment with respect to
those objects, unless it has been expressly consented by their original owner or bona fide
successor-in-interest, and accordingly, the registration or renewal of the trademarks in the
type mentioned above would not be permissible. 386 Section 211(a) (2) prohibits the exercise of
enforcement rights of a “designated national” with respect to those objects before the US
courts;387 and Section 211(b) prohibits the exercise of the treaty rights of a “designated
national” or its successor-in-interest with respect to those objects derived from any
international intellectual property conventions before the US courts. 388 The term “designated
national” is defined as Cuba and any national thereof including any person who is a specially
designated national.389
The EC claimed, among other things, that Section 211(a)(1) of OAA was inconsistent with
Article 2.1 of TRIPS in conjunction with Article 8 the Paris Convention providing for the
obligation of protection of trade names.390 The United States countered that Section 211 of the
OAA was not inconsistent with the provisions of TRIPS in conjunction with the relevant
provisions of the Paris Convention with two main arguments: firstly, the matter of refusal of
registration and the enforcement of trademarks as based on the grounds of ownership of
trademarks was not regulated by the Paris Convention to be applicable under TRIPS, and
TRIPS supported the provisions of Section 211 of OAA. 391 Secondly, there was no
discrimination existing in the law and practice in respect to the refusal of registration and
enforcement with regard to the confiscated trademarks and trade names.392
As a ground for determining whether the scope of the TRIPS encompasses trade names, the
Panel interpreted the definition of the term “intellectual property” used in TRIPS. The
interpretation of the Panel relied on a number of reasons: (i) since the word “all” in the
provision of Article 1.2 of the TRIPS indicates an exhaustive list of categories of intellectual
property rights, Sections 1 through 7 of Part II of the TRIPS do not provide for the protection
of trade names, and trade names do not come within the terms of intellectual property set
384
See Panel Report, US - Section 211 Omnibus Appropriations Act 1998, WTO Doc. WT/DS176/R (6 August
2001) [hereafter “Panel Report, US - Section 211 Omnibus”].
385
Id. at para.2.1.
386
Id. at 2.1, 2.9.
387
Id. at 2.1, 2.10.
388
Id. at 2.1, 2.6.
389
See Panel Report, US - Section 211 Omnibus, supra note 384, at 2.2.
390
Id. at 3.1.
391
Id. at 3.4, 8.44, 8.45, 8.72, 8.73, 8.93, 8.104, 8.114
392
Id. at 8.124, 8.134, 8.142.
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forth in Article 1.2 of the TRIPS; 393 (ii) the second sub-clause of Article 2.1 of TRIPS obliges
TRIPS Members to comply with the provisions of the Paris Convention, but it is conditioned
by the first sub-clause “in respect of Parts II, II and IV of this Agreement” meaning that the
TRIPS members shall comply with Articles 1 through 19 of the Paris Convention “in respect
of” what are covered by Parts II, III, and IV of the TRIPS, which do not include trade
names;394 (iii) the negotiating history reveals that trade names had not been addressed in the
TRIPS discussions.395 Based on those reasons, the Panel came to the conclusion that trade
names are not a category of intellectual property covered by the TRIPS. 396 Therefore, Section
211 of OAA is not inconsistent with Article 2.1 of the TRIPS in conjunction with Article 8 of
the Paris Convention.397
393
Id. at 8.26.
See Panel Report, US - Section 211 Omnibus, supra note 384, at 8.30.
395
Id. at 8.32-8.40. Particularly, the Panel found that:
“As regards the provision now contained in Article 2.1 of the Agreement, a
difference between the Chairman's text of July 1990 and the Brussels draft
was the addition of the words "in respect of Parts II, III and IV of this
Agreement" (…) The records do not contain information on the purpose of the
addition but the language of this provision, contained in Part I of the
Agreement, suggests that Members are to comply with the Paris Convention
(1967) provisions to the extent that they relate to Part II—i.e., the relevant
categories of intellectual property rights regulated in the agreement—Part III
(enforcement) and Part IV (acquisition).
“The negotiating history confirms the view that trade names are not covered
by the TRIPS Agreement.” (Emphasis added)
See Panel Report, US - Section 211 Omnibus, supra note 384, at 8.39, 8.40.
396
Particularly, the Panel found that:
“[W]e conclude that the categories of intellectual property covered by the
TRIPS Agreement are those referred to in Article 1.2. Article 8 of the Paris
Convention (1967) is relevant as part of the TRIPS Agreement to the extent
that it may affect the protection of the categories of intellectual property
covered by the Agreement. As trade names are not a category of intellectual
property covered by the TRIPS Agreement, Members do not have obligations
under the TRIPS Agreement to provide protection to trade names.” (Footnotes
omitted and emphasis added)
See Panel Report, US - Section 211 Omnibus, supra note 384, at 8.41.
397
Id. at 8.122, 8.165, 9.1.
394
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The Appellate Body reversed the findings of the Panel on the exclusion of Article 8 of the
Paris Convention providing for trade names from the scope of the TRIPS 398 for a number of
reasons: (i) the Panel erred in interpreting the phrase of “in respect of” in Article 2.1 of the
TRIPS as limiting the scope of the TRIPS incorporation into the categories of intellectual
property listed in Part II of the TRIPS; 399 (ii) the categories of intellectual property referred to
in Part II of the TRIPS is not an exhaustive list of intellectual property objects subject to the
regulations of the TRIPS;400 (iii) the negotiating history of the TRIPS did not exclude the
matter of trade names from the scope of the TRIPS. The Appellate Body argued for the
incorporation of Article 8 of the Paris Convention into the TRIPS by the explicit words of the
provision stipulated in Article 2.1 of the TRIPS:
“Moreover, we do not believe that the Panel's interpretation of
Article 1.2 can be reconciled with the plain words of Article 2.1.
Article 2.1 explicitly incorporates Article 8 of the
Paris Convention (1967) into the TRIPS Agreement".401
(Emphasis added)
As stated in the plain language of the TRIPS, the incorporation of Article 8 of the Paris
Convention cannot be excluded in the event that there is a lack of relevant evidence in the
398
The Appellate Body reversed the Panel’s finding that trade names are not covered by TRIPS:
“For all these reasons, we reverse the Panel's finding in paragraph 8.41 of the
Panel Report that trade names are not covered under the TRIPS Agreement
and find that WTO Members do have an obligation under the
TRIPS Agreement to provide protection to trade names.”
See Appellate Body Report, US - Section 211 Omnibus, WT/DS176/AB/R 2 January 2002, para. 341.
399
The Appellate Body disagreed with the Panel’s interpretation of the “conditional” effect of Article 2.1 of
TRIPS:
“The Panel was of the view that the words "in respect of " in Article 2.1 have
the effect of "conditioning" Members' obligations under the Articles of the
Paris Convention (1967) incorporated into the TRIPS Agreement, with the
result that trade names are not covered. We disagree.”
See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 337.
400
The Appellate Body interpreted the incorporation provisions in terms of the subjects instead of the titles of
the categories of intellectual property provided in Sections II of TRIPS:
“The Panel interpreted the phrase "'intellectual property' refers to all
categories of intellectual property that are the subject of Sections 1 through 7
of Part II"(emphasis added) as if that phrase read "intellectual property means
those categories of intellectual property appearing in the titles of Sections 1
through 7 of Part II." To our mind, the Panel's interpretation ignores the plain
words of Article 1.2, for it fails to take into account that the phrase "the
subject of Sections 1 through 7 of Part II" deals not only with the categories of
intellectual property indicated in each section title, but with other subjects as
well. For example, in Section 5 of Part II, entitled "Patents", Article 27(3)(b)
provides that Members have the option of protecting inventions of plant
varieties by sui generis rights (such as breeder's rights) instead of through
patents. Under the Panel's theory, such sui generis rights would not be
covered by the TRIPS Agreement. The option provided by Article 27(3)(b)
would be read out of the TRIPS Agreement.”
See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 335.
401
Id. at 336.
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negotiating history of the TRIPS. The following findings of the Appellate Body made this
point more clear:
“As for the import of the negotiating history, we do not see it as
in any way decisive to the issue before us. The documents on
which the Panel relied are not conclusive of whether the TRIPS
Agreement covers trade names. The passages quoted by the
Panel from the negotiating history of Article 1.2 do not even
refer to trade names. There is nothing at all in those passages to
suggest that Members were either for or against their inclusion
(…). Therefore, we do not consider that any conclusions may be
drawn from these records about the interpretation of the words
"in respect of " in Article 2.1 as regards trade names.”402
(Emphasis added)
Evidently, the above findings of the Appellate Body clarify that the incorporation of the
provision on trade names under Article 8 of the Paris Convention is effective under Article 2.1
of the TRIPS even without “for or against” evidence in the negotiating history of the TRIPS.
In other words, the Appellate Body confirms the full incorporation of the substantive
provisions of the Paris Convention into the TRIPS, as stated in the plain language of Article
2.1 of the TRIPS. In this respect, it is appropriate to say that the TRIPS incorporates the
provision on the independence of patents under Article 4bis of the Paris Convention since this
provision comes within the range of incorporated provisions pursuant to the wording of Article
2.1 of the TRIPS.403
In is clear that the findings of the WTO panels and the Appellate Body confirmed the
incorporation in full of the substantive provisions of the Berne Convention and the Paris
Convention into the TRIPS. The incorporation is understood in the broad meaning, which
covers both the contents and the context of the incorporated provisions. Moreover, the
incorporation is effective under the plain language of Article 2 of the TRIPS, irrespective of
the unavailability of relevant evidence existing in the TRIPS negotiating history.
The above section discussed how the panels and the Appellate Body give effect to the
provision of Article 2.1 of TRIPS on the incorporation of the substantive provisions of the
Paris Convention. The following section will examine how the “incorporated” provisions to
be effective under the substantive provisions of TRIPS. As stated in the language of Article
2.1 of TRIPS, WTO Members “must comply with” the substantive provisions of the Paris
Convention. However, this provision does not address the question of whether the
incorporated provisions must comply with the principles and the norms of TRIPS. And which
will prevail when there is difference among them? In other words, how the incorporated
provisions will work under the WTO jurisprudence. The panels and the Appellate Body have
provided the answers to these questions in handling some TRIPS related disputes.
402
Id. at 339.
Article 2.1 of the TRIPS provides that:
“In respect of Parts II, III and IV of this Agreement, Members shall comply
with Articles 1 through 12, and Article 19, of the Paris Convention (1967).”
See the TRIPS, supra note 10, art.2.1.
403
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Accordingly, the prevailing effect of the principles and norms of TRIPS is confirmed. The
implementation of the incorporated provisions should be under the surveillance of the norms
of TRIPS. In this respect, the panels and the Appellate Body have clarified another aspect of
the incorporation. It may be regarded as an additional implication to the provision of Article
2.1 of TRIPS. That is, WTO Members must otherwise “comply with” the substantive
provisions of TRIPS while they implement the incorporated provisions. The following
discussion will analyze the findings of the panels and the Appellate Body in some cases to
elucidate this point.
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II. Compliance with the TRIPS norms and
WTO dispute settlement rules
1. Incorporated provisions and the TRIPS principles
1.1. Prevailing effect of TRIPS national treatment and MFN principles
(United States - Section 211 Omnibus Appropriations Act 1998)
The implementation of the incorporated provisions of the Paris Convention is required to
conform not only to the national treatment principle and the other related provisions of the
Paris Convention, but also to the national treatment and MFN principles of the TRIPS. Even
though a domestic law does not violate its obligation under a particular provision of the
“incorporated” Paris Convention, it may violate its obligations under the national treatment
and MFN provisions of TRIPS. The Appellate Body has confirmed this requirement in the
case of US - Section 211 Omnibus Appropriations Act 1998. The Appellate Body found that
the relevant domestic law of the United States violated Articles 3.1 and 4 of TRIPS in despite
of the fact that it did not violate Article 8 of the Paris Convention.
As mentioned in the above section, the Appellate Body first reversed the finding of the Panel
and found that the TRIPS did not exclude trade names from its regulation. Under the plain
language of Article 2.1, TRIPS incorporates Article 8 of the Paris Convention providing the
obligation of WTO Members to protect trade names. In the next step, the Appellate Body
examined the consistency of the relevant domestic law with Article 8 of the Paris Convention,
with the national treatment provision of the Paris Convention and the national treatment and
MFN provisions of TRIPS in relation to trade names:
“Having reversed the Panel's finding, we consider next whether
we should complete the legal analysis with respect to the
application of Section 211 to trade names and to the consistency
of Section 211 with Article 2.1 of the TRIPS Agreement in
conjunction with Article 8 of the Paris Convention (1967), with
Article 2.1 of the TRIPS Agreement in conjunction with Article
2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS
Agreement, with Article 4 of the TRIPS Agreement (…).” 404
On this point, the Appellate Body assumed that the implementation of obligations under
Article 8 of the Paris Convention should be in conformity with the national treatment and
MFN treatment obligations under Articles 3.1 and 4 of TRIPS. The Appellate Body asserted
that that Sections 211(a) (2) and (b) of OAA did not distinguish on their face between
trademarks and trade names.405
In consideration of the alleged inconsistency of
Sections 211(a)(2) and (b) with Article 2.1 of the TRIPS Agreement in conjunction with
Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS Agreement, and with
404
405
See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 342.
Id. at 346.
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Article 4 of the TRIPS Agreement, the Appellate Body relied on the finding that these
Sections imposed on designated nationals and their successors-in-interest the requirement to
obtain the express consent of the original owners or their bona fide successors-in-interest.
On the one hand, it noted that the requirement to obtain express consent applied not only to
the defined category of trademarks, but also to the defined category of trade names referred
to in those Sections. On the other hand, Section 211(a) (2), reading in conjunction with
Section 211(d), applied only to successors-in-interest of non-United States origin, whereas
Section 211(b) applied to successors-in-interest of any origin. Consequently, the Appellate
Body found that Section 211(a)(2) was inconsistent with the national treatment provisions
under Article 2.1 of TRIPS in conjunction with Article 2(1) of the Paris Convention and
Article 3.1 of TRIPS in relation to trade names, with respect to successors-in-interest in trade
names referred to in that Section:
“[W]e find that our conclusion (…) that the "extra hurdle"
imposed by Section 211(a)(2) only to non-United States
successors-in-interest to trademark rights referred to in that
Section, the United States violates the national treatment
obligation in Article 2.1 of the TRIPS Agreement in conjunction
with Article 2(1) of the Paris Convention (1967) and Article 3.1
of the TRIPS Agreement, applies also to successors-in-interest
in trade names referred to in that Section.”406 (Emphasis added)
For the similar reasoning, the Appellate Body also found that the United Sates violated its
MFN treatment obligation under Article 4 of TRIPS in relation to trade names, with respect to
original owners of trade names referred to in Sections 211(a)(2) and (b):
“We find as well [in] our conclusion (…) that Sections 211(a)(2)
and (b) are inconsistent with Article 4 of the TRIPS Agreement,
to the extent that they concern the treatment of original owners of
trademarks referred to in those Sections, applies also to original
owners of trade names referred to in Sections 211(a)(2) and
(b).”407 (Emphasis added)
406
Id. at 354. The Appellate Body further found violations by the United States under Article 2(1) of the Paris
Convention and Articles 3 and 4 of TRIPS in relation to trade names as follows:
“We find further that our conclusion (…) that Section 211(b) is not
inconsistent with Article 2.1 of the TRIPS Agreement in conjunction with
Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS
Agreement, applies also to successors-in-interest to trade names referred to in
that Section.”
“We find also (…) [in] our conclusion (…) that (…) Sections 211(a)(2) and
(b) are inconsistent with Article 2.1 of the TRIPS Agreement in conjunction
with Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS
Agreement, to the extent that they concern the treatment of original owners of
trademarks referred to in those Sections, applies also to original owners of
trade names referred to in Sections 211(a)(2) and (b).” (Emphasis added)
See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 355, 356.
407
Id. at 357.
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It is evident that in the implementation of the incorporated provisions of the Paris Convention,
domestic law is required to conform to the obligations under the principles of TRIPS. The
strictness of the obligations under the principles of TRIPS implies that even if the relevant
domestic law may not violate its obligation under an incorporated provision of the Paris
Convention, it may violate the obligations under the principles of TRIPS. This situation may
be seen in the findings of the Appellate Body concerning the obligation under Article 8 of the
Paris Convention and that under Articles 3.1 and 4 of TRIPS. As mentioned above, the “extra
hurdle” is the reason for the Appellate Body finding that the relevant domestic law of the
United States violated its obligations under the national treatment and MFN treatment
principles of TRIPS. However, because Article 8 of the Paris Convention does not regulate
the matter relating to ownership, which is of the concern of the relevant domestic law under
examination, the Appellate Body found that the United States did not violate its obligation
under Article 8 of the Paris Convention:
“We recall further our conclusion (…) addressing Article 16.1 of
the TRIPS Agreement that neither the Paris Convention (1967)
nor the TRIPS Agreement determines who owns or who does not
own a trademark. We believe that the Paris Convention (1967)
and the TRIPS Agreement also do not determine who owns or
does not own a trade name. Given our view that Sections 211(a)
(2) and (b) relate to ownership, we conclude that these Sections
are not inconsistent with Article 2.1 of the TRIPS Agreement in
conjunction with Article 8 of the Paris Convention (1967).” 408
(Footnote omitted and emphasis added)
The similar finding was applied to the obligation under Article 6quinquies of the Paris
Convention. Namely, even though the relevant domestic law does not violate its obligation
under an incorporated provision (Article 6quinquies) of the Paris Convention in relation to
trademarks, it may violate its national treatment and MFN treatment obligations under
Articles 3.1 and 4 of TRIPS.409
408
Id. at 359.
The Appellate Body interpreted Article 6quinquies of the Paris Convention as not covering the question under
the claim of Section 211 of US Omnibus Appropriations Act (in relation to ownership of trademarks). Therefore,
the United States did not violate its obligation under this article:
“We have already stated that we agree with the Panel that Section 211(a)(1) is
a measure dealing, in the particular circumstances in which it applies, with the
ownership of a defined category of trademarks. We also agree that the
obligation of countries of the Paris Union under Article 6quinquies A(1) to
accept for filing and protect a trademark duly registered in the country of
origin "as is" does not encompass matters related to ownership.” (Footnote
omitted and emphasis added)
“For these reasons, we uphold the finding of the Panel in paragraph 8.89 of
the Panel Report that Section 211(a)(1) is not inconsistent with Article 2.1 of
the TRIPS Agreement in conjunction with Article 6quinquies A(1) of the
Paris Convention (1967).” (Emphasis added)
See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 147, 148.
409
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1.2. Impracticability of the objectives and principles under Articles 7 and 8 of TRIPS
(Canada - Patent protection of pharmaceutical products;
European Communities - Geographical indications)
With regards to the objectives and principles stipulated in Articles 7 and 8, the TRIPS is
designed in response to the expectation of balancing rights and obligations and promoting the
public interest and technological developments from the less developed countries.410 In the
practice of the settlement of disputes concerning TRIPS, the WTO panels have some
opportunities to consider the TRIPS obligations under these provisions.411 However, the
410
See Daniel Gervais, supra note 227, at 116-118. See also Abudulqawi A. Yusuf, supra note 8, at13-14.
E.g., the panels in the case of Canada - Patent protection of pharmaceutical products, Complaint by EC,
WTO Doc. WT/DS114/R (17 March 2000) [hereafter “Panel Report, Canada- Patent, Complaint by EC”] and in
the double cases of EC-Protection of trademarks and geographical indications for agricultural products and
foodstuffs, Complaint by the United States, WTO Doc. WT/DS174/R (15 March 2005) [hereafter “Panel Report,
EC-Geographical indications, Complaint by US”] and Complaint by Australia, WTO Doc. WT/DS290/R (15
March 2005) [hereafter “Panel Report, EC-Geographical indications, Complaint by Australia”] considered the
arguments for necessary exceptions in executing the obligations of TRIPS concerning the objectives and
principles enunciated in Articles 7 and 8 of TRIPS. The respondent in Canada-Patent, Complaint by EC, argued
for the application of such objectives and principles in interpreting the exceptions of patent rights under Article
30 of TRIPS. In contrast, the complainant asserted the inapplicability of these objective and principles to modify
the scope of such exceptions. The Panel was in favor of the argument of the complainant and found that the
objectives and principles could not be regarded as an additional element to the three-conditions in testing the
exceptions of patent rights, which were already specified in Article 30 of TRIPS. Particularly, Canada argued for
the applicability of provisions of Articles 7 and 8 of TRIPS in interpreting the three conditions stated in Article
30 of TRIPS. For that reason, these provisions provide the WTO Member governments with the necessary
flexibility to adjust patent rights to maintain the desired balance with other important national policies. Canada
expressed its argument as follows:
“[T]he italicized text of Article 7 above declares that one of the key goals of
the TRIPS Agreement was a balance between the intellectual property rights
created by the Agreement and other important socio-economic policies of
WTO Member governments. Article 8 elaborates the socio-economic policies
in question, with particular attention to health and nutritional policies. With
respect to patent rights, Canada argued, these purposes call for a liberal
interpretation of the three conditions stated in Article 30 of the Agreement, so
that governments would have the necessary flexibility to adjust patent rights
to maintain the desired balance with other important national policies.”
See Panel Report, Canada-Patent, Complaint by EC, para. 7.24. Otherwise, the EC argued that the TRIPS itself
contains the overall balance in its provisions. Therefore, the application of Articles 7 and 8 in interpreting the
exceptions provided in Article 30 would involve a double counting of the socio-economic polices. In particular,
the lock of consistency provided in Article 8.1 supports the EC’s argument:
“[I]n the view of the EC, Articles 7 and 8 are statements that describe the
balancing of goals that had already taken place in negotiating the final texts
of the TRIPS Agreement. According to the EC, to view Article 30 as an
authorization for governments to "renegotiate" the overall balance of the
Agreement would involve a double counting of such socio-economic policies.
In particular, the EC pointed to the last phrase of Article 8.1 requiring that
government measures to protect important socio-economic policies be
consistent with the obligations of the TRIPS Agreement ” (Emphasis added)
See Panel Report, Canada-Patent, Complaint by EC, para. 7.25. The Panel found that very the existence of the
exceptions provided in Article 30 amounts to the necessary adjustment of patent rights contained in Article 28,
relying on the consideration of the basic balance of the TRIPS. The interpretation of Article 30 needs not to
adjust these rights any more under the goals and the limitations stated in Articles 7 and 8.1 of TRIPS:
411
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principles and objectives provided in Articles 7 and 8 of TRIPS have not ever been applied to
modify a particular TRIPS obligation.412 In this respect, the TRIPS practice affirms the
proposition that the applicability of the objectives and principles under Articles 7 and 8 of the
TRIPS is very limited in comparison with that of the GATT standard principles.413
2. TRIPS substantive provisions prevailing the incorporated provisions
(United States - Section 110(5) of the US Copyright Act;
United States – Section 211 Omnibus Appropriations Act of 1998)
“In the Panel's view, Article 30's very existence amounts to a recognition that
the definition of patent rights contained in Article 28 would need certain
adjustments. On the other hand, the three limiting conditions attached to
Article 30 testify strongly that the negotiators of the Agreement did not intend
Article 30 to bring about what would be equivalent to a renegotiation of the
basic balance of the Agreement (…) Both the goals and the limitations stated
in Articles 7 and 8.1 must obviously be borne in mind when doing so as well
as those of other provisions of the TRIPS Agreement which indicate its object
and purposes.” (Emphasis added)
See Panel Report, Canada-Patent, Complaint by EC, supra note 411, at 7.26.
412
The Panel in EC- Geographical indications, Complaint by Australia found that the principles provided in
Article 8 of TRIPS does not allow any exception in securing the obligations under TRIPS. The Panel stated:
“These principles reflect the fact that the 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.
This fundamental feature of intellectual property protection inherently grants
Members freedom to pursue legitimate public policy objectives since many
measures to attain those public policy objectives lie outside the scope of
intellectual property rights and do not require an exception under the TRIPS
Agreement.” (Emphasis added)
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at
7.246.
413
The Appellate Body affirms the importance of the GATT standard national treatment enshrined in TRIPS and
the applicability of the GATT jurisprudence in interpreting TRIPS as follows:
“Thus, in drafting the TRIPS Agreement, the framers of the WTO Agreement
saw fit to include an additional provision on national treatment. Clearly, this
emphasizes the fundamental significance of the obligation of national
treatment to their purposes in the TRIPS Agreement.”
“Indeed, the significance of the national treatment obligation can hardly be
overstated. Not only has the national treatment obligation long been a
cornerstone of the Paris Convention and other international intellectual
property conventions. So, too, has the national treatment obligation long
been a cornerstone of the world trading system that is served by the WTO.”
“As we see it, the national treatment obligation is a fundamental principle
underlying the TRIPS Agreement, just as it has been in what is now the
GATT 1994. The Panel was correct in concluding that, as the language of
Article 3.1 of the TRIPS Agreement, in particular, is similar to that of
Article III:4 of the GATT 1994, the jurisprudence on Article III:4 of the
GATT 1994 may be useful in interpreting the national treatment obligation in
the TRIPS Agreement.” (Footnote omitted and emphasis added)
See Appellate Body Report, US-Section 211Omnibus, supra note 398, at 240, 241, 242. Similarly, the Appellate
Body emphasized the significance of the MFN treatment principle of TRIPS in the light of the corresponding
GATT principle:
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After incorporation into the TRIPS, the implementation of the obligations coming from the
incorporated provisions of the pre-existing treaties is subject not only to the principles, but
also to the relevant norms of TRIPS. The Panel in the case of United States-Section 110(5) of
the US Copyright Act confirmed this assumption in finding that the obligations under Article
11bis(1) of the Berne Convention, as incorporated by Article 9.1 of TRIPS 414, should conform
to the requirement provided in Article 13 of TRIPS.
By the finding that minor exceptions form part of the context of Articles 11bis (1) and 11(1)
(ii) of the Berne Convention, the Panel then examined the scope of applicability of this
doctrine under the conditions of Article 13 of TRIPS. Subsequently, the Panel found that
Article 13 of TRIPS is applicable not only to the relevant provisions of TRIPS, but also to the
incorporated provisions of the Berne Convention:
“In our view, neither the express wording nor the context of
Article 13 or any other provision of the TRIPS Agreement
supports the interpretation that the scope of application of Article
13 is limited to the exclusive rights newly introduced under the
TRIPS Agreement.”415
The Panel argued for the application of Article 13 to the relevant incorporated provisions of
the Berne Convention. Particularly, the three criteria test provided in Article 13 of TRIPS is
applied to measure the obligations under the Article 11bis (1) of the Berne Convention. The
Panel reasoned that the application of Article 13 of the TRIPS Agreement to the rights
provided under Articles 11(1) and 11bis(1) of the Berne Convention (1971) as incorporated
into the TRIPS Agreement need not lead to different standards from those applicable under
the Berne Convention (1971):
“We conclude that Article 13 of the TRIPS Agreement applies to
Articles 11bis (1) (iii) and 11(1) (ii) of the Berne Convention
“Like the national treatment obligation, the obligation to provide mostfavoured-nation treatment has long been one of the cornerstones of the world
trading system. For more than fifty years, the obligation to provide mostfavoured-nation treatment in Article I of the GATT 1994 has been both central
and essential to assuring the success of a global rules-based system for trade
in goods. Unlike the national treatment principle, there is no provision in the
Paris Convention (1967) that establishes a most-favoured-nation obligation
with respect to rights in trademarks or other industrial property. However, the
framers of the TRIPS Agreement decided to extend the most-favoured-nation
obligation to the protection of intellectual property rights covered by that
Agreement. As a cornerstone of the world trading system, the most-favourednation obligation must be accorded the same significance with respect to
intellectual property rights under the TRIPS Agreement that it has long been
accorded with respect to trade in goods under the GATT. It is, in a word,
fundamental.” (Emphasis added)
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 297.
414
Article 9.1 of TRIPS incorporates the substantive provisions of the Berne Convention while Article 2
incorporates the substantive provisions of the Paris Convention. See the TRIPS, supra note 10, arts. 2.1, 9.1.
415
Id. at 6.80.
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(1971) as incorporated into the TRIPS Agreement.”416 (Emphasis
added)
Relying on the finding that the possibility of providing minor exceptions forms part of the
context of these articles, the Panel examined the scope for permissible minor exceptions to the
exclusive rights in question by applying the conditions of Article 13 of the TRIPS
Agreement.”417 On this point, the Panel stated that the three conditions provided in Article 13
of TRIPS are also applied to examine the fulfillment of US obligations under Article 11bis(1)
(iii) and 11(1)(ii) of the Berne Convention as incorporated into TRIPS:
“We now proceed to applying the three conditions contained in
Article 13 of the TRIPS Agreement to the exemptions contained
in Section 110(5) of the US Copyright Act in relation to
Articles 11bis(1)(iii) and 11(1)(ii) of the Berne Convention
(1971) as incorporated into the TRIPS Agreement.”418 (Emphasis
added)
Accordingly, Section 110(5) of the US Copyright should be examined under the provisions of
the relevant provisions of the Berne Convention “plus” the conditions provided in Article 13
of TRIPS. In other words, the fulfillment of the obligations under the incorporated provisions
of the Berne Convention must be, at the same time, in conformity with the requirements under
the related substantive provisions of TRIPS.
By the same token, the implementation of the obligations under the incorporated provisions of
the Paris Convention should also be subject to the requirements under the related substantive
provisions of TRIPS. Regarding the prevailing effect of the relevant substantive provisions of
TRIPS in the relationship with the incorporated provisions, the finding of the Appellate Body
in the case of the United States – Section 211 Omnibus Appropriations Act of 1998 on the
relationship between Article 6(1) of the Paris Convention and Article 15.1 of TRIPS is of
significance. The Appellate Body endorsed that the implementation of Article 6(1) of the
Paris Convention should conform to Article 15.1 of TRIPS. Furthermore, the Appellate Body
found that by the distinctiveness requirement, Article 15.1 of TRIPS limits the right of
Members given by Article 6(1) of the Paris Convention, as incorporated into TRIPS. This
point could be read in the following finding:
“As with our interpretation of Article 6quinquies, here, too, we
recall that Article 6(1) of the Paris Convention (1967), which has
become a WTO provision by incorporation through Article 2.1 of
416
See Panel Report, US- Section 110(5) Copyright Act, supra note 337, at 6.94.
Id. at 6.81. The Panel further stated:
“We conclude that Article 13 of the TRIPS Agreement applies to Articles
11bis(1)(iii) and 11(1)(ii) of the Berne Convention (1971) as incorporated into
the TRIPS Agreement, given that neither the express wording nor the context
of Article 13 or any other provision of the TRIPS Agreement supports the
interpretation that the scope of application of Article 13 is limited to the
exclusive rights newly introduced under the TRIPS Agreement.”
See Panel Report, US- Section 110(5) Copyright Act, supra note 337, at 6.94.
418
Id. at 6.96.
417
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the TRIPS Agreement, reserves to each country of the Paris
Union the right to determine the "conditions" for filing and
registration of trademarks in its domestic legislation. (…) In our
view, Article 15.1 of the TRIPS Agreement limits the right of
Members to determine the "conditions" for filing and registration
of trademarks under their domestic legislation pursuant to Article
6(1) only as it relates to the distinctiveness requirements
enunciated in Article 15.1.”419 (Footnote omitted and emphasis
added)
Two implications may be drawn from the above-mentioned findings of the Appellate Body on
the incorporation of the substantive provisions of the Paris Convention into TRIPS. First, the
incorporated provision of the Paris Convention (Article 6.1) must be subject to the relevant
substantive provision of TRIPS (Article 15.1). Second, the right of each member of the Paris
Union granted by the related provision of the Paris Convention may be diminished by the
relevant provision of TRIPS.420 Particularly, Article 15.1 of TRIPS limits the right to
determine the “conditions” for filing and registration of trademarks given to domestic
legislation pursuant to Article 6(1) of the Paris Convention, to the extent that the latter
requires the distinctiveness of trademarks.
3. Subject to the WTO dispute settlement procedures
(United States – Section 211 Omnibus Appropriations Act of 1998)
The Paris Convention is incorporated into TRIPS, and therefore, into the WTO system. As a
result, the implementation of the incorporated provisions must be subject to the dispute
settlement procedures of the WTO. On this point, in the case of the United States – Section
211 Omnibus Appropriations Act of 1998, the Appellate Body stated:
“Article 2.1 of the TRIPS Agreement provides that: "[i]n respect
of Parts II, III and IV of this Agreement, Members shall comply
with Articles 1 through 12, and Article 19, of the Paris
Convention (1967)."
Thus, Article 6quinquies of the Paris
Convention (1967), as well as certain other specified provisions
of the Paris Convention (1967), has been incorporated by
reference into the TRIPS Agreement and, thus, the WTO
Agreement.”421
In the above-mentioned findings, the Appellate Body affirmed that, by incorporation into
TRIPS, the incorporated provisions of the Paris Convention are covered and regulated by the
419
See Appellate Body Report, US- Section 211 Omnibus, supra note 398, at 165.
The prevailing effect of the TRIPS provisions (in respect of rights and obligations) in the relationship with the
incorporated provisions of the Paris Convention invited different views of TRIPS as being “ Paris-plus” or
“Paris-minus” concerning different provisions of TRIPS and the Paris Convention. For the “Paris-plus” view,
see Daniel Gervairs, supra note 227, at 95; Carlos McCrea, supra note 221, at 189. For the “Paris-minus” view,
see Nuno Pires de Carvalho, supra note 103, at 72. The findings of the Appellate Body in this case to a certain
extent confirm the prevailing effect of the relevant TRIPS provisions or the “Paris-plus” approach.
421
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 124.
420
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WTO Agreement. The WTO Members should implement these provisions in the framework
of the WTO in the same way as they do with respect to the other obligations under TRIPS
and the WTO Agreement. The Appellate Body clarified this point as follows:
“Consequently, WTO Members, whether they are countries of the
Paris Union or not, are obliged, under the WTO Agreement, to
implement those provisions of the Paris Convention (1967) that
are incorporated into the TRIPS Agreement. As we have already
stated, Article 6quinquies of the Paris Convention (1967) is one
such provision.”422
The TRIPS is one of the covered agreements under the Dispute Settlement Understanding
(“DSU”) of the WTO. Therefore, the compliance with the TRIPS obligations is under the
surveillance of the Dispute Settlement Body (“DSB”) and subject to the dispute settlement
rules and procedures provided in the DSU. The Appellate Body confirmed the legal status of
the TRIPS under the WTO dispute settlement rules and procedures in the case of IndiaPatent protection for pharmaceutical and agricultural chemical products:
“As one of the covered agreements under the DSU, the TRIPS
Agreement is subject to the dispute settlement rules and
procedures of that Understanding. The dispute that gives rise to
this case represents the first time the TRIPS Agreement has
been submitted to the security of the WTO dispute settlement
system.”423
As a part of the WTO Agreement, the implementation of the obligations under the TRIPS,
including those under the incorporated provisions, must be subject to the dispute settlement
rules and procedures of the WTO. In the case of US-Section 211 of Omnibus Appropriations
Act of 1988, the Appellate Body endorsed that the obligations under Article 2(1) of the Paris
Convention and other incorporated provisions of this convention are enforceable under the
DSU as if the obligations under the WTO Agreement:
“As we have explained, what is new is that, as a consequence
of the Uruguay Round, Article 2(1) of the Paris
Convention (1967) was made part of the WTO Agreement.
And, as we have previously explained, by virtue of Article 2.1
of the TRIPS Agreement, Article 2(1) of the Paris
Convention (1967), as well as certain other specified
provisions of the Paris Convention (1967), have been
incorporated into the TRIPS Agreement and, thus, the WTO
Agreement. Consequently, these obligations of countries of the
Paris Union under the Paris Convention (1967) are also now
obligations of all WTO Members, whether they are countries of
the Paris Union or not, under the WTO Agreement, and, thus,
422
423
Id. at 125.
See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 29.
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are enforceable under the DSU.”424 (Footnotes omitted and
emphasis added)
As mentioned earlier, the fact is that the WTO panels and the Appellate Body were requested
to interpret the obligations under the particular incorporated provisions of the Paris
Convention, where there existed a dispute in the interpretation and implementation of such
provisions. In conjunction with the relevant provisions of TRIPS, the WTO panels and the
Appellate Body examined the fulfillment of the incorporated provisions pursuant to the WTO
dispute settlement rules and procedures. A possible conclusion from the above analysis is
that the Paris Convention, by incorporation into the TRIPS, is subject to the regulation of the
principles, norms and other procedural provisions of the TRIPS. In other words, after
incorporation, the implementation of the substantive provisions of the Paris Convention must
be not only consistent with the national treatment principle of the Paris Convention, but also
in compliance with the principles of national treatment and MFN as well as other related
provisions of the TRIPS and the WTO. The implementation of the incorporated provisions
therefore must not only to be in the light of the principle of national treatment of the Paris
Convention, but also conform to the principles and norms of the TRIPS. In consideration of
GATT surveillance, the following discussion will examine the practical challenges of WTO
jurisprudence to the “incorporated” Paris Convention, as developed by the WTO panels and
the Appellate Body in finding the TRIPS related disputes.
III. The extension of the GATT practice to the “incorporated”
Paris Convention
After incorporation into the TRIPS, the implementation of the “incorporated” Paris
Convention should be subject to not only the TRIPS regulation but also the WTO rules. As a
consequence of the integration of the WTO system, the panels and the Appellate Body
interpreted the principle of national treatment of the Paris Convention in terms of being “in
conjunction with” the related provisions of the TRIPS. The benchmarks they used in
measuring the compliance with the incorporated provision of the Paris Convention should
certainly be in conformity with the WTO disciplines and practices. The recently developed
rulings of the panels and Appellate Body revealed the practical requirements as to the
application of the national treatment principle of the Paris Convention after the incorporation.
1. “Effective equality of opportunities” and “no less favorable” standards
(United States - Section 211 Omnibus Appropriations Act of 1998)
In discussing the question of whether TRIPS incorporates the provision of the Paris
Convention on trade names, the fact of the case of US-Section 211 Omnibus Appropriations
Act of 1998 was mentioned previously. This section refers to only the factual aspects
concerning the discussing question. The dispute concerned Section 211 of the Omnibus
Appropriation Act (OAA) of 1998 of the United States in dealing with trademarks, trade
names, commercial names that are the same as or substantially similar to those used in
424
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 238.
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connection with business or assets that were confiscated by the Cuban Government on or after
1 January 1959.425 Particularly, Section 211(a)(1) of OAA prohibited the transaction or
payment with respect to those objects, unless it has been expressly consented by their original
owner or bona fide successor-in-interest, accordingly, the registration or renewal of the
trademarks in the type mentioned above would be prevented. 426 Section 211(a) (2) prohibited
the exercise of enforcement rights of a “designated national” with respect to those objects
before the US courts;427 and Section 211(b) prohibited the exercise of the treaty rights of a
“designated national” or its successor-in-interest with respect to those objects derived from
any international intellectual property conventions before the US courts. 428 The term
“designated national” is defined as Cuba and any national thereof including any person who is
a specially designated national.429
The EC claimed that Section 211(a) (2) was inconsistent with Article 2.1 of TRIPS in
conjunction with Article 2(1) (the national treatment obligation) of the Paris Convention,
Article 3.1 (the national treatment obligation) and Article 4 (the MFN obligation) of the
TRIPS.430 The EC argued that the above provision was inconsistent with the national
treatment principle at two levels: in respect of “designated nationals” and “successors-ininterest”.
By curtaining the protection of trademarks held by “designated nationals” while granting US
nationals the full enjoyment of their rights, Section 211(a)(2) discriminated against the
“designated nationals” in breach of the national treatment principle. In respect of successorsin-interest, this provision denied protection to foreign successors-in-interest while US
successors-in-interest can enjoy their rights to trademarks used in connection with confiscated
assets.431
The United States rebutted that Section 211 of OAA was not inconsistent with the provisions
of TRIPS in conjunction with the relevant provisions of the Paris Convention claimed by the
EC with two main arguments: First, the matter of refusal of registration and enforcement of
the trademark was based on the grounds of ownership of trademarks was not regulated by the
Paris Convention whilst being applicable under TRIPS, and TRIPS supported the provisions
of Section 211 of OAA.432 Second, there were no discrimination existing in the law and
practice in respect of the refusal of registration and enforcement with regard to confiscated
trademarks and trade names.433
Concerning the national treatment principle, the United States argued that under Section
211(a) (2) US courts were not to recognize, enforce or validate any assertion of rights in a
confiscated trademark by a designated national or national of any foreign country who is a
successor-in-interest to the designated national. The statutory language did not include US
425
See Panel Report, US-Section 211 Omnibus, supra note 384, at 2.1.
Id. at 2.1, 2.9.
427
Id. at 2.1, 2.10.
428
Id. at 2.1, 2.6.
429
Id. at 2.2.
430
See Panel Report, US-Section 211 Omnibus, supra note 384, at 3.1.
431
Id. at 8.123, 8.132.
432
Id. at 3.4, 8.44, 8.45, 8.72, 8.73, 8.93, 8.104, 8.114
433
Id. at 8.124, 8.134, 8.142.
426
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nationals and US nationals could not become a successor-in-interest to a designated national
because they were impossible to get the required license from the competent administrative
authority.434
The Panel did not distinguish the national treatment obligation of the TRIPS and that of the
Paris Convention in finding whether the Section 211(a) (2) was inconsistent with these
obligations. The Panel did not find how these obligations are different from each other in
terms of “no less favorable” under Article 3.1 of the TRIPS and “the advantages…now grant,
or may hereafter grant” under Article 2(1) of the Paris Convention.435 Otherwise, the Panel
mentioned the similarity in the language of these two provisions and argued for the “common
objective of according the non-discrimination treatment”:
“The national treatment provision as embodied in Article 2(1)
of the Paris Convention (1967) contains a statement similar to
Article 3.1 of the TRIPS Agreement: (…)”436 (Emphasis added)
The Panel interpreted the similarity in the nature of the two principles by the reference to “the
same protection (…) and the same legal remedy” under Article 2(1) of the Paris Convention
in comparison with “treatment no less favourable” under Article 3.1 of the TRIPS.
Significantly, the Panel reasoned that the inconsistency under Article 3.1 of the TRIPS could
at the same time be an inconsistency under Article 2(1) of the Paris Convention. This was the
reasoning for the conjunctional conclusion concerning the violation of the national treatment
obligation under Article 2(1) of the Paris Convention following the conclusion of a violation
of the national treatment obligation under Article 3.1 of the TRIPS. The reasoning of the
Panel is expressed in the below statement:
“Both Article 3.1 of the TRIPS Agreement and 2(1) of the Paris
Convention (1967) deal with "protection" of intellectual
property. Article 3.1 refers to "treatment no less favourable"
while Article 2(1) refers to "the same protection…and same legal
remedy".
We do not purport to determine whether the
expression "treatment no less favourable" means "the same
434
Id. at 8.124.
Article 3.1 of the TRIPS provides:
“Each Member shall accord to the nationals of other Members treatment no
less favourable than it accords to its own nationals with regard to the
protection (footnote 3) of intellectual property….” (Emphasis added)
See the TRIPS, supra note 10, art. 3.1.
436
Article 2(1) of the Paris Convention stipulates:
“Nationals of any country of the Union shall, as regards the protection of
industrial property, enjoy in all the other countries of the Union the
advantages that their respective laws now grant, or may hereafter grant, to
nationals; all without prejudice to the rights specially provided for by this
Convention. Consequently, they shall have the same protection as the latter,
and the same legal remedy against any infringement of their rights, provided
that the conditions and formalities imposed upon nationals are complied
with.” (Emphasis added)
See the Paris Convention, supra note 1, art. 2(1).
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.126.
435
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protection…and same legal remedy". However, given the
common objective of according non-discriminatory treatment to
foreign nationals in respect of protection of intellectual property,
a finding of inconsistency under Article 3.1 could also lead to
the same finding under Article 2.1 of the TRIPS Agreement in
conjunction with Article 2(1) of the Paris Convention (1967).” 437
(Emphasis added)
With the above reasoning, the Panel just examined the consistency of the US domestic
legislation with the requirements of Article 3.1 of the TRIPS to be able to come to the
conclusion on the consistency with Article 2(1) of the Paris Convention. In this respect, the
assessment of the obligation under the national treatment provision of the Paris Convention is
subject to the same discipline as that applied to the national treatment provision of the
TRIPS. In other words, domestic legislation should obey the same requirements to fulfill the
obligations under both of these provisions.
In the next step, for interpreting the obligation under Article 3.1 of the TRIPS, the Panel
adopted the provision and the practical application of Article III: 4 of the GATT 1994 438 as
the relevant context and guideline. The reasoning for the adoption is the similar language
used in the both provisions:
“The language of Article 3.1 of the TRIPS Agreement is similar
to that contained in III: 4 of the GATT 1994… In construing
Article 3.1 of the TRIPS Agreement, Article III: 4 can serve as a
useful context.”439
The term “treatment no less favourable” was thereupon interpreted in the light of the GATT
Article III:4 practice. The Panel referred to the findings of the panels in a number of GATT
and WTO cases as the basis to define this term in the concept of “effective quality of
opportunities” which was applied to imported products in comparison with domestic
products:
“The term "treatment no less favourable" was expressly
interpreted by the Panel in United States—Section 337of the
Tariff Act of 1930 as requiring Members to provide equality of
competitive conditions for imported products in relation to
domestic products.”440 (Emphasis added)
437
Id. at footnote 140 to para. 8.126.
Article III:4 of the GATT 1994 states:
“The products of the territory of any contracting party imported into the
territory of any other contracting party shall be accorded treatment no less
favourable than that accorded to like products of national origin in respect of
all laws, regulations and requirements affecting their internal sale, offering for
sale, purchase, transportation, distribution or use.”
See GATT 1994, supra note 14, art. III:4.
439
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.129.
440
Id. at 8.130. The Panel in United States—Section 337 stated the effective equality of opportunities for
imported products as a minimum permissible standard for the “treatment no less favorable” under Article II:4 of
438
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The Panel also applied the interpretation of the GATT panel for the practical application of
Article III: 4 of the GATT 1947 in interpreting Article 3.1 of the TRIPS. 441 There is no
substantive reasoning for the transfer of the GATT national treatment benchmarks applied to
“like products” into the TRIPS national treatment application:
“The relevant standard of examination to determine whether the
nationals of other Members are treated "less favourably" than the
nationals of the concerned Member under Article 3.1 of the
TRIPS Agreement is whether the measure provides effective
equality of opportunities as between these two groups in respect
of protection of intellectual property rights.”442 (Emphasis added)
Based on the “effective equality of opportunities” criteria imported from the GATT practice,
the Panel examined the implementation of the TRIPS national treatment obligation in the US
domestic legislation and found that, in the face of the statutory language, the differential
treatment in respect of intellectual property rights protection could be considered to provide a
less favorable treatment to nationals of other Members as it denied effective equality of
opportunities to non-US nationals.443 However, the Panel applied the concept of “mandatory
and discretionary legislation” developed by various GATT panels in determining whether the
United States violated its TRIPS obligation of national treatment. 444 The findings of the panel
in the case of United States—Measures Affecting the Importation, Internal Sale and Use of
Tobacco and of the Appellate Body in the case of United Sates-Antidumping Act of 1916
were the basis for the findings of the Panel in this case:
“[L]egislation which mandated action inconsistent with the
General Agreement could be challenged as such, whereas
GATT:
“[T]he "no less favourable" treatment requirement set out in Article III:4, is
unqualified. These words are to be found throughout the General Agreement
and later agreements negotiated in the GATT framework as an expression of
the underlying principle of equality of treatment of imported products as
compared to the treatment given either to other foreign products, under the
most favoured nation standard, or to domestic products, under the national
treatment standard of Article III. The words "treatment no less favourable" in
paragraph 4 call for effective equality of opportunities for imported products
in respect of the application of laws, regulations and requirements affecting
the internal sale, offering for sale, purchase, transportation, distribution or use
of products. This clearly sets a minimum permissible standard as a basis.”
(Emphasis added)
See Panel Report, United States—Section 337 of the Tariff Act of 1930 [hereafter "US—Section 337"),
BISD 36S/345, adopted 7 November 1989, para. 5.11.
441
The Panel in Canada—Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing
Agencies examined a Canadian measure in relation to Article III:4 of the GATT 1947 and stated that "by
allowing the access of domestic beer to points of sale not available to imported beer, Canada accorded domestic
beer competitive opportunities denied to imported beer". See Panel Report, Canada—Import, Distribution and
Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies, BISD 39S, adopted 18 February 1992, para.
5.6.
442
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.131.
443
Id. at 8.133.
444
Id. at 8.136. 8.137.
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legislation which merely gave the discretion to the executive
authority of a contracting party to act inconsistent with the
General Agreement could not be challenged as such; only actual
application of such legislation inconsistent with the General
Agreement could be subject to challenge.”445 (Emphasis added)
“[T]he relevant discretion, for purposes of distinguishing
between mandatory and discretionary legislation, is a discretion
vested in the executive branch of government.”446 (Emphasis
added)
As a result, the Panel found that the US domestic legislation did not violate the TRIPS
national treatment obligation because (i) Section 211(a)(2) did not accord a treatment less
favorable to foreign original owners than it accords to US original owners, and (ii) US
nationals were unable to obtain licenses so as to become a successor-in-interest and the fact
of no license having been granted by US competent authority. 447 The Panel reasoned that
although the term “designated national” does not include US nationals and therefore seems
literarily to provide less favorable treatment to nationals of foreign countries, 448 this provision
has no effect in reality, due to the non-operation of the administrative branch in charge of its
execution.449 Thereupon, Section 211(a) (1) of OAA was concluded to be not inconsistent
with Article 3.1 of the TRIPS and Article 2.1 of the TRIPS in conjunction with Article 2(1)
of the Paris Convention concerning the obligation of national treatment.450
For similar reasons, Section 211(b) was not found inconsistent with Article 3.1 of the TRIPS
and Art.2.1 of the TRIPS in conjunction with Article 2(1) of the Paris Convention. 451 As for
the MFN obligation, the Panel found that the term “designated national” used in Section
211(a) (2) means not only Cuba, a Cuban national, but also a specially designated national or
national of any foreign country who was a successor-in-interest to a designated national, and
therefore, it did not discriminate between Cuban nationals and other foreign nationals in
respect of trademarks used in connection with the confiscated assets. 452 Section 211(a) (2) of
OAA was found not inconsistent with Article 4 of TRIPS concerning the obligation of
MFN.453
The Appellate Body reversed the findings of the Panel and found that the US domestic
legislation violated the obligations under principles of national treatment and MFN of the
445
See Panel Report, United Sates – Measures Affecting the Importation, Internal Sale and Use of Tobacco,
BISD 41S, Volume 1, adopted 4 October 1994 [hereafter Panel Report, “US-Tobacco”], para.118.
446
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.137; Appellate Body Report, United SatesAntidumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, para. 88.
447
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.139, 8.140.
448
Id. at 8.133.
449
Id. at 2.2, 2.7, 8.134, 8.137, 8.138. Section 515.201 of 31 Code of Federal Regulations prohibits US nationals
from becoming successors-in-interest without obtaining a specific license from the Office of Foreign Assets
Control of the US Treasury Department (OFAC). In fact, OFAC, the agency of the executive branch which has
discretion to grant specific licenses, has never granted a specific license.
450
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.140.
451
Id. at 8.171.
452
Id. at 8.146.
453
Id. at 8.148.
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TRIPS and, at the same time, violated the obligations under the principle of national treatment
of the Paris Convention. The Appellate Body agreed with the Panel on the application of the
concept of “mandatory and discretionary legislation” in examining the US domestic
legislation in the implementation of the TRIPS obligations. However, the Appellate Body
went further into examining the US domestic legislation based on the argument of the EC on
the “extra hurdle” concerning the procedural difficulties faced by foreign successors-ininterest in registration and renewal of trademarks according to Section 211(a) (2). 454 The
Appellate Body found that:
“It is not disputed that Section 515.201 of the CACR imposes a
limitation – a "hurdle" – on both successors-in-interest who are
United States nationals and successors-in-interest who are not. It
is also not disputed that Section 211(a) (2) applies only to
successors-in-interest who are not United States nationals.”455
(Emphasis added)
By applying the approach of the Panel in the case of United States – Section 337 of the Tariff
Act of 1930456 for considering the possibility of offsetting against each other the elements of
less and more favorable treatment, the Appellate Body assessed whether the existence of
“extra hurdle” is the “possibility” of an “inherently less favourable treatment”. Consequently,
Section 211(a) (2) could not pass the “extra hurdle” test of the Appellate Body:
“The United States may be right that the likelihood of having to
overcome the hurdles of both Section 515.201 of Title 31 CFR
and Section 211(a) (2) may, echoing the panel in US – Section
337, be small. But, again echoing that panel, even the
possibility that non-United States successors-in-interest face
two hurdles is inherently less favourable than the undisputed
fact that United States successors-in-interest face only one”457
454
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 259, 260, 284.
Id. at 264.
456
The following findings of the Panel in US-Section 337 case are significance for the Appellate Body to deal
with this case:
"[T]he mere fact that imported products are subject under Section 337 to legal
provisions that are different from those applying to products of national origin
is in itself not conclusive in establishing inconsistency with Article III:4."
“[I]t would follow (…) that any unfavourable elements of treatment of
imported products could be offset by more favourable elements of treatment,
provided that the results, as shown in past cases, have not been less
favourable. [E]lements of less and more favourable treatment could thus only
be offset against each other to the extent that they always would arise in the
same cases and necessarily would have an offsetting influence on the other.”
(Emphasis added)
“[W]hile the likelihood of having to defend imported products in two fora is
small, the existence of the possibility is inherently less favourable than being
faced with having to conduct a defense in only one of those fora.” (Emphasis
added)
See Panel Report, United States – Section 337 supra note 440, at 5.11, 5.12, 5.19.
457
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 265.
455
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Considering the fact, as the United Stated submitted, that there was no actual applicability of
the “hurdle” in the practice of courts, the Appellate Body found that the “likelihood” of no
application of the hurdle could not escape the claimed provision from the finding of a less
favorable treatment:
“[A]s the United States argues, a likelihood that United States
courts would not enforce rights asserted by a United States
successor-in-interest, the fact remains, nevertheless, that nonUnited States successors-in-interest are placed by the measure,
on its face, in an inherently less favourable situation than that
faced by United States successors-in-interest. And, even if we
were to accept the United States argument about the doctrine of
non-recognition of foreign confiscation, presumably that doctrine
would apply to those who are not nationals of the United States
as well as to those who are. Any application of this doctrine
would therefore not offset the discrimination in Section 211(a)
(2), because it would constitute yet another, separate obstacle
faced by nationals and non-nationals alike. Hence, it would not
offset the effect of Section 211(a) (2), which applies only to
successors-in-interest
who
are
not
United
States
nationals.”458(Emphasis added)
Without mentioning the difference between the national treatment obligation under the TRIPS
and that of the Paris Convention, the Appellate Body concluded that Section 211(a) (2)
violated both related provisions of these two treaties. Logically, it results in the conception
that the national treatment principle of the Paris Convention also requires the treatment of “no
less favourable” as the TRIPS does. In addition, the existence of an “extra hurdle” in domestic
legislation is the likelihood of violation of the national treatment obligation of the Paris
Convention as well:
“Accordingly, we conclude that Section 211(a) (2) imposes an
additional obstacle on successors-in-interest who are not
nationals of the United States that is not faced by United States
successors-in-interest. And, therefore, we conclude that, by
applying the "extra hurdle" imposed by Section 211(a) (2) only
to non-United States successors-in-interest, the United States
violates the national treatment obligation in Article 2(1) of the
Paris Convention (1967) and Article 3.1 of the TRIPS
Agreement.”459 (Emphasis added)
By the same token, the Appellate Body found that the discrimination treatment imposed by
the “extra hurdle” concerning the foreign original owners of the confiscated trademarks,
which is available under Section 211(a) (2) and (b), could not be offset in every case by a
prohibiting provision of another law. And, therefore, since the inherently less favorable
treatment present in this Section could not be eliminated in each and every case, the Appellate
458
459
Id. at 267.
Id. at 268.
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Body concluded that this Section violated at the same time the national treatment obligations
under Article 3.1 of the TRIPS and Article 2.1 of the Paris Convention:
“We do not believe that Section 515.201 of the CACR would in
every case offset the discriminatory treatment imposed by
Sections 211(a)(2) and (b) (…)We are, therefore, not satisfied
that Section 515.201 would offset the inherently less favourable
treatment present in Sections 211(a)(2) and (b) in each and every
case. And, because it has not been shown by the United States
that it would do so in each and every case, the less favourable
treatment that exists under the measure cannot be said to have
been offset and, thus, eliminated.”460 (Emphasis added)
“Thus, we conclude that Sections 211(a) (2) and (b) are
inconsistent with the national treatment obligation of the United
States under the Paris Convention (1967) and the TRIPS
Agreement at the level of original owners. And, therefore, we
reverse the Panel's findings in paragraphs 8.140 and 8.173 of the
Panel Report that Section 211(a) (2) and Section 211(b) are "not
inconsistent with Article 3.1 of the TRIPS Agreement and Article
2.1 of the TRIPS Agreement in conjunction with Article 2(1) of
the Paris Convention (1967)" to the extent that they concern the
treatment of original owners.”461 (Emphasis added)
It is evident that the Appellate Body follows the same approach as the Panel did in
interpreting and examining the national treatment obligations under Article 2.1 of the Paris
Convention and Article 3.1 of the TRIPS, which relied on the reasoning of compatibility
between “the same protection” and “no less favorable” under these two provisions,
respectively, for “the common objective of according the non-discrimination treatment”. 462 By
examining the standards of “no less favorable” treatment in the light of the GATT practice,
the Appellate Body came to conclude the inconsistency with the national treatment
obligations under both provisions after finding the existence of the “extra hurdle” in the US
domestic legislation.
Clearly, by the incorporation of the TRIPS, the standards and disciplines of national treatment
under Article III: 4 of GATT were adopted in examining the complaints about the national
treatment obligation under the Paris Convention. The concepts of mandatory and
discretionary legislation, “effective equality of opportunities”, “treatment no less favorable”,
etc. developed from the GATT practice were transferred into the practice of implementation
of the national treatment obligation under the Paris Convention. In this respect, it is
reasonable for the perception that the nature of the national treatment obligation under the
Paris Convention after incorporation into the TRIPS has been changed substantially.
Accordingly, domestic legislation would certainly be subject to the more burdensome
requirements of both legislation and practical application.
460
Id. at 294.
Id. at 296.
462
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.126 and footnote 140.
461
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The above mentioned concern could also be regarded as a limitation that domestic legislation
should take into account in implementing the substantive provisions of the Paris Convention
after the incorporation into the TRIPS, and then into the WTO system. Otherwise, it is also
meaningful for domestic legislation to take into consideration the concepts developed from
the practice of Article II: 4 of GATT to secure compliance with the TRIPS for the extensive
effect of GATT on the implementation of obligations under the TRIPS and the incorporated
Paris Convention.
2. Extension of the rule of assimilation
(European Communities – Geographical indications)
This concerns the claim of violation of national treatment obligation under the Paris
Convention concerning the Regulation of the Council of the European Communities No
2081/92 of 14 July 1992463 on the protection of geographical indications and designations of
origin for agricultural products and foodstuffs, as amended by Regulation of the Council of
the European Communities No 692/2003 of 8 April 2003 (the “Regulation”). 464 The United
States argued that Article 12(1) of the Regulation requires equivalent and reciprocal
conditions for the registration of geographical indications located in the territory of a WTO
member outside the European Union, which are applicable to the WTO members and not
applicable to the EC members.465 Therefore, the United States claimed that the Regulation
violated the national treatment obligations under Article 3.1 of the TRIPS, Articles 2(1) and
2(2) of the Paris Convention because it imposes conditions of reciprocity and equivalence on
the availability of protection.466 Australia raised almost the same claim in a subsequent dispute
brought separately before the Panel.467
In the interpretation of the national treatment obligation under the TRIPS and that of the Paris
Convention as incorporated into the TRIPS, the Panel found that the scope of national
treatment obligation under the Paris Convention had also changed, namely, all Members of
the WTO are regarded as if the members of the Paris Convention. 468 Accordingly, the rule of
463
Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and
designations
of
origin
for
agricultural
products
and
foodstuffs,
available
at
http://www.wipo.int/clea/docs_new/en/fi/fi010en.html.
464
Council Regulation (EEC) No 692/2003 of 8 April 2003 Official Journal of the European Union, No.L99 of
17 April 2003 [hereafter the “Regulation”].
465
See Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.38.
466
Id. at 7.104, 7.109.
467
Id. at 7.89, 7.154, 7.159
468
However, as to the nature of the national treatment obligation under the Paris Convention, the Panel in this
case emphasized the unlikeness of the national treatment obligations under the Paris Convention and the TRIPS.
Different from the view of the Panel in the case of US-Section 211 Omnibus (see Panel Report, US-Section 211
Omnibus, supra note 384, at 8.126 and footnote 140), the Panel in this case did not mention the “common
objective” of these two national treatment obligations by reference to the provisions on “the same protection”
and “no less favourable” treatment under Article 2(1) of the Paris Convention and Article 3.1 of the TRIPS,
respectively. Otherwise, the Panel weighted the difference in the words “the advantages” and “no less
favourable than” in these two provisions. At least according to this reasoning it means that there are no totally
common standards for measuring the consistency with these two national treatment obligations. Applying this
reasoning in examining the implementation of the national treatment obligations under Article 2(1) of the Paris
Convention and Article 3.1 of the TRIPS will lead to the different results. While the concept “extra hurdle” is
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assimilation applied to the nationals of non-members of the Paris Union 469 would also apply to
the persons who are the nationals of non-members of the WTO, as long as they domicile or
have real and effective industrial or commercial establishments in the territory of any WTO
Member. The Panel referred to this point when focusing on the concept of nationals under the
Paris Convention and the TRIPS:
“The rule in Article 3 of the Paris Convention (1967) only
applies to nationals of countries outside the Paris Union.
According to Article 1.3 of the TRIPS Agreement, these criteria
shall be understood as if "all Members of the WTO" were
members of that Convention. Therefore, for the purposes of the
TRIPS Agreement, that rule of assimilation only applies to
persons that are nationals of a country that is not a WTO
Member.”470 (Emphasis added)
According to the findings mentioned above, the rule of assimilation under the Paris
Convention extended its scope to persons who are not nationals of WTO members, provided
found coming within the term “no less favourable” under Article 3.1 of the TRIPS, this concept may be regarded
going beyond the scope of the “advantages” under Article 2.1 of the Paris Convention. In other words, the “extra
hurdle” can be used in examining the former, but it may not be suitable to measure the latter. As a result, the
inconsistency with Article 3.1 of the TRIPS is not necessarily an inconsistency with Article 2.1 of the Paris
Convention. In this view, the examination of the national treatment obligation under each of these provisions
should be made separately and not based on the same standards. The Panel in this case clearly adopted this
methodology in making its findings. The Panel did not conclude automatically the violation of both provisions
after finding the existence of the “extra hurdle” and less favorable treatment (see EC-Geographical indications,
Complaint by US, supra note 411, at 7.139, 7.140, 7.213), as was done by the Panel and the Appellate Body in
the case of US-Section 211 Omnibus (see Panel Report, US-Section 211 Omnibus, supra note 384, at 8.126 and
footnote 140; Appellate Report, US-Section 211 Omnibus, supra note 398, at 268, 294, 296). Either way, the
Panel chose to exercise judicial economy with respect to the claim of the national treatment obligation under
Article 2.1 of the Paris Convention after having found inconsistency with the national treatment obligation under
Article 3.1 of the TRIPS. The viewpoint of the Panel in dealing with this issue expressed in the following
findings:
“With respect to the claim under paragraph 1 of Article 2 of the Paris
Convention (1967), as incorporated by Article 2.1 of the TRIPS Agreement,
the Panel observes that, unlike Article 3.1 of the TRIPS Agreement, Article
2(1) of the Paris Convention (1967) refers to "the advantages that ... laws now
grant, or may hereafter grant" and not to "no less favourable" treatment.
Therefore, the Panel has not actually reached a conclusion on this claim.
However, further findings on this claim would not provide any additional
contribution to a positive solution to this dispute and are therefore
unnecessary.” (Emphasis added)
See Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.216.
469
The rule of assimilation requires the provision of national treatment with the persons who are not nationals of
members of the Paris Convention but have a domicile or a real and effective industrial and commercial
establishment in the territory of a member. Article 3 of the Paris Convention (1967) provides for the rule of
assimilation as follows:
"Nationals of countries outside the Union who are domiciled or who have real
and effective industrial or commercial establishments in the territory of one of
the countries of the Union shall be treated in the same manner as nationals of
the countries of the Union." (Emphasis added)
See the Paris Convention, supra note 1, art. 3.
470
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 794.
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that they have a domicile or a real and effective industrial and commercial establishment in a
WTO member. Otherwise, the Panel noted that Article 1.3 of the TRIPS defines "nationals of
other members" in order to determine the persons to whom members shall accord treatment,
which includes national treatment.471 Thereby, Article 1.3 of the TRIPS qualifies the
assimilation to nationals under the Paris Convention as nationals of the WTO Members. It
states as follows:
"3. Members shall accord the treatment provided for in this
Agreement to the nationals of other Members. In respect of the
relevant intellectual property right, the nationals of other
Members shall be understood as those natural or legal persons
that would meet the criteria for eligibility for protection
provided for in the Paris Convention (1967), the Berne
Convention (1971), the Rome Convention and the Treaty on
Intellectual Property in Respect of Integrated Circuits, were all
Members of the WTO members of those conventions. (...)" 472
(footnote omitted and Emphasis added)
Accordingly, after the incorporation into the TRIPS, the rule of assimilation applied to
nationals of non-members of the Paris Convention became the rule of assimilation applied to
nationals of non-WTO members. In other words, the national treatment obligation under the
Paris Convention is required to apply not only to the assimilation of nationals of nonmembers of the Paris Convention, but also to the assimilation of nationals of non-members of
the WTO. And also, the TRIPS national treatment obligation with regards to the substantive
provisions of the Paris Convention is required to provide the assimilation of nationals of nonmembers of the WTO when reading the wording “in respect of the relevant intellectual
property right” provided in Article 1.3 in the context of Article 2.1 of the TRIPS for the
incorporation of the Paris Convention into the TRIPS.
471
472
See Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.142.
See the TRIPS, supra note 10, art.1.3.
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Conclusion
The panel rulings on the TRIPS related cases clarified the question of how the substantive
provisions of the Paris Convention are incorporated into the WTO system. It was found that
the relevant provisions of TRIPS will prevail the “incorporated” Paris Convention provisions
where exists the difference between them. The appearance of the “new” extensive rules of
WTO jurisprudence and the application of the GATT standards in examining the obligations
under the “incorporated” Paris Convention constitute the practical challenges for national
legislation in compliance with the TRIPS.
The practice of national treatment under Article III: 4 of GATT is extended to the
interpretation of the national treatment of the incorporated Paris Convention. By the extension
of the GATT disciplines to the incorporated Paris Convention, it is arguable that the nature of
the national treatment obligation under the Paris Convention has been changed substantially.
National legislation should take into account this challenge in compliance with the TRIPS.
The analysis of the rulings of the Panel over the recent TRIPS disputes affirmed the change in
the scope of the national treatment obligation of the Paris Convention under WTO framework.
Under WTO jurisprudence, national legislation should provide for the protection of inventions
in all fields of technology, without discrimination in respect of duration of patent and patents
for imported and domestic products, to nationals of all WTO Members. Second, the same
treatment is required to provide to nationals of WTO non-Members when they have a
domicile or a real and effective industrial and commercial establishment in the territory of a
WTO Member. Those effects arising from the incorporation of the Paris Convention into the
TRIPS may be regarded as the practical challenges to the implementation of the substantive
provisions of the Paris Convention as incorporated into the WTO system.
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Chapter Four
Increasing Risky in Compliance with the TRIPS
under WTO Jurisprudence
The surveillance of the GATT disciplines in interpreting the national treatment and MFN
principles and norms of the TRIPS created the burdensome of the TRIPS obligations. The
objectives and the principles inscribed in the TRIPS seem to be ineffective in practice. The
examination standards recently developed by the WTO panels regarding the intellectual
property protection constitute the new challenges to national legislation in compliance with
the TRIPS and WTO law.
The rulings of the WTO panels regarding the disputes concerning intellectual property
protection reflected the more and more restrictive approach in examining the inconsistency of
the relevant domestic law to WTO law. The unavailability of an effective implementing
mechanism in a domestic legislation may be regarded a WTO violation because WTO law
requires domestic law to secure positively its WTO obligations. The inconsistency of a
discretionary legislation can no longer be exempted from the charge of WTO violation as it
could be under the regime of GATT 1947. The intrusive examination and explanation of the
WTO panels and the Appellate Body on the particular domestic regulations in the recent
TRIPS related cases are also understood as the practical challenges to national laws in
compliance with the TRIPS under WTO jurisprudence.
The discussion in this Chapter will explore such challenges in examination of the relevant
panel findings over the TRIPS related disputes. Part I is going to deal with the question of
how to secure the obligations under the norms of the TRIPS as interpreted by the panel
rulings. Part II will examine an important aspect of the TRIPS regulation, that is, how the
national treatment and MFN principles of the TRIPS were interpreted in practice. To which
extent the GATT practice was applied in interpreting the TRIPS principles and provisions.
Part III will discuss the development of WTO jurisprudence regarding the intellectual
property, particularly the challenges in compliance of domestic law to WTO law.
I. Securing the obligations under the TRIPS norms
1. Rule of anti-discrimination
(Canada-Patent protection of pharmaceutical products).
Article 27.1 of the TRIPS requires that patents shall be available for any inventions, including
products and processes, in all fields of technology. Article 27.1 also prohibits the
discrimination as to inventions and patent rights. Particularly, the inventions should be given
the treatment without discrimination regarding the place of invention and the field of
technology. The patent rights should be given the treatment without discrimination between
the imported products and the locally produced products.473 In the sense that this article refers
473
Id. art. 27.1
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to the non-discrimination rule applied to inventions and patent rights, not only the contents
but also the scope of application of this rule is of great importance. Should the exceptions and
limitations of patent rights under Article 30 and 31 of the TRIPS be subject to the nondiscrimination rule? The relation between these provisions would be very important. The
former would limit where the non-discrimination rule prevailed the exceptions and
limitations, the scope of the latter. By contrast, it would be more flexible to decide a measure
in the meaning of an exception without the fear of a discrimination challenge. In fact, there
were different views on the scope of this rule in understanding and implementation of the
norms of the TRIPS. The debate reflected in the case of Canada – Patent protection of
pharmaceutical products. The relevant arguments and the answer of the Panel to this question
will be discussed below.
The fact was that the Canadian patent law allowed the kind of regulatory review exception for
the purpose of permitting potential competitors of the patent owner to obtain government
marketing approval during the term of the patent, so it is possible for them to procure
permission to sell pharmaceuticals in competition with the patent owner by the date of
expiration of the patent. 474 The kind of stockpiling exception also existed in the Canadian
patent law, it allowed competitors of the patent owner to manufacture and stockpile patented
goods during a period of six months before the patent expires, but the goods could not be sold
until the patent expired.475
The EC claimed that the regulatory review exception and the stockpiling exception provided
in the Canadian patent law violated Article 28.1 and Article 33 of TRIPS by virtue of
allowing manufacturing and stockpiling of pharmaceutical products without the consent of the
patent holder during the six months immediately prior to the expiration of the 20-year patent
term; and violated Article 27.1 of TRIPS by treating patent holders in the field of
pharmaceutical inventions less favorably than inventions in all other fields of technology. 476
To this point, the EC argued for the broad application of the non-discrimination rule under
Article 27.1 of the TRIPS relied on the general purpose of the TRIPS. Accordingly, it should
be applied to the exceptions under Article 30 of the TRIPS.
Canada argued that the provisions on the regulatory review exception and stockpiling
exception existing in the Canadian patent law were falling into “limited exceptions” to
exclusive rights conferred by a patent within the meaning of Article 30 of TRIPS. 477 To this
point, Canada argued for not extending the scope of the non-discrimination rule to the
exceptions of patent rights. The argument based on the rationale provided in objectives and
principles, which stand for the limitations of patent rights for the purpose of the public
474
Without this exception, the patent owner might be able to prevent potential competitors from using the
patented products during the term of the patent to comply with the testing requirements, therefore, the
competitors would have to wait until the patent expires before they could begin the process of obtain market
approval. See Panel Report, EC v. Canada-Patent, supra note 177, at para. 7.2.
475
See Panel Report, EC v. Canada-Patent, supra note 177, at paras. 77.-7.9. The stockpiling exception
complemented the competitive effects of the regulatory review exception: without the additional permission to
stockpile during the term of the patent, competitors who obtain regulatory permission to sell on the day of
expiration of the patent would still not be able to enter the market on that day, because they would first have to
manufacture a sufficient stock of goods.
476
See Panel Report, Canada-Patent Protection of Pharmaceutical Products, WT/DS114/R, 17 March 2000,
[hereafter “Panel Report, Canada-Patent, Complaint by EC”], para.3.1.
477
Id. at 3.2.
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interest. That rationale escaped the exceptions under Article 30 from the scope of application
of non-discrimination rule.
The Panel did not accept the argument of Canada. The Panel found that according to Article
27.1 of the TRIPS, the non-discrimination rule applied to both patents and patents rights. In
that way, domestic legislation cannot invoke an exception endorsed by Article 30 of the
TRIPS to justify a limitation applied to a patent for the reason that it belongs to a specific
field of technology. In this respect, the Panel in the case found that:
“[I]t is not true that being able to discriminate against particular
patents will make it possible to meet Article 30's requirement
that the exception be "limited". An Article 30 exception cannot
be made "limited" by limiting it to one field of technology,
because the effects of each exception must be found to be
"limited" when measured against each affected patent.”478
(Emphasis added)
According to the above findings, there exists no ground for any discrimination with regards to
inventions in different fields of technology under the TRIPS. The same rule is also applied to
the place of invention and the products of importation and domestic production as required by
the language of Article 27.1 itself. The Panel certified the broad view of understanding on the
applicability of the non-discrimination rule. The argument for that view is based on the
grounds of the overall purpose of the TRIPS in ensuring non-discriminatory treatment of
inventions of foreigners:
“It is quite plausible, as the EC argued that the TRIPS
Agreement would want to require governments to apply
exceptions in a non-discriminatory manner, in order to ensure
that governments do not succumb to domestic pressures to limit
exceptions to areas where right holders tend to be foreign
producers.”479
The Panel was in favor of the broad view of understanding on the anti-discrimination rule
results in the extension of the applicability of Article 27.1 to other provisions of the TRIPS,
including the provisions on the exceptions. Consequently, a limitation that is permissible
under Article 30 or Article 31 of the TRIPS should still satisfy the non-discrimination
requirement of Article 27.1 to be applicable in domestic legislation. The Panel certified the
applicability of the anti-discrimination rule under Article 27.1 in examining a measure of
domestic legislation that had been regarded as coming within the scope of the exceptions
authorized by Article 30 of the TRIPS:
“Having reviewed the conformity of Section 55.2(1) with each of
the three conditions for an exception under Article 30 of the
TRIPS Agreement, the Panel concluded that Section 55.2(1) does
satisfy all three conditions of Article 30, and thus is not
478
479
Id at 7.92
Id.
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inconsistent with Canada's obligations under Article 28.1 of the
TRIPS Agreement.”480
“The Panel concluded, therefore, that the anti-discrimination
rule of Article 27.1 does apply to exceptions of the kind
authorized by Article 30. We turn, accordingly, to the question
of whether Section 55.2(1) of the Canadian Patent Act
discriminates as to fields of technology.”481 (Emphasis added)
It is meant that even a limitation is permissible under Article 30, the application of that
limitation in domestic legislation is still impossible if it would result in discrimination
prohibited by Article 27.1 of the TRIPS. To this end, the broad view in understanding and
application of non-discriminatory rule clearly leads to the stricter requirements regarding
domestic legislation where it expects to apply some limitation to certain kind of inventions.
The reasoning of the Panel depended much on the words and the grammar used in wording
the provision of Article 30 of the TRIPS to suppress the exceptions under the scope of the
non-discrimination under Article 27.1 of the TRIPS. The argument of the Panel for the
extension of non-discrimination rule of Article 27.1 to the relevant other provisions of the
TRIPS is that Article 27.1 prohibits discrimination as to enjoyment of "patent rights" without
any limitation. Article 30 exceptions are described as "exceptions to the exclusive rights
conferred by a patent" and contain no exemption applicable to non-discrimination rules. The
Panel argued that a discriminatory exception “that takes away enjoyment of a patent right is
discrimination” as if it is “discrimination in the basic rights themselves”. The Panel also
acknowledged that the Article 31 exception for compulsory licenses and government use is
subject to the non-discrimination rule of Article 27.1, “without the need for any textual
provision so providing”. This perception further strengthens the argument for treating the
extension of non-discrimination rules to Article 30. As to the relation between Articles 30 and
31, the Panel also found that Articles 30 and 31 are linked together by the opening words used
in the title of Article 31. These opening words define the scope of Article 31 in terms of
exceptions not covered by Article 30. For that link, the Panel argued that the nondiscrimination rules under Article 27.1 should be applicable to all provisions of the TRIPS
concerning the patent rights. 482
The interpretation of the concept of discrimination provided in Article 27.1 of the TRIPS in
the broad sense is another difficulty for domestic legislation in justifying a limitation applied
to patents. At least, there are two aspects needed to be taken into account, that is, de jure
discrimination and de facto discrimination. Thereby, an identical treatment is not enough to
be qualified as non-discriminatory treatment. The following finding of the Panel refers to this
point:
“The ordinary meaning of the word "discriminate" is potentially
broader than these more specific definitions. It certainly extends
beyond the concept of differential treatment. It is a normative
480
Id. at 7.84
Id. at 7.93.
482
Id. at 7.91.
481
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term, pejorative in connotation, referring to results of the
unjustified imposition of differentially disadvantageous
treatment. Discrimination may arise from explicitly different
treatment, sometimes called "de jure discrimination", but it may
also arise from ostensibly identical treatment which, due to
differences
in
circumstances,
produces
differentially
disadvantageous effects, sometimes called "de facto
discrimination"”483 (Emphasis added)
While the anti-discrimination rule is applied in the broad sense, the objectives and principles
set forth in Articles 7 and 8 of the TRIPS is applied in a limited sense. Domestic legislation
cannot justify a limitation to the protection of patents by reason of the importance of national
policies if it is regarded as constituting a “frustration” to the overall purpose of the TRIPS.
The Panel discussed this point as follows:
“Moreover, to the extent the prohibition of discrimination does
limit the ability to target certain products in dealing with certain
of the important national policies referred to in Articles 7 and
8.1, that fact may well constitute a deliberate limitation rather
than a frustration of purpose.”484 (Emphasis added)
Clearly, in its broad and prevailing applicability, the anti-discrimination rule under Article
27.1 of the TRIPS restricts much, if it does not intend to eliminate entirely, the areas that the
provision on independence of patents of the Paris Convention leaves to domestic legislation.
The scope of application of the anti-discrimination rule is also extended to the exceptions and
limitations provided in the TRIPS.
The extensional scope of this rule would narrow down the flexibility of the exceptions and
limitations of the TRIPS. Consequently, national legislation may not invoke such provisions
to justify the regulations on the exceptions and limitations of patent rights that might fall into
the conception of discrimination. As for the developing countries, the findings of the Panel
seem to nullify their arguments for more extensive exploitation of the exceptions and
limitations of the TRIPS with respect to pharmaceuticals and some other products
indispensable for the public interest.485
483
Id. at 7.94. In this respect, the Panel chose the interpretation of this concept in the light of
GATT practices:
“In considering how to address these conflicting claims of discrimination, the
Panel recalled that various claims of discrimination, de jure and de facto,
have been the subject of legal rulings under GATT or the WTO (...) Given the
very broad range of issues that might be involved in defining the word
"discrimination" in Article 27.1 of the TRIPS Agreement, the Panel decided
that it would be better to defer attempting to define that term at the outset, but
instead to determine which issues were raised by the record before the Panel,
and to define the concept of discrimination to the extent necessary to resolve
those issues” (Footnote omitted and emphasis added)
See Panel Report, Canada-Patent, Complaint by EC, supra note 474, at 7.98.
484
See Panel Report, Canada-Patent, Complaint by EC, supra note 474, at 7.92.
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2. “Availability” and “extra” term of patent protection
(Canada – Term of patent protection)
Though Article 33 of the TRIPS specifies particularly the term of patent protection, there
some questions were unclear. For examples, how this provision would be interpreted in
relation with the other provisions, particularly the provisions on the protection of existing
subject matters. Whether the standards provided in Article 33 of the TRIPS would be applied
to the patents having granted before the effective date of the TRIPS in the relevant WTO
Members. Should the WTO Members implement the obligations under this provision
“retroactively” against the past act of granting patent. How to qualify the terms “available” in
Article 33 and “existing” in Article 70.2 of the TRIPS. Such questions were responded by the
findings of the Panel and the Appellate Body in the case of Canada – Term of patent
protection, 486 as discussed below.
In this case, the Panel and the Appellate Body interpreted strictly the meaning of the
“available” term as literally stipulated in Article 33 of the TRIPS. It is impossible for any
variant transformation of this provision in domestic legislation. For example, the arguments
for the equivalence of and an effective term of protection were not accepted in the case of the
domestic legislation of Canada. For understanding more particularly what domestic
legislation should and should not do in the implementation of this obligation in relation to the
other provisions of the TRIPS, it is worth studying further the findings of the Panel in the case
mentioned above.
The fact was that the Patent Act of Canada contained a transitional provision on the term of
patents granted on the basis of the Old Act, which counted twenty years from the “filing date”
for the patents based on applications filed on and after October 1, 1989, and seventeen years
counted from the “granting date” for patents based on those filed before October 1, 1989. 487
Consequently, a number of patents based on applications filed before October 1, 1989 were
granted a period three years less than that those patents granted twenty years duration as
provided in Article 33 of TRIPS.488
The United States claimed that Canada violated its obligations under Articles 33 and 70.2 of
TRIPS since a large number of existing Old Act patents expired before twenty years had
passed since the filing date.489
485
See Assafa Endeshaw, ‘Asian Perspectives on Post-TRIPS Issues in Intellectual Property’, The Journal of
World Intellectual Property (Vol. 8, 2005), p. 218. There was a criticism that the interpretation of the Panel in
this case is stricter than that of the Panel in the case of US-Copyright concerning the limitations of copyrights,
which would have given more attention to the social purposes of the exceptions. See Dara Williams, supra note
61, at 205. Another comment criticized that the interpretation of the Panel in this case is “extraordinary
constructionist” decision that went against the Doha Declaration on the TRIPS Agreement. See Daya Shanker,
‘The Vienna Convention on the Law of Treaties, the Dispute Settlement System of the WTO and the Doha
Declaration on the TRIPs Agreement’, Journal of World Trade (Vol. 36, 2002), p. 767.
486
See Panel Report, Canada-Patent, Complaint by US, supra 280; Appellate Body Report, Canada-Patent,
Complaint by US, supra note 281.
487
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 2.1
488
Id. at 2.7, 2.9.
489
Id. at 3.1.
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Canada argued that the transitional provision in its patent law was consistent with Articles 33
and 70.1 of TRIPS. Particularly, the term of seventeen years granted after the filing date was
effectively “equivalent or superior” to the term of twenty years granted from the filing date
according to Article 33 of TRIPS when read together with Article 62.2 of TRIPS, which
recognized that the term of a patent would be reduced in a reasonable period necessary for the
procedures for the granting of a patent (assumedly, it took a period of 2-4 years to complete
the examination process for the Old Act patents and the “average” pending period of five
years for the New Act patents).
Furthermore, Article 1.1 of TRIPS recognized the freedom afforded the members in
determining the appropriate method of implementing the provision of TRIPS. 490 Moreover,
the minimum term of protection described by Article 33 of TRIPS was and had been
“available” under its patent law and administrative practices relating to Old Act patents
because the applicants could choose to take advantage of the delays available to ensure a term
of protection ending on or after twenty years from the filing date.491
Additionally, the obligation in respect of the term of protection under Article 33 of TRIPS is
related to the act of filing a patent application and the act of granting a patent, while both of
these “acts” are within the scope of Article 70.1 of TRIPS, it does not have retroactive
application to the Old Act patents granted in Canada before the date of entry into force of the
TRIPS Agreement.492
The Panel interpreted Article 33 of TRIPS, and then the Appellate Body, upheld that the
provision on the term of patent under this article should be implemented precisely as it is
expressed in the plain text of TRIPS, and that any transformation to it, like the effectively
“equivalent” system of the term protection, cannot be recognized. 493 The findings over this
case adopted the ruling developed from the case of Japan- Taxes on Alcoholic Beverages that
“interpretation must be based on above all upon the text of treaty”. 494
The Panel and the Appellate Body did not accept the conception of an “average” pendency
period (namely, the period between the filing date of a patent application and the granting
date of a patent495) used to support the argument that the “effective” period of protection is
equivalent or superior to the term of protection under Article 33 of TRIPS. 496 The concept of
“average” pendency period was justified by the adoption of the ruling developed in the case of
United States - Section 337 of the Tariff Act of 1930, which rejected the notion of “balancing
more favorable treatment… against less favorable treatment” applicable to the imported
products within the scope of Article III of GATT.497
490
Id. at 3.2, 6.62-6.67, 6.75, 6.99.
Id. 3.2, 6.71, 6.72.
492
Id. 3.2, 6.27, 6.28.
493
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.92; Appellate Body Report,
Canada-Patent, Complaint by US, supra note 281, at 92.
494
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.92, referring to Appellate Body
Report, Japan - Taxes on Alcoholic Beverages, WTO Doc. WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R
(1 November 1996), footnote 14, p. 11.
495
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 2.11.
496
Id. at 6.92; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 95, 97.
497
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.98, referring to Panel Report,
United States-Section 337, supra note 440, at 5.14, 5.16.
491
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Canada could not advocate the conception of effectively “equivalent” term by the
combination of interpretation of Article 33 and Article 62.2 of TRIPS, because in the separate
obligations implied in these two articles, one referred to the expiry date of the available period
of protection and the other referred to the commencement of such period. 498 The Panel did not
allow the modification in implementing Article 33 of TRIPS by invoking the freedom in
determining the method of implementation permitted by the provision of Article 1.1 of
TRIPS, since the Panel found that this provision was not applicable to the putative obligation
concerning the length of effective protection.499
The Panel regarded the “available” term of protection under Article 33 of TRIPS as a matter
of legal right and certainty, 500 which denotes the term of protection in which the patent right
holders must pay the fees from time to time to maintain it, and is the same as that applicable
to industrial designs as provided in Article 26 of TRIPS and different from those applicable to
copyright, related rights and, trademarks.501 In that notion, the Panel defined the availability of
the term of patent protection as the opportunity to obtain a 20-year term of protection readily
available in both the filing and granting procedures.502
Accordingly, the delays in the examination procedures permissible in the law and
administrative practices could not provide the availability of the term of protection. 503
Moreover, the delays were not only unjustifiable under Article 62.2 in advocating the
availability of the term of protection, but also inconsistent with articles 62.1, 62.4, 42.2 of
TRIPS.504 Additionally, the members cannot satisfy their obligations on making available the
term of patent protection under Article 33 of TRIPS by resorting to the availability of the term
of protection under the national law whose validity ceased prior to the date of entry into force
of the TRIPS.505
With regard to the existing patents granted on the basis of the national law, which ceased to
exist on the date of entry into force of TRIPS, Article 33 of TRIPS requires the members to
implement the obligation on patent term protection in accordance with Article 70.2 of TRIPS.
This obligation could not be evaded by resorting to the exemption permitted by the
transitional provision of Article 70.1 of TRIPS.
The Appellate Body upheld the interpretation of the Panel that a patent is regarded as a
“patented invention” and then is an “existing subject mater” in the meaning of the provision
described by Article 70.2.506 Such patented invention, although subjected to a granting act in
the past, was a “situation” existing until the effective date of TRIPS, therefore it was justified
498
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.94, 6.95.
Id. at 6.94.
500
Id. at 6.102, Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 90.
501
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.110.
502
See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 92.
503
Id.
504
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.115-6.119.
505
Id. at 6.120; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281,at 82.
506
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.3, 6.41, 6.56; Appellate Body
Report, Canada-Patent, Complaint by US, supra note 281, at 65, 69.
499
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under the requirement of Article 70.2 of TRIPS, 507 and not related to the provision of Article
70.1 of TRIPS, which applied only to the “past” acts.508
The obligation on the term of protection is of equivalent significance to all other obligations
concerning patent described in Section 5 of TRIPS, and subject to the regulation of Article
70.2 of TRIPS,509 according to which the members should implement the obligation under
Article 33 of TRIPS in respect of those patents granted before the date of entry into force of
TRIPS.510 The interpretation of the Panel and Appellate Body on the provisions of the term of
patent and the protection of the existing subject mater ended the long debate concerning the
implementation of obligations under Article 33 in relation with Article 70.2 of TRIPS.511
The Appellate Body approved the interpretation of the Panel on the “available” term of
protection provided in Article 33. National patent law should make available in domestic
legislation the regulation allowing the patent applicant to enjoy fully the duration of 20 years
counting from the filing date. The Appellate Body found:
“In simple terms, Article 33 defines the earliest date on which
the term of protection of a patent may end. This earliest date is
determined by a straightforward calculation: it results from
taking the date of filing of the patent application and adding
twenty years”512
“We agree with the Panel that, in Article 33 of the TRIPS
Agreement, the word "available" means "available, as a matter of
right", that is to say, available as a matter of legal right and
certainty.” 513 (Emphasis added)
Clarifying the term of patent protection as a matter of right, the Appellate Body emphasized
that Article 33 of the TRIPS obliges domestic legislation to declare clearly in the language of
law the opportunity to obtain a twenty year patent term to such an extent that a patent
applicant can see that opportunity at the time of filing a patent application. Domestic
legislation shall be regarded as failing to meet that obligation when the opportunity is
available only to the persons who have to complete certain requirements of administrative
procedures. The Appellate Body stated:
“The opportunity to obtain a twenty-year patent term must not be
"available" only to those who are somehow able to meander
successfully through a maze of administrative procedures. The
507
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.52-6.56; Appellate Body Report,
Canada-Patent, Complaint by US, supra note 281, at 58, 60, 69.
508
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.41, 6.44, 6.56; Appellate Body
Report, Canada-Patent, Complaint by US, supra note 281, at 65, 69, 72, 77.
509
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.52-6.54; Appellate Body Report,
Canada-Patent, Complaint by US, supra note 281, at 77, 78.
510
See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.56; Appellate Body Report,
Canada-Patent, Complaint by US, supra note 281, at 79.
511
See Carlos McCrea, supra note 211, at 219.
512
See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 85.
513
Id. at 90.
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opportunity to obtain a twenty-year term must be a readily
discernible and specific right, and it must be clearly seen as such
by the patent applicant when a patent application is filed. The
grant of the patent must be sufficient in itself to obtain the
minimum term mandated by Article 33. The use of the word
"available" in Article 33 does not undermine but, rather,
underscores this obligation.”514
The Appellate Body clarified further that the requirements of the obligation on making the
term of patent available in domestic legislation be implemented without any modification or
transformation. The conception of effective and nominal term of protection in understanding
the language of Article 33 was unacceptable. In any case, domestic legislation should conform
strictly to the mandatory language of this provision:
“The text of Article 33 gives no support to the notion of an
"effective" term of protection as distinguished from a "nominal"
term of protection. On the contrary, the obligation in Article 33
is straightforward and mandatory: to provide, as a specific right,
a term of protection that does not end before the expiry of a
period of twenty years counted from the filing date” 515 (Emphasis
added)
In relation to the provision of Article 62.2 of the TRIPS on procedures relating the acquisition
of intellectual property rights, the Appellate Body rejected the argument for the linkage
between this provision and the provision of the term of patent protection, which aimed at
giving effect to the equivalent term of protection adopted in domestic legislation. At this
point, national patent law should implement the obligations on the term of patent protection
and the obligation on procedural matters distinctly and separately under the findings of the
Appellate Body:
“Article 62.2 deals with procedures relating to the acquisition of
intellectual property rights... This purely procedural Article
cannot be used to modify the clear and substantive standard set
out in Article 33 so as to conjecture a new standard of "effective"
protection (…) A harmonious interpretation of Article 33 and
Article 62.2 must regard these two treaty provisions as distinct
and separate Articles containing obligations that must be fulfilled
distinctly and separately.”516 (Footnote omitted)
Consequently, the Appellate Body upheld the findings of the Panel that the domestic
legislation of Canada violated the Canada’s obligation on the term of patent protection under
Article 33 of the TRIPS.517 In this case, the Panel and Appellate Body not only clarified the
criteria of patent term protection provided by the TRIPS in the light of GATT practice, but
514
Id. at 92.
Id. at 95.
516
Id. at 97.
517
Id. at 102.
515
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also specified the standards for implementing strictly such criteria in the domestic legislation
of the TRIPS members. Noticeably, the Appellate Body did not apply at any rate the
provisions on objectives and principles set out in Articles 7 and 8 of the TRIPS in
interpreting the obligation on the term of patent protection under Article 33 of the TRIPS.
This means that domestic legislation may not invoke the policy objectives allowed by those
Articles to argue for any modification of the obligation on the term of patent protection.518
In this respect, it is worth looking into the provision of the TRIPS on the term of patent
protection from the view of enforcing patent rights. The Panel in the case of Canada-Patent
protection of pharmaceutical products interpreted the concept of the normal exploitation of
patent rights as a significant basis for understanding fully the actual scope of the term of
patent protection. The Panel regarded patent rights as the right to exclude all possibilities of
competitive products entering the exclusive market of the patented products:
“The normal practice of exploitation by patent owners, as with
owners of any other intellectual property right, is to exclude all
forms of competition that could detract significantly from the
economic returns anticipated from a patent's grant of market
exclusivity (…)”519 (Emphasis added)
As a result, the Panel recognized the existence of an ad hoc “extra term of protection” in
addition to the term of 20 years provided in Article 33 of the TRIPS for the consequence of
enforcing patent rights:
“Some of the basic rights granted to all patent owners, and
routinely exercised by all patent owners, will typically produce a
certain period of market exclusivity after the expiration of a
patent (…) There is nothing abnormal about that more or less
brief period of market exclusivity after the patent has expired.”520
(Emphasis added)
As found by the Panels and Appellate Body in the interpretation of Article 33 and the related
provisions of the TRIPS, domestic legislation should provide unconditionally to the patent
applicants an opportunity to enjoy a full term of protection as defined precisely in the TRIPS.
The Appellate Body affirmed the way to understand the term “available” as “a matter of legal
right and certainty”. 521 As such, the TRIPS demands national law to secure strictly conformity
518
Furthermore, the Appellate Body laid down an open possibility for the applicability of those provisions in
future:
“[W]e note that our findings in this appeal do not in any way prejudge the
applicability of Article 7 or Article 8 of the TRIPS Agreement in possible
future cases with respect to measures to promote the policy objectives of the
WTO Members that are set out in those Articles. Those Articles still await
appropriate interpretation.”
See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 101.
519
See Panel Report, Canada-Patent, Complaint by EC, supra note 411, at 7.55.
520
Id. at 7.56.
521
See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 90.
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with the many substantive provisions related to the term of patent protection. Domestic
legislation cannot invoke important national policies at any rate to modify this obligation.
As to the patents for inventions having granted prior to the effect date of the TRIPS with
respect to the relevant national law, those patents should still be given the full term of patent
protection as provided in Article 33 of the TRIPS. Regardless of the granting of those patents
relates to a “past act”, the patents themselves are regarded being “existing” under the meaning
of Article 70. 2 of the TRIPS. The Appellate Body confirmed that the extension of the
applicability of Article 33 of the TRIPS to the “past act” of granting of patents did not mean
the retroactive application of the TRIPS.522
3. Availability and security of legal basis
(India - Patent Protection for Pharmaceutical and Agricultural Chemical Products)
How national legislation would be regarded being “compliance with” the requirements of
WTO law in the implementation of the TRIPS obligations? Would there any advantage or
differential treatment given to the legal situation of the developing countries in securing the
obligations in the transitional period? These questions were the topics of the disputes
concerning the Patent Act of India. The examination of the case of India-Patent Protection
for Pharmaceutical and Agricultural Chemical Products 523 below will discuss the
development of WTO jurisprudence in regulating the issue of intellectual property protection.
This was the first TRIPS dispute brought before the Dispute Settlement Body of the WTO
after the TRIPS went into effect.524 The findings of the Panel in this case, confirmed by the
Appellate Body, charged the domestic legislation of India with violating the TRIPS
obligations due to the lack of availability and the security of a legal basis in domestic
legislation for the protection of patents for pharmaceutical products during the transitional
period. It would be meaningful to this case discuss in more detail to draw some implications
relevant to national patent legislation in the TRIPS era.
Since the dominant pressure and lobbying of the pharmaceutical industries of the United
States in the GATT negotiation Uruguay Round, 525 the TRIPS virtually requires that the
obligation of patent protection in the field of pharmaceutical and agrochemical products be
fulfilled earlier than that of the other fields. Accordingly, although the developing countries
are given a transitional period to make available fully legal grounds for the protection of
patents in domestic legislation under Article 65.4 of TRIPS, they are obligated to execute the
so-called “mail box” system under Article 70.8 and a mechanism for granting exclusive
marketing rights under Article 70.9 of TRIPS to the foreign patent applicants for the
pharmaceutical, agricultural and chemical products.
The dispute occurred over differing views on the fulfillment of domestic legislation regarding
the above mentioned TRIPS obligations. The findings of the panels and the Appellate Body
put weight on the requirements for availability and security rather than the substantive criteria
522
Id. para. 77.
See Panel Report, India-Patent, Complaint by US, supra note 287.
524
See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 29.
525
See Terence P. Stewart, supra note 165, at 2256-57.
523
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of required mechanisms in domestic legislation. The details of these requirements could be
found the in the findings over the case of India-Patent Protection for Pharmaceutical and
Agricultural Chemical Products, with complaint by the United Sates in 1997526 (“India Patent, Complaint by the United States”) and the case of India-Patent Protection for
Pharmaceutical and Agricultural Chemical Products, with complaint by the European
Communities and their member States for the same concern in 1998 (“India - Patent,
Complaint by the EC).527
The Patent Act of 1970 of India excluded the pharmaceutical and agricultural chemical
products from patentability. 528 This exclusion was temporarily eliminated by the Patent
Ordinance of 1994 issued by the President of India, in which the system for filing and
processing patent applications for products and the system of granting exclusive marketing
rights for products being the subject of patent applications were established. 529 The Patent Bill
of 1995 was intended to give these systems a permanent effect. However, it was never
adopted because of the dissolution of the Parliament in 1996. 530 Despite the Patent Ordinance,
which lapsed at the expiration of six weeks from the reassembly of Parliament, the Indian
executive authorities instructed the Patent Offices in India to continue to receive patent
applications for pharmaceutical and agricultural chemical products to store them separately
for examination in future.531 However, after the expiration of the Patent Ordinance, there were
not any legal basis, procedurally and substantively, for the granting of exclusive marketing
rights in regards to products being the subject of patent applications in the “mailbox” system,
and there was not any request for the granting of exclusive marketing rights before the
Government of India.532
The main claim of the United States in India - Patent, Complaint by the United States was
that, by the insufficiency in the patent law, India had failed to implement its obligations under
articles 70.8 and 70.9 of TRIPS to establish a mechanism known as the “mailbox” for
preserving the novelty of patent applications for pharmaceutical and agricultural chemical
products and a system for granting exclusive marketing rights during the transitional period. 533
The EC raised almost the same claim in India - Patent, Complaint by the EC.534
India argued that it had been providing a “means” for filing patent applications for
pharmaceutical and agricultural chemical products consistent with Article 70.8 of TRIPS and
that it had not failed to accord exclusive marketing rights under Article 70.9 of TRIPS since
there had not been any request for exclusive marketing rights in India. 535 In addition, it was
not obligated to establish a system for the granting of exclusive marketing rights before all the
conditions for the granting of rights had been met in respect of a specific product.536
526
See Panel Report, India-Patent, Complaint by US, supra note 287; Appellate Body Report, India-Patent,
Complaint by US, supra note 287.
527
See Panel Report, India-Patent, Complaint by EC, supra note 287.
528
See Panel Report, India-Patent, Complaint by US, supra note 287, at 2.3, 7.1.
529
Id. at 2.3, 7.2.
530
Id. at 2.5, 7.3.
531
Id. at 2.6, 7.4.
532
Id. at 2.12, 7.5.
533
Id. at 7.6.
534
See Panel Report, India-Patent, Complaint by EC, supra note 534, at 7.7.
535
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.7.
536
See Panel Report, India-Patent, Complaint by EC, supra note 287, at 7.8.
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The Panel in India - Patent, Complaint by the United States interpreted the nature of the
obligation under Article 70.8 as being to provide “a means” by which applications for patents
for inventions in respect of pharmaceutical and agricultural chemical products “can be
filed”.537 In the language of Article 70.8 itself there is no definition of what type of means is
required. The Panel found the answer to this question on the basis of analysis of this provision
in the context of other provisions of TRIPS, particularly in relation with Article 27.1
concerning the criteria of patentability:
“[I]n order to prevent the loss of the novelty of an invention in
this sense, filing and priority dates need to have a sound legal
basis if the provisions of Article 70.8 are to fulfill their purpose.
Moreover, if available, a filing must entitle the applicant to
claim priority on the basis of an earlier filing in respect of the
claimed invention over applications with subsequent filing or
priority date.”538 (Emphasis added)
The Appellate Body upheld the findings of the Panel in India - Patent, Complaint by the
United States with the emphasis on two qualities relating to the functions and the legal status
of the mailbox system. That is, a system shall provide “a sound legal basis” to preserve
novelty and priority and allow the entitlement to file mailbox applications and the allocation
of filing and priority dates to them:
“Furthermore, the Panel was correct in finding that the “means”
established under Article 70.8(a) must also provide “a sound
legal basis to preserve novelty and priority as of those dates”.
The findings flow inescapably from the necessary operation of
paragraphs (b) and (c) of Article 70.8” 539 (Emphasis added)
The Panel interpreted the obligation on the substantive standards of the mailbox system under
Article 70.8 in so far as to “eliminate any reasonable doubts” about the unpatentability of the
inventions subject to the mailbox system:
“Article 70.8 requires the Members in question to establish a
means (…) so as to eliminate any reasonable doubts regarding
whether mailbox applications and eventual patents based on
them could be rejected and invalidated because, at the filing or
priority date, the matter for which protection was sought was
unpatentable in the country in question.”540 (Emphasis added)
However, the Appellate Body reversed the interpretation of the Panel on the obligation of the
substantive standards of the mailbox system. Instead, the Appellate Body emphasized the
significance of the security of the mechanism for implementing the obligations.
537
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.25.
Id. at 7.28.
539
Id. at 31; Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 57.
540
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.29.
538
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“[B]y Article 70.8, to provide a legal mechanism for the filing of
mailbox applications that provides a sound legal basis to
preserve both the novelty of the inventions and the priority of the
applications as of the relevant filing and priority dates. No
more.”541 (Emphasis added)
From the interpretation of the obligation under Article 70.8 in terms of “a sound legal basis”
for a mailbox system, the Panel found that the domestic legislation of India violated its
obligation under Article 70.8 of TRIPS due to the “administrative instructions” for receiving
mailbox applications of India had not provided a “sound legal basis” for preserving the
novelty and priority:
“In light of these provisions, the current administrative practice
creates a certainty of legal insecurity in that it requires Indian
officials to ignore certain mandatory provisions of the Patents
Act… The existence of the legislation per se is not a problem
under the TRIPS Agreement. However, in the absence of clear
assurance that applications for pharmaceutical and agricultural
chemical product patents will not be rejected and that the novelty
and priority will be preserved despite the wording of the Patent
Act, the legal insecurity remains”.542 (Emphasis added)
The findings on the soundlessness of the legal basis for the mailbox system were based on the
legal insecurity of the system after the lapse of the Patent Ordinance of 1994, 543 the uncertain
validity of the administrative actions which apparently contradicted mandatory legislation,544
and the lack of a sufficient legal basis for preserving novelty and priority leading an insecure
and unpredictable legal status of the patent applications for a possibly long period. 545 India
contended the availability of a “sound legal basis” in domestic legislation with the fact that
administrative instructions had been established to provide a mailbox system as required by
Article 70.8 of the TRIPS:
“India contends that it has established, through “administrative
instructions”, a “means” consistent with Article 70.8(a) of the
TRIPS Agreement. According to India, these “administrative
instructions” establish a mechanism that provides a sound legal
basis to preserve the novelty of the inventions and the priority of
the applications as of the relevant filing and priority dates
consistent with Article 70.8(a) of the TRIPS Agreement”546
(Footnote omitted and Emphasis added)
541
See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 58.
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.35; Appellate Body Report, IndiaPatent, Complaint by US, at 69, 70; Panel Report, India-Patent, Complaint by EC, supra note 287, at 7.55.
543
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.36.
544
Id. at 7.37; Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 69, 70.
545
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.38.
546
See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 60.
542
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The Appellate Body endorsed the finding of the Panel that it is not necessary to assess the
substantive functions of the mailbox system. Only the “lack of legal security” of such a
system is sufficient to be regarded as not being in conformity with the obligations under
Article 70.8547, even in a case where that system may practically ensure the necessary
substantive functions.548 The Appellate Body also found that the “administrative instructions”
of India did not provide a sound legal basis to preserve novelty of inventions under the
mailbox system:
“We are not persuaded of India’s explanation of these seeming
contradictions. Accordingly, we are not persuaded that India’s
“administrative instructions” would survive a legal challenge
under the Patents Act. And, consequently, we are not persuaded
that India’s “administrative instructions” provide a sound legal
basis to preserve novelty of inventions and priority of
applications as of the relevant filing and priority dates”549
(Emphasis added)
It is noted that the administrative practice to receive the mailbox applications without
legislative changes “does not itself constitute a violation” of obligations under Article 70.8 in
the light of Article 1.1 of TRIPS, which allows the freedom in determining the appropriate
method of implementation.550 Only when administrative practice “creates a certain degree of
legal insecurity”, for example, it overrides certain mandatory provisions of the related patent
law, shall it be regarded insufficient to fulfill the required obligations.551
Article 70.9 of TRIPS refers to exclusive marketing rights, a tough issue in the dispute that
lasted until the end of the Uruguay Round. 552 Together with Article 70.8, the interpretation of
Article 70.9 is of significance because it gives effect to the temporary protection regime in the
transitional period for the pharmaceutical and agricultural chemical patented products.
Article 70.9 is in direct relation with Article 70.8(a) of TRIPS in terms of the latter being the
requisite condition for the former “where a product is subject of a patent application … in
accordance with paragraph 8(a)”,553 and both contain the phrase “not withstanding the
provision of Part VI”, which implies that the transitional period under Article 65 is not
547
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.43; Appellate Body Report, IndiaPatent, Complaint by US, supra note 287, at 69-71.
548
The reasoning of the Panel on this point is as follows:
“We note the point made by India that the present system ensures the
retention of necessary facts to determine novelty and priority for the purposes
of decisions on the future grant of patent rights pursuant to Article 70.8(b) and
(c). Even if we persuaded that this was the case despite the unpublished nature
of the system, we do not believe that this would alter our concerns regarding
the soundness of the legal basis for the system under the law as it presently
stands.” (Emphasis added)
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.58.
549
See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 70.
550
See Panel Report, India-Patent, Complaint by US, supra note 287, at. 7.33.
551
Id. at 7.35.
552
See Terence P. Stewart, supra 165, at 2286.
553
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.54; Appellate Body Report, IndiaPatent, Complaint by US, supra note 287, at 82.
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applicable to them,554 and the term of “shall be granted” used in Article 70.9 is the same in
meaning with in “shall be available” in Article 27 of TRIPS.555 Therefore, both Article 70.8(a)
and Article 70.9 are intended to apply from the date of entry into force of the WTO
Agreement.556
Article 70.9 is understood to “share… the object and purpose” of Article 70.8, namely, to
“provide a degree of protection of the interests of inventors of pharmaceutical and agricultural
chemical products during the transitional period”. Therefore, they operate “in tandem” to
provide a package of rights and obligations that apply during the transitional periods
contemplated in Article 65 of TRIPS.557
The fact is that there was no request for the grant of exclusive marketing rights having been
filed before the Indian authorities.558 India argued for the unavailability of a regime granting
exclusive marketing rights on the grounds that a mechanism for grant of exclusive marketing
rights was not practically needed before 1 January 2000 in the commercial sense. 559 The Panel
rejected the argument of India and required India to “take positive action” to implement the
TRIPS obligations. The situation of non-action should be considered a violation because the
specific feature of the TRIPS obligations. The Panel expressed its view as follows:
“the TRIPS Agreement is different from other covered
agreements in that most of its provisions require Members to
take positive action; in this particular case to grant exclusive
marketing rights pursuant to Article 70.9 (…) a failure to
provide the executive with the required authority constitutes a
breach of the Agreement, because the lack of authority mandates
the executive not to comply with the Member’s WTO
obligations.”560 (Emphasis added)
By such interpretations, the Panel found that India violated its obligation by reason that India
had not enacted the legislation needed to implement its obligations under Article 70.9 of the
TRIPS which went into effective as from the date of entry into force of the WTO Agreement,
554
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.55; Appellate Body Report, IndiaPatent, Complaint by US, supra note 287, at 82; Panel Report, India-Patent, Complaint by EC, supra note 287,
at 7.64.
555
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.56; Panel Report, India-Patent,
Complaint by EC, supra note 287, at 7.65.
556
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.55; Appellate Body Report, IndiaPatent, Complaint by US, supra note 287, at 82.
557
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.57; Appellate Body Report, IndiaPatent, Complaint by US, supra note 287, at 82; Panel Report, India-Patent, Complaint by EC, supra note 287,
at 7.73.
558
See Panel Report, India-Patent, Complaint by US, supra note 287, at 2.12
559
Because, in the view of India, that mechanism is only possible to put in operation after a number of
conditional actions, e.g., a mailbox application has been filed in India, a patent application has been filed and a
patent has been granted in another WTO Member for the related product, the other Member has approved the
marketing of the product, India has approved the marketing of the product. It seems to be impractical for the
requirement of establishing a mechanism for grant of exclusive marketing rights when the above actions have
not happened yet. See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.58. 7.60
560
Id. at. 7.53.
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that is, 1 January 1995.561 The Panel recalled the fact that there was neither legislation nor
administrative practice in place in India regarding the grant of exclusive marketing rights. 562
India could not argue for the postponement of the effective date of issuance by the fact that
there had been no request for the grant of exclusive rights. 563 The reasoning of the Panel was
that the lack of legal security was likely to discourage potential applicants to file applications:
“Postponement of the effective date cannot follow merely the fact
that there has been no request for the grant of exclusive marketing
rights so far. Where, as we discussed with respect to Article 70.8,
lack of legal security is likely to discourage potential applicants to
file an application, this is certainly the case if a system is nonexistent.”564 (Emphasis added)
Interpreting the obligations under Article 70.9 of TRIPS in the light of Article XVI: 4 of the
WTO Agreement,565 the Appellate Body did not examine the mentioned-above reasoning of
the Panel. The Appellate Body concluded that India violated its obligation simply because
India did not make “available” in the domestic legislation a regime for granting exclusive
marketing rights as it should have been under Article 70.9 of the TRIPS Agreement. The
following findings of the Appellate Body are of significance on this point:
“Given India’s admission that legislation is necessary in order to
grant excusive marketing rights in compliance with Article 70.9
and that it does not currently have such legislation, the issue for
us to consider in this appeal is whether a failure to have in place
a mechanism ready for the grant of exclusive marketing rights,
effective as from the date of entry into force of the WTO
Agreement, constitutes a violation of India’s obligations under
Article 70.9 of the TRIPS Agreement”566 (Emphasis added)
561
Id. at 7.63.
Id. at 7.51.
563
India argued that Article 70.9 of TRIPS only obliges Members to establish a mechanism for the grant of
exclusive marketing rights after all the other conditions specified in this article have been fulfilled. India asserted
that Article 70.9 is unlike the other provisions elaborated in the TRIPS Agreement, which explicitly oblige
Members to change their domestic laws to authorize their domestic authorities to take certain action before the
need to take such action actually arises (e.g., according to articles 42-48, the judicial authorities of Members
“shall have the authority” to grant certain rights. Article 51 obliges Members to “adopt procedures” to enable
right holders to prevent the release of counterfeited or pirated products from customs. Pursuant to Article 25.1
“Members shall provide for the protection” of certain industrial designs. Article 22.2 obliges Members to
“provide the legal means for interested parties to prevent” certain misuses of geographical indications). India
alleged that, by the requirement of a mechanism for the grant of exclusive marketing rights to be established as
from the date of entry into force of the WTO Agreement, the Panel turned an obligation to take action in future
into an obligation to take action immediately, and therefore, made the transitional arrangements in Article 65 of
TRIPS nonsense in regard to pharmaceutical chemical products. See Appellate Body Report, India-Patent,
Complaint by US, supra note 287, at 78 and footnote 62.
564
See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.62.
565
The Appellate Body reasoned that the argument of India on the obligations under Article 70.9 of TRIPS “must
be examined in the light of Article XVI:4 of the WTO Agreement”. See Appellate Body Report, India-Patent,
Complaint by US, supra note 287, at. 79.
566
See India-Patent, Complaint by US, supra note 287, at 81.
562
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In the light of the “positive action” reasoning, the Appellate Body interpreted that Article
70.9 obliges WTO Members to make a mechanism for the grant of exclusive marketing
rights available and effective as from the date of entry into force of the WTO Agreement. 567
For the reason that India had not enacted the legislation to give effect to that mechanism, the
Appellate Body upheld the conclusion of the Panel that India violated Article 70.9 of TRIPS:
“[W]e agree with the Panel that India should have had a
mechanism in place to provide for the grant of exclusive
marketing rights as from the date of entry into force of the WTO
Agreement, and, therefore, we agree with the Panel that India is
in violation of Article 70.9 of the TRIPS Agreement.” 568
(Emphasis added)
In sum, in the light of the GATT/WTO, the panels and the Appellate Body give effect to the
strict TRIPS obligations with respect to the developing country members regarding the
availability and soundness of legal basis for patent protection. Furthermore, domestic
legislation is also bound with the strict requirements on the mechanism of implementing its
obligations. These requirements cannot be modified with resort to the special treatment given
to them during the transitional period.
For the specific interests of a group of patent holders in the field of pharmaceutical and
agricultural chemical products, the TRIPS obliges the developing country members to protect
the substantial patent rights, namely, the right to enjoy the priority through the mailbox
system and exclusive marketing rights, in respect of a patented product in this field. Despite
the lack of legal grounds for granting a patent for such a product in domestic legislation, a
developing country member should recognize a patent that has been granted for that product
in another country member and provide a patent applicant with the opportunities to enforce
his patent rights.
The Panels and Appellate found that the TRIPS required domestic legislation to secure the
availability and the soundness of the legal basis for the patent protection even for objects
currently excluded by national patent law. The availability of the legal basis was still
mandatory where there appeared no practical request of protection on the side of patent
applicants in national patent practice
The requirements of the legal security and the certainty of the legal grounds for patent
protection are also applied to the receiving patent application mechanism during the
transitional period. Moreover, the requirement of legal security obliges domestic legislation to
assure the protection of the substantial patent rights in regards to a product being protected by
567
The Appellate Body found that India had an obligation to implement the provisions of Article 70.9 of TRIPS
effective as from the date of entry into force of the WTO Agreement, that is, 1 January 1995. India had not
enacted the legislation that was needed to implement that obligation. “To give meaning and effect to the rights
and obligations” under Article 70.9 of TRIPS, such legislation should have been in effect since 1 January 1995.
See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 83.
568
See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 84.
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a foreign patent, in spite of the fact that national patent law currently declines to grant a patent
to that product due to the lack of legal grounds in domestic legislation.569
II. GATT standards for securing the TRIPS obligations
The national treatment and MFN principles of the TRIPS requires domestic legislation to
make available a treatment no less favorable and an opportunity of enjoying unconditionally
and immediately any advantage, favor, privilege or immunity for nationals of all other
members.570 How these requirements would be interpreted in ensuring the TRIPS substantive
norms? Should the GATT disciplines be fully appropriate to interpret the obligations under
the national treatment and MFN of the TRIPS? Besides, whether the traditional principles of
the pre-existing international treaties on intellectual property would have influence on the
interpretation of the TRIPS obligations. The discussion in this section will examine the above
questions in analysis of the relevant panel rulings over the WTO disputes concerning the
implementation of Article 3.1 and Article 4 of the TRIPS.
569
For this case invited comments in different views. E.g., for the ‘wiggle room’ remaining after the findings of
the Panel and the Appellate Body in this case, see Jerome H. Reichman, ‘Securing Compliance with the TRIPS
Agreement After US v India’, Journal of International Economic Law (1998), pp. 585-601; for the criticism
about no deference given to the domestic law of India in this case, in comparison with the partial deference in
other TRIPS cases concerning the domestic law of U.S. and that of Canada, see Daya Shanker, supra note 76;
for the criticism about the impact of the TRIPS obligation on the developing countries in dealing with the
problems of the public interest, see Tshimanga Kongolo, supra note 49, at 268-269.
570
See the Paris Convention, supra note 1, art.2(1); the TRIPS, supra note 10, arts. 3.1 and 4.
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1. Challenge of legislation “as such” and “extra hurdle”
(United States - Section 211 Omnibus Appropriations Act of 1998)
The fact of the case of Section 211 of Omnibus Appropriation Act of 1998 was mentioned
previously. This section recalls some relevant factual elements concerning the current topic of
discussion. Section 211 of OAA prohibited every transaction and payment necessary for the
registration or renewal of a trademark or a trade name confiscated by the Cuban Government
with respect to a “designated national”, unless an authorized administrative body approved
that transaction or payment. Section 211 of OAA also prohibited the enforcement procedures
concerning a confiscated trademark or trade name before US courts with respect to a
“designated national”. The term “designated national was defined to include Cuba, a Cuban
national, and a national of any foreign country who is a successor-in-interest thereto. 571
Especially, the great concern was with Sections 211(a)(2) and (b) of that Act, 572 based on the
statutory language of these provisions, the EC claimed that the United States violated the
national treatment and MFN treatment obligations under Articles 3.1 and 4 of the TRIPS.573
1.1. National treatment obligation
The EC argued that Section 211(a) (2) was inconsistent with Article 3.1 of the TRIPS because
the provision applied in respect of “designated nationals” which are basically comprised of
Cuba and Cuban nationals. Moreover, the statutory language referred only to nationals of a
foreign country without referring to US nationals in defining “successors-in-interest”. 574
Section 211(b) created the de jure discrimination between Cuban right holders and US right
holders and violated Article 3.1 of the TRIPS because this provision indicated “designated
national” referring essentially to Cuba and its nationals. Moreover, the language of this
provision singled out foreign successors-in-interest for the curtailment of their rights while
US successors-in-interest were not subject to such curtailment.575
571
See Panel Report, US-Section 211 Omnibus, supra note 384, at 2.1, 2.2, 2.7-2.12.
Sections 211(a)(2) and (b) of U.S. Omnibus Appropriations Act of 1998 provided that:
“(2) No U.S. court shall recognize, enforce or otherwise validate any assertion
of rights by a designated national based on common law rights or registration
obtained under such section 515.527 of such a confiscated mark, trade name,
or commercial name.
(b) No U.S. court shall recognize, enforce or otherwise validate any assertion
of treaty rights by a designated national or its successor-in-interest under
section 44(b) or (e) of the Trade Act of 1946 (15 U.S.C 1126 (b) or (e)) for a
mark, trade name, or commercial name that is the same as or substantially
similar to a mark, trade name, or commercial name that was used in
connection with a business or assets that were confiscated unless the original
owner of such mark, trade name, or commercial name, or the bona fide
successor-in-interest has expressly consented.”
573
See Panel Report, US-Section 211 Omnibus, supra note 384, at 2.1.
See Panel Report, US-Section 211 Omnibus, supra note 384, at 3.1.
574
Id. at 8.123.
575
Id. at 8.166, 8.167.
572
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The United States argued that under this provision US courts were not to recognized, enforce
or validate any assertion of rights in a confiscated trademark by a designated national or a
national of any foreign country who is a successor-in-interest thereto. Although the statutory
language did not include US nationals when describing successor-in-interest, US nationals
could never become a successor-in-interest, because it was impossible for them to get a
specific license from the Office of Foreign Assets Control (“OFAC”) due to the prohibiting
provision under Section 515.201 of title 31 of the Code of Federal Regulation (“CFR”). The
OFAC had never issued a specific license to a US national for the purpose of becoming a
successor-in-interest to a confiscated trademark. The United States contended that a measure
is inconsistent on its face only if it mandates WTO-inconsistent actions.576 The United States
also argued that Section 211(b) applied to designated nationals and any successor-in-interest
whether Cuban or not.577
To examine the consistency of the challenged legislation, the panel applied the concept of
mandatory and discretionary legislation by referring to the findings of the panel in the case of
United Sates – Measures Affecting the Importation, Internal Sale and Use of Tobacco.578 In
the findings of that panel, only the legislation which “mandated” action inconsistent with
GATT could be challenged “as such”, whereas legislation which merely “gave the discretion
to the executive authority” to act inconsistently with the General Agreement could not be
challenged as such, and only the actual application of such legislation inconsistent with
GATT could be subject to the challenge. 579 The Panel also referred to the finding of the
Appellate Body in the case of United States-Antidumping Act of 1916, which stated that “the
relevant discretion, for purpose of distinguishing between mandatory and discretionary
legislation, is a discretion vested in the executive branch of government.”580
The Panel admitted that the OFAC was part of the executive branch that was vested the
discretion to grant specific licenses to US nationals to become a successor-in-interest to a
“designated national”.581 Based on the fact that the OFAC had never granted a specific license
to US nationals to allow them to become a successor-in-interest to a “designated national”, the
Panel found that the EC had not demonstrated that the OFAC acted in a manner inconsistent
with the national treatment principle encapsulated in Article 3 of the TRIPS.582 Together with
the finding that Section 211(a)(2) did not accord a treatment less favorable to foreign original
owners than it accorded to original owners who are US nationals, the Panel concluded that
this provision is not inconsistent with the national treatment obligation under Article 3.1 of
the TRIPS.583 Similarly, the Panel found that that Section 211(b) did not violated Article 3.1
of the TRIPS because US courts would not recognize, enforce or validate any assertion of
treaty rights by a “designated national or its successor-in-interest”, of which the term its
successor-in-interest was not limited to foreign nationals.584
576
Id. at 8.124, 2.7, 2.11.
Id. at 8.169.
578
Id. at 8.136.
579
See Panel Report, US-Tobacco, supra note 445, at 8.118
580
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.137. See also Appellate Body Report,
United Sates-1916 Act, supra note 398, at 89.
581
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.137.
582
Id. at. 8.138.
583
Id. at 8.139, 8.140.
584
Id. at 8.171.
577
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The Appellate Body did not agree with the conclusion of the Panel on the consistency of
Sections 211(a) (2) and (b) with the TRIPS national treatment obligation. The Appellate Body
considered the facts submitted by the United Sates that the OFAC had not grant any specific
license due to the prohibition of Section 515.201, there was small likelihood for both United
States and non-United States to bring a case of enforcement of assertion rights before US
courts.585 In other words, although Section 211(a) (2) prohibited the enforcement of assertion
of rights in respect of the confiscated trademarks before US courts, its actual applicability is
unreal by the prohibition of Section 515.201.
However, the Appellate Body did not agree with the United States argument for the
elimination of the less favorable elements in the statutory language of Section 211(a) (2) on
the basis of those facts.586 The Appellate Body emphasized the situation that exists under the
statute on its face.587 It noted that while the prohibition under Section 515.201 of the Cuban
Assets Control Regulations ("CACR") applied to both United States and non-United States
successors-in-interest in getting the specific licenses, the prohibition under Section 211(a) (2)
on enforcement of assertion rights applied only to non-United States successors-in-interest.588
The Appellate Body reasoned that because the prohibition of Section 211(a) (2), there existed
a possibility that non-United States successors-in-interest would face two hurdles and the
United States successors-in-interest would face only one hurdle. And, therefore, the
inherently less favorable element was available under Section 211(a) (2). 589 In this point, the
view of the Appellate Body is expressed in the following finding:
“The United States may be right that the likelihood of having to
overcome the hurdles of both Section 515.201 of Title 31 CFR
and Section 211(a) (2) may, echoing the panel in US – Section
337, be small. But, again echoing that panel, even the
possibility that non-United States successors-in-interest face
two hurdles is inherently less favourable than the undisputed
fact that United States successors-in-interest face only one.” 590
(Emphasis added)
The Appellate Body found that Section 211(a) (2) imposed the “extra hurdle” on successorsin-interest who are not nationals of the United States, and therefore, the United States violated
the national treatment obligation in Article 3.1 of the TRIPS. 591 Based on the similar
reasoning, the Appellate Body found that Section 211(b) was discriminatory on its face
between Cuban nationals and United States nationals in terms of original owners of
trademarks that are the same or substantially similar to a Cuban trademark used in connection
with a business or assets that were confiscated in Cuba. 592 The discriminatory language of
Section 211(b) could not be offset in every case by the “unblocked” and prohibitive
585
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 265, 266.
Id. at 265-267.
587
Id. at 264.
588
Id.
589
Id. at 265.
590
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 265.
591
Id. at 267.
592
Id. at 279-281.
586
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provisions under the OFAC regulations.593 Particularly, the following point made by the
Appellate Body is significant:
“A Cuban original owner residing in a country other than the
United States or Cuban, for example, in the European
Communities, could apply to OFAC to be “specifically licensed
as [an] unblocked national.” (…) This could eliminate less
favourable treatment in practice. Yet, the very existence of the
additional “hurdle” that is imposed by requiring application to
OFAC is, in itself, inherently less favourable.”594 (Emphasis
added)
Clearly, by the application of the concept “additional hurdle” of the Appellate Body, the
argument of the United States on the practical elimination of less favorable treatment by an
action of the executive branch was of no weight. In other words, in examining the
inconsistency of discretionary legislation, the Appellate Body did not only appraise the actual
application, but also the possible application of that legislation.
Submitting the facts and arguments substantiating the impractical conditions and the available
offsetting provisions for working Section 211(a) (2) and (b), the United States insisted on the
non-actual application of these provisions in the practice of US courts. 595 Despite that, the
Appellate Body relied on the reasoning mentioned above to find that Sections 211(a) (2) and
(b) were inconsistent with the national treatment obligation of the United States under Article
3.1 of the TRIPS.596
1.2. MFN treatment obligation
As for the claim of the violation of the United States with regards to the MFN treatment
obligation under Article 4 of the TRIPS, the EC argued that Sections 211(a)(2) and (b) created
a discrimination de jure between Cuba/Cuban nationals and other non-US nationals by
denying protection of intellectual property rights held by Cuban nationals while granting such
protection to nationals of other countries. 597 Similarly to the argument on the national
treatment obligation, the United States contended that Section 211(a)(2) did not limit its scope
to Cuba and Cuban nationals because US courts would not enforce or recognize any assertion
of rights to the confiscated trademarks and trade names by any successors-in-interest whether Cuban or not. The United States argued that Section 211(b) did not grant an
"advantage, favour, privilege or immunity" to nationals of any other country that it does not
grant to the nationals of Cuba in respect of protection of intellectual property rights.598
The Panel was in favor of the argument of the United States and found that Section 211(a) (2)
did not discriminate between Cuban nationals and other foreign nationals in respect of the
593
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 289, 290, 294.
Id. at 289.
595
Id. at 291-295.
596
Id. at 296.
597
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.141.
598
Id. at 8.141.
594
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confiscated trademarks. The Panel admitted that pursuant to this provision “US courts will not
recognize, enforce or validate any assertion of rights” by a Cuban national or any other
foreign national in respect of trademarks in connection with confiscated trademarks and
assets.599 In respect of original owners, the Panel found that the language of the provision did
not limit the class of original owners based on nationality. 600 The Panel concluded that Section
211(a) (2) did not deny Cuban nationals any advantage,601 favor, privilege or immunity that it
accorded to other foreign nationals and therefore, was not inconsistent with Article 4 of the
TRIPS.602 Similarly, the Panel found that Section 211(b) was not inconsistent with Article 4 of
the TRIPS.603
The Appellate Body found that the discriminatory language in the statute itself was
inconsistent with the MFN treatment obligation under Article 4 of the TRIPS. The Appellate
Body emphasized the discriminatory nature of the statutory provisions on their face and did
not weigh the practical application of those provisions. To this point, the following findings
stated clearly:
“[O]n the face of the statute, the original owner who is a Cuban
national is subject to Sections 211(a) (2) and (b), and the original
owner who is a non-Cuban foreign national is not. This
alone(…) is sufficient for us to find that Sections 211(a)(2) and
(b) violate the most-favoured-nation obligation of the United
States. (Emphasis added)
“We agree with the European Communities that the situation it
describes on appeal is within the scope of the statute on its
face(…)” (Emphasis added)
Therefore, here too, as with national treatment, the European
Communities has established a prima facie case that Sections
211(a)(2) and (b) are discriminatory on their face, as between a
599
Id. at 8.146.
Id. at 8.147.
601
As for the term of “advantage”, in this case when interpreting the MFN treatment obligation under Art. 4 of
TRIPS the wording is in the positive sense of the term “advantage”, regardless of the difference in the wording
of this provision and the term “no less favourable” in the wording of Article 3.1 of the TRIPS on the national
obligation. The Appellate Body did not mention any difference between the two obligations in this aspect.
Consequently, the benchmark of “no less favorable” in terms of an “extra hurdle” was applied in examining the
discrimination under Article 4 of the TRIPS (see Appellate Body Report, US-Section 211 Omnibus, supra note
398, at 314, 317). Differently, in the case of EC-Protection of trademarks and geographical indications for
agricultural products and foodstuffs, although the Panel did not clarify the particular requirements of the
national treatment obligation under Article 2(1) of the Paris Convention, it remarked that the positive language
of Article 2(1) of the Paris Convention was not compatible with the negative language of Article 3.1 of the
TRIPS. It means that the term “advantages” under Article 2(1) of the Paris Convention does not cover all
contents of the term “no less favorable than” under Art. 3.1 of the TRIPS (see Panel Report, EC-Geographical
indications, Complaint by US, supra note 411, at 7.216).
602
See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.148.
603
Id. at 8.176.
600
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Cuban national and a non-Cuban foreign national” 604 (Emphasis
added)
The Appellate Body relied on the same reasoning as it did with respect to the national
treatment obligation and found that Sections 211(a) (2) and (b) were inconsistent with Article
4 of the TRIPS:
“The United States arguments on this claim are the same as their
arguments on national treatment. We have already addressed
these arguments. And, as these United States arguments have
not changed, our conclusions have not changed either.”605
(Emphasis added)
It is noted that in examining the consistency of Sections 211(a)(2) and (b) with the MFN
treatment obligation under Article 4 of the TRIPS, the Appellate Body applied the same
standards as used in examining the consistency of this provision with the national treatment
obligation under Article 3.1 of the TRIPS. Significantly, the examining standard of inherently
less favorable in terms of “extra hurdle” and are also bound with the MFN treatment
obligation.
“The United States further asserts that the Cuban original owner
could be "unblocked" by OFAC under Section 515.505… This
implies that Cuban nationals that reside in the "authorized trade
territory" face an additional administrative procedure that does
not apply to non-Cuban foreign nationals who are original
owners, because the latter are not "designated nationals".
Therefore, as we stated earlier, treatment that is inherently less
favourable persists...”606 (footnote omitted and emphasis added)
With regards to the argument for the offset possibility, which stated that the prohibitive
provisions in Sections 211(a)(2) and (b) were offset by Section 515.201 of Title 31 CFR,
another prohibitive provision which could also apply to a non-Cuban foreign national, the
Appellate Body found that these two regulations had no completely overlapping scope.
Therefore, it was not satisfied that Section 515.201 of Title 31 CFR would offset the
inherently less favorable treatment present in Sections 211(a)(2) and (b) in each and every
case.607
As analyzed, the findings of the Appellate Body in this case indicate a different approach of
the Appellate Body in dealing with the claim challenging domestic legislation “as such”. The
Appellate Body did not put weight on the actual application of discretionary legislation as the
Panel did in the adoption of GATT practice in interpreting the TRIPS national treatment
obligation. Otherwise, the Appellate Body emphasized the possibility of application of the
challenged legislation. In this point, the Appellate Body adopted a new concept in the terms
604
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 307-309.
Id. at 310.
606
Id. at 314.
607
Id. at 316, 317.
605
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of the “extra hurdle” which is referred to as an important examining standard for the
subsequent TRIPS disputes concerning legislation “as such”.
This development in the panel findings is of practical significance. Accordingly, not only the
actual application, but also the possible application of legislation is subject to the examination
of the panels and likely to be found in violation of the TRIPS national treatment and MFN
treatment obligations. Particularly, with the existence of a discriminatory provision in the
statutory language alone, it is enough for the related domestic legislation to be subject to the
challenge under the national treatment and MFN obligations of the TRIPS. By application of
the “extra hurdle” standard, even without evidence of the actual application in the case of
discretionary legislation, the likelihood of being found to be discriminating remains for the
panel examination with respect to possible applications in the future.
With the concept “extra hurdle”, the argument for the elimination of the less favorable or
discriminatory elements by the ‘lock’ or the ‘offset’ available in other national regulations is
also hard to maintain. Likewise, the evidence of no actual application of the allegedly
discriminatory provision would have no weight in findings of inherently less favorable or
discriminatory elements. The adopted reasoning is that the existence of such a situation in the
statutory language assumes an additional obstacle to foreigners that assumedly they would
face in exercising their intellectual property rights. 608 In effect, before a challenge to the
possible application of discretionary legislation, domestic legislation is facing higher risk in
the implementation of the TRIPS national treatment and MFN treatment obligations. National
legislation should take into consideration all such “new” principle constraints in compliance
with the TRIPS.
2. Adaptation of the GATT “fundamental thrust and effect”
(European Communities - Geographical indications)
2.1. The TRIPS national treatment obligation
As mentioned in the section above, the United States and Australia raised basically the same
claims about the Regulation of the European Communities and, among others, its
inconsistency with the national treatment and MFN treatment obligations of the TRIPS. 609
One point to be noted is that, different from the case of United States - Section 211 Omnibus
Appropriations Act of 1998, where the language of the statute included clauses that
particularly discriminated against “designated nationals”, the Regulation does not contain any
language of such a nature. Article 12(1) of the Regulation provides that the equivalence and
reciprocity conditions in the registration of geographical indications (“GIs”) apply to “the
third country”, which is subject to the general exception stated in the conditional clause
“without prejudice to international agreements”.610
608
Id. at 268.
A double cases complaint by Australia and the United States, the findings of the Panel on the claims relating
to the TRIPS national treatment in these two cases are almost the same.
610
Article 12(1) of the Regulation provided as follows:
"1.
Without prejudice to international agreements, this Regulation may
apply to an agricultural product or foodstuff from a third country provided
that:
609
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The European Communities explained that the conditions in Article 12(1) of the Regulation
do not apply to geographical areas located in WTO Members. The introductory phrase of
Article 12(1) provides that it applies "without prejudice to international agreements" – which
include the WTO agreements. This was made clear by the eighth recital of the April 2003
amending Regulation611 in taking specific account of the provision of the TRIPS. And
therefore, Article 12(1) and 12(3) of the Regulation 612 do not apply to WTO Members.
Accordingly, the registration of GIs from other WTO Members is subject to exactly the same
conditions as the registration of GIs from the European Communities. The European
Communities also argued that the term "third country" in Articles 12 through 12d613 did not
refer to WTO Members depending on the wording, context and objectives of each specific
provision.614
Australia challenged the Regulation "as such" with the claim that the equivalence and
reciprocity conditions applied to the registration of GIs located in the territory of a WTO
Member under Article 12(1) of the Regulation.615 In particular, Australia argued that the
European Communities “had consistently led other WTO Members to believe that” the Article
12(1) of the Regulation applied to them.616 Without the evidence of the actual application of
this provision, the argument of Australia based mainly on the text of the Regulation.617
the third country is able to give guarantees identical or equivalent to
those referred to in Article 4,
the third country concerned has inspection arrangements and a right
to objection equivalent to those laid down in this Regulation,
the third country concerned is prepared to provide protection
equivalent to that available in the Community to corresponding agricultural
products or foodstuffs coming from the Community."
See the Regulation, supra note 464, art.12.
611
The preamble to the April 2003 amending Regulation, which modified Article 12 and inserted a detailed
procedure for applications and objections from third countries in Articles 12a through 12d, sets out the
justification for the amendments as follows:
"(8)
The Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS Agreement) 1994, contained in Annex 1C to the Agreement
establishing the World Trade Organisation contains detailed provisions on the
existence, acquisition, scope, maintenance and enforcement of intellectual
property rights(…)”
See the Regulation, supra note 464, preamble.
612
Article 12(3) of the Regulation provides as follows:
"3.
The Commission shall examine, at the request of the country
concerned, and in accordance with the procedure laid down in Article 15
whether a third country satisfies the equivalence conditions and offers
guarantees within the meaning of paragraph 1 as a result of its national
legislation. Where the Commission decision is in the affirmative, the
procedure set out in Article 12a shall apply."
613
Art.12 through 12d of the Regulation provided the procedures for registration of geographical indications
(“GIs) in the European Communities from the third country. See the Regulation, supra note 464, art. 12.
614
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.92. 7.93.
615
Id. at 7.89.
616
Id. at 7.90.
617
Australia presented two types of evidence. The first was the text of the Regulation and the second consisted
of the European Communities' own statements concerning the Regulation prior to and during the panel
proceeding. See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, 7.12.
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The Panel did not accept the EC’s explanations of the phrase "without prejudice to
international agreements" as used in Article 12(1) of the Regulation.618 And based on the
analysis of the textual provision of the Regulation, the Panel found that such conditional
clauses of the Regulation do not exclude a WTO Member from the equivalence and
reciprocity conditions applied to “the third party”. 619 Otherwise, the term “the third party” of
the Regulation includes also a WTO Member.620 Therefore, the Panel concluded in favor of
Australia’s argument that the equivalence and reciprocity conditions in Article 12(1) of the
Regulation were applicable to the availability of protection for GIs located in WTO
Members.621
Australia claimed that the Regulation was inconsistent with Article 3.1 of the TRIPS
Agreement because non-EC nationals are not able to access the rights available to EC
nationals, including the advantages of registration by the conditions of reciprocity and
equivalence on the availability of protection of GIs. 622 Particularly, Australia argued that
under the Regulation, the right to obtain registration of a non-EC national seeking to register
a GI for an area located outside the European Union (“EU”) was treated less favorably than an
EC national seeking to register a GI for an area located within the EU.623
The EC argued that the conditions in Article 12(1) of the Regulation do not depend on
nationality, but on the location of GIs: one for geographical areas located within the EC and
one for those located outside the EU. The regulation on the location of GIs is in no way linked
to the question of the nationality of the producers concerned. 624 The European Communities
also argued that the rule of de facto application of the GATT national treatment was
incompatible with TRIPS national treatment. The EC argument was based on the following
main reasons: (i) there was no general concept of discrimination common to all WTO
agreements. There had never been a de facto application of Article 3.1 and the concept of
conditions of competition was not easily transposable to the TRIPS Agreement; and (ii)
de facto discrimination was a notion closely related to preventing circumvention of national
treatment obligations, which does not exist when the specific issue was dealt with in other
national treatment provisions, such as those of GATT; and (iii) the national treatment
provisions of GATT and the TRIPS Agreement should not systematically overlap.625
The Panel did not accept the arguments of the EC and argued for the adoption of a de facto
application of GATT national treatment in interpreting the “no less favourable” treatment
standard under TRIPS national treatment obligation. First, the Panel applied the standard
“effective equality of opportunities” having been approved by the Appellate Body in the case
of US – Section 211 Appropriations Act with the reference to the finding of the GATT panel
in US – Section 337.626 Then, the Panel adopted the concept “fundamental thrust and effect”
from the finding of the Appellate Body in the case of United States – Tax Treatment for
618
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.146
Id. at 7.116.
620
Id. at 7.117-7.118.
621
Id. at 7.152.
622
Id. at 7.156.
623
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.155.
624
Id. at 7.162.
625
Id. at 7.164.
626
Id. at 7.183.
619
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"Foreign Sales Corporations" that was applied in the interpretation of the "no less favourable"
treatment standard of Article III:4 of GATT.627
As explained by the Appellate Body, the “fundamental thrust and effect” refers to the
implications rather than the actual effects of the contested measure in the market place that
are appropriate to examine the practice of de facto application of Article II:4 of GATT.
However, the Appellate Body also noted that the application of this concept must be grounded
“in close scrutiny” and “on a careful analysis” of the contested measure and its implications in
the “marketplace”:
"The examination of whether a measure involves 'less favourable
treatment' of imported products within the meaning of
Article III:4 of the GATT 1994 must be grounded in close
scrutiny of the 'fundamental thrust and effect of the measure
itself'. This examination cannot rest on simple assertion, but
must be founded on a careful analysis of the contested measure
and of its implications in the marketplace. At the same time,
however, the examination need not be based on the actual
effects of the contested measure in the marketplace."628
(Emphasis added)
Without mentioning the particular justifications for the transfer of the “fundamental thrust
and effect” from the practice of de facto application of Article II:4 of GATT to deal with the
challenge of legislation “as such” in the protection of intellectual property, the Panel
considered that concept as an appropriate basis for interpreting the national treatment
obligation under Article 3.1 of the TRIPS. Particularly, the Panel examined the practical
implications of the Regulation on opportunities with regards to the protection of intellectual
property:
“Similarly, in the present dispute, the Panel considers it
appropriate to base its examination under Article 3.1 of the
TRIPS Agreement on the fundamental thrust and effect of the
Regulation, including an analysis of its terms and its practical
implications. However, as far as the TRIPS Agreement is
concerned, the relevant practical implications are those on
opportunities with regard to the protection of intellectual
property.” 629 (Emphasis added)
627
Id. at 7.186. See also Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations"
– Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW (14 January 2002), para.
215.
628
See Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to
Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW (14 January 2002), para. 215, quoting
Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef,
WT/DS161/AB/R, WT/DS169/AB/R (11 December 2000), para. 142, and Appellate Body Report, Japan – Taxes
on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R (4 October 1996) para. 110.
629
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.187.
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In reference to the “extra hurdle” standard that had been approved by the Appellate Body in
the case of US – Section 211 Appropriations Act, the Panel found that the Regulation posed a
significant “extra hurdle” in obtaining GI protection in respect to geographical areas located
outside the European Communities. The reasons for the finding were that (i) the Regulation
did not make available GI protection for a geographical area located in a third country that has
not been qualified to enjoy GI protection under Article 12(3) of the Regulation, and that (ii)
the Regulation required the third country to enter into an international agreement or satisfy the
conditions in Article 12(1) of the Regulation to enjoy GI protection.
The Panel reasoned the practical implications constituting the “extra hurdle” by the fact that
no third country had been recognized under Article 12(3) or entered into an international
agreement or satisfied the conditions under Article 12(1) of the Regulation. 630 Based on that
reasoning the Panel found that the equivalence and reciprocity conditions of the Regulation
affected adversely the effective equality of opportunities with respect to the availability of GI
protection for the persons who wished to obtain protection in respect of geographical areas
located in third countries, including WTO Members, and therefore, constituted less favorable
treatment. 631
Because the Regulation on its face contained formally identical provisions applicable to the
nationals of different members with respect to the availability of GI protection, 632 the Panel
referred to the GATT panel in US – Section 337, which interpreted the "no less favourable"
standard under Article III:4 of GATT in the case where application of formally identical legal
provisions would in practice accord less favourable treatment to imported products in terms of
de facto discrimination.633 It noted that the Panel in Canada – Pharmaceutical Patents
supported the approach of de facto discrimination in examining the minimum standards of
intellectual property protection.634
The panel considered that this reasoning is also appropriate for examining the no less
favorable treatment standard in Article 3.1 of the TRIPS. It means that, despite the provisions
of the Regulation being formally identical in the treatment accorded to the nationals of other
WTO Members and to the European Communities' own nationals, the Regulation is possibly
630
Id at 7.189.
Id. at 7.190.
632
The Panel recognized the formally identical provision provided in the Regulation. See Panel Report, ECGeographical indications, Complaint by Australia, supra note 411, at 7.206.
633
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.207. The Panel
in US-Section 337 stated that the formally identical legal provisions may in fact accord less favorable treatment
to imported products:
"On the one hand, contracting parties may apply to imported products
different formal legal requirements if doing so would accord imported
products more favourable treatment. On the other hand, it also has to be
recognized that there may be cases where application of formally identical
legal provisions would in practice accord less favourable treatment to
imported products and a contracting party might thus have to apply different
legal provisions to imported products to ensure that the treatment accorded
them is in fact no less favourable." (Emphasis added)
See GATT Panel report, US – Section 337, supra note 440, at 5.11.
634
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.209; Panel
Report, Canada-Patent, Complaint by EC, supra note 411, at 7.100-7.105.
631
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regarded a violation of Article 3.1 of the TRIPS. 635 For such a reasoning, the Panel would
have to review the "fundamental thrust and effect" of the Regulation on the effective equality
of opportunities with regard to the protection of intellectual property rights to identify
whether it provided the no less favorable treatment:
“Whether or not the Regulation accords less favourable treatment
to the nationals of other Members than it accords to the European
Communities' own nationals should be examined instead
according to the standard (...) namely, the "effective equality of
opportunities" with regard to the protection of intellectual
property rights. In this examination, we will follow the approach
(…) which focuses on the "fundamental thrust and effect" of the
Regulation.”636 (Emphasis added)
For the lack of formal criterion of nationality, the Panel compared the effective equality of
opportunities for the group of nationals of other WTO Members who may wish to see GI
protection and the group of the European Communities’ own nationals who may wish to seek
GI protection under the Regulation.637 This approach is based on the respective comparison
between the treatment accorded to group of “like” imported products and that accorded to the
group of “like” domestic products which has been contemplated by the Appellate Body in the
case of European Communities – Measures Affecting Asbestos and Asbestos-Containing
Products, in the context of the national treatment obligation in Article III:4 of GATT 1994.638
Based on the analysis of the particular provisions of the Regulation on the definition of a
“designation of origin”, the definition of a “geographical indication”, and the right of
objection, the Panel argued that the Regulation created a link between persons, the territory of
a particular WTO Members, and the availability of protection. 639 Although the European
635
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.210.
Id.
637
Id. at 7.218
638
The Appellate Body in European Communities – Measures Affecting Asbestos and Asbestos-Containing
Products adopted the approach of making a comparison between the group of like imported products and the group
of the like domestic products, for the purpose of examining the less favorable treatment under the national treatment
principle of GATT. The Appellate Body reasoned that:
"(…) A complaining Member must still establish that the measure accords to
the group of 'like' imported products 'less favourable treatment' than it
accords to the group of 'like' domestic products. The term 'less favourable
treatment' expresses the general principle, in Article III:1, that internal
regulations 'should not be applied (…) so as to afford protection to domestic
production'. If there is 'less favourable treatment' of the group of 'like'
imported products, there is, conversely, 'protection' of the group of 'like'
domestic products. However, a Member may draw distinctions between
products which have been found to be 'like', without, for this reason alone,
according to the group of 'like' imported products 'less favourable treatment'
than that accorded to the group of 'like' domestic products. (...)"
See Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing
Products, WT/DS135/AB/R (12 March 2001), para. 100.
639
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.225, 7.226,
7.237.
636
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Communities opposed this argument of the Panel,640 the Panel considered that link as a
“fundamental thrust and effect” of the Regulation, which constituted the less favorable
treatment provided to other WTO Members with respect to the availability of protection. 641
Because Australia claimed at the same time that the Regulation violated the national treatment
obligation under Article III: 4 of GATT, the European Communities argued that the
interpretation of the national treatment obligations in the TRIPS Agreement and GATT 1994
should not lead to "systematic overlap" between them. 642 Accordingly, when the Regulation
was examined under Article III: 4 of GATT, it could not be examined under Article 3.1 of the
TRIPS to avoid the system overlap between GATT and TRIPS. As for the relationship
between national treatment under 3.1 of the TRIPS and national treatment under Article III:4
of GATT, the Panel referred to the finding of the Appellate Body on the relationship between
GATS and GATT to find that there has no hierarchy between the TRIPS Agreement and
GATT 1994, which exist in separate annexes to the WTO Agreement. According to this
finding, the provisions of Article 3.1 of TRIPS and Article II: 4 of GATT shall apply
“cumulatively” and distinctly:
“The Panel notes that there is no hierarchy between the TRIPS
Agreement and GATT 1994, which appear in separate annexes to
the WTO Agreement. The ordinary meaning of the texts of the
TRIPS Agreement and GATT 1994, as well as Article II: 2 of the
WTO Agreement, taken together, indicates that obligations under
the TRIPS Agreement and GATT 1994 can co-exist and that one
does not override the other. This is analogous to the finding of the
Panel in Canada – Periodicals, with which the Appellate Body
agreed, concerning the respective scopes of GATS and GATT
1994. Further, a "harmonious interpretation" does not require an
interpretation of one that shadows the contours of the other. It is
well established that the covered agreements apply cumulatively
and that consistency with one does not necessarily imply
consistency with them all.” 643 (Footnote omitted and emphasis
added)
The Panel also found that the provisions supporting public policy objectives under Article 8
of TRIPS and the lack of a general exceptions provision like Article XX of GATT 1994 have
no impact on the analysis of Article 3.1 of TRIPS. 644 This means that, these factors would not
640
Id. at 7.238.
Id. at 7.239, 7.240
642
Id. at 7.241.
643
Id. at 7.244. For the cumulative application of GATT and GATS, see Panel Report, Canada – Periodicals, at
para. 5.17; Appellate Body Report, Canada – Certain Measures Concerning Periodicals, WT/DS31/AB/R
(30 June 1997), para. 465. For the cumulative application of GATT and other agreements covered by the WTO
Agreement, see e.g. Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear,
WT/DS121/AB/R (14 December 1999), para. 81; and Appellate Body Report, Appellate Body Report, Korea –
Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R (14 December 1999), para.
74; Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas –
Complaint by the United States, WT/DS27/R/USA (22 May 1997), para. 7.160.
644
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.246, 7.247.
641
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affect the assessment of the Panel on the fundamental thrust and effect of the Regulation on
the effective equality of opportunities for the purpose of examining the no less favorable
treatment standard under Article 3.1 of TRIPS. 645 For that reasoning, the Panel concluded that
the Regulation was inconsistent with Article 3.1 of TRIPS because it accorded treatment to
nationals of other WTO Members less favorable than that it accorded to the European
Communities own nationals.646
2.2. TRIPS MFN treatment obligation
Although Australia had withdrawn the claim on the violation of Article 4 of TRIPS before the
Panel rendered its findings,647 the United States challenged the Regulation "as such" and
claimed that the Regulation violated TRIPS MFN treatment obligation. 648 The United States
argued that the Regulation imposed conditions of reciprocity and equivalence on the
availability of protection. The Regulation did not immediately and unconditionally accords
the same advantages with respect to availability of protection that it accords to EC nationals.
Moreover, nationals of some WTO Members that satisfied those conditions would be
accorded more favorable treatment than nationals of the other WTO Members that did not.649
The European Communities argued that in fact it did not apply the conditions in Article 12(1)
of the Regulation to geographical areas located in WTO Members. Otherwise, the conditions
on availability of protection did not apply to nationality but according to the location of
geographical areas. The conditions in Article 12(1) of the Regulation were the same for all
third countries.650
The Panel was in favor of the argument of the United States in the assumption that there was
no possibility that the European Commission would refuse to recognize all third countries
645
It is clear that not only the language of the provisions, but also the practice of GATT standards national
treatment were adopted into the practice of TRIPS. The Panel developed the interpretation of Article 3.1 of
TRIPS by applying the practical requirements of Article III:4 of GATT. The disciplines of national treatment for
trade in goods were brought fully into the protection of intellectual property. The requirement of equally
effective opportunities for competitive imported products became the requirement of equally effective
opportunities for foreigners in protection of intellectual property. However, there are some points still
questionable here. First, how “the opportunities” in protection of intellectual property could be regarded “equally
effective” given the fact that most patent storage and patent applications are held by foreigners in the practice of
developing countries. This fact should also be taken into account in measuring the thresholds and fundamental
effects of national law and regulations in question. Second, in the GATT practice, domestic and imported
products should be in competitive relation to be enjoyed with equally effective opportunities. Where there does
not exist a competitive relation between domestic and foreign holders of intellectual property rights, the
justification for the adoption of the GATT practice into the TRIPS practice is questionable. Third, the rationale
of the equally effective opportunities under the GATT national treatment is a level “playing field” for
competitive products by eliminating the discriminatory tariff and non-tariff measures that restrict importation.
When the “equality effective opportunities” is transferred into the TRIPS practice, the rationale of the GATT
national treatment has been changed because it stands for the strengthening rather than elimination of the
restrictions on importation.
646
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.249.
647
Id. at 7.54, 7.55.
648
Id. at 7.689.
649
Id. at 7.689, 7.690.
650
Id. at 7.691, 7.692.
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under the procedures in Article 12(3).651 However, the Panel considered that even in such a
case, the Regulation would be inconsistent with the national treatment obligation. Because the
Panel had found the Regulation violated Article 3.1 of TRIPS, it exercised judicial economy
with respect to that claim.652
The analysis of the findings of the Panel in this case reveals that although the Panel reminded
itself that there exists different rationale for the national treatment obligations under Article
3.1 of TRIPS and Article III:4 of GATT, 653 the Panel adopted fully the examination standards
of less favorable treatment from the practice of de facto application of GATT national
treatment in interpreting the standards of TRIPS national treatment, without any further
reasoning. Accordingly, the concept of “fundamental thrust and effect” was applied in
examining the consistency of domestic legislation with TRIPS national treatment obligation.
In the findings of the Panel in the case of US-Section 211 Omnibus Appropriations Act, the
different language in treatment existing in the statutory language led to a finding of the
Appellate Body of violation of Articles 3.1 and 4 of TRIPS for applying not only the actual
application, but also the possible application of legislation in terms of the “extra hurdle”.
Differently, in this case, even where the statutory language contained a formally identical
language in treatment, the Panel found that the challenged legislation violated Article 3.1 of
TRIPS as the result of applying both the “extra hurdle” and the “fundamental thrust and
effect”.
Accordingly, when domestic legislation is subject to the challenge of legislation “as such”,
not only the actual and possible application of legislation, but also the practical implications
of legislation are possibly subject to the review of the panel under the TRIPS national
treatment obligation. Legislation as a neutral trade measure concerning Article III: 4 of GATT
on the marketplace becomes the protection of intellectual property under Article 3.1 of TRIPS
on grounds of different policy considerations. The assessment of its practical implication,
therefore, seems to be more difficult and political oriented.
In this respect, the adoption of the concept of “fundamental thrust and effect” would certainly
give rise to the strictness of TRIPS national treatment requirements with regard to domestic
legislation in the protection of intellectual property. Such specific accounts need to be
carefully taken in bringing national legislation into conformity with the TRIPS.
The panel finding on the cumulative application requirement with respect to national
treatment and MFN obligations under TRIPS and GATT poses another challenge to domestic
651
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.708.
Id. at 7.709.
653
The Panel considered that Article 3.1 applies to nationals, not products as GATT does:
“The Panel now examines the second element of this claim which is whether
the nationals of other Members are accorded less favourable treatment than
the European Communities' own nationals. It is useful to recall that
Article 3.1 of the TRIPS Agreement combines elements of national treatment
both from pre-existing intellectual property agreements and GATT 1994.
Like the pre-existing intellectual property conventions, Article 3.1 applies to
"nationals", not products (…)” (Footnote omitted)
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.181.
652
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legislation in the protection of intellectual property in general in formulating legislation for
the protection of patents in particular.654 This finding of the panel provides an answer to the
question under discussion of the scholars on the relationships among triangles: GATT, GATS
and TRIPS.655
Irrespective of the different comments on the specific features of TRIPS, 656 specific areas as
applied to national treatment and MFN obligations under GATT have been transferred into
the practice of TRIPS national treatment and MFN obligations. Although TRIPS has no
general exception clause as GATT does, the application of GATT standards to the
examination of national treatment and MFN obligations under TRIPS has no modification at
any rate. The situation does not change with the existence of the objectives and principles
clauses in TRIPS. Consequently, domestic legislation can face tougher challenges from the
importation of GATT standards in the interpretation and examination of TRIPS principle
obligations.
III. Domestic law under WTO Jurisprudence
In implementing the principle of the independence of patents, domestic legislation should not
only be subject to the principles and norms of TRIPS, but also be in compliance with the
WTO dispute settlement rules. The fact is that most TRIPS disputes brought before the WTO
panels related to claims about domestic legislation. 657 Therefore, the panels are often
requested by the claimants to find the inconsistency of the specific national law or regulation
with certain TRIPS provisions. Generally, the rulings developed from the WTO and GATT
practice are adopted in dealing with the claims about domestic legislation on the protection of
intellectual property.658 The WTO dispute settlement mechanism for handling the disputes
654
See generally, Joost Pauwelyn, Conflict of Norms in Public International Law How WTO Law Relates to
other Rules of International Law (Cambridge University Press, 2003), pp. 158-164 (discussing the accumulation
and conflict norms of GATT, GATS and TRIPS). See also Thomas Cottier and Krista Nadakavukaren Schefer,
‘The Relationship Between World Trade Organization Law, National Law and Regional Law’, Journal of
International Economic Law, (1998), pp. 86, 104 (discussing the effects of the WTO rulings on national
jurisdiction)
655
See William J. Davey and Werner Zdouc, ‘The Triangle of TRIPs, GATT and GATTS’, in Intellectual
Property: Trade, Competition, and Sustainable Development, World Trade Forum, Vol. 3. , Thomas Cottier and
Petros C. Mavroidis eds. (The University of Michigan Press, 2003), p. 66. Thomas Cottier and Krista
Nadakavukaren Schefer, supra note 654, at 86, 104.
656
See William J. Davey and Werner Zdouc, supra note 655, at 67-68. See also Thomas Cottier and Krista
Nadakavukaren Schefer, supra note 655; pp. 67-68; Wilfred F. Ethier,’ Intellectual Property Rights and Dispute
Settlement in the World Trade Organization’, Journal of International Economic Law (Vol. 2004), pp. 449-458.
657
See Matthijs Geuze and Hannu Wager, ‘WTO Dispute Settlement Practice Relating to the TRIPs Agreement’,
Journal of International Economic Law, (1999), pp. 347-384 (discussing the WTO challenges to the domestic
legislation of WTO Members in securing TRIPS obligations); Mathias Oesch, supra note 42, at 188-200
(discussing the jurisdiction of the WTO panels and the Appellate Body in reviewing domestic law under the
DSU).
658
See Michael Lennard, ‘Navigating by the Stars: Interpreting the WTO Agreements’, Journal of International
Economic Law (2002), pp. 52-53 (discussing the specific features in interpreting TRIPS by the WTO panels).
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concerning TRIPS provisions are becoming a real challenge for domestic legislation relating
to intellectual property in many cases.659
Perception of the recently developed WTO rules on the compliance of domestic legislation
will identify the present challenge for national legislation in compliance with the TRIPS. The
general account in this regard will be withdrawn from the analysis of certain WTO disputes
relating to the claims about domestic legislation, with the focus being on those relating to
TRIPS obligations.
1. Possible WTO law violation of discretionary legislation
Apart from the “extra hurdle” and the “fundamental thrust and effect” as discussed above,
discretionary legislation may also be subject to the finding of a violation on the basis of its
language per se being inconsistent with WTO law. In the practice of GATT/WTO, the
distinction between mandatory and discretionary legislation has been well recognized for the
purpose of identifying whether national legislation per se violated GATT obligations.660
The term mandatory legislation is used to refer to legislation, which on a mandatory basis
requires the executive authority to act in a manner inconsistent with its GATT/WTO
obligations.661 The term of discretionary legislation is used to refer to legislation, which
provides the executive authority with the discretion to decide whether to act inconsistently
with its GATT/WTO obligations.662 In the practice of GATT, when domestic legislation was
subject to the challenge of legislation “as such”, it could only be found in the violation of its
GATT obligations when it was defined as mandatory legislation. 663 Otherwise, the challenged
legislation per se was not regarded inconsistent with its GATT obligations, even if it was
discretionary legislation.664 The finding of GATT inconsistency in that case should await the
examination of the actual action of the executive authority that was vested with the discretion
from discretionary legislation.665
659
See Adrian Otten, ‘The First Five Years (1995-1999): Implementing and Enforcing TRIPs Obligations’, in
Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum, Vol. 3 eds.
Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), pp. 108-109. See also
Matthijs Geuze and Hannu Wager, supra note 657, at 347-384.
660
See generally, Mandatory and Discretionary Legislation, in WTO Appellate Body Repertory of Reports and
Awards 1995-2004, available at http://www.wto.org/english/tratop_e/dispu_e/repertory_e/m1_e.htm. For the
history and backgrounds of mandatory and discretionary legislation distinction under GATT/WTO, see Sharif
Bhuiyan, Mandatory and Discretionary Legislation: ‘The Continued Relevance of The Distinction under the
WTO’, Journal of International Economic Law 2002), pp. 671-604 (arguing for the continuance of the
distinction under the WTO); For the criticisms of the continuing distinction under the WTO, see Kwan Kiat Sim,
‘Rethinking the mandatory/discretionary legislation distinction in WTO jurisprudence’, World Trade Review
(Vol. 2, 2003), pp. 33-64
661
See generally, Mandatory and Discretionary Legislation, supra note 660. See also Sharif Bhuiyan, supra note
660.
662
Id.
663
Id.
664
Id.
665
Id.
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The situation has been changing recently. The WTO panels found that WTO law did not
preclude the possibility of WTO inconsistency with respect to discretionary legislation
either.666 The notable reasoning of that finding is that the “chilling effect” on economic
activities of individuals may be caused from the “mere existence of legislation” in general.
The supportive context for the adoption of that finding is the provision of Article XVI: 4 of
the WTO Agreement. In this respect, a brief discussion on the findings of the Panel in the
case of United States-Sections 301-304 of the Trade Act of 1974 667 will provide some useful
implications to national legislation in realizing the principle of independence of patents under
the WTO rules.
This case concerned Sections 301-304 of the US Trade Act of 1974. 668 The EC raised a
number of claims about the WTO’s inconsistency in these sections. Particularly, the EC
claimed that Section 304 violated Article 23.2(a) of the Dispute Settlement Understanding
(“DSU”). The argument was that this section mandated the United States Trade
Representative (“USTR”) to make a unilateral determination as to whether another WTO
Member had violated US rights under the WTO Agreements within 18 months, namely,
before the adoption of a panel or Appellate Body findings on the matter, which takes longer
than 18 months from the date of request for consultations under the DSU. Therefore, this
section was inconsistent with the United States obligation under Article 23(2) of DSU under
which such determination should be made in accordance with the relevant DSU procedure.669
The United States argued that even though Section 304 mandated the USTR to make a
determination at the end of 18-month period, it did not mandate the USTR to make a
determination of inconsistency within such period. Otherwise, the USTR was vested full
discretion to decide the contents of the determination. Accordingly, the USTR had the
discretion to make the determinations in the manner consistent with the requirements of the
DSU. On the basis of the GATT/WTO jurisprudence on the distinction between mandatory
and discretionary legislation, Section 304 could not by itself be regarded as WTO inconsistent
because it did not preclude the United States from acting consistently with Article 23.2(a).670
Concerning the issue of mandatory and discretionary legislation, the EC argued that the
distinction in the light of the GATT practice would be no longer appropriate to the context of
WTO law. It was necessary to distinguish between two types of discretionary legislation. The
first type is the “genuinely discretionary”, which refers to domestic law that is merely meant
to transfer decision-making authority from legislative body to executive authorities. The
second type is the “not genuinely discretionary” type, which refers to domestic law that does
not preclude the executive authorities from acting consistently with WTO law. However, it is
intended to encourage violations of WTO laws by its design, structure and architecture.671
666
See generally, ‘The possibility of challenging laws “as such”’, in Possible Object of a Complaint –
Jurisdiction of Panels and the Appellate Body (the WTO’s homepage), available at
http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c5s5p1_e.htm (discussing the change in the
rulings of the panels and the Appellate Body on the distinction of mandatory and discretionary legislation).
667
See Panel Report, United States-Sections 301-304 of the Trade Act of 1974, WT/DS152/R (22 December
1999) [hereafter “US-Sections 301-310”].
668
Id. at 1. 2.
669
Id. at 4.11-4.18, 7.2-7.7.
670
Id. at 4.19-4.26, 7.9.
671
Id. at 4.249-4.255.
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The Panel was in favor of the United States in the finding that the statutory language of
Section 304 neither mandates the USTR to make a determination of inconsistency nor
precludes the USTR from making such a determination for the aggregate effect of the
Statement of Administrative Action ("SAA") and US Statements before the Panel. 672
However, the Panel rejected the argument of the United States on the distinction between
mandatory and discretionary legislation for the purpose of determining the WTO
inconsistency. 673 Particularly, the Panel reasoned that:
“The question is then whether, on the correct interpretation of
the specific WTO obligation at issue, only mandatory or also
discretionary national laws are prohibited. We do not accept
the legal logic that there has to be one fast and hard rule
covering all domestic legislation. After all, is it so implausible
that the framers of the WTO Agreement, in their wisdom,
would have crafted some obligations which would render
illegal even discretionary legislation and crafted other
obligations prohibiting only mandatory legislation.” (Emphasis
added)
“[S]ince Article 23 may prohibit legislation with certain
discretionary elements and therefore the very fact of having in
the legislation such discretion could, in effect, preclude WTO
consistency.” (Emphasis added)674
Abandoning the classic argument for precluding discretionary legislation from the WTO
inconsistency, the Panel reasoned the possibility of violating WTO law with regard to
discretionary legislation per se, though it limited its reasoning within the interpretation of the
specific WTO obligations under Article 23 of DSU.
672
Id. at 7.126, 7.131-7.134.
See Panel Report, US-Section 301-310, supra note 667, at 7.54 – 757.
674
Id. at 7.53-7.54.
673
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1.1.“Chilling effect” of domestic legislation
The Panel opined that the general objects and purposes of GATT/WTO are to create market
conditions conductive to individual economic activity in national and global markets and
provide a secure and predictable multilateral trading system. 675 Therefore, the indirect impact
on individuals is one of the principal reasons constituting the violation of GATT/WTO. In
other words, for a treaty that benefits from the activity of individual operators the legislation
itself may be regarded a breach due to its significant “chilling effect” on the economic
activities of individuals. This reasoning was found as follows:
“Why is it, then, that legislation as such was found to be
inconsistent with GATT rules? If no specific application is at
issue – if, for example, no specific discrimination has yet been
made – what is it that constitutes the violation?
Indirect impact on individuals is, surely, one of the principal
reasons. In treaties, which concern only the relations between
States, State responsibility is incurred only when an actual
violation takes place. By contrast, in a treaty the benefits of
which depend in part on the activity of individual operators the
legislation itself may be construed as a breach, since the mere
existence of legislation could have an appreciable "chilling
effect" on the economic activities of individuals.”676 (Emphasis
added)
As the Panel argued, the general rationale for the findings of the GATT panels and the WTO
panels on the violation of domestic laws in imposing discriminatory taxation on imported
products was the negative effect of such domestic laws on individual economic operators. The
risk or threat of discriminatory taxation in the legislation affected adversely the relative
competitive opportunities between imported and domestic products. The “chilling effect” of
legislation would be a shift in consumption from imported to domestic products, caused by
the increased cost or a negative impact on economic planning and investment with respect to
imported products.677 Such rationale could also be found in this case.
Because Section 304 preserved the right for unilateral measures to be taken inconsistent with
DSU rules and procedures, it produced a “chilling effect” causing serious damage both to
other WTO Members and the marketplace. The damage caused directly to other WTO
Members when they are faced with a threat of unilateral action and may be forced to serve the
demands of the Member excerpting the threat even before the DSU procedures have been
activated. The damage also affects the marketplace because the statutory language permitting
conduct prohibited by the WTO may make economic operators change their commercial
behavior in a way that distorts trade.678
675
Id. at 7.71.
Id. at 7.80-7.81.
677
Id. at 7.84.
678
See Panel Report, US-Section 301-310, supra note 667, at 7.89-7.90.
676
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For these reasons, the Panel argued that Section 304 itself had an equally “chilling effect” on
both other WTO Members and the marketplace and therefore, constituted for the WTO an
inconsistency. The Panel, however, made its finding be limited within the obligations in
Article 23.2(a) of the DSU:
“In conclusion, the risk of discrimination was found in GATT
jurisprudence to constitute a violation of Article III of GATT –
because of the "chilling effect" it has on economic operators.
The risk of a unilateral determination of inconsistency as found
in the statutory language of Section 304 itself has an equally
apparent "chilling effect" on both Members and the marketplace even if it is not quite certain that such a determination
would be made (…)”
Consequently, the statutory language of Section 304 (…) must be
considered presumptively to be inconsistent with the obligations
in Article 23.2(a). The discretion given to the USTR to make a
determination of inconsistency creates a real risk or threat for
both Members and individual economic operators that
determinations prohibited under Article 23.2(a) will be imposed
(…) it is the core element of the prima facie inconsistency of the
statutory language of Section 304.”679 (Emphasis added)
The Panel seemed to emphasize the special adverse damage caused by Section 304 of the US
Trade Act to the other WTO Members and the marketplace. This may be the particular
response to the fact that the section was one of those that was much criticized for a long time
during and after the Uruguay Round of GATT negotiations.680 However, after finding the
prima facie inconsistency of the statutory language of Section 304, the Panel examined the
non-statutory elements of Section 304, including SAA and US Statements before the Panel.
Virtually, the Panel found that the prima facie violation had in fact been removed and no
longer existed and therefore, this section was not inconsistent with Article 23 of DSU. 681 This
conclusion was commented on as a compromise solution of the Panel in this special case. 682
Either way, it posed a condemnation of the United States regarding the future application of
this section. It is reflected in the warning that the finding of inconsistency with the WTO
would not be warranted whenever the non-statutory elements that removed the prima facie
inconsistency of its statutory language no longer existed. The warning massage of the Panel
stated as follows:
679
Id. at 7.91, 7.96.
See Duncan Matthews, Globalising Intellectual Property Rights The TRIPs Agreement (Routledge, 2002), p.
25. See also Terence P. Stewart, supra note 165, at 2256. Many criticisms on the imposition of Section 301 and
Special 301 of the United States were raised in the meetings of the Negotiating Group on TRIPS, especially on
the fact of United States took a unilateral action against Brazil for the claim concerning inadequate protection of
IPRs during the Uruguay Round. See Meeting of Negotiating Group of 17-21 October 1988, supra note 174, at
27; Meeting of Negotiating Group of 3-4 July 1989, supra note 174, at 4; Meeting of Negotiating Group of 12-14
July 1989 supra note 174, at 5.
681
See Panel Report, US-Section 301-310, supra note 667, at 7.104, 7.131.
682
See Yoshiko Naiki, ‘The Mandatory/Discretionary Doctrine in WTO Law: The US – Section 301 Case and its
Aftermath’, Journal of International Economic Law (Vol. 7, 2004), p. 54.
680
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“For the reasons outlined above we find that Section 304 is not
inconsistent with US obligations under Article 23.2(a) of the
DSU.
Should the undertakings articulated in the SAA and confirmed
and amplified by the US to this Panel be repudiated or in any
other way removed by the US Administration or another branch
of the US Government, this finding of conformity would no
longer be warranted.”683 (Emphasis added)
Despite this,684 the Panel paved the way for a new approach to the possibility WTO
inconsistency in discretionary legislation. To this end, there are two implications drawn from
the findings of the Panel that may be useful to domestic law in TRIPS implementation.
First, TRIPS contains in particular the norms for the protection of the interests of individuals.
TRIPS stipulates clearly the obligations of WTO Members to protect the intellectual property
rights of nationals of all other WTO Members in compliance with the non-discrimination
principles provided. In this sense, the reasoning behind the “chilling effect” on the economic
activities of individuals is evidently compatible with TRIPS norms.
Second, TRIPS provides for the substantive obligations of intellectual property protection,
which require WTO Members to take positive action in making available in domestic
legislation a sound legal basis for the protection of intellectual property rights. In this regards,
the rationale for the WTO inconsistency of domestic law caused by its negative effect on
individual economic operators may be subject to a broader view with respect to domestic law
under TRIPS obligations. Taking these accounts, domestic legislation under TRIPS
obligations seems to be at higher risk under the reasoning of the “chilling effect” than for
inconsistency with the WTO of discretionary legislation.
1.2. Article XVI: 4 of the WTO Agreement
Although the Panel did not give its findings directly on the inconsistency of Section 304 with
Article XVI: 4 of the WTO Agreement, it interpreted the WTO law violation with respect to
domestic law in the context of this provision. In other words, the general provision in this
article served as an important context for identifying the possibility of WTO inconsistency in
discretionary legislation. It reasoned that as a general proposition, Article XVI: 4 of the WTO
Agreement confirmed that legislation as such, independently from its application in specific
cases, might breach WTO obligations. The Panel based its reasoning on the following
grounds:
“Article XVI: 4 of the WTO Agreement explicitly confirms that
legislation as such falls within the scope of possible WTO
violations. It provides as follows:
683
See Panel Report, US-Section 301-310, supra note 667, at 7.135-7.136.
Some criticized the deference of the Panel to the U. S. statements in this case, which was quite different from
the approach of the Panel in the case of India-Patent, Complaint by US, supra note 287. See Daya Shanker,
supra note 76, at174-175
684
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"Each Member shall ensure the conformity of its
laws, regulations and administrative procedures with
its obligations as provided in the annexed
Agreements" (Emphasis added).
The three types of measures explicitly made subject to the
obligations imposed in the WTO agreements – "laws, regulations
and administrative procedures" – are measures that are applicable
generally; not measures taken necessarily in a specific case or
dispute. Article XVI: 4, though not expanding the material
obligations under WTO agreements, expands the type of
measures made subject to these obligations.”685 (Footnote
omitted)
The Panel also clarified the positive nature of the provision in Article XVI: 4 of the WTO
Agreement, which is different from the negative nature as stated in Article 27 of the Vienna
Convention. For the positive nature in the wording, Article XVI:4 not only abandons the
invocation of the provisions of domestic legislation as a justification for WTO
inconsistencies, but also demands the WTO Members bring their domestic law into
conformity with WTO obligations. The Panel made this point as follows:
“Article XVI: 4 goes a step further than Article 27 of the Vienna
Convention. Article 27 of the Vienna Convention provides that
"[a] party may not invoke the provisions of its internal law as
justification for its failure to perform a treaty". Article XVI: 4, in
contrast, not only precludes pleading conflicting internal law as a
justification for WTO inconsistencies, but requires WTO
Members actually to ensure the conformity of internal law with
its WTO obligations.”686 (Emphasis added)
In this approach, it is appropriate to read into the context of Article XVI: 4 the provision in
Article 1.1 of TRIPS. For giving effect to the substantive provisions in TRIPS, this article
imposes a general obligation on WTO Members to respond positively in their domestic
legislation conform to the principles and norms of TRIPS. Article 1.1 provides as follows:
“1.
Members shall give effect to the provisions of this
Agreement. Members may, but shall not be obliged to,
implement in their law more extensive protection than is required
by this Agreement, provided that such protection does not
contravene the provisions of this Agreement. Members shall be
free to determine the appropriate method of implementing the
provisions of this Agreement within their own legal system and
practice.” 687 (Emphasis added)
685
Id. at 7.41.
Id. at footnote 652 to para. 7.41.
687
See the TRIPS, supra note 10, art.1.1.
686
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To a certain extent, the finding of the Panel in the case of EC-Protection of trademarks and
geographical indications for the agricultural products and foodstuffs was a change in the
clarification of the obligations under Article 1.1 of TRIPS. Accordingly, the first sentence
creates an obligation to give effect to the provisions of TRIPS after the relevant transitional
period with respect to each category of intellectual property rights. The second sentence
recognizes the freedom of domestic legislation to implement the standards of protection to an
extent more extensive than that required by the minimum standards in TRIPS. However, such
freedom is subject to the consistency condition. 688 The relevant finding of the Panel in that
case was that:
“The Panel notes that the first sentence creates an obligation for
Members to give effect to the provisions of the TRIPS Agreement
and the second sentence recognizes Members' freedom to
implement more extensive protection, subject to a condition.
After the expiry of the transitional arrangements in Articles 65
and 66 (and 70.8 and 70.9), as applicable, a Member is obliged
to give effect to the provisions of the Agreement with respect to
each category of intellectual property right, irrespective of
whether it implements more extensive protection in the same or
another category of intellectual property right.”689
In addition, the Panel in the case of India-Patent protection for Pharmaceutical and
Agricultural Chemical Products clarified that TRIPS, different from the other covered
agreements of the WTO Agreement, substantially requires the “positive action” of the WTO
Members in the implementation of the obligations concerning domestic legislation. This point
could be seen in the following finding of the Panel:
“In our view (…) Most of the provisions in the WTO Agreement
aim to prevent governments from taking measures that might be
harmful to trade and, therefore, concern the existence of
legislation requiring governments to act in a way that is
inconsistent with the obligations under the WTO Agreement (…)
The TRIPS Agreement is different from other covered agreements
in that most of its provisions require Members to take positive
action, in this particular case to grant exclusive marketing rights
pursuant to Article 70.9. in situations where it is necessary for a
688
The condition “not contravene the provisions of this Agreement” was applied in the finding concerning the
inconsistency of Article 12a(2)(b) with Article 3.1 of TRIPS (see, Panel Report, EC-Geographical indications,
Complaint by US, supra note 411, at 7.431) and therefore, violated Article 1.1 of TRIPS in the second sentence
provision:
“This conclusion refers only to the United States' claim under Article 1.1 of
the TRIPS Agreement and is without prejudice to the Panel's conclusion…that
certain aspects of the inspection structures requirements are inconsistent with
Article 3.1 of the TRIPS Agreement. Those aspects contravene the provisions
of the Agreement within the meaning of the proviso in the second sentence of
Article 1.1.”
See, Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.767.
689
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.755.
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Member to give effect to such positive action, a failure to
provide the executive with the required authority constitutes a
breach of the Agreement, because the lack of authority mandates
the executive not to comply with the Member’s WTO
obligations.”690 (Emphasis added)
The Appellate Body confirmed the need to interpret the obligations under Article 70.9 of
TRIPS under the light of Article XVI: 4 of the WTO Agreement in dealing this case. 691 The
reasoning in this line resulted in the finding of the Appellate Body upholding the conclusion
of the Panel that India was in violation of Article 70.9 of TRIPS.692
For the compatible feature of the positive obligations under Article XVI: 4 of the WTO
Agreement and those under the principles and substantive provisions of TRIPS, the
requirements applied in examining the WTO consistency under Article XVI: 4 with respect to
domestic legislation will arguably be applied in measuring the TRIPS consistency. In this
respect, the rationale lying behind the obligations of WTO law is certainly different from that
which existed under the Paris Convention. It is necessary, therefore, to take into account the
substantially different contexts of the two systems in the adoption of the independence of
patents under the WTO framework.
2. Detailed examination and independent assessment of
the WTO panels on domestic law
Different from the situation under the Paris Convention, domestic legislation under WTO law
is subject to the detailed examination of the WTO panels when there appear claims about the
WTO inconsistency with domestic legislation. The tendency of examining more and more
strictly domestic legislation is reflected in the recent WTO cases. The extrusive examination
of domestic legislation will be the significant limitations to the discretion given to domestic
legislation in the fulfillment of WTO obligations.
These limitations are getting more burdensome with the views of the panels regarding
domestic law as a matter of evidence of the compliance of domestic legislation with WTO
law. Consequently, domestic legislation is subject to the examination of both panels and the
690
See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.53.
In India-Patent, Complaint by US, the Appellate Body found that:
“India’s argument must be examined in the light of Article XVI:4 of the WTO
Agreement, which requires that:
Each Member shall ensure the conformity of its
laws, regulations and administrative procedures with its
obligations as provided in the annexed Agreements.”
See Appellate Body Report, India-Patent, Complaint by US, supra note 423, at 79.
692
The Appellate Body upheld the finding of the Panel that India violated its obligations under Article 70.9 of
TRIPS:
“For these reasons, we agree with the Panel that India should have had a
mechanism in place to provide for the grant of exclusive marketing rights
effective as from the date of entry into force of the WTO Agreement, and,
therefore, we agree with the Panel that India is in violation of Article 70.9 of
the TRIPS Agreement.”
See Appellate Body, India-Patent, Complaint by US, supra note 423, at 84.
691
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Appellate Body in the relevant cases. For the perception of the WTO rules on the legal status
of domestic legislation, it is worth analyzing the development in the views of the panels and
the Appellate Body in reviewing domestic legislation in the recent WTO cases, with the focus
on TRIPS related disputes.
2.1. Detailed examination of the panels regarding the relevant domestic law
In the case of India-Patent protection for Pharmaceutical and Agricultural Chemical
Products, the first TRIPS related dispute brought before the WTO Dispute Settlement Body,
the Panel had a chance to examine Indian domestic law for assessing the fulfillment of India
regarding the obligations under Articles 70(8) and 70(9) of TRIPS. In this case, the Panel
admitted that under Article 1.1 of TRIPS, India had jurisdiction to “decide how to implement
its obligations under Article 70.8”. And therefore, the Panel recognized that the “mere fact” of
India relying administrative practice to receive mailbox applications without change in its
legislation did not itself constitute a violation of India’s obligations under Article 70.8.693
However, the Panel reasoned that in order to make an objective assessment regarding the
consistency of the current Indian mechanism with TRIPS, the Panel needed to analyze the
current Indian system from the viewpoint of whether it ensured a degree of legal security and
predictability for patent applicants of other WTO Members.694 The Panel interpreted the
standards of legal security and predictability under Article 70.8 by application of the concept
“legitimate expectation” in the light of GATT practice, 695 and then assessed Indian domestic
law relying on such standards.696 Although the Appellate Body consequently reversed the
application of the concept “legitimate expectation” in interpreting TRIPS obligations under
Article 70.8,697 the Appellate Body approved “the detailed examination” of the Panel
regarding Indian domestic law.698
693
See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.33.
Id. at 7.34.
695
Id. at 7.31.
696
Id. at 7.34.
697
See Appellate Body Report, India-Patent, Complaint by the United States, supra note 423, at 48. There are
several different opinions on this point. The Appellate Body found that this concept was only appropriate to deal
with “non-violation” complaints, while the matter of whether or not “non-violation” remained to be determined
by the Council for Trade-Related Aspects of Intellectual Property pursuant to Article 64.3 of TRIPS (Appellate
Body Report, para. 42). Some scholars did not agree with the view of the Appellate Body and argued for the
applicability of this concept. They suggested that the Appellate Body confused the approach of the Panel on the
doctrine of non-violation complaints. See Thomas Cottier and Nadakavukaren, Schefer Krista, supra note 654, at
87; Thomas Cottier and Nadakavukaren, ‘Good Faith and the Protection of Legitimate Expectations in the
WTO’, in Marco Bronkers and Reinhard Quick (eds.), New Directions in International Law, Essays in Honour
of John H. Jackson (Kluwer Law International, 2000), pp. 60-61. Others opined that, this concept should also be
applicable to the case of direct violation of TRIPS obligations as well. See William J. Davey and Werner Zdouc,
supra note 655, at 57-58.
698
See Appellate Body Report, India-Patent, Complaint by US, supra note 423, at 68. In reference to the GATT
practice, particularly the findings of the Panel in the case of United States-Section 337 where the Panel
conducted the “detailed examination” of the relevant US legislation and practice, the Appellate Body found that
the current case was comparable for carrying out such a kind of examination with respect to Indian domestic
law. Actually, the GATT practice was inconsistent in dealing with this matter. Generally, the GATT panels
adopted a careful approach in the assessment of domestic law. This remark was reflected in a finding of the
Panel in US-Tobacco:
694
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Without deference to the interpretation of India of its own legislation, the Panel conducted the
independent assessment of the relevant Indian law and administrative practices. From the
analysis of the particular provisions of Indian law, the Panel rendered its own assessment on
the legal status of Indian administrative practice on the mailbox system under its national
legal order. The Panel stated:
“First, under Section 12(1) of the Patents Act 1970, when the
complete specification has been filed in respect of a patent
application, the Controller must refer the matter to an examiner.
Section 12(2) clearly obliges the examiner ordinarily to complete
examination within 18 months from the date of reference from
the Controller. Under Section 15(2) of the Patents Act, any
application for the grant of a patent on a pharmaceutical or
agricultural chemical product must be refused by the Controller
for lack of patentability. In light of these provisions, the current
administrative practice creates a certain degree of legal
insecurity in that it requires Indian officials to ignore certain
mandatory provisions of the Patents Act.”699 (Emphasis added)
For the proposition on the “legal insecurity” of the mailbox administrative practice having
been in place, the Panel supposed that “even if” Patent Office officials did not examine and
reject mailbox applications, a competitor might seek a judicial order to force them to do so in
order to obtain a rejection of a patent claim. 700 Moreover, the evidence701 submitted by India
to substantiate its interpretation on its own legal system was rejected. Instead, the Panel made
independently its own assessment on the essence of the two submitted Indian Supreme Court
judgments and found that they did not support the position of India on the valid status of the
current “mailbox” administrative practice. The Panel indicated its independent assessment of
the evidence and the relevant proposition submitted by India concerning the judgments of its
Supreme Court in the following statement:
“[The Panel] noted in this regard that previous panels, consistent with the
practice of international tribunals, had refrained from engaging in an
independent interpretation of domestic laws, and had treated the
interpretation of such laws as questions of fact.” (Emphasis added)
See Panel Report, US-Tobacco, supra note 445, at para. 75.
699
See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.35.
700
Id. at 7.37.
701
India referred to two judgments of its Supreme Court, of which the Supreme Court held that if there were no
statutory rules in force or even if there are statutory rules but they are silent on any particular subject, it was
competent to the Government to make appropriate rules “to fill in the lacuna in the statutory rules”. The other
judgment stated that where a statute was to be implemented by a designated authority, Parliament must have
assumed that the designated authority would act properly and responsibly, with a view to doing what was best in
the public interest and most consistent with the policy of the statute. By these judgments, India explained that
even if there were any statutes, but were silent on any particular subject, the Government was competent to fill in
the lacunae in the statute rules. Moreover, if there were certain deviations from the guidelines set for in-house
management of the government departments, the courts did not need to interfere. It was to maintain that mailbox
applications had a proper legal status under Indian law and the current mechanism of administrative instructions
on the filing system was valid under the Patents Act and the Constitution. See Panel Report, India-Patent,
Complaint by US, supra note 41, at 4.10, 4.12.
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“ The evidence submitted by India - two Supreme Court rulings
on administrative practices - does not sufficiently demonstrate
that a court will uphold the validity of administrative actions
which apparently contradict mandatory legislation. One case
cited by India involved a situation where the administrative
practice was not contrary to the statutory provisions. In the other
case, the Supreme Court reached a conclusion that administrative
guidelines had no statutory force and conferred no right on any
citizen to complain that they were not being met. These cases
may confirm the Indian position that its reliance on an
administrative practice regarding the handling of pharmaceutical
and agricultural chemical product patent applications is not
unconstitutional, but they do not specially answer the question
we are facing, i.e., whether a court will uphold the validity of
administrative actions which apparently contradict mandatory
legislation.” 702 (Emphasis added)
2.2. Detailed examination of the Appellate Body regarding the relevant domestic law
In its appeal, India contended that the Panel erred in its treatment of India’s municipal law
because municipal law should be a fact that must be established before an international
tribunal by the party relying on it. India viewed that the Panel did assess the Indian domestic
law as a law to be interpreted by the Panel. It argued that the Panel should have followed the
GATT practice703 and given India the “benefit of the doubt” as to the status of its mailbox
system under its own domestic law.704
The Appellate Body reasoned that in public international law, municipal law may serve as
evidence of facts, otherwise, it may also constitute “evidence of compliance or noncompliance” with international obligations.705 Therefore, it was needed for the Panel to have a
702
See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.37.
India referred to Panel Report. Canada-Measures Affecting the Sale of Gold Coins, L/5863, 17 September
1985, not adopted, paras. 58-59, and Panel Report, United States- Tobacco, supra note 445, at 75 (stating that
the general approach adopted by the previous GATT panels was that the panels refrained in their findings from
the independent assessment of the related domestic law).
704
See Appellate Body Report, India-Patent, Complaint by US, supra note 423, at 9. 64.
705
Id. at 65. The Appellate Body reconfirmed and clarified this reasoning in US-Section 211 Omnibus, which put
domestic law and the panel’s examination of domestic law into the scope of appellate review under the DSU
provisions. This point could be read in the following findings of the Appellate Body:
“Our rulings in these previous appeals are clear: the municipal law of WTO
Members may serve not only as evidence of facts, but also as evidence of
compliance or non-compliance with international obligations. Under the
DSU, a panel may examine the municipal law of a WTO Member for the
purpose of determining whether that Member has complied with its
obligations under the WTO Agreement. Such an assessment is a legal
characterization by a panel. And, therefore, a panel's assessment of municipal
law as to its consistency with WTO obligations is subject to appellate review
under Article 17.6 of the DSU.”
“To address the legal issues raised in this appeal, we must, therefore,
necessarily examine the Panel's interpretation of the meaning of Section 211
703
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detailed examination of the relevant Indian domestic law to assess the compliance of India
with its obligations under TRIPS. Particularly, it was necessary for the Panel to seek a
detailed understanding of the operation of the Indian Patents Act in relation to administrative
practice in order to assess whether India had complied with Article 70.8. The Appellate Body
explained that the Panel did not interpreted Indian law “as such”, but only for the purpose of
determining whether India had met its obligations under TRIPS. This reasoning was inscribed
in the following findings:
“It is clear that an examination of the relevant aspects of Indian
municipal law and, in particular, the relevant provisions of the
Patents Act as they relate to the “administrative instructions”, is
essential to determining whether India has complied with its
obligations under Article 70.8(a). There was simply no way for
the Panel to make this determination without engaging in an
examination of Indian law.”706 (Emphasis added)
For the same reasoning, the Appellate Body considered that it needed to engage in the
detailed examination of the relevant Indian domestic law to review the Panel’s examination
with respect to the same domestic law. As a result, the Appellate Body came to the same
conclusion as the Panel did, that is, the domestic law of India lacked a sound legal basis for
the maintenance of the mailbox system. The following findings of the Appellate Body
reflected this point:
“[S]o, too, [it] is necessary for us in this appeal to review the
Panel’s examination of the same Indian domestic law.
To do so, we must look at the specific provisions of the Patents
Act (…)
We are not persuaded by India’s explanation of these seeming
contradictions. Accordingly, we are not persuaded that India’s
“administrative instructions” would survive a legal challenge
under the Patents Acts (…)
(…)And, consequently, we are not persuaded that India’s
“administrative instructions” provide a sound legal basis to
under United States law. An assessment of the consistency of Section 211
with the Articles of the TRIPS Agreement and of the Paris Convention (1967)
that have been invoked by the European Communities necessarily requires a
review of the Panel's examination of the meaning of Section 211. Likewise,
that assessment necessarily requires a review also of the Panel's examination
of the meaning of both the CACR and the Lanham Act, to the extent that they
are relevant for assessing the meaning of Section 211. This is an
interpretation of the meaning of Section 211 solely for the purpose of
determining whether the United States has fulfilled its obligations under the
TRIPS Agreement. The meaning given by the Panel to Section 211 is, thus,
clearly within the scope of our review as set out in Article 17.6 of the DSU.”
See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 105, 106.
706
See Appellate Body Report, India-Patent, Complaint by US, supra note 411, at 66.
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preserve novelty of inventions and priority of applications as of
the relevant filing and priority dates” 707 (Emphasis added)
Evidently, both the Panel and the Appellate Body adopted the approach of engaging in a
detailed examination of the relevant Indian domestic law in the assessment of its TRIPS
obligations. Accordingly, not only the related national legislation, but also the administrative
and judicial practices were subject to the examination of the Panel and the Appellate Body.
Significantly, against the request of India, the Panel and the Appellate Body did not deem that
it was necessary to give deference to some extent to the positions of India in its interpretation
of its own domestic law and practice. Instead, they considered and took the independent views
in understanding and assessment of the particular provisions of Indian law and the related
administrative and judicial practices, for the purpose of identifying the legal status of Indian
mailbox mechanism within the context of its domestic law.
3. Independent explanations of the panels on the domestic law in question
The approach of detailed examination of domestic law approved by the Appellate Body in this
case was then referred to in many subsequent WTO cases, however, with some modification
or clarification. For example, the Panel in the case of US Section 301-310 of the Trade Act of
1974 confirmed that it followed that approach, and additionally, regarded the relevant US
domestic law as “factual elements” to check whether these factual elements constitute conduct
by the US contrary to its WTO obligations. The Panel stated:
“In respect of the examination of domestic law by WTO panels,
both parties referred to the India – Patents (US) case. There the
Appellate Body stated that "[i]t is clear that an examination of
the relevant aspects of Indian municipal law (…) is essential to
determining whether India has complied with its obligations
under Article 70.8(a) [of the TRIPS Agreement]. There was
707
Id. at para. 68-70. The Appellate Body conducted an independently detailed assessment of the relevant
provisions of the Patents Act and the administrative instructions of India before coming to the conclusion in the
agreement with the finding of the Panel, as follows:
“Section 5(a) of the Patent Act provides that substances “intended for use, or
capable of being used, as foods or as medicine or drug” are not patentable.
“When the complete specification has been led in respect of an application for
a patent”, section 12(1) requires the Controller to refer that application and
that specification to an examiner. Moreover, section 15(2) of the Patents Act
states that the Controller “shall refuse” an application in respect of a substance
that is not patentable. We agree with the Panel that these provisions of the
Patent Acts are mandatory. And like the Panel, we are not persuaded that
India’s “administrative instructions” would prevail over the contradictory
mandatory provisions of the Patents Act. We note also that, in issuing these
“administrative instructions”, the Government of India did not avail itself of
the provisions of section 159 of the Patents Act, which allows the Central
Government “to make rules for carrying out the provisions of [the] Act” or
section 160 of the Patents Act, which requires that such rules be laid before
each House of the Indian Parliament. We are told by India that such
rulemaking was not required for the “administrative instructions” of issue
here. But this, too, seems to be inconsistent with the mandatory provisions of
the Patents Act.” (Emphasis added)
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simply no way for the Panel to make this determination without
engaging in an examination of Indian law".
In this case, too, we have to examine aspects of municipal law,
namely Sections 301-310 of the US Trade Act of 1974. Our
mandate is to examine Sections 301-310 solely for the purpose
of determining whether the US meets its WTO obligations. In
doing so, we do not, as noted by the Appellate Body in India –
Patents (US), interpret US law "as such", the way we would, say,
interpret provisions of the covered agreements. We are, instead,
called upon to establish the meaning of Sections 301-310 as
factual elements and to check whether these factual elements
constitute conduct by the US contrary to its WTO obligations.
The rules on burden of proof for the establishment of facts
referred to above also apply in this respect.” 708 (Footnote omitted
and emphasis added)
Regarding the relevant US domestic law as a question of facts and applying the rules on
burden of proof for the establishment of facts, the Panel weighted the evidence and arguments
of the parties and rendered its own assessment of the meaning of the concerning domestic law
provisions in comparison with the corresponding provisions of the WTO provisions. For
instance, the Panel considered that:
“As regards the statutory language of Section 304, we consider
it sufficient to make the following findings based upon
examination of the text itself, the evidence and arguments
submitted to us in this respect as well as interpretation, where
applicable, of the relevant provisions of the WTO.
(…)
(d)
708
709
Fourth, as a matter of fact, we find that even though
the USTR is not obligated, under any circumstance,
to make a Section 304 determination of inconsistency
prior to exhaustion of DSU proceedings, it is not
precluded by the statutory language of Section 304
itself from making such a determination. We find that
the broad discretion given to the USTR allows him or
her to do exactly what the statutory language
suggests: to determine whether US rights have been
denied, i.e. to determine that they have not been
denied but also to determine that they have been
denied.709 (Emphasis added)
See Panel Report, US-Section 301-310, supra note 667, at 7.17, 7.18.
Id. at 7.31.
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For this approach, the Panel did not agree with the interpretation of the United States and
made its own understanding on the meaning of Section 304 based upon its textual
provision.710 As a result, after assessing the statutory language of Section 304 under the
obligations provided in Article 23 of the DSU, the Panel came to conclusion that the statutory
language of Section 304 constituted a prima facie violation of Article 23.2(a).711 However,
with the recognition of the legal status of the non-statutory elements existing in the US multilayered law system,712 especially the aggregate effect of the SAA and the US statements, the
Panel found that these elements had removed the inconsistency of Section 304 with Article
23.2(a).713
The Panel in the parallel cases of EC-Geographical Indications also adopted and developed
the approach of the Appellate Body in the case of India-Patents (US). The Panel affirmed that
its mandated obligation was to “make an objective assessment of the meaning of the relevant
provisions of the Regulation”, which was not bound by the European Communities’
interpretation of its relevant domestic law. It also clarified the rule of burden of proof applied
to the parties with respect to each party’s interpretation concerning the related provision of the
Regulation. The Panel stated:
“The fact that this is an "as such" challenge, and that the parties
disagree sharply on whether the European Communities'
interpretation of its own measure is correct, requires the Panel to
conduct a detailed examination of the Regulation. In doing so,
the Panel examines the Regulation solely for the purpose of
determining its conformity with relevant obligations under the
WTO covered agreements. Although the Regulation is part of
the European Communities' domestic law, the parties agree that
the Panel is not bound by the European Communities'
interpretation of its provisions. Rather, the Panel is obliged, in
accordance with its mandate, to make an objective assessment of
the meaning of the relevant provisions of the Regulation. In this
context, the Panel is mindful that, objectively, a Member is
normally well placed to explain the meaning of its own law. To
the extent that either party advances a particular interpretation
of a provision of the Regulation at issue, it bears the burden of
proof that its interpretation is correct.”714
Consequently, after analyzing the particular related provisions of the EC domestic law, the
Panel rejected the European Communities’ explanations of the disputed clause "[w]ithout
710
Id. at 7.32, 7.33.
Id. at 7.97.
712
Id. at 7.132-7.134.
713
See Panel Report, US-Section 301-310, supra note 667, at 7.126, 7.135.
714
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.106; The panels
generally referred to the approach of the Appellate Body in India – Patents (US) as the basis reasoning for its
examination of the relevant EU law. Id. at footnote 133 to para. 7.106. See also Panel Report, EC-Geographical
indications, Complaint by US, supra note 411, footnote 89 to para. 7.55.
711
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prejudice to international agreements" inscribed in the provision 12(1) of the Regulation. 715
That was the main reason for Panel reached the conclusion that Australia and the United
States had made a prima facie case that the equivalence and reciprocity conditions in
Article 12(1) of the Regulation applied to the availability of protection for GIs located in third
countries, including WTO Members. And the European Community had not succeeded in
rebutting that case.716 This finding resulted in the final conclusion that the Regulation was
inconsistent with the EC obligations under Article 3.1 of TRIPS.717
In sum, the analysis of the findings of the panels and the Appellate Body on WTO cases,
especially TRIPS related disputes reveals that the practice of WTO dispute settlement poses
tough requirements on the compliance of domestic law with WTO law. The WTO panels,
different from the general approach adopted by the GATT panels in the past, have not
refrained themselves from making their own independent assessment of the relevant domestic
law at issue.
By regarding domestic law as evidence of facts and evidence of compliance or noncompliance with international obligations, domestic law may be subject to the detailed
examination by panels and reviews by the Appellate Body. By application of the rule of
burden of proof, the WTO panels and the Appellate Body often assess the evidence and
arguments submitted by the parties to the dispute for establishing the meaning of the related
domestic law provisions in the comparison with the related WTO provisions.
Significantly, the panels and the Appellate Body, in the appropriate case, may reject the
explanations of the meaning of the relevant domestic law provisions or law practices made by
either the respondent or the complainant in the related dispute. Instead, they can render their
own understanding or interpretation of the relevant domestic law provisions or related
national administrative and judicial practices, for the purpose of assessment of WTO
consistency with respect to the relevant domestic law.
Conclusion
The WTO panels and the Appellate Body not only adopted adequately the GATT standards,
but also created some more specific rulings in measuring the national treatment obligations
under TRIPS. The rulings of the “extra hurdle” place domestic legislation on intellectual
property protection in a more risky situation in terms of a challenge to legislation on the
grounds of de jure or de facto discrimination. The surveillance of the GATT practice in
interpreting the TRIPS principles and norms gives rise to the burdensome of the obligations
under the TRIPS.
715
See Panel Report, EC-Geographical indications, Complaint by Australia, para. 7.146; Panel Report, ECGeographical indications, Complaint by US, supra note 411, at 7.96.
716
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.152; Panel
Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.102.
717
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.249; Panel
Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.213.
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The newly developed concepts in finding the TRIPS-related cases would place domestic law
in the vulnerable situation before challenge of legislation “as such”. The actual application,
the possible application and even the practical implication of legislation might be fallen
within the terms of “extra hurdles” and the “fundamental thrust and effect”, which might lead
to the panel finding of a de facto discrimination.
The strict requirements of securing the obligations under the substantive provisions of TRIPS
concerning the patentability and duration of patents are the practical challenges to national
legislation in the intellectual property protection. The rule of anti-discrimination and the
rulings on the availability and soundness of the legal basis in patent protection limit to much
extent the scope of the exceptions and the limitations for the public interest.
Due to the cumulative application of the principles of GATT and the TRIPS, national
legislation would face a heavy task from the surveillance of the standards of national
treatment and MFN treatment developed from GATT practice in implementation of the
TRIPS obligations. While the GATT standard principles applied fully to the obligations under
TRIPS, the provisions on the objectives and principles stated in Article 7 and 8.1 of the could
not be invoked to justify any reduction of such obligations. The “consistency test” blocked the
effect of these principles in the practice of TRIPS.
In addition, the development of the panel rulings on the positive compliance requirement of
WTO law, the possible violation of discretionary legislation, the detailed examination and
independent explanation of the panels as to the relevant domestic law is also the practical
challenge for domestic legislation in compliance with the TRIPS under WTO jurisprudence.
After the great effort of bringing the national patent legislation into compliance with
TRIPS/WTO for the last decade, the current patent regulations of Vietnam are generally
assumed to be “fully” qualified or in compliance with the TRIPS standards. 718 Most of the
commentators and authorities admitted that there would be no problem with the current
national legislation on the patent protection under the TRIPS/WTO. 719 Is this assumption truly
correct in the view of the recently developed rulings of the WTO panels? In this connection,
the next chapter will examine the current domestic patent legislation of Vietnam in the light
of the development of WTO jurisprudence regarding the intellectual property protection.
Relying on the recently developed rulings of the WTO panels, the examination of the relevant
domestic patent law of Vietnam will explore some hidden problems in the current regulations,
which might be the vulnerable points of the national legislation before the likely challenges.
This work is expected to be a small contribution to the effort of bringing the national
legislation in compliance with the TRIPS and WTO jurisprudence.
718
See Submissions of the Draft of Intellectual Property Law.
See e.g., Tran Viet Hung, Intellectual Property System of Vietnam, WIPO National Roving Workshop on the
Enforcement of Intellectual Property Rights, Hanoi July 5-6, 2004, p. 4.
719
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Chapter Five
Hidden problems of the patent legislation of Vietnam in
compliance with the TRIPS and WTO rulings
In the light of the development of WTO jurisprudence regarding the intellectual property
protection as discussed in the previous chapters, this chapter examines the implementation of
this principle in the patent law and practice of Vietnam. The purpose of the discussion in this
chapter is to identify the problems of the domestic legislation regarding the patent protection.
These problems might be at risk before the challenge of the “incorporated” Paris Convention
together with the TRIPS and WTO rules. The specific implication from such a discussion
serves the national objectives of accession to the WTO in the near future.
In the context that Vietnam is a party to the Paris Convention and expecting to be a party to
the TRIPS and the WTO, the clarification of the undiscovered problems in the current
legislation would be helpful for Vietnam to complete its domestic law in the light of the
currently developed rulings of the WTO panels on the implementation of the obligations
under the TRIPS and the WTO. That is also a good response to the requirement for active
action in bringing domestic law and regulations into compliance with the TRIPS and WTO
law, as secured by both the TRIPS and WTO law.
In the perception that the legislation might be challenged for the discriminatory language
existing in the statutes or for the “extra hurdle in the terms of practical application, possible
application, or even practical implications, the discussion in this chapter will examine the
current regulations in the light of the relevant panel rulings. As regards each identified
problem, which might be regarded as inconsistent with the “incorporated” Paris Convention,
the TRIPS and WTO rules, the relevant suggestion for the elimination of such inconsistency
will be provided.
Before exploring the problems of the current regulations and the necessity for their
elimination under the TRIPS, it worth providing an overview of the national law system
regarding the patent protection. The process of improvement of the national legislation
towards the Paris Convention and the TRIPS is mentioned by reference to the historical
existence of the problems in the national patent legislation. The problems inherent to the
national patent legislation may be attributed to certain reasons, which might be justified under
the Paris Convention. However, they would be no longer justifiable under the TRIPS and
WTO jurisprudence.
Furthermore, some problems seem to be unidentifiable when looking only to the textual
language of the TRIPS and the “incorporated” provisions of the Paris Convention. It would be
necessary to examine the national legislation according to both textual language of these
treaties and the “benchmarks” developed by the panel rulings. The panel rulings themselves
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are also moving on, particularly in dealing with the issue of the intellectual property
protection. In that sense, reviewing the national legislation under the development of WTO
jurisprudence for identification of the “new” problems is a meaningful work. As examined in
the previous chapters, in the practice of the TRIPS, a dispute might be arisen from a vague
point or an unclear problem existed in domestic law.
I. Vietnam Patent Legislation under the Paris Convention
1. Unavailability and insufficiency in the protection of patents
Although becoming a member of the Paris Convention since 1949, 720 there had been no patent
act that gave effect to patent protection in the whole territory of Vietnam until 1981, when the
first ordinance on innovations and inventions was issued by a governmental degree. 721 In the
period from 1981 to 1989, appropriate to the features of a centrally planned economy,
Vietnam adopted a system granting certificates of inventors and patents, which was aimed
towards the moral rights of inventors rather than the material rights of patent holders. 722 The
ownership of inventions subject to certificates of inventions belonged to the State. The
inventors had the rights to place their name in the certificates and to receive the prescribed
remuneration for the exploitation of inventions.723
In the period from 1989 to 1995, the legal patent protection system of Vietnam underwent a
significant change following the renovation policy for the transition from a centrally planned
economy into a market-oriented economy. 724 The Act on the protection of industrial property
of 1989 eliminated the mechanism for granting certificates of inventions. Instead, the
exclusive patent rights with respect to inventions were recognized as the private property
rights of individuals and legal entities. 725 The amended ordinance on innovations and
inventions stated that the single form of protection regarding an invention was the patent.726
720
The Paris Convention entered into effect in Vietnam on 8th March 1949. See Paris Convention, supra note 1.
After Independent Day, 2nd September 1945, Vietnam experienced a long period of war until 30 th April 1975,
during which the territory was divided into two separate areas: North Vietnam (Democratic Republic of
Vietnam) and South Vietnam (Republic of Vietnam). Correspondingly, there existed two legal systems in
Vietnam during that period. South Vietnam seemed to have a legal system of intellectual property stronger than
that of North Vietnam due to the former adopting a market economy while the latter following a centrally
planned economy, the model of the socialist countries. See Pham van Thuyet, The Emerging Legal Framework
for Private Sector Development in Viet Nam's Transitional Economy, World Bank, Washington, DC, 1995, pp.
12-13. After unification, the first legal document on the protection of inventions that had effect throughout the
territory of Vietnam was Governmental Decree No. 31 issued on 23 January 1981, which recognized certificates
of inventors rather than the exclusive patents of inventions, as did most former socialist countries. See Pham
Dinh Chuong, The Role of IPR System for Economic Development in Vietnam, National Office of Intellectual
Property of Vietnam, Hanoi, 1988, p. 13.
722
See Pham Dinh Chuong, supra note 721, at 13.
723
See Dieu le ve sang kien cai tien ky thuat va hop ly hoa san xuat va sang che (Ordinance on innovations of
improvement and rationalization of production and inventions), issued by Decree 31/CP on 23 Jan. 1981, art. 20,
Vietnam Laws (the National Politics Publishers, 2000).
724
See Pham Dinh Chuong, supra note 721, at 13.
725
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, art. 9.
721
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At the beginning of 1995, Vietnam applied for accession to the WTO, and since then, it has
been attempting at make its domestic legislation on intellectual property consistent with
TRIPS/WTO requirements.727 For the period of the last ten years, the government has
expended great efforts to revise and enact a series of regulations on the protection of
intellectual property in general and on patents in particular, to fill up the gaps existing in the
current legislation in comparison with the TRIPS standards. 728 Significantly, for the time
being, the draft of a new act on protection of intellectual property is been prepared also for
that purpose. This act intends to codify all current regulations concerning intellectual property
located in various legal documents. The act will become the first statute on intellectual
property rights in Vietnam, which provides in full and in detail the principles and norms for
the all categories of intellectual property rights being protected in the country, including those
covered by the TRIPS.729
2. Legal grounds for refusal of patents
As for the legal grounds for the refusal of patents, the first ordinance on inventions excluded a
wide range of categories of inventions from patentable subject-matters, including chemical
products, pharmaceuticals and foodstuffs used for human beings and animals.730 The
inventions of such products were subject to the ownership of the State. The inventors who
created those inventions could receive certificates of inventors but had no right to prevent
others from using the inventions. Even with the lack of legal grounds for granting patents for
the chemical, pharmaceutical and foodstuff products in the domestic legislation, it was not
regarded as inconsistent with the Paris Convention under the mandate of the principle of
national treatment of the Convention.
726
See Phap lenh ve bao ho quyen so huu cong nghiep (Ordinance on protection of industrial property rights),
promulgated on 28 Jan. 1989, art. 14, Vietnam Laws (the National Politics Publishers, 2000).
727
Vietnam applied for the accession to the WTO in 1 Jan. 1995 and is aiming for satisfying the requirements of
TRIPS/WTO in the area of intellectual property rights. See Pham Dinh Chuong, The Extension of the Scope
Protection for New IPR Categories-A Pressing Demand to Industrial Property System of Vietnam, National
Symposium on the Extension of the Scope Protection for New IPR Categories, Hanoi 10 January 2000.
728
See e.g., Nghi dinh 63/CP ngay 24 thang 10 nam 1996 quy dinh chi tiet ve so huu cong nghiep (Decree on
63/CP issued on 24 Oct. 1996 detailed provisions on intellectual property) [hereafter “Decree 63”], amended on
1 Feb. 2001 by Nghi dinh 06/2000/ND-CP ve sua doi bo sung mot so dieu cua Nghi dinh 63/CP quy dinh chi tiet
ve so huu cong nghiep (Decree 06/2000/ND-CP on amendment and supplement of Decree 63/CP detailed
provisions on industrial property [hereafter “Decree 06”], Nghi dinh 12/199/ND-CP ngay 6 thang 3 nam 1999 ve
xu phat hanh chinh trong linh vuc so huu cong nhiep (Decree 12/1999/ND-CP issued on 6 March 1999 on issued
on administrative sanctions on violations of industrial property regulations) [hereafter “Decree 12”], Nghi dinh
54/2000/ND-CP ngay 3 thang 10 nam 2000 ve bao ho bi mat kinh doanh, ten thuong mai, chi dan dia ly va
chong canh tranh khong lanh manh lien quan den so huu cong nghiep (Decree 54/2000/ND-CP on protection of
business secrets, trade names, geographical indications and protection against unfair competition relating
industrial property), Nghi dinh 13/2001/ND-CP ngay 20 thang 4 nam 2002 ve bao ho giong cay trong (Decree
13/2001/ND-CP issued on 20th April 2002 on protection of new varieties of plants), Nghi dinh so 42/2003/NDCP ngay 2 thang 5 nam 2003 ve bao ho quyen so huu cong nghiep doi voi bo tri thiet ke mach tich hop (Decree
42/2003/ND-CP issued on 2 May 2003 on protection of industrial property rights with respect to layout designs
of integrated circuits), Vietnam Laws (the National Politics Publishers, 2004).
729
The Publication of the Draft of Law of Intellectual Property (the fourth draft), the National Office of
Intellectual Property of Vietnam, Hanoi, 2005, available in Appendix.
730
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, art. 15.
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The amended ordinance on inventions did not exclude the chemical, pharmaceutical and
foodstuff products from being patentable subject-matters.731 However, the amended ordinance
did not stipulate how to handle the applications for patents with respect to such inventions
either. Given the lack of the relevant examining procedures for granting patents with respect
to those products, the effect of the amended ordinance in this aspect was still limited in
reality.732
3. Legal grounds and procedures for revocation and invalidation of patents
With regards to the legal grounds for the revocation and invalidation of patents, the first
ordinance on inventions provided a large discretion to the governmental authorities to decide
the forfeiture of a patent for public exploitation in the case of necessity. 733 A patent might be
subject to a decision of revocation when there appeared a justified claim concerning the patent
holder or the patentability of the invention in question. However, there was no procedure for
the judicial review of an administrative decision of revocation or forfeiture of a patent. 734 A
decision of invalidation was applicable to a patent when the patent holder did not make the
due payment of validity maintenance fees.735
The amended ordinance on inventions removed the reason for the forfeiture of a patent but
maintained the existing legal grounds for revocation and invalidation of a patent. The
administrative agencies had exclusively competent authority to deal with the complaints of
revocation and invalidation concerning the patentability of a patent under the administrative
procedures.736 The courts only settled the complaints concerning the right to register an
invention or the right to be the inventor of the registered invention under the judicial
procedures.737
4. Term of patent protection
Regarding the term protection of patents, the first ordinance on inventions stipulated the term
of patent starting from the filing date. 738 The amended ordinance changed the starting date of
731
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, amended by Nghi dinh 84/HDBT ngay 20 thang 3 nam 1990 (Decree 84/HDBT on 20 th March 1990),
Vietnam Laws (the National Politics Publishers, 2000), art. 13.
732
See statistics of applications for patents of inventions, the National Office of Intellectual Property of Vietnam,
Hanoi, 2005.
733
Namely, the Prime Minister may decide, upon the proposal of the State Committee of Science and Technical
Affairs, to forfeit a patent of invention with the payment of certain compensation to the patent holders in the case
of necessity for the public or national demands. See Ordinance on innovations of improvement and
rationalization of production and inventions, supra note 723, Vietnam Laws (the National Politics Publishers,
2000), art. 23.
734
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, arts. 50, 51, 23.
735
Id. art. 21.
736
Id. art. 50.
737
Id. art 51.
738
Id. art. 16.
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patent validity from the filing date into the priority date. 739 In this point, the amended
ordinance was inconsistent with Article 4bis of the Paris Convention. However, because there
is not a clear requirement on the starting date of patent validity in the provisions of this
article, Vietnam did not deem that inconsistent provision necessary to be changed.
The amended ordinance also provided that a patent might be terminated before the expiry of
this term if the patent holder did not pay the fee for maintenance of patent validity or declared
abandonment of the patent.740 As for the priority date of the patent applications, both
ordinances contained the provision consistent with the provision of the Paris Convention on
the priority right. However, the primary ordinance did not give real effect to this provision by
the absence of particular procedures for claiming the priority right.741 The amended ordinance
overcame the shortcoming by the addition of provisions on procedures for claiming the
priority right under the Paris Convention.742
5. Different treatment for inventions of foreigners
In relation to the treatment given to the inventions of foreigners, the first ordinance required
that a patent application for an invention of a foreigner from another country had to be lodged
with the representatives of the Vietnam Commercial Chamber located in the respective
country before filing with the national patent office of Vietnam. 743 This requirement was
certainly a discriminatory treatment regarding procedural aspects applied to the inventions of
foreigners.
The amended ordinance did not impose this burdensome requirement any more. However, it
maintained that a patent application with respect to an invention of a foreigner had to be filed
through a patent attorney of Vietnam when the applicant had no permanent residence or
business establishment in Vietnam.744 Though this requirement of additional procedures was
also a discrimination against foreigners in protection of inventions, it was not regarded
inconsistent with the Paris Convention.745
739
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, art. 15.1. Ordinance on innovations of improvement and rationalization of production and inventions, supra
723, amended by Decree 84/HDBT, supra note 731. In this respect, the provision on the duration of patent
counting from the priority date was inconsistent with the provision of independence of patents under Art.4 bis of
the Paris Convention.
740
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, amended by Decree 84/HDBT, supra note 731, art. 15.2.
741
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, art. 28.
742
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, amended by Decree 84/HDBT, supra note 731, art. 29.
743
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, art. 25.2.
744
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, amended by Decree 84/HDBT, supra note 731, art. 26.2.
745
See the Paris Convention, supra note 1, art. 2(3). This provision reserves “expressly” the independence of
national laws of the members in maintaining certain discriminations against nationals of other countries, e.g., in
judicial proceedings or administrative procedures or in appointment of an agent, concerning the procedural
matters in protection of industrial property.
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In other aspects, the first ordinance applied the reciprocal principle as a pre-condition for the
protection of inventions with respect to nationals of the other countries. This was deemed
inconsistent with the national treatment of the Paris Convention, and therefore, the amended
ordinance changed the wording of the related provision to place the consistency with the Paris
Convention in the priority position.746
In summary, under the mandate of the Paris Convention, Vietnam was able to exploit
effectively the principle of independence of patents in national legislation and the
administrative practices concerning the protection of inventions. For the particular social and
economic circumstances of the country, the regime of patent protection experienced flexible
changes to serve the specific national policies in each period of development.
The regulations on the protection of inventions might contain certain permissible
discriminations against foreigners and foreign inventions. The lack of a legal basis for the
protection of patents for a long period after being a member of the Paris Convention did not
lead to domestic law being found in violation of the Paris Convention. In the same vein, the
absence of legal grounds for patent protection with respect to the inventions in a given field of
technology did not itself constitute inconsistency of domestic law with the Paris Convention
obligations.
Similarly, the legal grounds for identifying the validity, duration and scope of patent
protection were up to decisions of the domestic legislature. As a matter of fact, there was no
ruling of the International Court of Justice on the inconsistency with the Paris Convention
imposed upon the allegedly violating domestic law of its members. 747 Assumedly, even with
both de jure and de facto discriminations against foreign inventions existing in the national
patent regulations and practice of Vietnam, there would be no problem under the shield of the
principle of national treatment of the Paris Convention.
746
See Ordinance on innovations of improvement and rationalization of production and inventions, supra note
723, amended by Decree 84/HDBT, supra note 731, art. 25.1. Article 25.1 of the Ordinance provided:
“Foreigners (or foreign legal entities) may enjoy the rights and the interests
provided by this ordinance on the basis of the reciprocal principle, in
accordance with the legislation of the Socialist Republic of Vietnam and the
international treaties to which Vietnam is a party”. (emphasis added)
Art. 26.1 of the amended Ordinance stipulated:
“Foreign organizations and individuals may request the protection of
inventions in Vietnam and may enjoy the rights and interests provided by this
ordinance in consistent with the international treaties to which Vietnam is a
party or following the reciprocal principle.” (emphasis added)
747
There was no case brought before the International Court of Justice for the alleged violation of the Paris
Convention. See Provisions on Enforcement in International Agreements on Intellectual Property Rights, GATT
Doc. MTN.GNG/NG11/W/18, Feb. 10, 1988 Compilation on Enforcement of IPRs, supra note 155, at 42 (the
factual report from the World Intellectual Property Organization). In the case of Vietnam, both the first
ordinance and the amended ordinance on the protection of inventions contained certain provisions which could
be regarded as a violation of its obligations under the Paris Convention. However, there was no complaint of
such inconsistent provisions referred to the International Court of Justice. This seems to be part of general
situation regarding the implementation of the Paris Convention in the other countries, e.g. the principle of firstto-use in the patent protection adopted by the United States still existed for a long time although it was clearly
contrary to the principle of first-to-file mandated by the Paris Convention.
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With the perception that the above-mentioned situation could no longer be maintained under
the TRIPS and WTO framework, Vietnam has invested great effort in changing its own
legislation on patents to move towards the TRIPS standards. How this work has been done,
and whether the current legislation satisfies with the TRIPS/WTO rules, are the questions for
discussion in the next section.
II. Establishment of legal framework in
conformity with the TRIPS
Since 1995, after the application for accession to the WTO, Vietnam has enacted a big volume
of new laws and regulations on intellectual property protection in the light of TRIPS/WTO
requirements. Concerning the patents of inventions, the new legal instruments have replaced
the old ordinances on protection of inventions. Significantly, the Civil Code of 1995 provided
the principles and substantial norms of the paten protection. For the implementation of the
provisions on patents inscribed in the Civil Code, the government issued detailed regulations
on particular matters such as patentable subject matters, granting procedures, duration and
scope of patent protection etc.
Currently, the most important document is Decree 63 on detailed provisions of industrial
property that was issued in 1996 and amended in 2001. This document is the main legal basis
for the protection of patents in Vietnam at the present. Generally, it is admitted that the
current domestic legislation has met the “adequate” protection standards required by TRIPS,
except for the problems in the enforcement of intellectual property rights. 748 The current
national legal framework regarding the patent protection may be briefly introduced as
follows.
1. The Civil Code of 1995
For the first time the protection of intellectual property rights was introduced in the Civil
Code, a highest legal document passed by the National Assembly of the Vietnam on 28
October 1995 and which entered into force on 1 July 1996.749 This is a landmark in the history
of the protection of IPR in Vietnam. The Civil Code that includes 26 Articles (Section 2,
Chapter, Part 6) on the industrial property rights, stipulating the basic principles for
establishment and protection of industrial property rights in Vietnam. 750 In general, most
articles maintain the spirit of the earlier ordinance on the protection of industrial property and
covers additional articles to clarify the contents and scope of the industrial property
protection. Concerning patents for inventions, the Civil Code provides generally for the
patentability criteria, the basic and scope of patent rights, the exceptions and limitations of
patent rights, the principles for determining the right of priority, the term of patent protection,
the revocation and invalidation of patents.
748
See Tran Viet Hung, supra note 719, at 4.
See Bo luat dan su cua nuoc Cong Hoa Xa Hoi Chu Nghia Viet Nam do Quoc Hoi thong qua ngay 28 thang
10 nam 1995 (The Civil Code of the Socialist Republic of Vietnam, passed by the National Assembly on 28 Oct.
1995), Vietnam Laws (the National Politics Publishers, 2000).
750
Id.
749
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Although there was still a lack of separate laws for the protection of each industrial property
subject matter was yet to put forth like other countries in the world, the Civil Code constituted
the highest legal status to implement comprehensive industrial property activities and it
marked an epoch-making turning point in the history of protection of industrial property in
Vietnam.
2. The Governmental Regulations
Along with the process of negotiation for the WTO's accession, participation in the
international and regional organizations and economic fora as well as preparation for the
signing of bilateral trade agreement with the United States, foreign investment and economic
relations between Vietnam and other countries are expanded and developed rapidly. Under
these circumstances, the effective protection and enforcement of industrial property rights in
Vietnam become a compulsory requirement for its integration into the world economy. One of
the obligations that Vietnam has to fulfill before WTO is to ensure an intellectual property
system, which satisfies the requirements provided for in the TRIPS.
2.1. Decree 63 on industrial property regulation
The Government promulgated the Decree 63/CP dated 24 October 1996 on detailed provision
concerning industrial property (“Decree 63”), for implementing the Chapter 2, Part 6 on
Industrial Property of the Civil Code.751 The Decree contains almost all necessary contents for
implementing the provisions in the Civil Code and more over added many other necessary
provisions on the procedures for the establishment and protection of industrial property rights
through administrative measures in order to set up a complete legal framework for the
increasingly efficient implementation of industrial property activities. It goes beyond doubt
that the whole contents of the 5 Decrees issued earlier by the Government on industrial
property were reviewed and adequately reflected in the Decree 63.752
By the issuance of Decree 63, the legal framework of Vietnam was basically appropriate to
the standards required by the TRIPS. The main contents that were introduced in Decree 63 for
the purpose of compliance with the TRIPS includes:753
- The term of protection of an invention has been increased to 20 years from the official filing
date (instead of 15 years in the past);
- The registration of a trademark or an appellation of origin shall be cancelled if the owner has
not used the trademark or appellation of origin without legitimate reasons for five consecutive
years prior to the request for termination of validity;
- The procedure for registration of copyright has been stipulated for the compliance with the
international standards.
751
See Decree 63, supra note 728.
See History and Development of the National Office of Industrial Property, The National Office of
Intellectual Property of Vietnam (2004).
753
See Pham Dinh Chuong, supra note 721. See also Decree 63, supra note 728.
752
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However, a number of problems in legislation system of intellectual property in Vietnam had
been not yet in conformity with the TRIPS Agreement at the time of issuance of Decree, such
as:
- There was still a lack of regulations on protection of layout designs of integrated circuits,
undisclosed information including trade secrets and repress of unfair competition.
- Geographical indications were not fully protected. Under existing legislation only
geographical indication of a special kind, namely appellations of origin are protected;
geographical indications other than appellations of origin, even signs symbolizing the origin
country or locality of goods are not protected. Vietnamese law on protection of appellation of
origin had no provision on additional protection for wines and spirits.
- The scope of trademark protection was narrower than the requirement of the TRIPS
Agreement.
- The protection of plant variety was inefficient. The creators of plant varieties were protected
by Certificate of Plant Variety Creator with validity term of 15 years counted from the date of
filing applications. Apart from moral rights, the creator of a protected plant variety has the
right to remuneration paid by the users whereas the exclusive right over the plant varieties
belongs to the State.
- Micro-organisms and micro-biological processes were included in patent coverage of the
Vietnamese existing law. However, at the time being special regulations on filing an
application, examination and deposition had not been promulgated yet.
- There was still a lack of a special legislation on administrative procedures and remedies
against the infringement of intellectual property rights.
2.2. Revision of Decree 63 and supplemental regulations
In order to establish and complete the legal documents on the industrial property protection,
the Government made certain amendments of and supplements to Decree 63 with a view to
meeting the standard under TRIPS. Along with the amendment of Decree 63, the Government
issued some other legal documents on the protection of new industrial property subject
matters, the issuance of legal documents on handling of violation of administrative
regulations on industrial property as well as legal documents on the civil procedures for
disputes and violations of industrial property rights. These regulations set up the legal regime
for the protection of plant varieties, undisclosed information, geographical indications, repress
of unfair competition, and layout designs of integrated circuits. Such regulations are provided
in the following legal documents:
- Decree 12/1999/ND-CP on the handling of violations of administrative regulations on
industrial property.
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- Decree 54/2000/ND-CP on the protection of industrial property rights to business secrets,
geographical indications and trade names, and the protection against industrial propertyrelated unfair competitions.
- Decree 06/2001/ND-CP on amendment of and supplement to the provisions in the Decree
63/CP on the detailed regulations concerning industrial property.
- Decree 42/2003/ND-CP on the protection of industrial property rights over semiconductor
integrated circuit layout designs.
3. Substantive provisions on patent protection
3.1. Patentability
Under the existing laws on industrial property, the technical solutions may be protected as
inventions include devices (machineries, equipment, tools, accessories, consumers goods
etc.), substances (materials, chemical products, pharmaceutical products etc.) and methods
(technological process, method of treatment, method of forecast etc.). Thus, patentable objects
are required to be the types of technology. 754
Technology to be protected in Vietnam has to satisfy certain criteria. To be patented as an
invention, respective technology must comply with three requirements: it must be novel
compared with the state of the art of the world technology on the date of priority; involve an
inventive step and at the same time must be industrially applicable. Failing to meet one of
these criteria, a technology can not be protected. 755 The Vietnamese patent law is not different
at all in comparison with common patent laws prevailing in the world.
Before the Civil Code of 1995 came into force, criteria for protection of utility solution were
much lower compared with that of invention. It was sufficient that a technology was novel
compared with the state of the art of the Vietnamese technologies and industrially applicable
under the existing conditions of Vietnam, the technology may be patented and protected as
utility solution. At that time, the criteria for utility solution in Vietnam were much lower
compared with that for utility models in other countries as the Vietnamese technology was at
a much lower level compared with the world’s one.
Such low criteria for utility solution were appropriate only to the practical conditions
prevailed in the past years. Today, together with the broadening of the relations in the field of
science, technology with the world, such criteria are no more compatible. If such criteria are
maintained, technologies created in Vietnam would remain at a low level compared with that
of the world and would lead to a trend of importation into Vietnam of second class technology
widely available abroad, but not yet appears in Vietnam, and would make the technology
exclusive for the importer, hence hampering the importation of other similar technology or
more advanced technology.
754
755
See Decree 63, supra note 728, art. 4.
See the Civil Code, supra note749, art. 782 and Decree 63, supra note 728, art. 4.
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As a result of the said reasons, as stated in the Civil Code and Decree 63, the criteria for
protection of utility solution have been changed to novelty compared with the world state of
the art and applicability. These criteria are consistent with those for utility models applicable
in developed countries. An invention is a technical solution that is new in terms of the world's
existing technical development, involves an inventive step and is applicable to different social
and economic fields.756
3.2. Patent rights
Under the current legislation,757 a patentee has the following rights:
- To have exclusive right to use the patented objects;
- To transfer the right to use the patented objects to other persons (through licensing
contracts);
- To request the State competent authority to force the infringers of their industrial property
rights to stop the infringing acts and pay damages
3.3. Exceptions of patent rights
However, the patent rights of the patentee are subject to certain limitations stipulated by the
law and regulations.758 Accordingly, the patentee may not prevent others from using the
patented objects in the following cases:
- The use of these objects is not for business purposes;
- Circulation and usage of the objects that the patentee or the persons having right of use in
advance, the licensees had traded in markets;
- The usage of these objects by foreign transportation means that temporarily are or travel by
transit through the territory of Vietnam provide that this usage is for maintaining the activities
on such transportation means.
The patentee has the obligation of working the granted patent to serve the demands of
public interest. In certain cases, the exclusive rights of the patentee may be subject to
granting of compulsory licenses.759 By the application of persons having the need in
patented invention, the competent state authority may order the patentee to license
patented invention under the following conditions:
the
the
the
the
- The patentee, without reasonable motivation does not use, or uses the patented invention not
in accordance with the needs of economic, social development of the country;
756
See the Civil Code supra note 749, article 782 and Decree 63, supra note 728, art. 4.
See the Civil Code, supra note 749, art. 796
758
Id. arts. 801, 802, 803
759
Id. art. 802.
757
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- The persons who have the needs in using the patented invention, have negotiated with the
patentee in different ways and have offered reasonable price but the latter still refuse to
conclude a contract on transfer of the right to use the patented invention;
- The use of the patented invention is necessary for satisfying the interest of national defense,
national security, health, or other urgent needs of the society.
3.4. Enforcement of patent rights
Being civil rights provided for by the Civil Code, patent rights are protected through civil
procedures. The patentee owners can bring before the civil court the person who did or does
commit any acts infringing his patent rights.
In practice, civil court cases relating to industrial property are centered in Ha Noi city and Ho
Chi Minh city. Majority of such cases are solved by mediation. This has possibly been
resulted from the fact that Vietnamese people find judicial procedures unfamiliar, and they are
afraid of possible procedural complexity, high cost and lack of judges experienced in the field
of industrial property, etc.760
Administrative handling is the way to take administrative measures against those industrial
property infringements, which are not serious enough to be subject to criminal procedures,
and the industrial property owner would not like to have his case dealt with by the civil court.
Administrative measures can be taken against industrial property infringements discovered by
administrative authorities while carrying out their task of inspection and control.761
In practice of Vietnam, cases of industrial property infringements and disputes are settled
more often through administrative procedures than judicial one. The reason is that the former
is simple, quick and not too costly. According to statistics, annually there are thousands cases
of infringement of industrial property rights, which are handled by the market management
organizations and the police.762
The existing legal instrument applied for handling cases of industrial property rights
infringement is Decree No 12/1999/ND-CP of 6 March 1999 the Government on the
sanctions against administrative violations in the field of industrial property. The Decree
provides for fully in detail all kinds of infringing acts, level of penalties, procedures and
authorities responsible for the settlement. Accordingly, the competent authorities involving in
the investigation and handling of administrative violations in the field of industrial property
include the People Committees at various levels, the specialized industrial property
inspectorate, the police, the customs, the market control forces, and the National Office of
Intellectual Property.763 However, in the general view of compliance with WTO law, there are
some vulnerable points existing in the domestic legislation, which are no longer safe as they
were under the mandate of the Paris Convention. The discussion below will specify the
760
Tran Viet Hung, ‘Legal Provisions and Industrial Property Rights Enforcement in Vietnam’, Workshop for
Judges, Hanoi, March 6-7, 2000.
761
Id.
762
Id.
763
See Decree 12, supra note 728, arts. 12-14.
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hidden problems existing in the current national legislation on patents in the light of the WTO
panel rulings in interpreting the internal relations among the provisions of the TRIPS, their
relevance to the rules of GATT 1994 and the consistency requirement of WTO law.
III. The hidden problems of the current patent legislation
1. Patentable subject matters:
absence of detailed examining procedures
Under Decree 63 on detailed provisions of industrial property, the patentable subject matters
cover both pharmaceuticals and microorganisms.764 However, there is no detailed provision on
the examining procedures with respect to the inventions of these objects. For this reason, even
though the language of the regulation is not inconsistent with the TRIPS requirements, the
absence of the implementing instructions may preclude the real effect of the regulation in this
respect.
The practice of the TRIPS was not justified by the fact of there being no actual demand from
the side of applicants.765 Even though there were no request for patents of such products in
practice, TRIPS requires the domestic law to make “available” the effective regime for the
patent protection of inventions in all fields of technology. 766 WTO law also requires the
Members to respond with the “positive” action of bringing domestic laws and regulations into
compliance with WTO obligations.767
764
Article 4.4 of Decree 63, supra note 728, as amended by Decree 06, supra note 728, in 2001, does not exclude
pharmaceuticals and microorganisms from patentability. This provision states:
“The following objects shall not be protected by the State as inventions or
utility solutions:
- scientific concepts, principles and discoveries;
- methods and systems for economic organization and management;
- methods and systems for education, teaching and training;
- methods for the training of animals;
- systems in regard of linguistics, information, classification and compiling of
documentation;
- designs and planning schemes for construction works, projects for regional
development and planning;
- solutions concerning only the shape of articles and being of an aesthetic nature
only;
- conventional signs, timetables, rules and regulations and symbols;
- computer software, layout designs of integrated circuits, mathematical
models, graphs and the like;
- plant or animal varieties;
- methods for the prevention, diagnosis or treatment of diseases for human
being, animals;
- processes bearing biological nature (except for micro-organic processes) for
producing plants and animals.”
765
See Chapter 4, the findings of the Panel and the Appellate Body in the case of India-Patent, Complaint by US.
766
See the TRIPS, supra note 10, art.27.1. See also discussions in Chapter 4.
767
See the WTO Agreement, available at http://www.wto.org, Art.XVI:4. See also discussions in Chapter 4.
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The domestic law could not argue for the non-existence of the relevant implementing
mechanism through internal technical or legal problems. Because the transitional period
applicable to the WTO Members of developing countries has been terminated,768 a late comer
like Vietnam should conform immediately to all TRIPS obligations.
For that reason, the absence of an effective implementing mechanism in the domestic
legislation in patent protection for those products is likely to invite a complaint on the
violation of the anti-discrimination rule of TRIPS, the unavailability and insecurity of the
domestic legal basis, and the incompliance with WTO rules. In dealing with this situation,
there would be no other option but creating the availability of the particular and executable
examining procedures with respect to the inventions in the mentioned-above fields.
2. Revocation of patents:
uncertainty of legal basis and problem of MFN obligation
2.1. Incompatibility with Article 32 of TRIPS
Article 32 of TRIPS requires that an opportunity for judicial review as to any decision of
revocation or forfeiture of a patent shall be available. 769 Though it does not set forth the
particular legal grounds for revocation of patents, this provision may be regarded as a general
limitation on the implementation of the principle of independence of patents regarding
revocation of patents. In this aspect, the current legislation of Vietnam is deemed to be
incompatible with that general limitation. For instance, Article 27 of Decree 63 on the
detailed provisions of industrial property provides that:
“(1). (…) (a) First appeal:
An applicant for Protection Titles shall have the right to file an
appeal to the Director General of the National Office of
Industrial Property with respect to the rejection of an application
for a Protection Title or refusal to grant; (…)
Any third party, whose rights and interests are directly linked to
the grant of Protection Titles, … shall have the right to file an
appeal to the Director General of the National Office of
Industrial Property with respect to his relevant decisions.
(b) Second appeal, litigation:
In the event of disagreement with the decision by the Director
General of the National Office of Industrial Property, the
768
See the TRIPS, supra note 10, arts. 65 and 70. The findings of the Panel and the Appellate Body in the case of
India – Patent, Complaint by US clarified the expiry date of transitional period and the starting day for the full
patent protection with respect to chemical agricultural and pharmaceutical products shall be 1 st Jan. 2005. See
also discussion in Chapter 4.
769
See the TRIPS, supra note 10, art. 32. This article provides:
“An opportunity for judicial review of any decision to revoke or forfeit a
patent shall be available.”
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appellant shall have the right to file further appeal to the Minister
for Science, Technology and Environment (second appeal) or
proceed litigation according to the administrative procedures.
(4). (…) Appeals are dealt with in the order, procedures set forth
in the Law on complaints and denouncements (...)”770
According to the above provisions, any third party may take a complaint against the decision
of granting a patent. Consequently, the General Director of the National Office of Intellectual
Property may render a decision of revocation of the patent where the complaint is evidenced
and justified by reasonable arguments. That is so-called the first appeal.
Then, in the case where the complainant disagrees with the decision of the General Director
of the National Office of Intellectual Property, he has an option: either taking an appeal to the
administrative authority at a higher level, or taking a suit before the administrative court of
competence. That is the so-called the second appeal or taking a suit.
Normally, the procedure for the second appeal or taking a suit is only applicable to the
complainant in the case that the first appeal is subject to the decision of non-revocation of
patent. This two-step optional procedure is also applicable in handling the complaints of
termination and invalidation of patents under Article 28 and Article 29 of Decree 63,
respectively.771
It is clear that the provision of Article 27 of Decree 63 provides an opportunity for the
complainant to take a suit against the decision of non-revocation of a patent before the
competent court. However, there exist two questionable points:
770
See Decree 63, supra note 728, and amended in 2001, art. 27. The English translation of the provisions of
Decree 63 used in this paper is quoted from that made by the National Office of Intellectual Property of
Vietnam, available in the Appendix.
771
Arts. 28 and 29 of Decree 63 issued in 1996 and amended in 2001 provide:
“Section 28: Termination of validity of Protection Titles
(1) Any third party shall have the right to file an application requesting the
National Office of Industrial Property to terminate the validity of a Protection
Title for reasons referred to in (2) of this Section.
The application requesting termination of validity of a Protection Title shall
be handled in accordance with the procedures for appeals under Section 27(2),
(3) or (4) of this Decree. (…)
Section 29: Cancellation of validity of Protection Titles
(1) Any third party shall have the right to file an application requesting the National
Office of Industrial Property to cancel the validity of a Protection Title for the reason
that such Protection Title has been granted contrary to the provisions of law, as
stated in (2) of this Section.
The application requesting cancellation of validity of a Protection Title shall
be handled in accordance with the procedures for appeals under Section 27(2),
(3) or (4) of this Decree.(…)”
In the above provisions, the term “Titles of Protection” refers generally to patents and certificates of registration
with respect to the objects of industrial property rights granted by the National Office of Intellectual Property.
See Art. 9, Decree 63 issued on 24 Oct. 1996 and amended on 1 Jan. 2001, Vietnam Laws (the National Politics
Publishers, 2002).
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First, the provision does not mention the possibility of taking an appeal against the decision
of revocation of patents from the side of the patent holder. Logically, he shall have no
opportunity to bring a case before the competent court against the decision of non-revocation
of his patent.
Second, the complainant may not take a suit before the competent court against the decision
of non-revocation of a patent after he has opted to take an appeal to the administrative
authority at a higher level. In both cases, the competent court does not have any chance to
review the administrative decision with respect to the revocation of a patent.
Some may argue that an opportunity for the complainant to subject a revocation decision to a
judicial review procedure is already available in the above mentioned provision, and
therefore, may be regarded as being compatible with Article 32 of TRIPS.772 It should be
noted that the language of Article 32 of TRIPS requires the availability of an opportunity for
judicial review for every decision of revocation. Under this provision, at least the competent
court should have an opportunity to review the final administrative decision of revocation of
a patent. Otherwise, the patent holder who possesses the patent that was subject to the
decision of revocation should be provided with an opportunity to bring a case against that
decision before the competent court.
The legal basis for the existence of both these opportunities, one for the judicial bodies and
the other for the patent holder, is indispensable for proceeding with a judicial review with
respect to a decision of revocation. Because this legal basis is currently absent in the
provision of Article 27 of Decree 63, it cannot be regarded as being compatible with the
requirements of Article 32 of TRIPS.
One more point is that, Article 27 of Decree 63 refers to the Law on Complaints and
Denouncements as a general legal ground for dealing with a complaint of revocation of a
patent.773 Articles 39 and 46 of this law provide for an optional opportunity for a complainant
to bring a complaint before administrative authorities or courts under administrative or
judicial procedures.774Accordingly, an opportunity for bringing a lawsuit against an
772
See the Explanations of Amendments to Decree 63/CP made by Decree 06/2001/ND-CP, the National Office
of Intellectual Property of Vietnam, Hanoi, 2001.
773
See Luat ve khieu nai va to cao (Law on Complaints and Denouncements) No. 09/1998-QH10 dated 2 Dec.
1998, Vietnam Laws (the National Politics Publishers, 2000). The Law of Complaints and Denouncements is
referred as a general legal ground for dealing with the complaints of termination and invalidation of a patent. See
Arts.27.4, 28.1 and 29.1 Decree 63 issued on 24 Oct. 1996 and amended on 1 Jan. 2001, Vietnam Laws (the
National Politics Publishers, 2002).
774
Arts. 39 and 46 of the Law on Complaints and Denouncements provide:
“Article 39. Within the period of 30 days, counting from the date of expiry of
the time-limit for handling complaints as prescribed in Article 36 of this Law
where the complaint has not been handled, or counting from the date of
receiving the first decision of complaint where the complainant disagrees with
this decision, the complaint may take an appeal to the competent authority at
higher level or take a suit before courts in compliance with the procedures
provided by law...
Article 46. Within the period of 30 days, counting from the date of expiry of
the time-limit for handling complaints as prescribed in Article 36 of this Law
where the complaint has not been handled, or counting from the date of
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administrative decision is only available for the complainant when he opts for a judicial
procedure instead of administrative procedures in taking his appeal against the first decision
of the complaint. Where the complainant opts for an administrative procedure for his appeal,
the decision of the administrative authority at a higher level shall be final without any further
review.
In this respect, the Law on Complaints and Denouncements precludes the right of a
complainant to sue the final administrative decision on a complaint before a competent court.
And therefore, the courts will have no chance to review under judicial procedures with
respect to that decision. For this structure of dispute settlement, an opportunity for the
judicial review of a decision to revoke a patent is not always available under the Law on
Complaints and Denouncements.
It is noted that the Law on Complaints and Denouncements contains two “precautionary”
provisions, which may be explained in a way to argue for the compatibility with Article 32 of
TRIPS. These provisions are arranged in the last section of the law, that is, the provisions for
the implementation of the law. Firstly, Article 101 of the law provides that the complaints of
foreigners be handled in accordance with the law and the related international treaties to
which Vietnam is a member. 775 Secondly, Article 102 of the law empowers the government
to stipulate in details instructions for the implementation of the law. 776 In this point, the
argument based on the provision conforming to the implementation of the law to the TRIPS
and WTO Agreement may be questionable in some aspects:
Firstly, when the international treaty itself requires the “availability” of the procedure that is
unavailable under the law, the non-existence of any other detailed provisions on that
procedure would make the general provision of Article 101 ineffective. The rulings on the
availability of the patent protection regime strengthen the “availability” requirement of the
judicial review mechanism required by Article 32 of TRIPS. 777 By the same token, the WTO
Agreement mandates the positive response in bringing domestic laws and regulations into the
compliance with the WTO law.778
Secondly, because there is no mandatory clause which clearly prohibits the opportunity of the
courts to interfere with the process of handling complaints in the law, while it does allow the
government to issue detailed implementing regulations, it could be argued that it has the
nature of discretionary legislation of the law. However, this argument cannot always be
justifiable under the rulings on the possible violation of discretionary legislation. In other
receiving the decision of complaint where the complainant disagrees with this
decision, the complaint may take an appeal to the competent authority at
higher level, unless the decision of complain is the final decision…”
(Emphasis added) (English translation made by VietLaw & Legal Forum)
See Law on Complaints and Denouncements, supra note 773.
775
See Law on Complaints and Denouncements, supra note 773, art.101.
776
Id. art.102,
777
See findings of the Panel and the Appellate Body in the case of India-Patent, Complaint by US, discussed in
Chapter 4
778
See discussions in Chapter 4.
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words, the WTO rules will challenge any argument for the exemption of the law from
possibility of violating WTO obligations relying on the provision of Article 102 of the law.779
Thirdly, it may be explained that the combination of the provisions in both articles provides
the discretion for the executive branch to implement the law in a manner consistent with
TRIPS and WTO requirements. In this respect, the practical implementation of the law does
not support that explanation. The fact is that the related regulations of the government for
implementing the law contain no specific provision providing for an additional opportunity
for taking a suit against the final decision of patent revocation under administrative
procedure before the courts.780
Fourthly, it may be argued that the complaint settlement structure inscribed in the law is to
deal with complaints in all areas generally. Article 102 allows the government to issue a
particular regulation to provide a supplemental mechanism to deal with specific complaints
concerning patent revocation. Even if this argument is practical, it is hard to be secure under
the rulings on the uncertainty of legal basis formed by administrative instructions when they
are counter to the statutory language of law.781
For the above-mentioned reasons, it seems that the provisions of Articles 101 and 102 of the
Law on Complaints and Denouncements cannot help in demonstrating the compatibility of
the law with TRIPS requirements and WTO rules. For the purpose of making domestic
legislation conform to WTO law, the appropriate solution for this particular issue is to make
both provisions of the Law on Complaints and Denouncements and of Decree 63 consistent
with the language of Article 32 of TRIPS. Accordingly, an opportunity for the competent
court and the patent holder involving judicial review procedures for every patent revocation
decision should be available in the statutory language and the related implementing
regulation.
2.2. Problems with MFN treatment requirements
The legislation of Vietnam is likely to face certain problems caused by the requirement of
MFN treatment regarding the revocation of patents. The fact is that Vietnam has concluded a
bilateral trade agreement with the United States that contains a specific provision limiting
legal grounds for a decision of patent revocation. Article 7.6, Chapter II of the bilateral trade
agreement with the United States provides that each party may revoke a patent “only when
grounds exist that would have justified a refusal to grant the patent.” 782 This limitation is not
found in the text of TRIPS. However, where the limitation of legal grounds for the revocation
of patents is regarded as an advantage in the protection of intellectual property that Vietnam
provides the nationals of the United States, such an advantage should be accorded
779
Id.
See Nghi dinh huong dan thi hanh Luat khieu nai to cao (Decree on detailed provisions and instructions for
implementing the Law on Complaints and Denouncements), Vietnam Laws (the National Politics Publishers,
2000).
781
See discussions in Chapter 4.
780
782
See Hiep dinh Thuong mai giua Hoa Ky va Cong Hoa Xa hoi Chu nghia Vietnam (Agreement between the
United States of America and the Socialist Republic of Vietnam on Trade Relations), available at
www.usvtc.org/trade/bta/, Chapter II, art.7.6.
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immediately and unconditionally to nationals of the other WTO Members to be compatible
with Article 4 of TRIPS.
Under Decree 63 on detailed provisions of industrial property, the reason that may result in a
refusal to grant a patent refers only to the insufficient patentability criteria of the related
invention.783 In addition, although there is no clear provision, it may be justifiable for a
refusal to grant a patent if there appears an unresolved dispute about the right to be the
patentee or proof of untruthful information on the part of the applicant or the inventor.784
According to the bilateral trade agreement with the United States, Vietnam may refer to these
legal grounds to revoke a patent. It is noted that, besides such legal grounds, in the current
legislation of Vietnam there exist some other reasons leading to the revocation of a patent.
Particularly, Decree 12 on handling violations of administrative regulations on industrial
property stipulates the revocation of a patent as a sanction applied to the violations during the
carrying out of patent registration procedures.785 The acts of registering a patent for the
purpose of unfair competition, unlawful market monopoly or market power appropriation, or
falsifying the contents of a patent are subject to the imposition of a fine and the sanction of
revocation of the patent.786 Where the patent was determined as the object of an act violation
as mentioned, the National Office of Intellectual Property is required to revoke a patent
783
See Decree 63, supra note 728, arts. 23.1 and 25.
Id. arts.15.4, 16.2.
785
See Decree 12, supra note 728, art.5.2.
786
Article 5 of Decree 12 provides that:
“Article 5. The acts of violation of regulations on the procedures of
establishment and exercise industrial property rights (…)
1. (…)
(a) Carrying out the procedures of establishment or exercise of industrial
property rights to avoid or to execute the acts that are prohibited or restricted
by the laws and regulations in other areas;
(b) Carrying out the procedures of establishment or exercise of industrial
property rights for the purpose of unfair competition, unlawful market
monopoly or market power appropriation, nullification of industrial property
objects, restraint or restriction of the protection scope of industrial property
rights of others, abuse or derogation of commercial reputation of others; (…)
2. (…)
(a) Falsifying, erasing, forging a Title of Protection or a Certificate of
Registration on protection of industrial property rights, to the extent that the
criminal liability for such acts is not applied.
(b) Forging documents, having a deceit in carrying out the procedures of
request of grant or renewal or amendment of a Title of Protection (…).
3. The supplemental sanctions:
(…)
(b) Forfeiture of the document, or the Title of Protection, or the Certificate of
Registration that was falsified or forged with respect to the acts of violation
prescribed in paragraph 2 of this Article;
(c) Forfeiture of the Title of Protection or the Certificate of Registration
having been granted to the individual or organization committed an act of
violation prescribed in subparagraphs (a) and (b) of paragraph 1 of this
Article.”
784
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pursuant to the proposal of the other administrative authority of competence in handling the
violations of administrative regulations on industrial property.787
It is clear that the provisions of Decree 12, on its face, refer to some legal grounds and
procedures applicable to the revocation of a patent that go beyond the limitation provided by
Article 7.6, Chapter II of the bilateral trade agreement with the United States. It may be
argued that these provisions are elaborated for the purpose of warning rather than actual
application in practice of implementing this regulation. In fact, there has been no case of
revoking a patent under procedures provided in Decree 12.788
Such an argument and fact would be unjustifiable under the rulings on discrimination
treatment that violates Article 4 of TRIPS. On the one hand, the possibility of applying these
procedures can be regarded as an “extra hurdle” imposed on the nationals of the other
countries other than those of the United States, and therefore the previously mentioned
provisions on the face of it may constitute less favorable treatment being given to the
former.789 On the other hand, even if there is no actual opportunity for the competent
authority to apply these provisions in reality, the practical implications or “fundamental
thrust and effect” of these provisions may be the vulnerable points in a challenge to
legislation “as such” as it stands.790
It needs to be recalled that the WTO panels and the Appellate Body may express their own
understanding and explanations on the relevant domestic law and regulations subject to their
examination, which could be independent from that of the related dispute party. 791 At any
rate, the additional legal grounds and procedures applicable to the revocation of patents
stated in the language of Decree 12 would be at a high risk before a challenge on the basis of
the MFN treatment obligations of TRIPS. The wise advice would be to abolish the current
provisions on the revocation of patents in terms of a supplemental sanction, applicable to an
act of violation of administrative regulations on industrial property. Moreover, all legal
grounds for the revocation of patents should be defined and stipulated clearly in the
provisions of Decree 63. The wording of these provisions needs to avoid using vague
language that may lead to different understandings and explanations. 792 Because the
limitations of the legal grounds to revoke a patent has been determined clearly in the bilateral
787
See Decree 12, supra note 728, art.14.4.
See Report on Enforcement Situation of Intellectual Property Rights in Vietnam, the Ministry of Science and
Technology and the Ministry of Culture and Information, July, 2004. See also Le Van Kieu, the Role of
Inspectors of the Ministry of Science and Technology in Handling the Disputes and Complaints on Intellectual
Property, the Ministry of Science and Technology, 2004.
789
See the findings of the Appellate Body in the case of US-Section 211 Omnibus, discussed in Chapter 4.
790
See the findings of the Panel in the case of EC-Geographical indications, Complaint by Australia, discussed
in Chapter 4.
791
See discussions in Chapter 4.
792
The wording of the relevant provisions of Decree 63 presently uses some unclear terms that may lead to
confusion in understanding. E.g., termination of validity and cancellation of validity refer to some legal grounds
that should have been defined in terms of revocation. Therefore, which legal grounds are applied to the
revocation of a patent and which are applied to the invalidation of a patent seem to be undistinguishable. While
the procedure for filing a request of revocation is available, there is no clear provision on legal grounds and
procedure for the issuance of a decision of revocation. The vague and confusing provisions on this matter are
likely to cause disputable questions in their explanation and application. See Decree 63, supra note 728, arts. 27,
28, 29.
788
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trade agreement with the United States, the relevant domestic regulation on this matter
should be revised appropriately. The revised regulation needs to ensure that it will not create
any discriminatory treatment inconsistent with the requirements of Article 4 of TRIPS.
3. Term of protection of patents: “extra hurdle” in renewal procedure
Since Vietnam has recently changed its legislation on the protection of patents towards the
TRIPS standards, there exist different regimes applied to calculating the term of protection of
patents. On the one hand, the term of a patent granted on the basis of the old regulations is
counted from the priority date.793 On the other hand, the term of a patent is granted on the
basis of the new regulation is counted from the filing date. 794 In the perception that the
patents granted pursuant to the old regulation have an insufficient term of 20 years counting
from the filling date as required by Article 33 of TRIPS, the government has amended the
new regulation to allow the prolongation of the protection term with respect to those patents
granted on the old regulation.795
The renewal of the term of protection is applicable to such patents in so far as they get a
sufficient term of 20 years counting from the filing date. By this amendment, it was deemed
that the new regulation was satisfactory with the TRIPS standards. 796 However, in the view of
rulings regarding “extra hurdles” recently developed by the WTO panels and the Appellate
Body, there appears a hidden problem in the revised provision of the new regulation on
patents mentioned above. The question is that, under the amended provision allowing the
prolongation, the patent holder of a patent granted on the basis of the old regulation should
express his wish to renew the patent by filing a request with the National Office of
Intellectual Property. Article 69.2 of Decree 63 as amended by Decree 06 in 2001 states that:
“Section 69: Transitional provisions
(2) Protection Titles granted on the basis of the Ordinance on
Innovations and Inventions of 1981, the Ordinance on Utility
Solution of 1988, the Ordinance on Trademarks of 1982, the
Ordinance on Industrial Designs of 1988 or on the basis of the
Decree on the Protection of Industrial Property Rights of 28
January 1989 shall continue to be valid under such legal
instruments until the date of expiry. After the above respective
term of validity, according to the procedures for renewal
provided in paragraph 2, Section 30 of this Decree, upon the
owners’ request, the Trademark Registration Certificates and
Industrial Design Certificates shall be renewed, patents for
inventions shall be renewed until expiration of 20 years of the
793
See Ordinance on protection of industrial property of 1989, supra note 726, art. 23 and Ordinance on
innovations and inventions, supra note 723, art. 15.
794
See Decree 63, supra note 728, art. 9,
795
See Decree 63, supra note 728, art. 69, as amended by Decree 06, supra note 728.
796
See Hoang Van Tan, The New Regulations on Industrial Property of Vietnam, the National Office of
Intellectual Property of Vietnam, August, 1997, p.5.
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official accepted date of the application.” (amended provision is
in italics)797
According to the above provision, the National Office of Intellectual Property only provides
for the renewal of a validity term to a patent granted on the basis of the old regulation after
consideration of the request filed by the patent holder. It is noted that there is not any
procedure applied to the renewal of term of validity of a patent granted on the basis of the
new regulation, except for the obligation of payment of a validity maintenance fee. 798 Even if
the National Office of Intellectual Property cannot refuse any request of renewal with respect
to a patent granted on the basis of the old regulation, the requirement of an additional
procedure for the renewal of the patents granted on the basis of the old regulation is evident.
It is necessary to recall that the patents that need to be renewed under Article 69.2 are those
that start the term of protection from the priority date, and for that reason their duration is
shorter than those starting the term of protection from the filing date. In other words, in terms
of duration, there exist two different categories of patents granted under the old regulation.
The first category includes those patents having been granted with claims of the priority
right, and therefore, they were determined the starting date as the priority date. The second
category includes those patents that have been granted without the claim of the priority right,
and therefore, the starting was date was determined as the filing date. Under the new
regulation, only one category of patents exits so every patent’s starting date for the term of
protection is the filing date.
This amended provision can be attack on two aspects. First, the provision imposes an
additional procedure only on the patents with claim of the priority right granted on the basis
of the old regulation. Therefore, it creates discrimination between the first category of patents
and the second category of patents, which are granted under the old regulation. Presently,
Vietnam has no mechanism for the protection of dependent patents and both old and new
regulations do not refer to the concept of internal or domestic priority right. 799 Namely, a
patent applicant cannot claim the priority right based on the first application that is a
domestic one, while he may claim the priority right based on the first application having been
filed in other countries under Article 4 of the Paris Convention.800
For that legal structure, the additional procedure in essence is applicable only to a patent for a
foreign invention that has been subject to a foreign patent application. It does not apply to a
patent for a domestic invention that comes first to the National Office of Intellectual
Property. In other words, the requirement of the additional procedure creates an “extra
hurdle” that basically imposed on the patent holders who obtained the patents for the
inventions having been protected under the patents of foreign countries. This point is
797
See Decree 63, supra note 728, art. 69, as amended by Decree 06, supra note 728.
See Decree 63, supra note 728, art. 45.
799
The additional inventions are not protected under the legislation of Vietnam at present. See Decree 63, supra
note 728. The protection of dependent patents is proposed in the draft of the new law on intellectual property.
See Du Thao 5 Luat So Huu Tri Tue (the fifth Draft of Law on Intellectual Property), art. 138, the Legislation
Committee of the National Assembly, September 2005.
800
See Ordinance on Innovations and Inventions, supra note 723, art. 29; Decree 63, supra note 728, art. 17,
798
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certainly inconsistent with the rule of anti-discrimination of inventions in terms of the place
of invention enshrined in Article 27.1 of TRIPS.
In addition, if the fact that the patent applications with claim of the priority right only came
from the foreign applicants is proved, the additional procedure could be regarded as an “extra
hurdle” imposed purposely on the foreign patent holders. The extra hurdle, consequently, is
regarded as the less favorable treatment given to the foreign patent holders. This treatment
certainly contradicts the national treatment principle under Article 3.1 of TRIPS. Moreover,
when the GATT standards of less favorable treatment are also applied in examining the
national treatment obligation of the “incorporated” Paris Convention, the “extra hurdle” may
violate at the same time the national treatment obligation under Article 2(1) of the Paris
Convention, as incorporated by Article 2.1 of TRIPS.801
In other aspect, based on that fact, the revised provision would be subject to not only a
challenge of legislation “as such”, but also a challenge of de facto discrimination regarding
the actual application of that provision. It is noted that the rulings of the WTO panels have
confirmed the possibility of raising a challenge of de facto discrimination in regard to the
relevant domestic legislation under TRIPS obligations.802
Second, it is also plausible for the claim of the discrimination between treatment given to the
first category of patents under the old regulation and that provided for the patents under the
new regulation. For similar reasons, the patents for the foreign inventions with claims of the
priority right under the old regulation shall be subject to the requirement of additional
procedure for the renewal of term of protection. While such a requirement does not apply to
the patents granted under the new regulation, it does not distinguish the patents with the
priority right and those without the priority right in terms of duration account.
In other words, under the new regulation, the patents for domestic inventions are not subject
to the requirement of the additional procedure. In this respect, the “extra hurdle” created by
the revised provision is likely to create discrimination against the patents for foreign
inventions under the old regulation in comparison with the patents for domestic inventions
under the new regulation. The revised provision is, therefore, incompatible with the rule of
anti-discrimination under Article 27.1 of TRIPS.
Otherwise, if the fact that the patent holders of the patents with the priority right are actually
the foreign patent applicants is evidential in the practice of the National Office of Intellectual
Property, the additional procedure may be regarded as an extra hurdle imposed only on the
foreign patent holders. By the same reasoning with respect to the foreign patent holders in
relation to the domestic patent holders under the old regulation, the requirement for the
renewal procedure may constitute the less favorable treatment with respect to the foreign
patent holders in the comparison with the domestic ones under the new regulation. As a
result, it would be risky before a challenge on the basis of legislation “as such” as it stands or
a challenge of de facto discrimination. The rulings on the standards of domestic law
801
The change of the standards for measuring the consistency of the national treatment obligations under the
Paris Convention after incorporation into the TRIPS is discussed in Chapter 3. See the findings of the Panel and
the Appellate Body in the case of US-Section 211 Omnibus as discussed in Chapter 4.
802
See the findings of the Panel in the case of Canada- Patent, Complaint by US, discussed in Chapter 4.
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examination seem to preclude the consistency of this provision under the national treatment
obligations under TRIPS and the “incorporated” Paris Convention.803
In short, since the application of the relevant “incorporated” provisions of the Paris
Convention should be in compliance of with the rule of anti-discrimination and the national
treatment principle of TRIPS, the requirement of an additional procedure for filing requests
of renewal and considering such requests is deemed to be inconsistent to the rules of TRIPS
and the WTO. Although the amendment that the government made to the transitional
provisions of the new regulation is admittedly an active step towards conformity with the
TRIPS standards, the amended provision needs to be reviewed in regards to its procedural
aspects. Accordingly, it should eliminate any elements that may cause a discriminatory
treatment due to the specific features of the legislation and the practice of Vietnam on the
protection of patents.
4. Requirement of source indication with respect to foreign licensing
Under the rationale of protection of social interests, Section 65(5) of Decree 63, on the face of
it, provides that a product manufactured in Vietnam under a “foreign licensing” or with a
“foreign trademark” be required to display an indication “made in Vietnam” on its label. This
is regarded as a national policy for the protection of consumers’ interest. It protects the
domestic consumers from confusion over the sources of products. Despite this, there is no
governmental regulation to clarify what a “foreign licensing” or a “foreign trademark” is.
An instruction from the National Office of Intellectual Property refers to “foreign licensing”
and “foreign trademark” with the implication of the use of an industrial property subject
matter that originates from a foreign country, or is transferred by a foreign owner. 804 The
foreign element in the use of the industrial property subject matter may cause confusion for
the consumers as to the source of the goods when it is advertised on products. For example, it
may create an image that the related product is produced in, or originates from a foreign
country whose reputation for such products is widely known. For that reason, it is necessary
the true source indication “made in Vietnam” is added on the label of all products that are
produced in Vietnam under a “foreign licensing”. In the language of a governmental decree,
this requirement is read as follows:
“Section 65: Protection of national interests and social interests
in industrial property activities
(…)
(5)(…)In case a product is manufactured in Vietnam under a
foreign license or bears a trademark which may create the
803
See the discussions on the change of the national treatment principle of the Paris Convention as incorporated
into the TRIPS and the challenge of legislation “as such” and de facto discrimination under the TRIPS in
Chapters 3 and 4, respectively.
804
See Cong van so 1080/PC-QQL cua Cuc So huu cong nghiep tra loi Tong cuc Hai quan ngay 4 thang 11 nam
1999 (Official Response Letter No. 1080/PC-QL of the National Office of Industrial Property on the date of 04
November 1999 provided to the General Customs), Official Notice Records of 1999, the Legislation and
Management Division, the National Office of Intellectual Property.
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impression that the trademark is a foreign mark or has a foreign
origin, an adequate and unabbreviated indication “made in
Vietnam” on the product shall be compulsory.”805
The requirement of source indication is applicable to any industrial property subject matter
belonging to the categories provided in Decree 63, when it is under a “foreign licensing”. 806 It
means that this requirement is also applicable to a foreign licensing of a patent. Accordingly,
licensing a patent that covers a foreign originated invention or a patent that is held by a
foreign patentee should be subject to the requirement. A product that is manufactured in
Vietnam under the license of a foreign originated patent, or a license granted by a foreign
patentee, is required to add the source indication “made in Vietnam” on its label.
The provision is problematic when there is no provision in Decree 63 on the same
requirement applied to a product manufactured under a domestic licensing. A product
manufactured under a domestic patent licensing, accordingly, is not subject to the requirement
of source indication. It means that the use of a patent that covers a domestically created
invention and is licensed by a domestic patentee is not subject to the requirement of source
indication.
On this point, Decree 63, on the face of it, contains a discriminatory treatment applied to a
patent for a foreign originated invention and a foreign patent holder. It may be argued that the
requirement of source indication is an “extra hurdle” in the patent protection given to a
foreign originated invention and a foreign patent holder. The effective equality of
opportunities in patent protection is not available to a foreign invention and a foreign patent
holder. This may be regarded as a less favorable treatment to the foreign inventions and
foreign patent holders.
In addition to the provision of Decree 63 on the requirement of source indication, Decree 12
on the administrative remedies in the field of industrial property applies a fine and certain
supplemental sanctions to an act of failing to comply with the requirement of source
indication.807 The supplemental sanctions, in an appropriate case, may be the revocation of the
business license, the confiscation of the products subject to the violation, the compulsory
attachment of the indication to the products, or the correction of the improper indication
displayed on the products.808 Particularly, Section 6.2(b) provides that the failure to display
the source indication on the products manufactured in Vietnam under a “foreign licensing” is
an act of violation of the regulations on industrial property protection indications:
“Section 6: The acts violating the regulation on industrial
property protection indications
(…)
805
See Decree 63, supra note 728, art. 65, as amended by Decree 06, supra note 728.
This decree provides the regime protection to patents, trademarks, industrial designs, appellation of origin of
goods. See Decree 63, supra note 728, arts. 4-7, as amended by Decree 06, supra note 728.
807
See Decree 12, supra note 728, art. 6 (title ).
808
See Decree 12, supra note 728, art. 6.3.
806
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2(b) Failing to display the indication or displaying in an
insufficient or unclear manner the indication in the phrase “made
in Vietnam” on the products manufactured in Vietnam under a
foreign licensing (…)”809
This provision applies generally to a product manufactured by a “foreign licensing”, including
a foreign licensing of a patent. It means that an act of failing to display, or displaying
improperly the source indication “made in Vietnam” on a product manufactured under a
foreign licensing of patent shall be regarded as an act of violation. Pursuant to Section 6.2(b)
of Decree 12 such an act shall have applied the prescribed relevant fine and sanctions.
It is noted that there is no provision in Decree 12 providing for similar sanctions applicable to
an act of failing to display, or displaying improperly, the source indication on a product
manufactured under a domestic licensing. Accordingly, where a product manufactured under
a domestic licensing of patent does not display, or displays improperly the source indication,
there will be no fine and sanction applied to it.
It is clear that, on the face of it, Decree 12 applies administrative sanctions on the failure to
display the source indication with respect to the use of a patent for a foreign originated
invention or a patent licensed by a foreign patent holder, while it does not do so with respect
to the use of a patent for a domestically originated invention or licensed by a domestic patent
holder. In this respect, similar to Section 60(5) of Decree 63, Section 6.2(b) of Decree 12, on
the face of it, it is likely to constitute discriminatory treatment against a foreign originated
invention and a foreign patent holder. A claim of a less favorable treatment in terms of
application of an “extra hurdle” to a foreign originated invention and a foreign patent holder
may be relevant in this case.
In the practice of implementation, there are many cases to which the administrative authorities
applied the provisions of Decree 63 and Decree 12 on the source indication requirement. After
the issuance of Decree 12 in March 1999, the competent authorities, including the Economic
Polices, the Market Inspections, and the Customs, executed a series of examinations with
respect to the products manufactured by a “foreign licensing” or bearing a foreign trademark.
In such cases, the mentioned-above provisions have been uniformly applied, without any
distinction between a product under a trademark licensing and one under a patent licensing.
The practical effects of the provisions under Section 65(5) of Decree 63 and Section 5.2(b) of
Decree 12 are reflected in the series of decisions made by the enforcement authorities on the
detention of the products, which are manufactured domestically under a “foreign licensing”
and lacked the source indication as required. 810 The instructions of the National Office of
809
See Decree 12, supra note 728, art. 6.2(b).
For example, under Cong van cua Chi cuc Quan ly thi truong Thanh pho Ha Noi so 30 ngay 1 thang 7 nam
1999 (Official Notice of the Market Inspection of Hanoi City No. 30 on the date of 1 June 1999) provided to the
National Office of Industrial Property, the Market Inspection of TanBinh District, HochiMinh City, detained a
lot of “Lee Part Korea” gas cookers, of which the main parts were manufactured by a domestic enterprise,
without displaying the indication “Made in Vietnam” as required. Under Cong van so 137-QLTT cua Cuc Quan
ly thi truong ngay 5 thang 7 nam 1999 (Official Notice of the Market Inspection Bureau No. 137-QLTT on the
date of 5 July 1999) provided to the National Office of Industrial Property, the Market Inspection of HoChiMinh
City detained a lot of “TOSHIBA” refrigerators, which were assembled from imported accessories by a domestic
810
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Intellectual Property in response to the requests of the enforcement authorities also give effect
to the provisions in the implementing practice. The implementing instructions of the National
Office of Intellectual Property provided to the enforcement authorities clarification that the
source indication requirement under Decree 63 and Decree 12 is applicable to any forms of
manufacture of a product. A product that is manufactured in Vietnam, wholly or partly, under
a foreign licensing should be subject to the source indication requirement:
“If the product (or its main part) is manufactured in Vietnam, it is
required to display the indication “made in Vietnam” on the
product; with regards to the failure to display clearly and
sufficiently this indication as required, it shall be regarded as an
act of violation and be handled under Section 6 of Decree 12
dated 6 March 1999 in terms of a violation on the industrial
property indication.”811
“Where a product is assembled in Vietnam, it should display the
indication that the product is assembled in Vietnam, if not, it
shall be an act of violation under Section 6 of Decree 12.”812
The requirement is also applied generally to any industrial property category that is the object
of a license granted by a foreign industrial property right holder. There is no limitation or
exception regarding a patent in the application of the requirement. The purpose of the
requirement is to protect the consumers’ interests from confusion over the source of products.
The particular instructions may be read in the following explanation of the National Office of
Intellectual Property:
“The regulation on industrial property protection requires a
compulsory expression of the indication “made in Vietnam”
with respect to a product manufactured under a foreign
licensing, or produced in Vietnam and bearing a foreign
trademark, which contains an element that may cause a
misleading perception that the product is of a foreign country
enterprise. These products did not bear the source indication as required. Under Cong van cua Tong cuc Hai
quan so 5799/TCHQ-GSQL ngay 12 thang 10 nam 1999 (Official Notice of the General Customs No.
5799/TCHQ-GSQL on the date of 12 October 1999) provided to the National Office of Industrial Property, the
local customs detained some lots of products which did not attach properly the source indication as required.
Under Cong van cua Cong an Thanh pho Ha Noi so 312 ngay 7 thang 12 nam 2000 (Official Notice of the Police
of Hanoi City No. 312 on the date of 07 December 2000) provided to the National Office of Industrial Property,
the Police of DongDa District detained a lot of BBM motorbike exhaust pipes, which were produced by a
domestic enterprise, and so on. See Official Letter Records of 1999 and 2000, the Legislation and Management
Division, the National Office of Intellectual Property.
811
See Cong van cua Cuc So huu cong nghiep so 589/PC-QL ngay 22 thang 7 nam 1999 tra loi cong van cua Cuc
Quan ly thi truong Thanh pho Ha Noi (Official Response Letter No. 589/PC-QL of the National Office of
Industrial Property on the date of 22 June 1999 provided to the Market Inspection of Hanoi City), Official Notice
Records of 1999, the Legislation and Management Division, the National Office of Intellectual Property.
812
See Cong van cua Cuc So huu cong nghiep so 668/PC-QL ngay 17 thang 7 nam 1999 tra loi cong van cua Cuc
Quan ly thi truong (Official Response Letter No. 668/PC-QL of the National Office of Intellectual Property on
the date of 17 July 1999) provided to the Market Inspection Bureau, Official Notice Records of 1999, the
Legislation and Management Division, the National Office of Intellectual Property.
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or originated from a foreign country (pursuant to Section 66 of
Decree 63/CP dated 24 October 1996 and Section 6 of Decree
12/1999/ND-CP dated 6 March 1999), in order to protect the
interest of the consumers”813
In addition, the instructions also specified that the indication should be in Vietnamese. The
expression of the indication on the product should be presented in such a manner that informs
clearly the source of the product to the consumers that the product is manufactured in
Vietnam under a foreign licensing.814 The following instructions referred to these points:
“Under the provisions of Section 66 of Decree 63/CP dated 24
October 1996 of the Government on detailed regulation on
industrial property, if a product is manufactured in Vietnam
under a foreign licensing or bears a trademark that may create
an image that such a product is of a foreign country or
originates from a foreign country, it is mandated to display in
full (not in abbreviation) the indication “made in Vietnam” on
the product. This provision is explained that the related
manufacturer does not necessarily inscribe precisely the phrase
“made in Vietnam” on the product. Instead, it is possible to
replace this phrase by other words (in Vietnamese), which give
a clear indication that the product is manufactured by an
enterprise having a particular address in Vietnam.”815
Under Section 14 of Decree 12, the investigation and consideration of the violation, the
competent authorities should follow a three-step proceeding for complicated cases, or a onestep proceeding for simple cases.816 In practice, in almost all cases the three-step proceedings
are applied.817 Three steps include detection, consultation, and decision. For example, in
813
See Cong van cua Cuc So huu cong nghiep so 1080/PCQL ngay 4 thang 11 nam 1999 tra loi Tong cuc Hai
quan (Official Response Letter No. 1080/PC-QL of the National Office of Intellectual Property on the date of 04
November 1999 provided to the General Customs), Official Notice Records of 1999, the Legislation and
Management Division, the National Office of Intellectual Property.
814
It is noted that a licensing with respect to a patent or trademark itself, for example, should be subject to the
requirement of licensing indication, which applies to the products manufactured under the licensing. However,
this requirement applies to a license in general. It does not discriminate between a foreign licensing and domestic
licensing as in the case of source indication requirement. This may be read in another clause of Section 65(5) of
Decree 63, as follows:
“In case a product is manufactured under a license, such indication on
products, in advertisements and transactions for commercial purposes shall be
compulsory.”
See Decree 63, supra note 728, art. 65(5), as amended by Decree 06, supra note 728.
815
See Cong van cua Cuc So huu cong nghiep so 1832/PC-QL ngay 21 thang 12 nam 2000 tra loi Cong an Quan
Dong da (Official Response Letter No. 1832/PC-QL of the National Office of Intellectual Property on the date of
21 December 2000 provided to the Police of DongDa District), Official Notice Record of 2000, the Legislation
and Management Division, the National Office of Intellectual Property. In this letter, the instructions referred to
Article 66 of Decree 63 because at this time this decree was not amended. Section 66 became Section 65 after
amendment. See Decree 06, supra note 728, art. 2.31.
816
See Decree 12, supra note 728, art. 14.
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dealing with the case of a patent relating to a violation, the order of procedures would be as
follows:
First, the enforcement authority in charge of implementing the regulations on the source
indication requirement needs to identify the different kinds of patented products during the
course of market inspection and handling of the violation. The patented products in every case
should be classified into two kinds: the patented products, which are subject to a foreign
licensing, and the products, which are not subject to a foreign licensing, for the purpose of
application of the source indication requirement. When they suspect the patented products are
of the kind that should have applied the source indication requirement, normally based on the
trademark of the products, they will detain the lot of products which have no “made in
Vietnam” indication presented in Vietnamese and in full letters.
Second, the enforcement authority shall consult with the National Office of Intellectual
Property, or the Department of Science and Technology belonging to the Municipal People’s
Committee, to confirm whether the related patent involving the pending case belongs to a
foreign patent holder, and whether it is subject to an effective licensing agreement. The
consulted agency shall respond to the request of the enforcement authorities in a certain
period. In the response letter, the consulted agency should clarify the legal situation of the
related patent, information about the patent holder, the related effective licensing, if any, as
requested. The consulted agency may also render the tentative conclusion about the violation
based on the information provided by the enforcement authority, and specify particularly legal
provisions applicable to the case.
Third, the enforcement authority after receiving the response letter from the consulted agency,
will decide the appropriate measures in the case. Where it is confirmed that an act of
violation exists in the pending case, they will apply certain fine and supplemental sanctions as
provided in the related provisions. The decision of the case, in the case of violation, will be
delivered to the consulted agency for co-operation and supervision and the revocation of the
related license when necessary.
For the purpose of applying the source indication requirement, the enforcement authorities
during the operation of the above procedures should always keep in mind the distinction
between a foreign originated trademark and a domestic trademark; between a foreign
originated patent and a domestic patent; between a foreign trademark owner and a domestic
trademark owner; between a foreign patent owner and a domestic patent owner, etc., in
relation to a product produced in Vietnam. That distinction is nothing but a discriminatory
treatment with respect to foreign originated trademarks and foreign originated patents, and to
foreign trademark owners and foreign patent owners, in comparison with the domestic ones.
The above discriminatory treatment is clearly inconsistent with the requirements of the antidiscrimination rule under Article 27.1 and the national treatment principle under Article 3.1 of
TRIPS. A claim may be made under the current regulation with a challenge to the legislation
“as such” or a using the “extra hurdle” argument. The challenge may be made not only
regarding the discriminatory language, but also the actual application of the regulation. Even
817
See Official Notices Records, the Legislation and Management Division, the National Office of Intellectual
Property.
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if it may be argued for the unclear language in the legal text, the claim of de facto
discrimination in the practical application of the regulation would be relevant.
The government may explain that the source indication requirement is necessary for the
purpose of protecting the legitimate interests of the domestic consumers. The argument for the
interest of consumers seems to be valid under the rationale of the principles provided in
Article 8.1 of TRIPS. However, this explanation may not be justifiable for the reason that the
requirement of source indication itself is inconsistent with Articles 27.1 and 3.1 of TRIPS,
because it is applied in a manner that discriminates against foreign originated patents and
foreign patent holders. The demand of the public interest does not justify the inconsistency of
the relevant domestic law to the TRIPS obligations. Otherwise, any measure executed under
the rationale of Article 8.1 shall be subject to the “consistency test” existing as a lock to the
realization of this provision.818 As discussed earlier, the WTO panels may examine domestic
legislation for the purpose of the assessment of WTO obligations compliance. They may
make their own understanding and independent explanation on the relevant domestic law.819
In such a situation, the “fundamental thrust and effect”, in terms of the practical implications
or the actual effects of the regulation, may be the appropriate reasoning for the conclusion of
inconsistency with the national treatment obligation under Articles 3.1 of TRIPS. Moreover,
where the GATT standards of less favorable treatment is practically applied to measure the
national treatment obligation of the Paris Convention, the “extra hurdle” caused by the
imposition of the discriminatory requirement of source indication may also be a violation of
the national treatment obligation under Article 2(1) of the Paris Convention, as incorporated
by Article 2.1 of TRIPS.
The examination of the provisions on the source indication requirement and their actual
application discloses that the current regulations are incompatible with the requirements of
Articles 27.1 and 3.1 of TRIPS, in response to the source indication requirement. The
incompatibility in this point cannot be justified under Article 8.1 of TRIPS because of the
TRIPS inconsistent nature. The solution for that may be one of the two suggested options.
Either the source indication requirement is totally eliminated from the current regulations or
the discriminatory elements existing in the language of such regulations be excluded.
If the requirement of source indication is necessary for the purpose of the public interest, it
should be set forth and applied in a manner consistent with the requirement of the national
treatment principle and the anti-discrimination rule. Particularly, it should be applicable to
both foreign and domestic patents and patent owners. Any discrimination existing in the
textual language of the legal documents and in the implementing mechanism should be
entirely precluded.
The government may also choose another way to implement the second option. It seems to be
safe under TRIPS if it leaves this matter to the regulation of the other fields other than
industrial property protection. Under the regulation of the other fields, for example, the law
on the protection of consumers’ interest or on protection against unfair competition practices,
the kind of the source indication requirement may find some justification.
818
819
See discussions in Chapter 3.
Id.
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5. The right of priority:
incompatible with the extended rule of assimilation
At present, Decree 63 is the only national legal document containing provisions on the matter
of the priority right. Article 17 of this Decree provides for the right to claim the priority right
of nationals and the assimilation of nationals of the Members of the Paris Convention. The
contents of this provision were prepared in the light of the relevant provisions of the Paris
Convention on the priority right.820
Apart from that, Article 17 requires reciprocity in the provision of the priority right.
Basically, this article enables a patent applicant to claim the priority right on the basis of an
application having been filed earlier in another country when such a country is a member of
the Paris Convention or also provides with the nationals of Vietnam the same treatment. The
claim of the priority right referring to a basic patent application having been filed in the
country that has entered a bilateral agreement with Vietnam on the matter of the priority right
is also recognized.
Similarly, the rule on the assimilation of nationals under the Paris Convention is also applied
in the provisions of this article. Accordingly, not only the nationals or residents but also the
persons who have real and effective industrial or commercial establishment in the territory of
a member of the Paris Convention are entitled to claim the priority right under this article. A
similar rule applies to nationals and the assimilation of nationals of a country that has
concluded a bilateral agreement with Vietnam or recognized the principle of reciprocity on
the matter of the priority right. This structure can be read in the following provisions:
“Section 17: Priority rights
1) Applicants for a Protection Title for an invention, utility
solution, industrial design or trademark may claim priority on
the basis of an application which has been filed earlier in
another country for the same subject matter or on the basis of an
exhibition of the object described in the application at an official,
or officially recognized international exhibition, organized in
Vietnam or a third country, if:
a) Such third country where the earlier application has been filed
or where the exhibition has been organized is a member of the
Paris Convention or has signed a bilateral agreement on priority
rights with Vietnam, or applies the principle of reciprocity in this
respect;
b) The applicant is a national or resident or has a real and
effective industrial or commercial establishment in a country
which satisfies the conditions under (a) of this subsection;(…)”
(emphasis added)
820
See Decree 63, supra note 728, art. 17.
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It is clear that the above-mentioned provisions do not provide for or, at least, make available
an open opportunity for the extension of the application of the priority right, for instance,
where Vietnam accesses the WTO, and therefore are bound with TRIPS and the
“incorporated” Paris Convention. As discussed, the scope of the national treatment principle
and the assimilation rule has been changed due to the incorporation of the Paris Convention
into the TRIPS. The nationals of all WTO Members are regarded “as if” they are the
nationals of the countries in the Union of the Paris Convention, and the nationals of nonWTO Members shall be regarded “as if” they are nationals of the countries outside the Union
of the Paris Convention.821 As a result, the national treatment regarding the priority right
under Article 2.1 of the Paris Convention, when it is subject to the treatment of nationals
under Article 3.1 of TRIPS, will be provided unconditionally to the nationals of all WTO
Members. Similarly, the same treatment regarding the assimilation of nationals under Article
3 of the Paris Convention, when it is subject to the treatment of nationals under Article 3.1 of
TRIPS, shall be accorded unconditionally to the nationals of non-WTO Members who meet
the criteria of the extended rule.
Both of paragraphs (a) and (b) of Section 17 of Decree 63 are incompatible with these
implications. On the one hand, paragraph (a) of Section 17 of Decree 63 does not provide any
possibility for according the treatment of nationals regarding the priority right to the
nationals of all WTO Members. The requirement of reciprocal conditions in the application
of this provision is inconsistent with the national treatment and MFN treatment requirements
of Articles 3.1 and 4 of TRIPS. On the other hand, paragraph (b) of this section does not
allow the extensibility of the rule of assimilation regarding the priority right to provide the
same treatment to the nationals of non-WTO Members who meet the criteria of the extended
rule. In addition, the reciprocal conditions set forth in both paragraphs of this article are
clearly incompatible with the national treatment and MFN treatment requirements of Articles
3.1 and 4 of TRIPS.
In other words, the application of the paragraphs (a) and (b) of this section is likely to result
in a “less favourable treatment” regarding the priority right with respect to the nationals of a
given WTO Member or non-WTO Member to some extent. The language of this section
itself does not, at any rate, seek the extensibility and the unconditional provision of the
priority right to the nationals of all WTO Member and those of non-WTO Members qualified
for the extended rule of assimilation. In this point only, the section is at highly risk before a
challenge to legislation “as such” as it stands for its inconsistency with Articles 2.1 and 3 of
the Paris Convention, as subjected to the requirements of Articles 3.1 and 4 of TRIPS, when
Vietnam becomes a WTO Member.
The solution for this incompatibility is that Section 17 of Decree 63 should be revised in time
so as to make available a possibility of adaptation to the change in the “incorporated” Paris
Convention obligations in respect to the priority right. Alternatively, the appropriate
amendments should be added to the contents of this section, immediately after the accession
of Vietnam to the WTO.
6. Reciprocity in the protection of patent for foreigners
821
See discussions on the change in the scope of the national treatment principle and the rule of assimilation of
nationals under the Paris Convention after incorporation, in Chapter 3.
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One incompatible point existing in Decree 63 is the provision on the conditional protection of
industrial property rights providing for foreigners. This point stays behind the requirement of
reciprocity applicable to the nationals of the countries outside the Paris Union to which
Vietnam is a member. This requirement could be read in the provisions of Section 67.1 of
Decree 63:
“Section 67: Protection of industrial property rights of foreigners
1. Foreign natural or legal persons in the following cases shall
have the right to request protection for their industrial property
rights in Vietnam in accordance with the provisions of this
Decree and shall enjoy all such rights and be subject to all such
obligations as Vietnamese subjects:
(a) Natural or legal persons that enjoy the rights in accordance with
the Paris Convention;
(b) Natural or legal persons of countries that have signed an
agreement on the mutual protection of industrial property with
Vietnam or adopted the principle of reciprocity in matters of
industrial property protection with regard to Vietnam for each
other’s natural or legal persons.” (Emphasis added)
As stipulated in the above provision, apart from the nationals and the assimilations of
nationals of the Paris Union countries, Decree 63 provides the protection of industrial
property rights only to the nationals of those countries which have either concluded the
bilateral agreements on the protection of industrial property rights with Vietnam or accepted
the reciprocity principle in the protection of industrial property.
Accordingly, the scope of application of the national treatment in the patent protection cannot
be automatically extended to the nationals of the countries who are not enjoyable the national
treatment under the Paris Convention. In the sense that the TRIPS does not allow the
reciprocity in the application of the national treatment principle, the above provision of
Decree is incompatible. The reciprocity requirement is inconsistent to the provision of
Article 3.1 of the TRIPS.
Some may be arguable for the application of a provision existing in the Civil Code, which
allows the application of the international treaty provisions in case there exists a conflict
between the national law provisions and the international treaty provisions. 822 However, in
the view that the National Assembly would not recognize the WTO Agreement, including the
TRIPS, as the treaties having direct applicability in the jurisdiction of Vietnam, as generally
admitted by other countries, the possibility of excluding the above inconsistence seems to be
impractical. This point therefore would be likely to cause some dispute when Vietnam
adheres to the WTO Agreement and the TRIPS regulation.
7. Incompatible requirements regarding compulsory licenses
822
See the Civil Code, supra note 749, art. 837. This article provides:
“Industrial property right of foreign individuals and legal persons in regard of
the objects patented by the Government of the Socialist Republic of Vietnam
and the international conventions which the Socialist Republic of Vietnam
has signed or joined to.” (Translation of the National Politics Publisher)
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As discussed in the previous chapters, the TRIPS requires much more intensive conditions as
to the application of national regulation on compulsory licenses, compared with the Paris
Convention. Not only compulsory licenses for non-working and insufficient working of
patent should be subject to the rules provided in Article 5(A)(4) of the Paris Convention, all
other types of compulsory licenses must observe the requirements stipulated in Article 31 of
the TRIPS. The provisions of the Civil Code and Decree 63 mention only to the types of
compulsory licenses for non-working and insufficient working of patent in light of Article
5(A) of the Paris Convention.823
“Section 51: Licence upon decision of the competent State
authority (“Non-voluntary licence”)
1. A non-voluntary licence refers to a permission compulsorily
granted by the owner of an industrial property right, or his or her
licensee over the whole invention, utility solution or industrial
design, to another natural or legal person or another entity to use
such industrial property object upon a decision of the competent
State body as provided for in this Section.
(a) The owner of industrial property rights shall be forced to grant a nonvoluntary license on the conditions provided for in Article 802 of the Civil
Code.
(b)
The provisions set forth in paragraph 1 Article 802 of the
Civil Code shall not apply to the four (4) year period of the filing date and three
(3) year period of the date of granting Protection Titles.
(c)
The industrial property rights owner who was forced to grant
a non-voluntary license has the right to request the termination of the nonvoluntary license when the circumstances resulted in the non-voluntary license
do not exist and impossible to take place any more, provided that the
termination shall not cause any damage to the licensee.
It is clearly that the types of compulsory licenses, e.g., for the use of the Government in
certain cases, would not be subject to the requirements provided in the Civil Code and
Decree 63. This is likely to be inconsistent with the requirement of the TRIPS. Stating in the
term “other use without authorization of the right holder”, Article 31 of the TRIPS places the
all the types of use of patent without the authorization of the patent owner to be subject to the
detailed conditions stated in this article, except for the exceptions provided in Article 30 of
the TRIPS. This point is endorsed by the Panel in the case of Canada-Patent protection for
pharmaceuticals, as discussed in the previous chapters. Furthermore, the national regulations
on compulsory licenses should also observe the rules of non-discrimination as required by
Article 27.1. The Panel in the case mentioned above affirmed the extension of this rule to the
provisions of Articles 30 and 31.824
In the light of the WTO panel rulings on the scope of the rules of non-discrimination and the
prevailing effect of these rules under Article 27.1 upon the limitations of patent rights under
823
824
See Civil Code, supra note 749, art. 802, Decree 63, supra note 728, art. 51.
See discussions on the case of Canada-Patent, Complaints by EC, in Chapter 4
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Article 31, the narrow scope of the national regulation on compulsory licenses under the
Civil Code and Decree 63 appears incompatible to the requirement of the TRIPS. This point
should be taken into account in the preparation of the new law on intellectual property.
Another point concerning the procedures of granting of compulsory licenses seems to be
inconsistent with the requirements of the TRIPS. That is, the national legislation should make
available the possibility for the patent right holder to take claim according to a review
procedure against the decisions of the government authority on the granting of compulsory
licenses and on the remuneration paid to the patent right holder.825
Under the provision of Decree 63, the Minister of Science and Technology is the only
government authority having the competence to grant compulsory licenses and to handle the
complaint regarding compulsory licenses. The patent right holder where he is enforced by a
compulsory license cannot take an appeal against the decision of the Minister of Science and
Technology when that decision is regarded being final. This point could be read in the
provisions of Sections 51.8 of Decree 63:
“8.The non-voluntary licensor has the right to file an appeal to
the Minister of Science, Technology and Environment for the
decision of rejecting his request.
The person requesting the non-voluntary license has the right to file
an appeal to Minister of Science, Technology and Environment for
the decision of rejecting his request.
The procedures for filing and handling an appeal provided for in
Section 27 of this Decree shall also apply to the appeal to the
Minister of Science, Technology and Environment under this
paragraph, where the latter is handling the first appeal.
In the case of disagreement with the decision of the Minister of
Science, Technology and Environment, the appellant has the
right either to file a further appeal to the Prime Minister
according to the Law on complaint, denouncement or to proceed
litigation according to administrative procedures.” 826
Again, as the case of the decision on the revocation of patent discussed above, the reference
to the dispute settlement procedures provided in Article 27 of Decree 33 and the Law on
Denouncements and Complaints would not be convinced in certain aspects in the light of the
relevant WTO panel rulings for the uncertainty of the national legal grounds. The
unavailability of the legal grounds for foreign patent holders to take a complaint against the
government decisions under the a review procedure is, therefore, likely to be challenged
under Article 31 of the TRIPS.
8. Absence of procedures for enforcement of patent rights
825
826
See the TRIPS, supra note 10, arts. 31(g), (i), (j).
See Decree 63, supra note 728, art. 51. 8.
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As stated in Articles 28.1, 34, 42 of the TRIPS, in conjunction with Article 3 of the TRIPS,
foreign patent right holder should be provided the opportunity in taking advantages from the
so-called reversal of the burden of proof in enforcing the patent rights in the infringement
cases, especially in the case of the process patents. 827 Accordingly, the WTO Members are
required shall make available this opportunity in the civil procedural jurisdiction. In Vietnam
Domestic courts appear to be unfamiliar to this type of procedures which fall in the term of
the principle of fair and equitable procedures and preliminary injunctions prevailing in the
western countries.828 Neither the civil procedural law of Vietnam nor the court practice
endorses this type of procedures in the civil enforcement jurisdiction. Certainly, this would
be a challenge for the domestic civil law in dealing with this requirement of the TRIPS in
ensuring the opportunity of enforcement of patent rights for foreigners.
Even the TRIPS does not require the national civil law to create a special system for
enforcement of intellectual property right separate from the common civil procedural
system,829 it is noted that Article 3 of the TRIPS requires the WTO Member to give effect to
the obligations coming within the “minimum standards” determined in the substantive
provisions of the TRIPS. Where the language of Article 3 and the related substantive
provisions of the TRIPS do not mention any exception in the execution of the obligations
under these minimum standard provisions, the derogation of such obligations might be
subject to a likely challenge under the TRIPS jurisprudence.
9. Procedural burden and ex officio enforcement
As discussed earlier regarding the regulation on foreign licensing and source indication, there
exists a situation that sometimes might amount to an abuse of the regulation on the
intellectual property protection to interfere arbitrarily with the normal course of trade in
goods, including the importation. After the issuance of the regulation on administrative
sanctions against the infringement of industrial property rights, the enforcement authorities in
many cases invoking this regulation to take ex officio action against the distribution of the
suspecting infringement goods.830 Among the good faith actions undertaken by some
enforcement authorities, there appeared the abuse of this regulation in certain cases. The
enforcement authorities may themselves determine their actions in investigating and
controlling the goods that they suspected the infringing goods. Especially, the customs
827
See the TRIPS, supra note 10, arts. 28.1, 34, 42, 3. See also Joseph Straus, Reversal of the Burden of Proof,
the Principle of “Fair and Equitable Procedures” and Preliminary Injunction under the TRIPS Agreement’, The
Journal of World Intellectual Property (Vol. 3, 2000), pp. 807-823.
828
See Dinh Ngoc Hien, ‘Legal Sanctions to Ensure the Enforcement of Industrial Property Rights in Vietnam’,
Workshop for Judges, Hanoi, March 6-7, 2000.
829
See the TRIPS, supra note 10, art. 41.5.
830
E.g., a series of cases conducted ex officio by the enforcement authorities were mentioned the official letters
exchanging with the National Office of Intellectual Property. See Cong van cua Chi cuc Quan ly thi truong Ha
noi so 30 ngay 1 thang 6 nam 1999 (Official Notice of the Market Inspection of Hanoi City No. 30 on the date of
1 June 1999 provided to the National Office of Industrial Property), Cong van cua Cuc Quan ly thi truong so 137
–QLTT ngay 5 thang 7 nam 1999 (Official Notice of the Market Inspection Bureau No. 137-QLTT on the date
of 5 July 1999), Cong van cua Tong cuc Hai Quan so 5799/TCHQ-GSQL ngay 12 thang 12 nam 1999 (Official
Notice of the General Customs No. 5799/TCHQ-GSQL on the date of 12 October 1999), Cong van cua Cong an
Thanh pho Ha Noi so 312 ngay 7 thang 12 nam 2000 (Official Notice of the Police of Hanoi City No. 312 on the
date of 07 December 2000), Official Letter Records of 1999 and 2000, the Legislation and Management
Division, the National Office of Intellectual Property.
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authorities, in some cases under the instruction of the Government, created the procedural
requirement as to “non-infringing situation” applicable to the importation of goods in certain
fields. 831 Under the rules of the customs, the importers should provide with the customs
officers the certification of non-infringing situation of the imports. 832 If not, the imports
would be suspended for investigation and verification of non-infringement situation. 833
Coincidently, the verification of non-infringement situation concerning the industrial
property rights, including trademarks, industrial designs, and patents are subject to a very
complicated and time-consuming procedure.834 Consequently, if the importers do not prepare
in advance the certification of non-infringement situation, the imports are likely to be subject
the decision of suspension by the customs authorities. The effect of the regulation on
enforcement of intellectual property might sometimes focuses in certain types of imported
products, both in the domestic distribution and in the importation. As a result, the application
of that regulation might amount to an effective barrier to the importation of the specific
products. The question is whether this kind of measure is always justifiable under the TRIPS
and, further, WTO jurisprudence.
Would the regulation and the application of the regulation be regarded the appropriate
measures of enforcement that “do not themselves become barriers to legitimate trade” in the
meaning of the Preamble of the TRIPS? It is noted that the TRIPS gives effect to the kind of
challenges under the nullification and impairment violations in the provisions o Article 64.2
of the TRIPS.835 Another account might also be relevance for consideration is that, as found
by the Panel in the case of EC-Geographical indications discussed in the previous chapter,
the TRIPS and GATT 1994 may be cumulatively applied in certain cases. When the strict
measures being applied in contingency against certain kinds of imported products to an
intensive extent, even if they might not be directly in violation of any provisions of the
TRIPS, would these measures be safe under Article III: 4 of GATT 1994? Further, if it may
be justified by some way for the non-discrimination against origin of products, should such
measures of intellectual property protection as far as being amounted to barriers to the
importation be always justifiable under Article XX (d) of GATT 1994? Pursuant to the recent
WTO panel rulings, it may be confident that the possibility of escaping entirely the
challenges from these provisions is impractical.
10. Greater protection
While the enforcement under the civil procedures lacks certain legal grounds for the courts to
conduct the procedures in consistent with the requirement of the TRIPS, in the recently
enacted Law on Customs contains some provisions “going beyond” the minimum standard
requirement of the TRIPS. This point may be read in Article 57 of the Law on Customs of
2001.836 This article allows the intellectual property right holder to request the Customs
authorities to enforce against the suspecting action of infringement in both importation and
831
Id.
Id.
833
Id.
834
See Decree 12, supra note 728, arts. 11-21.
835
See the TRIPS, supra note 10, art. 64.2.
836
See Luat Hai Quan 2001 (the Law on Customs of 2001), art. 57, Vietnam Laws (the National Politics
Publisher, 2004).
832
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exportation. The customs procedure of suspension of goods for enforcement of infringement
is applicable equally to both imports and exports. Along with this provision, Decree 12 on
administrative sanctions against the industrial property infringement acts also provides the
opportunity for the right holders taking action before the enforcement authorities to suppress
the infringement in the exportation of goods.837
In the sense that the TRIPS does not compulsorily require the WTO Members to have the
strong action in the suppression of infringement in the exportation of goods, the above
provisions of the Law on Customs and regulation on administrative sanctions constitute a
greater protection regime for the right holder. Even these provisions are not inconsistent with
the provisions of the TRIPS, it is noted that Article 1.1 in conjunction with Articles 3 and 4
of the TRIPS requires the greater protection treatment should be accorded to the nationals of
all WTO Members in the manner of non-discrimination. This type of provisions, on the face
of it, does not contradict the provisions of the TRIPS. However, it might also become an
easily disputable issue when the enforcement authorities, by some reason, create a different
treatment in applying such provisions. In that situation, a challenge under the relevant articles
of the TRIPS would not be impossible.
837
See Decree 12, supra note 728, art. 9.1.e.
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Conclusion
In the general assessment of the domestic legislation, the current regulations on patents in
Vietnam contain a number of problems in regard to their detailed provisions from the view of
the rulings of the WTO panels that have been recently developed in dealing with TRIPS
related disputes. These problems are the vulnerable points for challenges by TRIPS and
WTO that the domestic legislation of Vietnam is likely to face after becoming a WTO
Member.
The analysis of the relevant domestic law of Vietnam shows that the incompatibility of the
current regulations with the requirements of the “incorporated” Paris Convention and TRIPS
either discloses on the surface of the particular provisions or lies behind the legal structure of
the provisions. In this point, the specific features of the legislation system and practical
situation of Vietnam on the protection of patents are the significant accounts in the
examination of the domestic law for purpose of ensuring conformity with TRIPS standards
and WTO rules.
Any solution to overcome the revealed problems should observe the view that, what may be
done under the mandate of the Paris Convention may not always be justifiable when it is
subject to the requirements of TRIPS. In that view, the revision of the relevant provisions of
the current regulations concerning the treatment given an invention and a patent should take
into account the change in the rules of the incorporated Paris Convention. Moreover, it also
needs to comply with the limitations and requirements under the TRIPS and WTO
jurisprudence.
In that connection, it is worth examining the patent related contents of the draft of the new
law on intellectual property that is the subject of hot debate in the recent meetings of the
legislators, namely, the periodical sections of the National Assembly of Vietnam. The draft of
the new law should be examined for some specific provisions with relevance to the new
challenges from the TRIPS and WTO jurisprudence, which were used in the examination of
the current legislation on the patent protection. In addition, in response to the current debates
of the legislators and the drafters of the draft of the new law, the discussion in the next
chapter focuses on a selected issue where it is possible to find an appropriate answer in the
light of the development of TRIPS and WTO jurisprudence regarding the intellectual
property. In this respect, the discussion in the next section intends to serve both the drafting
process at present and the implementing process after the enactment of the new law.
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IV. Compliance of the New Intellectual Property Law Draft of Vietnam with
the TRIPS and WTO Law
Along with the efforts of the government in reviewing the current regulations in relation to
TRIPS standards, the National Assembly, the highest legislative body of Vietnam, is
considering the enactment of a new law on intellectual property. With the perception that this
new law on intellectual property is an important step to facilitate the process of accession to
the WTO, which is facing obstacles from some key players the WTO, 838 the discussion and
consideration of the draft of the new law is following a tight schedule. 839 The first duty of the
new law is to codify all norms and procedures on intellectual property protection available in
the different regulations into one code.840 The second duty is to clarify and supplement the
legal grounds, if necessary, for the purpose of compliance with TRIPS and WTO rules.841
In dealing with the first duty, the drafters feel that the current regulations are in full
compliance with TRIPS standards and requirements. It is therefore not necessary to revise
any contents of the substantive provisions in the current regulations, but to rewrite them in
the language of the new law. 842 Concerning the second duty, the exhaustion of rights in
relation to parallel importation is one of the issues subject to different opinions.843 The
drafters proposed some alternative solutions to this issue. However, the legislators are
considering these concerns from different aspects.844
Along with the duties of the new law, the discussion in this section examines the provisions
set out in the recent drafts of the new law to identify the problems, if any, in light of the
“constrained” principle of independence of patents, as well as the solution to them. To some
extent, this study supports the first duty of the new law. Subsequently, the discussion will
focus on the specific issue of parallel importation by clarifying the problems concerning this
issue in certain aspects. A comprehensive understanding of the existing problems in the
current legislation and policy on parallel importation is necessary for seeking an appropriate
solution in the new law. The discussion on this issue will be continued in the next chapter,
clarifying the concerns of the legislators regarding the legality and justification for the
adoption of parallel importation of patented products in the new law and its implementing
838
See To Trinh ve Du An Luat So Huu Tri Tue No. 235/TTr-BKHCN ngay 7 thang 2 nam 2005, lan thu hai (the
Second Submission of the Draft of Law on Intellectual Property dated 7 th Feb 2005), pp. 5-6, the Legislation
Department, the Ministry of Sience and Technology, 2005. The issue of intellectual property protection in
Vietnam is a particular concern of the United States in the bilateral negotiations for the accession of Vietnam to
the WTO. See news available at http://www.wto.int/english/news_e/news05_e/vietnam_15sep05_e.htm,
http://english.vietnamnet.vn/biz/2005/11/507975/.
839
The schedule for the discussion and consideration of the draft of the new law on intellectual property is
arranged for two consecutively periodical sessions of the National Assembly in the year of 2005. See
VNNExpress.net.
840
See To trinh ve Du An Luat so huu tri tue, lan thu nhat, ngay 10 thang 1 nam 2005 (the First Submission of
the Draft of Law on Intellectual Property dated 10 Jan 2005) Ministry of Science and Technology, 10 th Jan.
2005, pp. 2-3.
841
Id.
842
Id.
843
See the First Submission of the Draft of Law on Intellectual Property Submissions of the Draft Intellectual
Property, supra note 840; the Second Submission of the Draft of Law on Intellectual Property, supra note 838.
844
Id.
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mechanism. Such a discussion is intended to support the second duty of the new law. In that
connection, the following discussion will address those problems in turn.
1. The problems inherited from the current regulations
The draft of the new law was prepared on the basis of codifying all current provisions
concerning intellectual property rights that are presently located in different laws and
regulations.845 The norms and procedures contained in the current administrative regulations
issued by the government will be given a stronger legal status, that is, a statute enacted by the
National Assembly. By codifying in full the provisions of the current regulations, the
administrative authorities and the courts shall base their acts of protection and enforcement
of intellectual property rights on the particular legal basis existing in the statutory provisions
instead of governmental regulations. The law shall therefore limit the arbitrary discretion
given to the government in the issuance of under-law decrees.846
With respect to patents for inventions, for the view that there is no incompatibleness between
the current provisions on patents and the requirements of TRIPS, 847 the draft of the new law
mostly retains the principles and norms of the patent protection provided in the Civil Code
and Decree 63.848 For this feature, the problems hidden in the current regulations, as
discussed in the above section, remain intact in the new draft law. On this point, the first
type of problems that should be clarified in the statutory language of the new law includes
those existing in the current regulations. For instance, the following provisions of the draft
should particularly be reviewed.
1.1. Ineffective examining regime for patents of pharmaceuticals
Article 59 of the draft does not exclude pharmaceuticals and agricultural chemical products
from being unpatentable subject matters.849 However, the articles of Section 3, Chapter VIII
do not contain any specific provisions as a particular legal basis for examining patent
applications with respect to these products either. 850 The lack of the particular provisions and
the legal basis for detailed instructions on the examining procedures would in fact nullify the
protection of patents with regard to such products. Consequently, in terms of the
requirements for adequate and effective protection and the rule of anti-discrimination under
TRIPS, at least a claim of de facto discrimination for the ineffective protection given to these
objects may bring a challenge to the legislation on this point.
845
See the Second Submission of the Draft of Law on Intellectual Property, supra note 838, p. 6.
See the First Submission of the Draft of Law on Intellectual Property supra note 840, pp. 2-3.
847
See the Second Submission of the Draft of Law on Intellectual Property , supra note 838, p. 3.
848
See Du Thao Luat So Huu Tri Tue, the Draft of Law on Intellectual Property (the fifth draft and the fourth
draft), Section III (the fifth draft which is going to be submited to the eighth section of the elevent National
Assembly), the Legislation Committee of the National Essembly, 23 rd September 2005. The fourth draft was
published for the public opinions. Non-official English translation version of the fourth draft made by the
National Office of Industrial Property is available in the Appendix of this paper.
849
See the Draft of Law on Intellectual Property, supra note 848, art. 59 of the fifth draft and art. 63 of the fourth
draft.
850
Id.
846
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1.2. Incompatibility and discrimination in revocation of patents
There is no particular provision in the draft to provide the general legal grounds for the
revocation of patents. On the one hand, there is no provision for judicial review in the draft
that is applicable to every decision of revocation, as required by Article 32 of TRIPS. Article
119 of the draft allows a third party to make an opposition or claim on the grant of a patent,
but does not provide in details the procedure of dealing with such opposition or claim. 851 In
addition, as the Decree does, this article refers to the Law on Complaints and Denouncements
as the legal grounds for the procedure for handling the request of revocation.852
On the other hand, Article 117 of the draft refers only to the grounds of refusal to grant a
patent to an invention for the reason that it does not meet the requirements of patentability. 853
This article does not provide generally what would justify the refusal to grant a patent to
determine the legal grounds for revocation of patents, as defined in Article 7.6 of the bilateral
trade agreement between Vietnam and the United States.854 Article 217 of the draft does not
provide in detail the sanctions applicable to the violations of administrative regulations to
replace all current provisions of Decree 12.855 The problem with the MFN treatment of
TRIPS regarding the revocation of patents remains in reality, since the provision regarding
the revocation of patents as a sanction would continue to be in the effect under Decree 12.856
1.3. Procedural requirement for renewal of patent duration
The draft does not provide the details of the renewal procedure, which is applicable to the
patents granted on the basis of the old regulations. Article 224 of the draft refers generally to
the application of the new law in transitional provisions and therefore, requires some
concrete administrative instructions for the implementation. 857 Where the current requirement
of additional procedures for the request and consideration of term renewal applied to those
patents based on the old regulations858 is not eliminated an “extra hurdle” is existent in this
aspect. In that case, the likelihood of a challenge on the basis of less favorable treatment or
discrimination under Articles 27.1 and 3.1 of TRIPS still exists in regard to the domestic
legislation on the term of patent protection.
851
See the Draft of Law on Intellectual Property, supra note 848, art. 119 of the fifth draft, art. 123 of the fourth
draft.
852
See the Draft of Law on Intellectual Property, supra 848, art. 119 of the fifth draft, there is no reference to the
Law on Complaints and Denouncements in art. 123 of the fourth draft).
853
See the Draft of Law on Intellectual Property, supra note 848, Section 3 of Chapter VIII of the fifth draft,
Section 3 of Chapter VIII of the fourth draft.
854
See the Bilateral Trade Agreement between VN and USA, supra note 782, art. 7.6,
855
See the Draft of Law on Intellectual Property, supra note 848, art. 217 of the fifth draft, art. 251 of the fourth
draft.
856
See Decree 12 supra note 728, arts. 5, 15.
857
See the Draft of Law on Intellectual Property, supra note 848, art. 224 of the fifth draft, art. 259 of the fourth
draft.
858
The requirement of additional procedure applied to those patents granted on the basis of the old regulations is
provided in art. 69, Decree 63. See Decree 63, supra note 728, as amended by Decree 06, supra note 728.
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1.4. Irrelevant regulations on the priority right
Article 91 of the draft provides for the general principles of regulations on the priority right,
that is, “pursuant to the international treaty containing the provisions on the priority of right
that Vietnam is a party” and the principle of reciprocity. 859 According to this provision,
TRIPS and the WTO Agreement would not be relevant in terms of “the international treaty
containing the provisions on the priority right” as mentioned in the draft. Through the
incorporation of the Paris Convention, TRIPS does not directly contain provisions on the
priority right. Instead, TRIPS refers to the obligation to provide the priority right under the
Paris Convention to the nationals of WTO Members and nationals of non-WTO Members
who qualify under the criteria of the assimilation rule under Article 3 of the Paris
Convention.
The first principle inscribed in Article 91 of the draft, therefore, in fact refers only to the
Paris Convention, the only international treaty containing provisions on the priority right to
which Vietnam is a party. It would not cover the extendibility of the provisions on the
priority right under the requirement of Article 3.1 of TRIPS and in the light of the
“incorporated” Paris Convention. Otherwise, under the second principle underlined in Article
91 of the draft, the requirement of reciprocal conditions on the priority right with respect to
the nationals of WTO Members under the national treatment, or with respect to the nationals
of non-WTO Members under the rule of assimilation, would be inconsistent with the
requirements of Article 3.1 and Article 4 of TRIPS. On this point, the current draft does not
pave the way for the extension of the provision on the priority right in the light of the Paris
Convention under the requirements of TRIPS in any event. The hidden problem concerning
the provision on the priority right is therefore still existent in the domestic legislation.
1.5. The source indication requirement regarding “foreign licensing”
As mentioned in the third point above, because the new draft law only contains general
principles and does not set forth particular provisions, the handling of violations of the
administrative regulations on industrial property protection shall still continue to be based on
the particular provisions of Decree 12 and the detailed instructions of the Ministry of Science
and Technology860 and the National Office of Intellectual Property. 861 The principle
provisions on this matter in the new law, as suggested in the current draft, will not be detailed
enough to be executable. Therefore, it will not replace the effects of the current regulations in
859
See Draft of Law on Intellectual Property, supra note 848, art. 91 of the fifth draft, art. 96 of the fourth draft.
Art. 91 of the fifth draft added the principle of reciprocity in the application of provisions on the priority right
that was not included in art. 96 of the fourth draft.
860
The detailed instructions for implementing Decree 12 on the handling of the violations of administrative
regulations on industrial property are included in two circulars issued by the Ministry of Science and
Technology. See Thong tu so 825/2000/TT-BKCNMT nay 3 thang 5 nam 2000 (Circular No. 825/2000/TTBKHCNMT on the date of 3 May 2000), Thong tu so 49/2001/TT-BKHCNMT ngay 14 thang 9 nam 2001
(Circular No. 49/2001/TT-BKHCNMT on the date of 14 September 2001), the Legislation Department, the
Ministry of Sience and Technology, 2004.
861
The National Office of Intellectual Property, as a specialized agency in the field of intellectual property, shall
provide the necessary evaluation and instruction on a case-by-case basis, at the request of the enforcement
authorities pursuant to the procedures provided in the governmental regulation. See Decree 12, supra note 728,
art. 14.
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practice after the enactment of the new law. If the government sees it necessary to issue a
new regulation to implement the new law on this matter, it would certainly take time for the
new issuance.
In any case, the current draft of the new law would not solve totally and immediately the
problems inherent in the provisions of Decree 12. The problem caused by the source
indication requirement under Section 6.2(b) of Decree 12, as discussed in the previous
section, has not been settled yet. The risk of a challenge to the legislation “as such” or as an
“extra hurdle” with respect to the requirement applied to products manufactured under a
“foreign licensing” still exists. The claims may come from the continuing effect of this
provision and the actual application of this provision in the practice of the enforcement
authorities. Consequently, foreign patents and foreign patent holders are subject to a less
favorable treatment in comparison with that applied to domestic patents and domestic patent
holders.
The comments on the incompatibilities in the particular provisions of the governmental
decrees, as mentioned in the above section, would be applicable to the same extent to the
relevant provisions of the draft of the new law. The solutions for those incompatibilities, as
suggested earlier, should be clearly expressed in the new law draft to such an extent that the
provisions are consistent with the requirements of the “incorporated” Paris Convention,
TRIPS, and WTO rules.
For such reasons, it may be seen that there exist certain problems in the new draft law from
the viewpoint of the workings of the principle of independence under the WTO framework.
The drafters of the new law should pay more attention to what can no longer be maintain
under the principle of independence of patents of the Paris Convention, since it has been
incorporated into TRIPS and therefore, included in the WTO framework.
1.6. Other problems
As discussed in the previous chapter, some other problems existing in the current legislation
regarding the protection of industrial property rights appear not to be satisfactorily dealt with
in the text of the new law draft. For examples, the draft has not clarify the question of
application of the national treatment regarding the protection of intellectual property rights to
the nationals of WTO Members and those of non-WTO Members who may enjoy the benefit
from the national treatment of “incorporated” Paris Conventions and the national treatment of
TRIPS. The problems concerning the lack of review procedure applicable to the decision of
compulsory licenses and the absence of the civil procedure for the reversal of the burden of
proof are not resolved. The likely challenge from the national treatment and MFN principles
of the TRIPS to the TRIPS greater protection in applying the enforcement measures in the
exportation of goods and is not excluded.
It is also noted that the above-mentioned problems might not be resolved totally in the new
law on intellectual property. To deal with these problems, it requires some amendments to
other laws, including the Civil Code, the Civil Procedural Code, the Law on Denouncements
and Complaints, the Law on Customs and the Law on Administrative Sanctions. In the sense
that these laws might not be prepared for the amendment in the very near future, the
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challenges to the national legislation in compliance with the TRIPS and WTO law are still
existent. To certain extent, the Law on intellectual property, as a specialized law in this field,
would be able to deal with some of these problems if it might contain some principles and
provisions in the light of the relevant rules of the TRIPS and WTO law. Though it may create
some conflict or uncertainty of the legal grounds for the implementing mechanism, such
proposal might be a temporary solution to avoid the challenges for the direct inconsistence of
the national legislation under the TRIPS and WTO jurisprudence.
2. Unsettled issue in the new law draft:
parallel importation of patented products
The preparation of the draft of the new law is part of the context of Vietnam receiving
intense pressure for the strengthening of intellectual property protection and enforcement
from some key players in the WTO. 862 The enactment of the new law therefore is necessary
to serve the purpose of the international trade integration of Vietnam. 863 Strengthening patent
protection and enforcement is a clear mandate for the new law draft. 864 Also, domestic
industrial development and consumers’ interests are additional important factors in the
consideration of the new draft law.865
In the ongoing discussions, one of the issues being debated concerning the draft of the new
law is the issue of so-called parallel importation. 866 In relation to patented products, a
contradiction may emerge from the conception that a strong regime of intellectual property
protection in favor of the patent holders would not serve directly the interests of the domestic
consumers.867 Therefore, the legislators are facing the question of how to formulate a law on
intellectual property that strengthens patent protection and facilitates international trade
integration but at the same time gives effect to measures for the protection of the interests of
domestic producers and consumers.868
As reported, there exist two main opinions relating to the provisions on parallel importation
in the new law draft. The first suggests that there is no need to set forth in the new law the
particular provisions on this issue since it is not clarified legally and there is an unclear
conception of its positive and negative effect.869 The second supports the elaboration of the
provisions on this issue in the new law for the argument that it is not inconsistent with the
862
The problem of the protection and enforcement of intellectual property are regarded as obstacles to the WTO
integration process of Vietnam. The issue of ineffective enforcement of intellectual property in Vietnam is under
particular observation by the United States, the EU, Japan, Switzerland and Australia. See the Second
Submission of the Draft of Law on Intellectual Property, supra note 838, p. 5.
863
See the Second Submission of the Draft of Law on Intellectual Property, supra note 838, at 5.
864
Id. at 5-6.
865
Id.
866
Id.
867
See Pham Dinh Chuong, The Extension of the Scope Protection for New IPR Categories-A Pressing Demand
to Industrial Property System of Vietnam, National Symposium on the Extension of the Scope Protection for
New IPR Categories, Hanoi 10 January 2000.
868
See Second Submission of the Draft of Law on Intellectual Property, supra note 838, at 6. See also Pham
Dinh Chuong, supra note 867.
869
See the First the Second Submission of the Draft of Law on Intellectual Property, supra note 840; the Second
Submission of the Draft of Law on Intellectual Property, supra note 838.
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requirements of the international treaties to which Vietnam is a party or going to be a party,
that is, the Paris Convention and TRIPS. 870 More or less, the legislators seem to agree with
the drafters in the suggestion of parallel importation in respect of patented products.
However, the question of what is legal and justified from the perspective of the Paris
Convention and TRIPS is still vague and confused.
In other words, the legislators and drafters have the same concern about whether the adoption
of parallel importation in every case will face any obstacle or complaint from the patent
holders for its inconsistency with the spirit and particular provisions of the related
international treaties. It is also in the confusion over how to adopt an appropriate policy of
parallel importation with respect to patented products in the view of harmonization between
the public interest and the patent holders to serve the purpose of international trade
integration. These questions face not only the draft of the new law but also the
implementation mechanism of the new law after its enactment. In this situation, the draft of
the new law is in the process of seeking a clarification on the legality and an appropriate
solution in the adoption of parallel importation of patented products.
For a comprehensive understanding on the difficulty of the duty placed on the drafters of the
new law, an overview of the legal situation of parallel importation in the current legislation is
necessary. The general conception of the problems in the domestic legislation as a whole will
give a systematic view on the legal situation of parallel importation. Besides, the examination
of the practice of dealing with this issue in the circumstances of Vietnam will explore the
specific problems to be settled in the new law and in its implementing mechanism.
2.1. Systematic problems in the current domestic legislation
2.1.1. Lack of statutory provisions in settlement of intellectual property disputes
Since the legislation of Vietnam is of the tradition of statutory law, the provisions existing in
the language of statutes are always the most important legal grounds for the courts to judge a
case.871 A precedent is not regarded as a legal basis for the court’s judgment over a case.
Instead, the courts must base their judgments on the particular statutory provisions. Where
there is not clearly legal ground existing in the language of the law, the judges cannot
themselves create the legal grounds for their reasoning in dealing with the case. In addition, a
judgment is proper only when it is based on the legal basis provided in the relevant laws and
regulations.
The Suppreme People’s Court affirmed this assumption in the finding on the case of Hoai
Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd in a dispute over the trademark “Phu
Dong”.872 In this case, Hoai Nam Co., Ltd claimed that Phu Dong Thien Vuong Co., Ltd
infringed the trademark “Phu Dong” by using the confusingly similar trademark “Phu Dong
870
See the Second Submission of the Draft of Law on Intellectual Property, supra note 838, at 14.
See The Civil Law System of Vietnam, the Ministry of Justice, 1987.
872
See Nhan dinh cua Hoi dong xet xu Toa Phuc tham Toa an Nhan dan Toi cao ve vu an Cong ty Hoai nam kien
Cong ty Phu Dong Thien Vuong ngay 10 thang 7 nam 2001 (Findings of the Appeal Trial Council of the
Supreme People’s Court on the case Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd dated 10 July 2001),
Cases Record, the Supreme People’s Court, 2001.
871
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Thien Vuong” for the same restaurant service. The plaintiff registered trademark “Phu Dong”
for the restaurant service, while the defendant did not register the trademark “Phu Dong
Thien Vuong” for that kind of service. Hanoi Municipal People’s Court found that the words
“Phu Dong” in their structure were different from “Phu Dong Thien Vuong” 873and therefore,
the court dismissed the claim of the plaintiff. 874 The plaintiff took an appeal to the Supreme
People’s Court with the argument that even though the two trademarks were different in the
structure of the words, both of them indicated the same meaning and therefore were likely to
confuse the clients of the plaintiff with the service of the defendant. 875 The Supreme People’s
Court ruled in favor of the plaintiff with the reasoning that the confusion likely to be caused
by the similar meaning of the words constituted the related trademarks.876
In considering the findings of the first instance court, the Supreme People’s Court set aside
the legal basis that the first instance court applied in dealing with the case. The Supreme
People’s Court found that the first instance judgment was wrong in the first place in the legal
aspect when it invoked and applied the provisions of a regulation guiding the handling of
administrative violations in the settlement of a civil dispute. 877 The fact is that there is no
particular provision on how to measure the confusing similarity for the purpose of identifying
an act of trademark infringement existing in the substantive law. 878 However, the detailed
instructions may be found in the legal document guiding the application of administrative
sanctions regarding the acts of trademark infringement. For this reason, the Supreme
People’s Court though disagreeing with the first instance court on the transfer of a legal basis
from a regulation on the application of administrative sanctions into the settlement of a civil
dispute, it, itself, did not refuse the “valuable reference” of the regulation in supporting the
determination of an act of infringement. 879 In turn, the Supreme People’s Court referred to
that regulation, the legal basis that the first instance court had based its judgment on, to find
the merits of the case. Furthermore, due to the lack of particular instructions on how to
determine the “confusingly similar situation” of a mark, the Supreme People’s Court had to
refer to the internal rule of trademark examination, which was never made public and only
applied within the practice of the National Office of Intellectual Property Office, to assess the
confusing similarity of the disputed trademarks.880
The situation would be the same when the court is faced with a dispute concerning a patent
for an invention. There is no particular provision on how to determine an act of patent
873
The words of “Phu Dong” and “Phu Dong Thien Vuong” refer to the name (in short and long form) of a
Vietnamese legendary hero who was equipped with an extraordinary power and an iron horse to fight against the
northern invaders.
874
See Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd , supra note 872, at 8.
875
Id. at 3.
876
Id. at 17.
877
Id. at 8.
878
There is no provision on how to assess the criteria of a trademark, industrial design, appellation of origin, or
invention to be protected in the language of the Civil Code and details of its regulatory implementation. This
kind of matter is left to the National Office of Intellectual Property. This office has often issued a rule on the
examination of each category that was unpublished and applied internally within this office for the examining
procedures. See e.g., Rule No. 191/QC-XN dated 6 April 1994 of the National Office of Industrial Property,
cited in the Findings of the Appeal Trial Council of the Supreme People’Court on the case Hoai Nam Co., Ltd
vs. Phu Dong Thien Vuong Co., Ltd, supra note 872, p. 12.
879
See Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd , supra note 872, at 13.
880
Id. 13.
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infringement and the permissible exceptions to that act. The fact is that the court should
request the evaluation of the National Office of Intellectual Property and use it as an
important basis for finding a judgment in a patent case. In the case of Nguyen Lien Phuong
vs. Sapa Afforestation and Viet Dai Co., Ltd for the alleged infringement of a patent on
wooden bead cutting knives,881 the Lao Cai Provincial People’s Court requested an evaluation
from the National Office of Intellectual Property with respect to both the technical and legal
aspects of the disputed technical solution being used by the dependent. 882 Accordingly, the
National Office of Intellectual Property not only rendered its own assessment of the technical
elements, but also concluded in the non-infringing situation of the disputed technical solution
by applying its own interpreted legal argument, without reference to any legal basis stated in
the law or regulations.883
The uncertainty of legal grounds in the conclusion of the non-infringing situation of the
disputed technical solution led to an appeal of the plaintiff against the evaluation made by the
National Office of Intellectual Property regarding the case.884 The court seemed to be
incapable of interpreting and applying the general provisions in the relevant law and
regulation to deal with the case. Even if the technical evaluation on the disputed technical
solution was available to it, the court still appeared to be in confusion when it made a further
request of evaluation to the National Center of Natural Science and Technology upon the
request of the plaintiff. 885 It deemed that the court would follow the second evaluation if the
plaintiff did not request suspension of the case for the objective reasons. 886 When the second
evaluation was not clear on the legal aspects as well, the difficulty for the court in finding the
case would be still available since the lack of particular legal grounds in the relevant statutes.
2.1.2. Lack of professional judges
In the field of intellectual property, the courts are raising the complaint that there is a lack of
necessary legal grounds for handling the disputes and claims of infringement of intellectual
property rights.887 The unavailability and vagueness in the language of law becomes a more
serious problem in the situation that the judges are now very limited in their professional
881
See Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd , Cases Record, Lao Cai Provincial
People Court, 1997.
882
See Cong van yeu cau tham dinh cua Toa an Nhan dan Tinh Lao cai so 19/DS ngay 5 thang 3 nam 1997 (the
Request of Lao Cai Provincial People’s Court No. 19/DS dated 5 March 1997), in Nguyen Lien Phuong vs. Sapa
Afforestation and Viet Dai Co., Ltd , supra note 881.
883
See Thong bao Tham dinh cua Cuc So huu cong nghiep so 294/KN ngay 28 thang 5 nam 1997 (the Notice of
Evaluation of the National Office of Industrial Property No. 294/KN dated 28 May 1997), in Nguyen Lien
Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd, supra note 881.
884
See Khieu nai cua nguyen don ve ket qua tham dinh ngay 10 thang 6 nam 1997 (the Statement of
Disagreement with the Result of Evaluation by the Plaintiff dated 10 June 1997), in Nguyen Lien Phuong vs.
Sapa Afforestation and Viet Dai Co., Ltd , supra note 881.
885
See Cong van yeu cau than dinh cua Toa an Nhan dan tinh Lao cai so 53/DS ngay 18 thang 6 nam 1997 (the
Request of Lao Cai Provincial People’s Court No. 53/DS dated 18 June 1997), in Nguyen Lien Phuong vs. Sapa
Afforestation and Viet Dai Co., Ltd , supra note 881.
886
The plaintiff requested the suspension of the proceedings of the case due to the governmental order of
prohibiting the exploitation of rare woods for industrial production. The defendant in fact ceased its production
and achieved an agreement with the plaintiff to halt the application of the disputed technical solution. See Don
yeu cau cua nguyen don ngay 16 va ngay 25 thang 9 nam 1997 (Requests of the Plaintiff dated 16 and 25
September 1997), in Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd, supra note 881.
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knowledge of intellectual property in general.888 Because there does not exist a specialized
court and specialized judges in intellectual property, any judge of a provincial court or of the
Supreme Court may be likely to involve in handling an intellectual property case. 889 It is
acknowledged that the protection of intellectual property rights is a new and unprecedented
legal matter for the judges in the courts of all levels. 890 The insufficiency of particular legal
grounds in the statutory provisions makes it more difficult and confusing for judges in
finding the merits of the case.891
Together with the lack of sound legal grounds in statutes, the lack of qualification of the
judges on matters of intellectual property rights is the primary reason for the limited role of
the courts in the settlement of intellectual property disputes at present. 892 As mentioned
earlier, in dealing with a particular patent case a judge in charge of the handling of the case
deemed himself to be unconfident of being able to make a judgment and did not himself take
an independent finding. The conclusion of the merits of case therefore would depend much
upon the evaluation of the other authorities, including their opinion on the legal aspects of the
case. Among other reasons, the situation of dependent findings of the court would certainly
be due to the insufficient legal knowledge of the judges in this field.
Because the current law delegates the first instance of court hearings over intellectual
property cases to all courts at the provincial level, 893 most judges of provisional courts and
the Supreme People’s Court are likely to be involve in dealing with intellectual property
cases. While time is needed to provide the necessary professional skills and experience to the
judges, the elaboration of particular provisions on the related matters in the statutes is a good
option to enable the judges to be confident in hearing these cases.
2.2. Limited jurisdiction in interpreting substantive law
887
See Nguyen Van Luat, The Role of The Prople’s Courts in Enforcement of Intellectual Property Rights in
Vietnam, The Supreme People’s Court, July 2004.
888
Id.
889
Id. See also Dinh Ngoc Hien, Legal Sanctions to Ensure the Enforcement of Industrial Property Rights in
Vietnam, EC-VN Intellectual Property Project, Symposium on the Court and Intellectual Property Protection,
Hanoi 6-7 March 2000. It is reported that there are about one hundred Justices working at the Supreme Court and
about one thousand Judges working at the provincial courts. See Report on the Current Situation of Judge Staff
in the Courts, the People’s Supreme Court, June 2003.
890
See Nguyen Van Luat, The Role of The Prople’s Courts in Enforcement of Intellectual Property Rights in
Vietnam, The Supreme People’s Court, July 2004.
891
See Nguyen Van Luat, supra note 887. See also Dinh Ngoc Hien, Legal Sanctions to Ensure the Enforcement
of Industrial Property Rights in Vietnam, EC-VN Intellectual Property Project, Symposium on the Court and
Intellectual Property Protection, Hanoi 6-7 March 2000.
892
It is reported that the number of intellectual property cases brought before the courts is very limited in
comparison with that brought before the National Office of Intellectual Property. See Nguyen Van Luat, supra
note 887.
893
See Phap Lenh ve giai quyet cac vu an dan su nam 1989 (the Ordinance on Procedures of Handling Civil
Cases of 1989), Vietnam Laws (the National Polictics Publisher, 2004).
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Under the provisions of the Constitution and the relevant laws, the courts have no jurisdiction
to interpret substantive law provisions.894 The Supreme People’s Court is only empowered to
provide the trial skills instruction in relation to the local courts.895 The courts are required to
apply precisely the relevant law provisions in hearing the case. 896 This requirement to a large
extent prevents the judges from clarifying the vague language or general provisions existing
in the legal documents in hearing the case. As mentioned in the above section, the Supreme
People’s Court should refer to the kind of internal rules issued by the National Office of
Intellectual Property in finding out about a particular legal matter of a case. The court itself
can neither create the new norms nor provide the detailed criteria for understanding and
applying the general provisions provided in the statutory language. 897 The limited jurisdiction
of the courts in the interpretation of law urges for the elaboration of detailed provisions in the
new law on intellectual property to provide clear legal basis for the courts in handling the
legal matters of the concerned disputes.
2.3. Problems in handling the issue of parallel importation
2.3.1. Unsound legal grounds
There is no provision applicable to the issue of parallel importation under the Civil Code of
2005.898 In the past, there was one clause of the Civil Code of 1995 providing an exception to
patent rights that could be understood as a general legal basis to deal with this issue. Article
803 of the Civil Code of 1995 provided that the use of an object with an industrial property
right having been put into the market place by the owner of the industrial property right, or
with his consent, was excluded from the enforcement of the related industrial property
right.899 This provision was not further clarified under the implementing regulation, Decree
63 on detailed provisions on industrial property. 900 After the amendment of Decree 63 in
2001, the “market place” stated in Article 803 of the Civil Code of 1995 was explained as
“including” foreign markets.901 Irrespective of the unsound statutory reasoning of this
provision, this indicated the attitude of the government in favor of parallel importation
practice.902 The Civil Code of 2005 takes away the particular provision on the exception
894
See Hien Phap cua nuoc Cong hoa Xa hoi Chu nghia Viet Nam nam 1992 (the Constitution of the Socialist
Republic of Vietnam of 1992), art. 127, Vietnam Laws (the National Politics Publisher).
895
The Constitution of Vietnam of 1992, supra note 894, art. 127; Luat To chuc To an Nhan dan nam 2002, Law
on Organization of the People’s Courts of 2002, art. 19, Vietnam Laws (the National Politics Publisher).
896
The Constitution of Vietnam of 1992, supra note 894, art. 130, Law on Organization of the People’ Courts of
2002, supra note 895, art. 5, Phap lenh tham phan (the Ordinance on Judges), art. 4. Vietnam Laws (the National
Polictics Publisher).
897
See Findings of the Appeal Trial Council of the Supreme People’s Court on the case Hoai Nam Co., Ltd vs.
Phu Dong Thien Vuong Co., Ltd, supra note 872, at 13.
898
See Bo luat Dan su nam 2005 (the Civil Code of 2005), Vietnam Laws (the National Polictics Publisher), Part.
VI.
899
See Civil Code of 1995, supra note 749, Part. VI.
900
See Decree 63, supra note 728, art. 52.
901
See Decree 63, supra note 728, art. 52, as amended by Decree 06, supra note 728.
902
The Supreme People’s Court is prevented from the interpretation of the general provisions in the statutes,
while the government is vested a large discretion in the “particularization” of the principle provisions in the Civil
Code. Decree 63 did not only extend the scope of the provisions defined in the Civil Code of 1995, but also
create the new norms of industrial property protection that found no relevant legal basis in this code. E.g. the
protection of new categories was regarded as particularizing the term of “other objects” in the definition of
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mentioned above and retains only the general principles for intellectual property protection.
The exclusion of the relevant provision in the Civil Code of 2005 precluded the statutory
legal basis of the provision concerning the issue of parallel importation stipulated in Decree
63 as amended in 2001. For this reason, at the present, there is no statutory ground for the
courts for handling the issue of parallel importation. An unsound and non-clarified legal basis
created by a governmental regulation in this respect would not equip the judges with
sufficient legal backgrounds and confidence in dealing with this issue.
2.3.2. Unclear instructions for implementation
Since there is common knowledge of the ineffectiveness in the settlement of intellectual
property disputes under judicial proceedings, the parties to a dispute often opt for making a
complaint to the administrative authorities rather than take a suit before the courts. 903 Among
the very limited number of patent related disputes brought to the courts, there is no case
concerning parallel importation with respect to patented products. 904 On the other hand, the
National Office of Intellectual Property received a significant number of complaints
concerning patent infringements, including those that may concern the issue of parallel
importation.905
Because the National Office of Intellectual Property has no authority to handle a patent
infringement dispute, this office is very often provides to the complainant a general evaluation
of the claimed action and instructions on the relevant provisions applicable to that action. For
example, in Official Letter No. 722/KN of the National Office of Intellectual Property dated
12 July 2001 responded the complaint filed by Honda Giken Kogyo Kabushiki Kaisha (Japan)
(through Pham and Associates Patent Attorney) on the alleged infringement of its patent No.
1980 on the structure of a motorbike saddle, it stated that:
“(…)1. The National Office of Industrial Property has only
responsibility of handling the complaints concerning the
decisions of refusal of a patent application, of grant or refusal to
industrial property rights stated in Article 781 of the Civil Code of 1995. See Decree 54/2000/ND-CP, supra
note 749, art. 1. The legal basis for establishment of traditional industrial property rights did not support that of
the new categories under the governmental regulation. Article 788 of the Civil Code of 1995 provided that
granting the certificates of rights is the legal ground for establishment of industrial property rights. This principle
did not stand for the protection of trade names and business secrets under the regulation of the government
because the protection of these subject matters does not require any registration procedure or any certificates to
be granted. See Decree 54/2000/ND-CP, supra note 749. This unsound legal ground for the protection of
intellectual property rights would certainly cause the great difficulty in applying the legal basis to deal with the
case in practice of the courts. It noted that the Supreme People’s Court has no power to interpret the statutory
acts, review and nullify an unconstitutional statute or an against-law governmental regulation. Instead, the
National Assembly and the Standing Committee of the National Assembly hold that kind of power. See the
Constitution of Vietnam of 1992, supra note 894, arts. 84, 91.
903
See Nguyen Van Luat, supra note 887, at 15.
904
There has been insignificant number of patent infringement claims brought before the courts until now. See
Dinh Ngoc Hien, supra note 889. See also Nguyen Van Luat, supra note 887, at 14.
905
The number of patent infringement complaints come to the National Office of Intellectual Property is
increasing significantly: 2001: 2 complaints; 2002: 9 complaints; 2003: 23 complaints. See General Report of
Enforcement Situation of Intellectual Property Rights in Vietnam, the Ministry of Science and Technology and
the Ministry of Culture and Information, July 2004, p. 7.
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grant a patent, and no responsibility of handling a complaint
concerning patent infringement. Therefore, the National Office
of Industrial Property shall only consider your request of
evaluation with respect to the suspected infringement object.
2. The results of the comparison between the “structure of
motorbike saddle” being protected by Patent No. 1980 (…) with
the structures of the motorbike saddle that are described in the
materials provided by the complainant are presented hereunder.
(…)
Based on the above table of comparison, it is possible to
conclude that all elements constituted the invention of Patent No.
1980 (as described in the Claims of Patent No. 1980) present in
the compared structures.
According to Article 805 of the Civil Code, if the structures of
motorbike saddle described in the materials provided by the
complainant are using by those persons other than Honda Giken
Kogyo Kabushiki Kaisha, and if those persons are not licensed
for the use of Patent No. 1980, and if those persons do not belong
to those mentioned in Articles 801 and 803 of the Civil Code,
and if such use is carried out after the granting date of Patent No.
1980 (…), such use will be considered an act of infringement of
Patent No. 1980(…)”906 (Emphasis added)
As mentioned above, Article 803 of Civil Code of 1995 referred generally to the limitations
of patent rights. Among others, the use of a patented products after having been circulated
into the market place by the patent holder should not be considered an act of patent
infringement. In this dispute, the respondent, the General Corporation of Transportation
Mechanics of Vietnam, made the claim that it imported the patented motorbike saddles from
a trading company in China to assemble the motorbikes for selling in the market of
Vietnam.907 It was indicated that the motorbike saddles were marketed in China before their
importation into Vietnam. Supposing that the circulation of the motorbike saddles in the
market of China were made under the authorization of Honda Giken Kogyo Kabushiki
Kaisha, the importation of such products could be argued to be an exception under Article
803 of the Civil Code 1995.
However, the language of Article 803 of the Civil Code itself did not state clearly that the
exception was applicable with respect to the patented products having been marketed
domestically or internationally. The argument based on this provision was deemed uncertain.
The dependent might not understand fully the legal situation and consequences of its acts in
906
English translation made by the author. See Khieu nai ve xam pham quyen doi voi sang che cua
cong ty Honda (Complaint of Patent Infringement by Honda Giken Kogyo Kabushiki Kaisha),
Complaints Record of 2001, the National Office of Intellectual Property.
907
See Complaint of Patent Infringement by Honda Giken Kogyo Kabushiki Kaisha, Complaints Record of 2001,
the National Office of Intellectual Property.
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the importation and assembly of the patented products. The word “if” together with the
complicated structure and vague expression used in the official letter by the National Office
of Intellectual Property might make the respondent confused when reading it. The instruction
in the official letter of the National Office of Intellectual Property did not refer particularly to
the act of importing the patented products, nor explain clearly the legal matters concerning
this act. It would be clearer to the respondent if it explained that, were the motorbike saddles
were legally marketed in China under the control of the patent holder of the corresponding
patent obtained in China, the importation of such products into Vietnam for assembling and
selling the motorbikes in Vietnam would not be considered an act of infringement.
The absence of that particular instruction was, on the one hand, legally attributable to the
lack of clear provisions in the statutory language of Article 803 of the Civil Code of 1995.
On the other hand, it was consistent with the policy of the government on preventing the
importation of motorbikes and motorbike accessories from China at that time. 908 The fact was
that the motorbikes and the motorbikes with the accessories imported from China caused a
serious concern in the society. 909 Due to the massive importation of such products at very
cheap prices, the traffic problems became insolvable in the urban areas.910 A series of severe
accidents occurred because of low quality motorbikes.911 The interests of the domestic
consumer could not be protected since the imported products were not accompanied by
assurance services. Another aspect was that the domestic motorbike producers, like the
Honda Vietnam Company, suffered a great disadvantage from the pressure of reduced prices
whilst maintaining quality standards and the warrant services. 912 The domestic motorbike
industry, typically the Honda Vietnam Company, made great efforts to pressurize
908
E.g., Cong van so 3470/TCT/NV6 cua Tong cuc Thue ngay 16 thang 12 nam 2002 (Instruction No. 3470
TCT/NV6 of the Taxation Department dated 16 September 2002), the Taxation Department, the Ministry of
Finance; Cong van cua Van phong Chinh phu so 5110/VPCP-KHTH ngay 16 thang 9 nam 2002 (Instruction of
the Government Office No. 5110/VPCP-KHTH dated 16 September 2002) requested the Ministries of Finance,
Trade, Industry, Planning and Investment, Transportation, Department of Customs and the other related agencies
to strengthen the measures to restrict the importation of motorbikes and motorbike accessories; Cong van cua
Thu tuong Chinh phu so 38/2002/QD-TTg ngay 14 thang 3 nam 2002 (Instruction No. 38/2002/QD-TTg dated
14 March 2002) of the Primer Minister requested the Ministry of Industry to impose the severe sanctions on the
acts violating the importation policy on the domestically production of motorbikes, allowing the prohibition of
the importation of motorbike accessories in the appropriate circumstances; Cong van cua Van phong Chinh phu
so 15/TB-VPCP ngay 25 thang 1 nam 2002 (Instruction No. 15/TB-VPCP dated 25 January 2002 of the
Government Office); Cong van cua Van phong Chinh phu so 136/TB-VPCP ngay 8 thang 8 name 2002
(Instruction No. 136/TB-VPCP of the Government Office dated 8 August 2002); Thong tu cua Bo Tai chinh so
69/2002/TT-BTC (Circular of the Ministry of Finance No. 69/2002/TT-BTC) entered into effect on 1 September
2002; Cong van cua Bo Tai chinh so 3645 TC/TCT ngay 6 thang 9 nam 2000 (Instruction No. 3645 TC/TCT of
the Ministry of Finance dated 6 September 2000); Cong van cua Tong cuc Thue so 740/TCT-NV6 ngay 23 thang
3 nam 2002 (Instruction No. 740/TCT-NV6 of the Taxation Department dated 23 March 2001) on handling the
violation acts in the importation and assembly of motorbike accessories. See Governmental Letters, the Taxation
Department, the Ministry of Finance.
909
See ‘Tre em chet do tai nan giao thong tang dot biet’ (Suddenly increasing deaths of children for traffic
accidents), in the Health News, released on VNExpress Online Newspaper of 15 December 2005, available at
http://vnexpress.net/Vietnam/Suc-khoe/2005/12/3B9E510C/; ‘Gia tang xe may – Gia tang tai nan’ (Increasing
number of motorbikes – increasing number of traffic accidents), in the Focused Problems, released on VTV
homepage, available at http://www.vtv.vn/vi-vn/VTV1/tieudiem/2005/9/65149.vtv.
910
See ‘Xe may tu boc chay’ (Self-burning motorbike), in the Social News, released on VNExpress Online
Newspaper of 9 September 2004, available at http://vnexpress.net/Vietnam/Xa-hoi/2004/09/3B9D64EC/.
911
See Increasing number of motorbikes – increasing number of traffic accidents, supra note 909.
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governmental agencies into resisting the free importation of cheap and low-quality
motorbikes and motorbike accessories from China.913 The demands of social safety and
domestic industrial development called for a protectionist policy with respect to those kinds
of products. In this situation, an unclear instruction from the National Office of Intellectual
Property on the matter of parallel importation with respect to patented products in such a case
appeared to be appropriate.
What could be drawn from the analysis of the above example is that the real problems are not
only generated from the uncertain legal grounds of the current legislation, but also from the
unclear policies on parallel importation from different circumstantial aspects. In practice,
these are problems facing both the administrative agencies and the courts in handling this
issue. In support of the judges and other enforcement authorities who have less experience in
the field of intellectual property, it is justifiable to elaborate clearly the provisions on this
issue in the statutory language of the new law.
In the practice of Vietnam, the simple encouragement of parallel importation is not in every
case a good option. The negative effects of this policy on the domestic industrial
development, consumers’ interests and social security are in some cases are evident. Because
of the geographical position adjacent to China, the sensitive market and industry of Vietnam
is under high pressure from the cheap price production policy of its huge neighbor. This fact
gives rise to the mandate of the new law in drawing out a justifiable solution for to
inconsistent interests underpinning the policy of parallel importation.
2.3.3. Fluctuations in the wordings of the new law drafts
The fluctuation wordings of the different new draft laws show the unstable views of the
drafters on the policy of parallel importation.914 This also reflects the prudential consideration
of the legislators in this aspect of intellectual property protection in general and patent
protection in particular. Examining the recent drafts reveals that there exist two main views
on this issue. The first endorses the policy of parallel importation applied to every category
of intellectual property rights in general. 915 It means that it is not necessary to pose any
different treatment or limitation to the implementation of this policy. The second prefers the
separate treatment applied to each category of intellectual property. 916 Accordingly, for
example, the policy on patented products should be different from that of trademarks or
copyrights. On this point, the reasoning for the adoption of this policy needs a more careful
consideration based on the particular factual situation.
In the perception that the rationale underlining the regime of protection with respect to each
category of intellectual property is not identical, the objectives of policy of parallel
importation is not necessarily applicable to all kinds of objects of intellectual property rights.
Otherwise, the demands of domestic industry and the interests of consumers may not be
912
See Report of Honda Vietnam, WIPO National Roving Working on the Enforcement of Intellectual Property
Rights, Hanoi July 5-6, 2004.
913
Id.
914
See the Draft of Law on Intellectual Property (the third draft, fourth draft, fifth draft), supra note 848.
915
Id. (Particularly, the statement on the different suggestions and options in the third draft).
916
See the Draft of Law on Intellectual Property (the third draft, fourth draft, fifth draft), supra note 848.
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constant in every situation and particular accounts should be given to the practices of
implementing the policy.
However, how to verify the objectives or the effects of a policy, which is regarded a
reasonable solution to a specific case is another question that is not easy to find an
appropriate answer in reality. In each case, the consideration ought to focus on what is
regarded being more important in the national policies. For example, in the case of Vietnam
at the present, the policy of parallel importation with respect to patented products should be
balanced at least among the interests of three groups: the patent holders, the domestic
industrial development, and the domestic consumers.
Some key actors in the WTO are insisting on the strengthening of the interests of the first
group, that is, patent holders who are mainly the foreign owners of inventions. This request
should certainly place in a priority position because of Vietnam’s objective of soon joining
the WTO.917 It is noted that although this objective is regarded as an important target
presently, the government has stated that it does not wish to enter the WTO at the expense of
all other interests.918 In this statement, the government affirms its standpoint in supporting
protectionism for the domestic industry and the public interest. In this controversy, the
drafters of the new law seem unlikely to find a satisfactory solution to respond to all
requirements from different aspects.
Conclusion
The present draft of the new law on intellectual property contains certain problems
concerning the patent protection from the view of the TRIPS, the “incorporated” Paris
Convention, and the WTO rules in general. The examination of the latest drafts reveals that
inherent problems in the current legislation on the patent protection have not been settled.
These problems may be well secure under the mandate of the Paris Convention, as it was
practiced in Vietnam. However, the situation has changed since the incorporation of this
treaty into TRIPS and the WTO legal system. For this reason, the drafters of the new law
should pay more attention to the problems existing in the current regulations that mostly
shifted into the language of the new law draft. The elimination of these problems should not
only be in the statutory language of the new law, but also in its implementing mechanism.
The objective of the issuance of the new law should be the compliance of the domestic law
with the obligations under TRIPS, the “incorporated” Paris Convention and WTO
jurisprudence. Accordingly, both the compliance of the new law at face value and in its
practical implementation should be ensured.
917
See the First Submission of Draft of New Law on Intellectual Property, supra note 840, the Second
Submission of Draft of New Law on Intellectual Property, supra note 838.
918
See ‘Vietnam will not enter the WTO at any cost’, in the Business News released on VNExpress Online
Newspaper of 7 April 2005, available at http://vnexpress.net/Vietnam/Kinh-doanh/2005/04/3B9DD065/ (in
English); ‘WTO accession difficulties continue’, in Interviews released on VNN Online Newspaper of 7
November 2005, available on http://english.vietnamnet.vn/interviews/2005/11/508789/ (in English).
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The second point in the conclusion of this chapter concerns the unsettled issue in drafting the
new law regarding parallel importation caused by the systematic problems in the current
legislation, policy and practice in handling this issue. The unsound legal basis and unclear
instructions for the competent authorities are in fact generated from the difficulties and
confusions in the perception and application of this policy in certain circumstances of the
economy and society. This issue becomes a sensitive matter when Vietnam is facing the
options for accession to the WTO. A reasonable solution to this issue should take into
account the different interests and demands coming from various its various aspects. The
currently indispensable accounts for a suggested solution should be flexible enough to stand
for, at least, the interests of the patent holders, the rationale for international trade integration,
domestic industrial development, and the interests of the consumers and the public, in
different circumstances.
In the view that the examination of this issue in the light of the “incorporated” Paris
Convention and the TRIPS would identify some legal justification as well as the likely
challenges relating the issue of parallel importation, the next discussion will examine this
issue in the development of the TRIPS and WTO jurisprudence. The national practices
dealing with this question will be examined for an empirical suggestion for the new law and
its implementing regulations.
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Chapter Six
International Exhaustion of Patent Rights under WTO Jurisprudence
Implications for Vietnam
In connection to the issues having been examined in the previous chapters, this chapter
discusses particularly issue of parallel importation of patented products under WTO
jurisprudence. The discussion is going to investigate the appropriate answers for some
disputable questions: What is the legal justification for the adoption of parallel importation of
patented products under the “incorporated” Paris Convention, the TRIPS, and GATT? And
are there any constraints or likely challenges from WTO jurisprudence to national legislation
in dealing with the matter of parallel importation of patented products? It is expected that the
analysis of the legal provisions under the different aspects, the development of WTO panel
rulings, and the national practices in dealing with the relevant issue would reveal some
implications for the case of Vietnam.
I. Parallel importation and international exhaustion of patent rights
1. The absence of a general definition
There is no definition of the parallel importation of patented products existing in the language
of both the Paris Convention and TRIPS. Generally, the concept of parallel importation with
respect to patented products refers to the unauthorized importation of patented products that
have been marketed abroad with the authorization of the patented holder.919 The conception of
parallel importation of patented products often happens in the event that a third party buys the
patented products in a foreign market, and then imports and resells them in the domestic
market in direct competition with the authorized distributors.920
919
E.g., parallel imports are regarded as “goods that are sold, or authorized for sale, abroad by the United States
intellectual property owner, but are subsequently imported into the United States without the United States
intellectual property owner's authorization”. See Margreth Barrett, ‘The United States' Doctrine of Exhaustion:
Parallel Imports of Patented Goods’, Northern Kentucky University Law Review, (Vol. 27, 2000), p. 911. Both
parallel imports and gray goods are used as distinct from counterfeit goods, which were initially produced and
marketed unlawfully, without the authorization of the patent holder. Id. Parallel imports are "genuine goods or
services imported by a reseller into a country without the authorization of the owner of the intellectual property
right in that country". See Claude E. Barfield & Mark A. Groombridge, ‘The Economic Case for Copyright
Owner Control over Parallel Imports’, the Journal of World Intellectual Property (Vol. 1, 1998), p. 903.
"Parallel trade" is "the exportation and importation of products through distribution channels that are other than
those authorized by the owner or licensee of a patented (..) product". See Harvey E. Bale, ‘The Conflicts
Between Parallel Trade and Product Access and Innovation: The Case for Pharmaceuticals’, Journal of
International Economic Law (Vol. 1, 1998), p. 637. At the beginning, the term "parallel imports" was adopted in
the European Community, while the terms "gray goods" and "gray market" were used in the United States in a
similar meaning. See Tait R. Swanson, ‘Combating Gray Market Goods in a Global Market: Comparative
Analysis of Intellectual Property Laws and Recommended Strategies’, Houston Journal of International Law
(Vol. 22, 2000), available at http://www.Lexis.com. Generally, gray goods are also regarded as genuine goods
sold through unauthorized channels in direct competition with authorized distributors. Id.
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There exist different views on the legality of parallel importation of patented products. It is
argued that parallel importation is allowable only if the imported product has been marketed
in a territory in which the product is subject to the protection of a corresponding patent for the
same invention.921 In other words, this argument connects parallel importation of patented
products with the conception of parallel patents. 922 It means that if a patented product was
marketed in a foreign country where the patent holder may not seek a patent protection, or
could not obtain a patent for that product, the parallel importation of that product would not
be free from the charge of patent infringement. 923 Otherwise, the recognition of the legality of
parallel importation as to patented products whose first sale took place in a territory lacking
the relevant patent protection is in fact accepted in certain cases.924
In other aspects, it is arguable that parallel importation can only be permitted in the case
where the patented product is marketed with the consent of the patent holder, namely, it must
be sold either directly by him or indirectly by his authorized licensee. 925 Pursuant to this
920
See Hillary A. Kremen, ‘International Application of the First Sale Doctrine’, Syracuse Journal of
International Law and Commerce, (Vol. 23, 1997), p. 161. Parallel imports are defined as “goods that are
purchased in foreign markets by third parties and then resold in the domestic market in direct competition with
authorized distributors”. Ako Shimada Williams, ‘International Exhaustion of Patent Rights Doctrine: Is Japan’s
Move A Step Forward or Back from the Current Harmonization Effort?’, Detroit Journal of International Law
& Practice (Vol.7, 1998), p. 327, available on http://www.Lexis.com.
921
See Nuno Pires de Carvalho, supra note 103, at 102.
922
Parallel importation is often examined in the cases where “patentees hold "parallel patents" for the same
invention in several nations." See Hillary A. Kremen, supra note 920. See also Darren E. Donnelly, ‘Parallel
Trade and International Harmonization of the Exhaustion of Rights Doctrine’, School of Law, Santa Clara
University Santa Clara Computer and High Technology Law Journal (Vol. 13, 1997), p. 445.
923
See Nuno Pires de Carvalho, supra note 103, at 102. The findings of the European Court of Justice in two
cases were referred for the relevant argument. In Centrafram BV et Adriann de Pejper v. Sterling Drug Inc.,
Case 15/74, European Court Reports 1974, p. 1147, the European Court of Justice found that a patentee could
prevent the importation of protected products marketed by him or with his consent in another EC Member State
in a situation where no restriction of trade “was necessary to guarantee the essence of the exclusive rights
flowing from the parallel patents”. It is explained that this finding allowed the patentee to prevent parallel
imports from the country where the patent right for the related products is not existent. In a previous case, Parke,
Davis and Co. v. Probel, Reese, Beintema-Interpharm and Centrafarm Case 24/67, European Court Reports
1968, the European Court of Justice found that the patent owner (in Netherlands) could prevent the importation
of products from a country where they were not patentable (Italy) despite the fact that the price of the products in
the Netherlands, for the patent protection, were much higher than that in Italy.
924
E.g., in Merck & Co. v. Stephar BV, Case 187/80, European Court Reports 1981, p. 2063, the European Court
of Justice held that patent rights in one EU Member State were exhausted with the sale in another member state
where no patent protection was available. The fact was that Merck owned patents in the Netherlands on the
composition and process for making the drug Moduretic and marketed the product in Italy where no patent
protection was available. Id. Stephar purchased the drug wholesale in Italy and sought to resell it in the
Netherlands. Id. Merck argued that the purpose of a patent is to allow the patentee to enjoy the rewards of the
exclusive right to first market the patented article, and that this was not exhausted by the sale in Italy where there
was no exclusive right. Id. The court, however, concluded that the patent right guaranteed the right to first
market the product, but does not guarantee that the patentee would obtain a reward in all circumstances. It
rejected Merck's argument, and held that, having chosen to market its product in Italy, Merck exhausted its right
to block reimportation into the Netherlands. Id. at 2081-2082
925
The view that any sale with the right holder's consent can exhaust his patent right was made clear in the
judgment of the European Court of Justice in Centrafram BV et Adriann de Pejper v. Sterling Drug Inc., Case
15/74, European Court Reports 1974, p. 1147. The fact that Sterling held parallel patents in several EU Member
States, including Britain and the Netherlands, for the pharmaceutical Negram. Id., at 1148. With prices for
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argument, parallel importation of the patented products that are manufactured or marketed
under a compulsory patent license will be not permitted.926
It is also opined that the importation of a patent product marketed abroad is only considered
“parallel” where the importation is in the position of competing directly against the patented
product that is made available in the domestic market by the patent holder or his authorized
licensee.927 Accordingly, where the patent holder or his authorized licensee did not make
available the patented product in the domestic market, by manufacture or importation, there
would not exist parallel importation in the absence of the actual possibility of competition in
regards to that patented product.928 However, there is no precedence in the courts to confirm
this line of opinion.
2. Exhaustion of patent rights
The legality of parallel importation is related closely to the conception of exhaustion of patent
rights. In relation to parallel importation, the exhaustion of patent rights refers generally to the
situation that a patent holder has no right to control over the movement of the patented
product after that product has been marketed with his consent. 929 The sound reasoning for the
pharmaceuticals 30% lower in Britain than in the Netherlands, Centrafarm purchased the drug in Britain for
import into the Netherlands. Id. at 1149. The court held that Sterling's rights were exhausted upon its sale of the
drug in Britain and clarified that parallel imports of a patented product were justified on the reasoning that the
product had been put onto the market in a legal manner, by the patentee himself or with his consent, in the
country from which it was imported, particularly in the case of a proprietor of parallel patents. Id., at 1147.
926
E.g., in Pharmon BV v. Hoechst AG, Case 19/84, European Court Reports 1985, p. 2281 (also available at
httt://wwww.europa.int/cj), the European Court of Justice held that the marketing in an EU Member State under
a compulsory license was not a consensual first sale that exhausted the patent rights, accordingly, parallel
imports in that case were not allowed. Id. The court also found that national competent authorities in a Member
State granted a compulsory license to a third party patentee which allowed him to carry out manufacturing and
marketing operations which the patentee would normally have the power to prohibit, the patentee could not be
regarded as having consented to the actions of the third party. Id. The court clarified further that its holding in no
way depended on the conditions attached to the compulsory license by the granting State, such as the amount of
royalties and whether the patent owner accepted or refused such royalties. Id.
927
The question of to which extent parallel importation and the products of the authorized distributors in a
domestic market are regarded being in the “direct competition” is not clear in this perception. See Hillary A.
Kremen, supra note 920.
928
One way of explanation is that parallel importation, in its literal meaning, indicates the patented product being
imported into the territory of one country through unauthorized channels of distribution, which run in “parallel” to
the channels established by the paten owner or its licensee (that is why it is called “parallel imports”). It is
therefore opined that there is parallel importation only when the patented product is already being commercially
distributed, after being locally manufactured or imported by the patented owner or its licensee. Where a distributor
imports patented products that have been exhausted in another country but that are not available in the importing
country, there is no “parallel” importation. See Nuno Pires de Carvalho, supra note 103, at 103.
929
The exhaustion of rights doctrine, in general terms, means that when an intellectual property right holder sells
an article embodying those rights, they are exhausted with respect to that article, and therefore, a purchaser can
resell the article without being liable for infringement. See Darren E. Donnelly, supra note 922. The doctrine of
exhaustion contemplates that an intellectual property owner will have exclusive control over the first sale of
goods embodying the intellectual property. See Margreth Barrett, supra note 919. A patent right is exhausted, in
the sense that it is completely consumed and therefore ceases to exist, by the first act of introduction into the
commercial circuit of the product incorporating the claimed invention, being the product itself or the process of
directly manufacturing the product, as long as that introduction has been made by the patent owner or with the
consent of the patent owner. See Nuno Pires de Carvalho, supra note 103, at 97.
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exhaustion of this right is that, by the first sale of the patented product, the patent holder has
transferred all of his rights attached to that product to the buyer, and therefore, he cannot
restrain the buyer from reselling that product. 930 It is also reasoned that the patent holder has
an opportunity to enjoy the reward for his invention after the first sale of the patented product,
and this prevents him from collecting further reward from the subsequent transactions in
relation to that product.931 In this respect, the so-called first sale doctrine is popularly adopted
in the assumption that the patent holder exhausted his patent right after the first sale of the
patented product.932 However, a big difference exists in the conception of whether the first
sale that took place in foreign markets would exhaust the patent right of the patent holder in a
930
In dealing with the cases involving parallel patents obtained for the same invention, the U.S. courts provided
different findings on exhaustion, e.g., the court in Holiday v. Mattheson, 24 F. (S.D.N.Y. 1885), p. 185, the court
held that U.S. patent rights were exhausted if there were no prohibitions made in the bargain. The court
explained:
“When the owner sells an article without any reservation respecting its use, or
the title which is to pass, the purchaser acquires the whole right of the vendor
in the thing sold: the right to use it, to repair it, and to sell it to others; and
second purchasers acquire the rights of the seller, and may do with the article
whatever the first purchaser could have lawfully done if he had not parted
with it.”
In Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., 266 F. (2d Cir. 1920), pp. 71, 78, the
court followed the presumption that the seller "intends to part with all his rights in the thing sold" in Holiday v.
Mattheson and supported the international exhaustion principle, holding that goods sold by a patentee are
released from the patentee's exclusive rights, including the exclusive rights in all domestic and foreign patents.
In Sanofi v. Med-Tech Veterinarian Products., Inc., 565 F. Supp. (D.N.J. 1983), pp. 931, 938-39, the court held
that an "unrestricted sale" prohibits the patent owner from later imposing restrictions on the use of the goods sold
to the buyer. The court explained that to hold otherwise would defeat the purchaser's expectation of unrestricted
ownership and use of the goods and also the presumption following a lawful sale that the seller intends to part
with all of his rights in the goods. The court also stated that a buyer only receives rights in the goods purchased
to the extent of the seller's rights in the goods sold. In this respect, another line of reasoning is to distinguish the
patent right from the property right attached to an invention. It is argued that a patented article has embodied in
itself the invention, but not the patent right. When the article is sold, the property right in the tangible thing is
transferred along with the material possession of the article, but the patent right is not accompanied with it. The
patent owner therefore may not oppose any act the buyer may wish to practice regarding the patented article. See
Nuno Pires de Carvalho, supra note 103, at 98.
931
The U.S. Supreme Court presented the view that the purpose of patent law is to promote the progress of
science and the useful arts by granting to the inventor a limited monopoly, the exercise of this purpose enables
the inventor to secure the financial rewards for his invention. The patentee may surrender his monopoly in whole
by the sale of his patent or in part by the sale of the article embodying the invention. The decisions of the court
have uniformly recognized that the purpose of patent law is fulfilled with respect to any particular article when
the patentee has received his reward for the use of his invention by the sale of the article, and that once that
purpose is realized the patent law affords no basis for restraining the use and enjoyment of the thing sold. The
purpose of the patent law is thus fulfilled with respect to any particular article once the patentee has received the
reward for the use of his invention by selling the article. See United States v. Univis Lens Co., 316 U.S. (1942),
pp. 241, 250-51. See also United States v. Masonite Corp., 316 U.S. (1942), pp. 265, 278; B. Braun Med., Inc. v.
Abbott Lab., 124 F.3d (Fed. Cir. 1997), pp. 1419, 1426; Brandt Consol., Inc. v. Agrimar Corp., 801 F. Supp.
(C.D. Ill. 1992), pp. 164, 173. The European Court of Justice has stated that the specific subject matter of patent
rights is to reward the creative effort of the inventor by guaranteeing that the patentee has the exclusive right to
use an invention with a view to manufacturing industrial products and putting them into circulation for the first
time, either directly or by the grant of licenses to third parties, as well as the right to oppose infringements. See
Cases 267-268/95, Merck & Co. Inc. v. Primecrown Ltd., European Court Reports 1997, p. 30 citing case 15/74,
Centrafram BV. v. Sterling Drug Inc., European Court Reports 1974, p. 1147.
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domestic market.933 Concerning the rationale for parallel importation of patented products,
whether the exhaustion of the patent right should be recognized either territorially or
internationally in the context of the WTO is a matter still in dispute.934
For various reasons, different approaches to the exhaustion of patent rights are adopted in the
practices of each country.935 There are also divergent arguments for and against the
justification of parallel importation in terms of various aspects. 936 In the legal aspect, the
rationale of territorial exhaustion is against that of international exhaustion in the connection
to parallel importation. Basically, when the patent right adherent to a patented product is
regarded as being exhausted internationally after the first sale of the patented product, the
932
In relation to the practice of parallel importation, the "first sale" doctrine is discussed in the assumption that
patent protection is usually limited to the first sale, that is, the patent holder loses rights to any royalty after the
initial sale of the patented product. Therefore, the patent holder does not have any right to control subsequent
sales because the patent rights have been "exhausted." Once a patent becomes "exhausted”, the initial purchaser
may resell the goods without infringing on the patent held by the original seller. See Hillary A. Kremen, supra
note 920.
933
E.g., in the practice of the United States, there are conflicting views on whether unauthorized first sales under
foreign patents will exhaust U.S. patent rights when the U.S. patentee holds patents for the same invention in
several nations. In Boesch v. Graff, 133 U.S. (1890), pp. 697, 701-02, the U.S. Supreme Court held that lawful
sales abroad by someone unrelated to the patentee did not exhaust U.S. patent rights. In Griffin v. Keystone
Mushroom Farm, Inc., 453 F. Supp. (E.D. Pa. 1978), p. 1283, the court rejected adopting the international
exhaustion rationale. Differently, in Holiday v. Mattheson, 24 F. (S.D.N.Y. 1885), p. 185, the court held the sale
abroad exhausted all of plaintiff's patent rights around the world. In Curtiss Aeroplane & Motor Corp. v. United
Aircraft Engineering Corp., 266 F. (2d Cir. 1920), p. 71, the court supported the international exhaustion
principle, holding that goods sold by a patentee are released from the patentee's exclusive rights, including the
exclusive rights in all domestic and foreign patents. Though the fact that the U.S courts disagreed on the matter
of exhaustion in relation with parallel importation, the courts appear to apply the territorial approach more than
the international exhaustion approach. The prevailing reasoning is that there is generally no patent exhaustion
where foreign sales were not authorized by the U.S. patent owner. See Tait R. Swanson, supra note 919.
934
See generally, Frederick M. Abbott, ‘First Report (Final) to the Committee on International Trade law of the
International Law Association on the Subject of Parallel Importation’, Journal of International Economic Law
(1998), p. 607. It is argued that a rule of territorial exhaustion, in the form of national or regional exhaustion,
conflicts with the specific provisions of the WTO and TRIPs Agreement, and should be replaced by a rule of
international exhaustion to be consistent with the mandate of the WTO. Id. On the contrary, it is argued that a
rule of territorial exhaustion does not conflict with various provisions of GATT and TRIPS. See Barfield &
Groombridge, supra note 919, at 91-93. See also S. K. Verma, ‘Exhaustion of Intellectual Property Rights and
Free Trade – Article 6 of the TRIPS Agreement’, International Review of Industrial Property and Copyright
Law (Vol. 29, 1998), pp. 552-58. It is also argued that a territorial regime of exhaustion is no longer justifiable in
view of the increasing globalization of the world economy, the efforts for greater liberalization of international
trade, and the drive towards the establishment of internationally uniform standards of intellectual property
protection and their incorporation into a GATT-based international trading system. See Abdulqawi A. Yusuf,
supra note 8, at 8. Similarly, it is reasoned that the GATT does not lend itself to a limitation of the worldwide
exhaustion principle. See Bronckers, Marco C.E.I. Bronckers, ‘The Impact of TRIPs: Intellectual Property
Protection in Developing Countries’, Common Market Law Review (Vol. 31, 1994), p. 1268. For the opposite
view, see Alexander J. Stack, ‘TRIPs, Patent Exhaustion and Parallel Imports’, The Journal of World
Intellectual Property (1998), at 685.
935
Generally, the different views of the countries on the issue of exhaustion may be classified into two basic
categories: international exhaustion and territorial exhaustion, of which the developing countries favor the
former, while the developed countries prefer the latter. However, there exist also different classifications of
views. The special case of the EU invites the approach of “regional exhaustion”. In essence this may be regarded
a kind of territorial exhaustion due to the uniform market of the EU. The patent right in certain cases is found to
be exhausted in all members of the EU when it is exhausted in one member. As for the outside of the EU, the
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legality of parallel importation of the patented product will be recognized. 937 By the contrast,
if the patent right is regarded as being exhausted territorially, the legality of parallel
importation in regards to the patented product will be generally precluded.938
The issue of exhaustion was such a fraught topic that the TRIPS negotiators could not achieve
a necessary trade-off on it during the Uruguay Round of the GATT Negotiation. In the
context of TRIPS setting aside this issue, the possibility of bringing a case concerning this
matter before a WTO panel seems at present unlikely. It seems impractical for the argument
that a complaint on the problems generated from parallel importation may be raised under
certain provisions of GATT.939 Besides, many studies and various suggestions have been put
forwards concerning an international harmonization regime of parallel importation in the
WTO framework.940 Nevertheless, the existing disparity in the viewpoints of the WTO
Members seems to make any suggestion impractical in the near future.941
In the connection to the concerns of parallel importation regarding patented products in
Vietnam, the policy-makers deemed to accept the international exhaustion approach to pave
the way for parallel importation. As stated in the Submissions of the Draft of Law on
Intellectual Property, the option of international exhaustion serves the benefit of the domestic
consumers. That is an appropriate decision going along with the general perception of the
developing countries.942 In the particular circumstances of Vietnam, however, there still exist
a number of concerns from different aspects, which have led to debate among the legislators
rationale of EU regional exhaustion is not different from that of national exhaustion. International exhaustion of
the patent right is generally not recognized in the EU member states. There is also the argument for the
“modified” international exhaustion of the patent right adopted in the United States. This approach relied
basically on the findings of the local courts in some special cases. This approach is in debate because it has never
been endorsed by the U.S. Supreme Court. A similar view applies to the approach of a “modified” or
“conditioned” international exhaustion of the patent right adopted in Japan. See Darren E. Donnelly, supra note
922; Tait R. Swanson, supra note 919.
936
See generally, Margreth Barrett, supra note 919 (discussing different views on various aspects of parallel
importation of patented products). See also Frederick M. Abbott, supra note 934; Darren E. Donnelly, supra
note 922.
937
See Hillary A. Kremen, supra note 920. See also Darren E. Donnelly, supra note 922.
938
Id.
939
See Abdulqawi. A. Yusuf, supra note 8.
940
See e.g., Frederick M. Abbott, supra note 934; Darren E. Donnelly, supra note 922; See Tait R. Swanson,
supra note 919; Hillary A. Kremen, supra note 920; Ako Shimada Williams, supra note 920.
941
See Margreth Barrett, supra note 919 (generally viewing that in the long run international exhaustion will
prevail for all intellectual property rights).
942
A footnote to TRIPS Article 28.1 elaborates that the right of importation "is subject to the provisions of
Article 6." Article 6, in turn, provides that for the purposes of dispute settlement under the TRIPS Agreement,
"nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights."
Thus, while TRIPS requires adhering nations to provide a right of importation, it deliberately avoids directly
addressing the applicability of the doctrine of exhaustion to temper that right. This is because the nations
negotiating the TRIPS Agreement were unable to reach agreement about the applicability of the doctrine of
exhaustion to goods sold internationally. While the developed nations took the position that intellectual property
owners should be able to assert their intellectual property rights to prevent parallel imports in some or all
instances, most developing countries advocated a rule of international exhaustion. See Ana M. Pacon, ‘What
Will TRIPS Do For Developing Countries?’, in From GATT To TRIPs - The Agreement on Trade-Related
Aspects of Intellectual Property Rights (eds. Friedrich-Karl Beier & Gerhard Schricker,) (IIC 1996), p. 329-337,
Watal, ‘TRIPS and the 1999 WTO Millennium Round’, The Journal World Intellectual Property, (Vol. 3, 2000),
pp. 17-18.
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and the undecided attitude of the drafters concerning this matter in the most recent drafts of
the new law.
In settling such concerns, it is worth clarifying two essential questions on the issue in the light
of the development of the TRIPS and the panel rulings regarding the intellectual property
protection. The first question is the legality of international exhaustion under the Paris
Convention, the TRIPS and GATT. The second question is the justification under WTO
jurisprudence for an appropriate national parallel importation policy in the situation of
Vietnam. In the context of Vietnam being a party to the Paris Convention and expecting to be
a party to TRIPS, it is supposed that the clarification of these two questions would be helpful
for policy-makers to consider different aspects of the issue and decide an appropriate national
patent policy in consistency with these treaties. Regarding the notion that the incorporated
substantive provisions must comply with the TRIPS rules, and otherwise, the implementation
of the obligations under TRIPS does not derogate the obligations under the Paris Convention,
the next discussion will examine particularly these questions in relation to the “incorporated”
Paris Convention, particularly Article 4bis of this Convention, and to the extent of its
relevance, Article 6 of TRIPS. Then the subsequent discussion is going to examine the legal
justification of this issue under WTO jurisprudence in the relation with the TRIPS and GATT.
II. Legality of international exhaustion under the Paris Convention
In the general view, it may be argued for international exhaustion in any case where a
patented product has been marketed abroad by or under the authorization of the related patent
holder. After the first sale of the patented product, all patent rights adherent to it will have
been exhausted. It may not be taken into consideration the particular concerns relating to the
patent holder, the distributor of the patented product, and the market where the patented
product has been first distributed, for example, whether the conditions on the consent of the
related patent holder(s), the validity of the related patents, the way of distribution of the
patented product into the market place, the distribution of the exclusive licensee, the
identification of the distributor and the market limitation on the product, etc. need to be
accounted in the application of international exhaustion.943
In one particular view, it is perceived that international exhaustion is only relevant in the case
where the sale and the importation of a patented product involves at least two patents being
valid in two countries. Otherwise, international exhaustion would not be relevant in the case
that the patented product is manufactured or first distributed in the market, where there does
not exist an effective patent right with respect to that product, namely, the patented product
being not subject to the control of a valid patent right in the exporting country. It is also
arguable the applicability of international exhaustion concerning the patented product being
subject to a patent compulsory license or a price control regulation of government, or that the
product is not marketed by the same patent holder or under the direct consent of the original
patent holder etc. The reasons may be that the patent right would not be considered as
exhausted in the absence of the corresponding patent right adhering to the marketed patented
943
See e.g., Margreth Barrett, supra note 919 (discussing different views on various aspects of parallel
importation of patented products).
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product, or that the conditions for rewarding the relevant royalty or presenting the consent of
the patent holder were not satisfied.944
Leaving the other concerns aside, it can be supposed that international exhaustion is clearly
relevant in the case where the patented product involves two patents being valid in two
countries for the same invention.945International exhaustion invites dispute regarding its
legality under the principle of the independence of patents. The dispute stems from the
different views on the consistency of international exhaustion under the provision on the
principle of independence of patents. The main question remaining in the dispute is the
difference in the perception on the scope of this provision. Taking this question into account,
the discussion below will focus on the legality of international exhaustion under the principle
of independence of patents in relation to Article 4bis of the Paris Convention.
The present controversies on this issue may be summarized in two main lines of prepositions.
The first preposition argues that international exhaustion is in violation of Article 4bis of the
Paris Convention.946 This proposition relies on the perception of Article 4bis of the Paris
Convention in the broad meaning. Accordingly, both the existence and the exercise of a patent
right granted by a patent in a Union country must be absolutely independent from the patent
right subject to the corresponding patent existing in another Union country. On the contrary,
the second proposition states that international exhaustion does not conflict with the principle
of independence of patents since Article 4bis of the Paris Convention does not cover the issue
of exercise of patent right.947 In the view of the author, the scope of Article 4bis is needed to
understand in the broad meaning. However, the exercise of a patent right in a Union country
is not necessarily perceived of absolute independence as far as that country is prohibited from
referring to the situation of the corresponding patent right in another Union country for
rendering its own decision on the issue of exhaustion. In this respect, the principle of
independence of patents needs not to be understood as being extremely identical to the
territorial principle in every aspect. The following discussion will explore further the
arguments underpinning the mentioned above propositions.
944
See e.g., Nuno Pires de Carvalho, supra note 103, at 102-107.
See Darren E. Donnelly, supra note 922; Hillary A. Kremen, supra note 920; Ako Shimada Williams, supra
note 920.
946
See Nuno Pires de Carvalho, supra note 103, at 104, 105.
947
See Decision of the Supreme Court of Japan in BBS Kraftfahrzeug Technik v. Jap-Auto Products (“BBS
case”), the Supreme Court Decision on July 01, 1997, H6 (Ne) 3272 (“BBS Wheels III”), International Review
of Industrial Property and Copyright Law (Vol. 15, 1998), pp. 331-335.
945
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1. The Paris Convention prohibiting international exhaustion
The argument for the restriction of international exhaustion is the perception that the
principle of independence of patents under Article 4bis of the Paris Convention should be
understood as the territorial principle of patent protection in the broadest sense, which covers
all matters relating to patent rights and enforcement of patent rights. 948 Accordingly, the
patent rights exhausted in the territory of one country would have no impact on the patent
rights of the patent obtained for the same invention in the territory of another country. 949
It is argued that Article 4bis (2) only gives two examples of independence which relate to the
validity and duration of a patent. Accordingly, the forfeiture and nullification of a patent in
one country does not necessarily lead to the forfeiture and nullification of the corresponding
patent in another Union Member on the same grounds. Similarly, the lapse of a patent due to
the expiry of its term protection in one country does not automatically cause the lapse of the
corresponding patent in the territory of other Union Members. The emphasis is placed on the
open language of this provision. It must be explained that these are only examples that are
mentioned in “particular” in response to the common practice of regulating the automatic
invalidation and lapse of patents for the same invention following the invalidation and lapse
of the patents in another country at the time of the Conference of London of 1934 leading to
the addition of paragraph 2 of Article 4bis to the Convention.950 From this argument, an
international exhaustion regime may be regarded as being in violation of Article 4bis of the
948
It is viewed that the general effect of Article 4bis is that the protection granted by a patent in one contracting
country is not affected in any way whatsoever by the exercise of a parallel protection existing abroad. The
consent given by the patentee to a licensee abroad to make and sell the subject matter of the foreign patent
cannot legally be assumed or presumed to be also a consent with respect to his protection rights in another
country. Furthermore, the theory that the patentee received his “reward” by exercising the exclusive right in
country A and therefore cannot claim another reward by exercising an exclusive separate right in country B, and
that his protection right was exhausted or consumed by the marketing of the products in country A and such
products can now fully circulate in country B is a theory without any legal foundation whatsoever. See Stephen
P. Ladas, ‘Exclusive Territorial Licenses Under Parallel Patents’, International Review of Industrial Property
and Copyright Law (Vol. 3, 1972), p. 346. See also Straus, supra note 123, at 194, 195.
949
See Stephen P. Ladas, supra note, at 335-346. See also Straus, supra note 123, at 194. The reasoning for this
view is that, under Article 4bis of the Paris Convention, Paris Union Members must treat patents applied for in
the various countries of the Union by nationals of the countries of the Union as being “independent of patents
obtained for the same invention in other countries, whether members of the Union or not.” This includes
exhaustion, because “the foregoing provision is to be understood in an unrestricted sense”. In other words, the
fact that patent rights are exhausted in the territory of one country “should have no impact whatsoever on the
patent rights held in the territory of another country, given that those rights are entirely independent.” See Nuno
Pires de Carvalho, supra note, at 104.
950
The scope of this provision should be, otherwise, understood in the broader view. It is argued that the core
provision of paragraph 2 is that independence “is to be understood in an unrestricted sense”. It applies, therefore,
to the enforceability of rights as well. See Nuno Pires de Carvalho, supra note, at 104, 105.
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Paris Convention. 951 In addition, it is argued that only the national exhaustion regime is in
compliance with the principle of independence of patents. 952
In short, under the argument for the inconsistency of international exhaustion with the
principle of independence of patents, an international exhaustion regime violates the
obligations under Article 4bis of the Paris Convention. Because the implementation of the
obligations of TRIPS does not derogate the obligations under the Paris Convention, this
argument supposes that a WTO Member who is at the same time a party to the Paris
Convention should not adopt an international exhaustion regime in dealing with the issue of
parallel importation.
2. The Paris Convention without relevance with exhaustion of patent rights
The proposition in this line of view reasons that Article 4bis of the Paris Convention has no
relevance to the existence of a patent right. In this respect, the judgments of the Japanese
Supreme Court in the case of BBS Kraftfahrzeug Technik AG v. K. K. Racimex Japan and K.
K. Jap-Auto Products953 (“BBS case”) on this matter in dealing with disputes concerning
parallel importation.
The Tokyo District Court found that Article 4bis of the Paris Convention is related to the
existence of patent rights but not the exercise of patent rights. 954 The Court opined that this
article, underpinning the principle of patent independence as well as the principle of
territoriality does not directly influence the decision of the Court on the admissibility of
parallel importation.955 The Court interpreted the Japanese Patent Act and denied to introduce
951
It is argued that WTO Members that have adopted international exhaustion regimes in the area of patents are
nonetheless in violation of Article 4bis of the Paris Convention. See Nuno Pires de Carvalho, supra note 103, at
105.
952
The reason is that although a number of WTO Members have implemented Article 6 provision in a way that is
inconsistent with Article 4bis of the Paris Convention, Article 6 is not per se in conflict with the principle of
independence of patents, many WTO Members have indeed adopted a national exhaustion regime, which is in
full compliance with the principle of independence. See Nuno Pires de Carvalho, supra note 103, at 105.
953
See the Supreme Court Decision, supra note 947. The fact was that plaintiff BBS Kraftfahrzeug Technik AG
("BBS"), a German company, holds a patent entitled “Wheel for Automobile” in Japan and a patent in German
for the same invention. The defendant K. K. Jap Auto Products ("Jap Auto"), a Japanese company, had been
importing into Japan the aluminum wheels (“the patented product”) manufactured and distributed by the plaintiff
in Germany. The codefendant K. K. Racimex Japan ("Racimex"), also a Japanese company, had been selling
(“the patented product”) imported by Jap Auto. BBS sued Racimex and Jap Auto on the grounds that the acts of
importation and resale of the patented products in the market of Japan without BBS’ s authorization was an
infringement of BBS's Japanese patent. See Jinzo Fujino, Parallel Importation of Patented Goods, AIPPI Journal,
July 1995, p. 205.
954
See the Tokyo District Court Decision on July 22, 1994, Case No. Hei 4 (wa) 16565 (“BBS Wheels I”),
International Review of Industrial Property and Copyright Law (1996), p. 547.
955
See the Tokyo District Court Decision, supra note 954. Jap Auto appealed to the Tokyo High Court against
the judgment of the Tokyo District Court, arguing that the court should adopt the principle of international
exhaustion of patent rights. BBS, on the other hand, argued that international exhaustion of patent rights, which
allows for the exhaustion of patent rights on a product in a foreign country to the exhaust patent rights on the
same product in one's home country would violate the principles of patent independence and territorial
jurisdiction. In addition, BBS invoked public policy and argued that parallel importation works against consumer
protection especially where the patented product requires "strict quality control". See Jinzo Fujino, supra note
953.
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the principle of international exhaustion of patent rights and the parallel importation of
patented products into Japan.956 The Tokyo High Court stated that the principle of patent
independence and the principle of territoriality should mean that the effect of a patent right
obtained on the basis of the Japanese Patent Act is to be determined by interpreting the
Japanese Patent Act.957 The Court further reasoned that the question to what extent the lawful
marketing of patented products abroad has to be taken into consideration is to be determined
under Japanese Patent Law.958 The Court would consider whether the lawful putting into
circulation of patented products abroad influences the scope of a patent right within Japan. 959
The arguments for prohibiting international exhaustion of the patent right and parallel
importation of patented products raised by the patentee and found that the patent right was
exhausted by putting into circulation of the patented products abroad by the patentee. 960 The
Supreme Court upheld the Tokyo High Court’s decision and dismissed BBS' s appeal.961
In the circumstances that the decision of the Tokyo High Court received many comments
from opponents and supporters,962 the Supreme Court found that Article 4bis of the Paris
Convention relates only to the matters of existence of a patent right, such as the granting,
validity and expiration of a patent etc., but does not concern the exercise of patent rights by
the patentee.963 Accordingly, the issue of exhaustion is a matter of domestic patent law. 964 The
Supreme Court considered the relationship between the free movement of goods in
international trade and the interests of the patentee. 965 For the development of international
trade, in common sense when the patentee transfers his patented products, it would imply that
the patentee has transferred to transferee the rights to undertake the subsequent transactions
with respect to the patented products, including the importation into Japan and the distribution
of patented products in Japan.966 However, the Supreme Court further found that if, at the time
of transfer, the patentee reserves his rights as to the subsequent transactions with respect to
the patented products, and such reservation is clearly indicated on the patented products, the
patentee may retain his right to control the importation or the distribution of the patented
products in Japan.967
956
See the Tokyo District Court Decision, supra note 954, at 549.
See the Tokyo High Court Decision on March 13, 1995, Case No. Hei 6 (ne) 3272 (“BBS Wheels II”),
International Review of Industrial Property and Copyright Law (1996), p. 552.
958
Id.
959
Id.
960
Id. at 554-55.
961
See the Supreme Court Decagon, supra note 947.
962
E.g., for the opposition views, see Hillary A. Kremen, supra note 920; Tait R. Swanson, supra note 919;
Matthew R. Hicks, ‘Japanese-Auto Products v. BBS- Threat to Exacerbate U.S.-Japanese Trade Relations?’
Loyola of Los Angeles International & Comparative Law Review (Vol. 23, 1997), p. 161; Claude E. Barfield
and Mark A. Groombridge, ‘Parallel Trade in the Pharmaceutical Industry: Implications for Innovation,
Consumer Welfare, and Health Policy’, Fordham Intellectual Property, Media & Entertainment Law Journal
(Vol. 10, 1999), p. 185, available on http://www.Lexis.com; and for the supportive views, see Darren E.
Donnelly, supra note 922; Ako Shimada Williams, supra note 920.
963
See the Supreme Court Decision supra note 947, at 333.
964
Id.
965
Id. at 334.
966
Id.
967
Id.
957
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Generally, in the BBS case the Japanese Supreme Court upheld the view of the lower courts
that Article 4bis of the Paris Convention is not relevant to the issue of exhaustion of patent
rights. In contradiction with the view that this article prohibiting international exhaustion of
patent rights, the Japanese courts endorsed the understanding this article in the sense that it
leaves this issue to the domestic law to decide. In other words, the Paris Convention does
mention the legality of any approach of exhaustion of patent rights.
For seeking an appropriate answer for the question of legality of international exhaustion of
patent rights, the author’s view is that Article 4bis of the Paris Convention, on the face of it,
does not oblige an understanding the scope of independence of patents in a narrow meaning.
Otherwise, there is neither word in this article forcing an intrusive conception of the
territoriality for the absolute independence of patents. In the situation of vagueness of the
provision, an interpretation that would lead either to narrow down the scope of the provision
or to the absolutism of some rule embed in that provision would easily result in the dispute.
Under the mandate of the Paris Convention, this stands for the common rules of substantive
law regarding the patent protection. National legislation may adapt those rules with specific
interests and preferences. Even if the exercise of patent rights is covered by this provision, it
would not possibly bind the exercise of patents of rights insofar the legality of international
exhaustion of patent rights is excluded. Where there is no clear exclusion in the language of
the Convention, national legislation may refer to the situation of exercising the relevant patent
right in another country as a factual reference for its decision.
III. The Relevance of the TRIPS and GATT
As stated in Article 6, TRIPS precludes disputes concerning the exhaustion of patent rights
from the WTO dispute settlement system. Accordingly, even if the policy of exhaustion
adopted by a given WTO Member may cause some detrimental consequence to another WTO
Member, there is not available an opportunity for the damaged member to bring a case before
a WTO panel against that policy. However, the question is that, although exhaustion of rights
is mentioned in Article 6 and some footnotes attached to some other provisions on patent
protection and enforcement in TRIPS Agreement, TRIPS itself does not define clearly what is
exhaustion of rights.
It is argued that Article 6 of the TRIPS, though precluding the disputes of exhaustion of rights
from the WTO dispute settlement mechanism, does not prevent the parties from requesting a
WTO panel to clarify the concept of exhaustion of rights inscribed in TRIPS. 968 In practice,
the exhaustion policy adopted by the national law of a WTO Member might become the
disputed subject in the bilateral trade relations between the related WTO Members. 969
However, there has been no claim brought before a WTO panel concerning a dispute on
exhaustion related issues.970
968
See Frederick M. Abbott, ‘The Doha Declaration on the TRIPs Agreement and Public Health: Lighting a Dark
Conner at the WTO’, Journal of International Economic Law (Vol.5, 2002), p. 493; William J. Davey and
Werner Zdouc, supra note 655, at 69.
969
See Tait R. Swanson, supra note 919.
970
See http://www.wto.int/english/tratop_e/dispu_e/dispu_subjects_index_e.htm.
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There exist some different arguments on the legality of international exhaustion under TRIPS.
Some scholars argue that Article 6 of TRIPS supports international exhaustion in the context
of the GATT system underpinning the freer trade in goods. 971 Others contend that TRIPS
favors national exhaustion of patent rights when this question is placed in the context of
Article 28.1 of TRIPS, which stands for patent rights in preventing the importation of a
patented product.972
There are different views on the relevance of international exhaustion of patent products
under TRIPS and GATT in the sense that it allows parallel importation. The debate on this
issue is resulted from different understandings of the legal implications of Article 6 of TRIPS
in relation with some other provisions of TRIPS and GATT. The possible interpretation of
Article 6 of TRIPS in various ways results in the difference in the arguments for and against
the legality of international exhaustion under the WTO rules.
The controversies on this issue may be summarized in three main lines of views regarding the
legality of international exhaustion of patent rights under the TRIPS. The first view asserts
that the TRIPS itself obliges WTO Members to protect the patent right holders against parallel
importation of patented products.973 The second view argues that TRIPS and GATT mandates
the approach of international exhaustion of rights in general and parallel importation of
patented products in particular.974 The third view reasons that TRIPS, without relevance to the
GATT and WTO rules, records the freedom of the WTO Members to regulate the matters of
exhaustion of rights.975
The national legislation of the WTO Members, from such views, is subject to different extents
of the constraints from TRIPS and WTO law in dealing with the issue of international
exhaustion of patent rights. The recent development of WTO jurisprudence regarding the
intellectual property protection, to certain extent, provided some grounds for reviewing the
practical effect of the mentioned-above views. Accordingly, it might draw an empirical
971
See Frederick M. Abbott, supra note 919 (discussing a number of approaches to this issue, including
arguments based on Article XI:1 of GATT 1994, GATT Art. III, GATT Art. XI and XX(d)). It is argued that a
policy of territorial exhaustion is prohibited under the GATT and TRIPS. All things being equal, GATT and
TRIPS favor international exhaustion standing alone. Id. See also Abudulqawi A. Yusuf TRIPS: ‘Background,
Principles and General Provisions’, in Intellectual Property and International Trade: The TRIPs Agreement, eds.
Carlos M. Correa and Abdulqawi A. Yusuf (Kluwer Law International, 1998), p, 18; S. K. Verma, supra note
934 (relying on GATT Art. III(4) and GATT Art. XI(1) to argue for the contrary).
972
Notwithstanding the language of Article 6 of the TRIPS, some commentators have argued that other
provisions of TRIPS or other Agreements within the General Agreement on Tariffs and Trade, indirectly prohibit
a policy of international exhaustion. See e.g., Thomas Cottier, ‘The Prospects for Intellectual Property in
GATT’, Common Market Law Review (Vol. 28, 1991), pp. 399-400 (argument based on GATT Art. XXIII(1)
(b)); Straus, supra note 123, at192-193 (relying on TRIPs Art. 27(1) and 28(1)); Harvey E. Bale, ‘The Conflicts
Between Parallel Trade and Product Access and Innovation: The Case of Pharmaceuticals’, Journal of
International Economic Law, (Vol. 7, 1998), pp. 637-644 (relying on TRIPs Art. 28). See also Watal, ‘TRIPs
and the 1999 WTO Millennium Round’, The Journal of World Intellectual Property (Vol. 3, 2000), pp. 17-18
(describing similar arguments).
973
See Joseph Straus, supra note 123, p. 192.
974
See Frederick M. Abbott, supra note 934, at 633.
975
See Macro C. E. J. Bronckers, ‘The Exhaustion of Patent Rights under WTO Law’, Journal of World Trade
(Vol. 32), p. 157.
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perception about the constraints of the TRIPS and WTO law on the application of
international exhaustion of patent rights.
In that connection, the discussion bellow is going to examine the three lines of views
regarding the different effects of the TRIPS and GATT rules on international exhaustion of
patent rights. Then it is trying to assess such effects in the recent development of WTO
jurisprudence concerning intellectual property to seek an appropriate perception of the legality
of this issue and the constraints on its application under WTO jurisprudence. At first, three
views on the legal status of international exhaustion of patent rights under the TRIPS and
WTO law will be discussed in turn.
1. The TRIPS precluding international exhaustion of patent rights
Article 6 of TRIPS provides:
“For the purposes of dispute settlement under this Agreement,
subject to the provisions of Articles 3 and 4 nothing in this
Agreement shall be used to address the issue of the exhaustion of
intellectual property rights.”976
The view of the TRIPS precluding the international exhaustion of patent rights relies on the
narrow interpretation of Article 6 of the TRIPS. Accordingly, the wording “for the purpose of
dispute settlement under this Agreement” is perceived as a procedural provision of the TRIPS.
In this view, Article 6 of the TRIPS is intended only to exclude the issue of exhaustion from
the TRIPS dispute settlement procedure. It does not preclude or derogate any obligation of the
WTO Members derived from the substantive provisions of the TRIPS. 977 With regards to
patents, it is argued that Article 6 should be read in the relation with the substantive
provisions set forth in Articles 27.1 and 28.1 of the TRIPS. 978 The provisions of Article 27.1,
in conjunction with Article 28.1, obliges the WTO Members to grant the patentees the right to
prohibit the sale and the importation by third parties of a patented product, or a product
obtained directly by a patented process, regardless of where the products were produced. 979
Those substantive provisions of the TRIPS amount to a barrier to international exhaustion of
patent rights.980 The provisions of Article 6 and the footnote reference in Article 28.1 does not
976
See the TRIPS supra note 10, art. 6.
See Joseph Straus, supra note 123, at 192.
978
Articles 27.1 provides that patents shall be available for any inventions, whether products or processes, in all
fields of technology, provided that they are new, involve an inventive step and are capable of industrial
application, and patents shall be available and patent rights enjoyable without discrimination as to the place of
invention, the field of technology and whether products are imported or locally produced. See the TRIPS, supra
note 10, art. 27.1. Article 28.1 provides that the patent holders shall have the exclusive rights to prevent third
parties not having the owner’s consent from making, using, offering for sale, selling, or importing the patented
products. See the TRIPS, supra note 10, art. 28.1.
979
It could be inferred from this argument that, the non-discrimination rules under Article 27.1, applying to the
patent rights provided in Article 28.1, would prevail the effect of Article 6 of the TRIPS. It based on the reason
that Articles 27.1 and 28.1 providing the non-discrimination rules and patent rights are the substantive
provisions, while provision of Article 6 is only a procedural provision.
980
Id.
977
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remove that barrier, because these provisions only say that in a case of dispute the issue of
exhaustion will not be handled within the TRIPS settlement dispute procedure.981
It is reasoned that the language of Article 6 itself, by using the words “nothing in this
Agreement”, infers the understanding that the substantive rules of the TRIPS contain the
provisions that may be invoked to argue against the application of the international exhaustion
principle. To this point, the meaning of Article 6 needs to be construed in the relation with the
principles worded in the preamble and the rules embedded in the substantive provisions of the
TRIPS.982
It is also alleged that the principle of international exhaustion of patent rights directly
contravenes both the substantive provisions of the TRIPS and the fundamental TRIPS
rationale, which stands for the greater protection given to the patented products. That rationale
is still appropriate at the present situation and in the foreseeable future of the world market of
products in general, of certain products such as pharmaceuticals in particular. For that reason,
there does not exist legal and practical grounds for the argument in favor of the principle of
international exhaustion of patent rights under the TRIPS.983
For the reasoning that Article 6 does not derogate the obligations under the substantive
provisions in Articles 27.1 and 28.1 of the TRIPS, it is asserted that a WTO Member would
not be in the position to fulfill its obligations regarding the patent protection if it adopted the
principle of international exhaustion of patent rights. 984 In such a case, a patent holder in that
country would not be able to control the distribution and the production of the patented
products in the relevant market by resorting to the patent rights conferred by his patent. In
other words, the patent he was granted in that country would have no sense by the application
of the principle of international exhaustion of patent rights. This situation would entail a
reduction in the filing of the applications for the grant of patents and not an increase in
technology transfer. Such undesirable consequence would go against the objectives of the
TRIPS.985
Based on that reasons, the proponents of the narrow view on the scope of Article 6 of the
TRIPS argues against the legality of international exhaustion of patent rights under the
TRIPS. On one hand, Article 6 of the TRIPS is a procedural rather than a substantive
provision. On the other hand, the obligations under the substantive provisions of the TRIPS
are not affected by the procedural provision. Accordingly, the TRIPS obliges the WTO
Members to preclude the application of the principle of international exhaustion of patent
rights to give effect to the provisions of Articles 27.1 and 28.1 of the TRIPS. The application
of international exhaustion does not only fail of the fulfillment of the obligations under the
TRIPS substantive provisions, but also undermine the basic principles and objectives of the
TRIPS. In both legal and factual aspects, this view did not find any justification for the option
of international exhaustion of patent rights under the TRIPS rationale. The national legislation
of the WTO Members, in this view, should preclude the option of international exhaustion of
981
Id.
See Joseph Straus, supra note 123, at 193
983
Id.
984
Id. at 194.
985
Id., at 195.
982
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patent rights for their compliance with Articles 27.1 and 28.1 of the TRIPS. National laws
therefore cannot invoke Article 6 of the TRIPS to permit the parallel importation with respect
to the patented products.
2. The TRIPS and GATT mandating international exhaustion of patent rights
The proponents supporting the legality of international exhaustion of patent rights under the
TRIPS provides a broader view in understanding Article 6 of the TRIPS. It does not conceive
Article 6 of the TRIPS as only a procedural provision to exclude the issue of exhaustion from
the TRIPS dispute settlement procedure. Moreover, with the reference footnote in Article
28.1,986 the elimination of Article 6 reading in the patent context contains an implication that a
third party having the owner’s consent to manufacture and sell a patented product in one
WTO Member might be entitled to parallel export that product to another market. 987 In this
respect, the patent rights mentioned in Article 28.1 is subject to the elimination of Article 6
not only in the procedural aspect, but also in the substantive aspect. Although Article 6 itself
would not resolve the questions of parallel importation in general, the implication for parallel
importation with regards to patented products was under the sufficient estimation of the
drafters of Article 28 of the TRIPS, when they made the reference of this matter back to
Article 6.988
In this view, Article 6 of the TRIPS only says that “nothing in this Agreement” is used to
address the question of exhaustion of rights. Accordingly, it does not exclude the possibility
of invoking provisions of other agreements to deal with the issue where they are relevant. 989
The concern may be that international exhaustion and parallel importation would have the
affect as providing subsidized exports of licensed products to countries. 990 Therefore, the
application of international exhaustion, while it is consistent with the TRIPS, may frustrate
the legitimate expectations of the right holders for the greater protection. It may result in
nullification and impairment under the unfair trade and competition conditions.991 Such
concerns would be dealt with by invoking to the relevant rules of GATT. 992 To overcome the
situation mentioned in the above example, the rules on nullification and impairment under
Article XXIII (1) (b) of GATT would be applied. 993 For the reason that the rules applicable to
the application of doctrines of exhaustion are available under GATT law, there is no need to
modify Article 6 of the TRIPS to regulate that practice.994
986
Footnote 6 to Article 28.1 says: “This right, like all other rights conferred under this Agreement in respect of
the use, sale, importation or other distribution of goods, is subject to the provisions of Article 6.” See the TRIPS,
supra note 10, art. 28.1.
987
See Frederick M. Abbott, supra note 934, at 633.
988
Id.
989
Id.
990
See Thomas Cottier, ‘The Prospects for Intellectual Property in GATT’, Common Market Law Review (Vol.
28, 1991), p. 399.
991
Id.
992
Id.
993
Id. at 400.
994
In the same vein, the GATT rules continue to govern the other aspects of exhaustion and parallel importation:
Article XX(d) provides the basis to justify the exclusion of parallel importation for the application of national
exhaustion. Article XXIV of GATT continues to provide the basis for the application of regional exhaustion
within the customs unions or free-trade areas. See Thomas Cottier, supra note 972, at 400.
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The justification for the application of international exhaustion also stays behind the argument
that national exhaustion may amount to a restriction on imports or a barrier to international
trade that GATT rules intend to remove. 995 In this regards, Articles XI and XX (d) of GATT
provide the general basis for the exclusion of the rules against parallel importation in the
WTO context.996 Exceptionally, Article XX (d) may be invoked to justify an exception for the
case of markets being distorted by government intervention with respect to the patented
products. The application of national exhaustion would create a discrimination against
imported products, and therefore, Article III:4 of GATT may also be applicable. 997 However,
to the extent that Article 6 of the TRIPS is an “agreement to not agree”, the invocation of such
rules of GATT may be not necessary in practice. 998 At any rate, in this view, GATT rules
mandate international exhaustion rather than national exhaustion. The application of
international exhaustion is generally appropriate to the rationale underpinning the WTO
system, which is, eliminating barriers and discriminations that hamper international trade.999
For the reasoning that TRIPS and GATT rules mandate the principle of international
exhaustion of patent rights and parallel importation, the national legislation of the WTO
Members should adopt this principle to be in position of compliance with the TRIPS and
GATT rules. The application of international exhaustion, otherwise, must be taken in the way
that assures the conditions of fair trade and competition, as required by GATT law, with
regards to parallel imports. The view arguing for international exhaustion and parallel
importation under the GATT mandate results in a consequent effect. The GATT rules restrain
generally national legislation from taking the option of national exhaustion that is left open by
Article 6 of the TRIPS.1000 The application of exhaustion should comply with not only the
principles of the TRIPS, but also the relevant rules of GATT. National legislation therefore is
governed by the GATT disciplines, and may be subject to the WTO dispute settlement
procedures for the GATT relevance, applicable to the issue of parallel importation.1001
There is also an argument for the prevailing effect of GATT rules over the TRIPS based on
provision of Article XVI (3) of the WTO Agreement. 1002 In this view, the basic GATT
principles is made applicable to the TRIPS and any conflict between the WTO Members’
obligations under the TRIPS with any covered Agreement will be governed by the GATT
rules.1003 By that reason, the principle of exhaustion should not be applied in derogation with
the WTO Members’ obligations under the WTO.1004 The national or territorial exhaustion, in
995
See Frederick M. Abbott, ‘First Report (Final) to the Committee on International Trade law of the
International Law Association on the Subject of Parallel Importation’, Journal of International Economic Law
(1998), p. 633.
996
Id.
997
Id.
998
See Frederick M. Abbott, supra note 934, at 633.
999
Id.
1000
Id.
1001
Id.
1002
It is also argued that both the TRIPS and GATT stand for the liberalization of trade, relying on the language
of the Preambles of these agreements. See S. K. Verma, supra note 934, at 553. Also relying on the Preamble of
GATT, it is viewed that GATT should subordinate trade concerns to welfare interests where a measure is
welfare-enhancing but decreases trade. See Alexander J. Stack, ‘TRIPs, Patent Exhaustion and Parallel Imports,’
The Journal of World Intellectual Property (Vol. 1, 1988), p. 685.
1003
See S. K. Verma, supra note 934, at 553.
1004
Id.
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this view, is a discriminatory treatment in favor of the national right holder and inconsistent to
the national treatment principle of GATT under Article III(4).1005 By the same token, in the
term “other measure” restricting imports, territorial exhaustion is inconsistent to Article XI
(1) of GATT.1006
3. The TRIPS leaving freedom to national laws without the relevance of GATT
The third view argues for the entire freedom left by Article 6 of the TRIPS to national option
regarding exhaustion of rights without the relevance of GATT. 1007 Accordingly, WTO law
neither obliges countries to adopt nor prohibits them from adopting the international
exhaustion of patent rights.1008 International exhaustion in this view is not a legal obligation
and could not be enforced under WTO law.1009 This view argues for the understanding of
Article 6 of the TRIPS in the broadest meaning. By the eliminating wording of this article, the
drafters of the TRIPS were under the careful consideration of the exhaustion issue and failed
to reach a consensus, in so far as they did not accept this issue be resolved through the WTO
dispute settlement proceedings.1010 By the same token, the reference footnote in Article 8.1 of
the TRIPS showed that the drafters of the TRIPS did not want the question of exhaustion of
patent rights to be resolved through the WTO dispute settlement proceedings. 1011 From the
referent wording of the footnote, it cannot draw any implication regarding whether a third
party “having the owner’s consent” to manufacture and sell the product in one Member
implies the right to parallel import that product to another Member.1012
Accordingly, Article 6 of the TRIPS represents the agreement to disagree in the sense that it
reserves the sovereignty of WTO Members regarding this issue. 1013 This article gives each
1005
The reason is that national exhaustion does not allow the goods under parallel importation to be distributed
freely in the importing country, while the goods provided by the right-holder himself or with his consent will
not be subject to such a restriction. See S. K. Verma, supra note 934, at 553. The opposite view argued that all
systems of exhaustion of rights, whether national, regional, international, affect the sale of domestic and
imported products in a similar way. There is no discrimination against the origin of products because both
domestic and imported products are subject to the same condition about the consent of the right holder.
Particularly, systems of national and regional exhaustion of rights equally restrict the marketing of both
internally traded and imported products in the relevant territory, if that marketing in that territory takes place
without the consent of the right holder. Both domestic products and products originating from another WTO
Member that are marketed with the consent of the right holder can be traded without restriction within that
country. Otherwise, where the domestic products are exported from that country and then marked abroad by or
with the consent of the right holder. As with the importation of foreign products, the re-importation of the
products in question to that country without the consent of the right holder could be blocked by the rule of
national exhaustion. From this view, domestic products and products from other WTO Members are accorded
the same treatment. The system of national exhaustion therefore does not distinguish according to the origin of
the goods and is consistent to Article III:4 of GATT 1994. Consequently, Article XI:1 of GATT 1994 is not
applicable to systems of national and regional exhaustion of rights. See Macro M. Slotboom, ‘The Exhaustion of
Intellectual Property Rights’, The Journal of World Intellectual Property (Vol. 6, 2003), p. 437.
1006
Id.
1007
See Macro C. E. J. Bronckers, supra note 975, at 138-157.
1008
Id.
1009
Id. at 146-157.
1010
Id. at 152.
1011
See Macro C. E. J. Bronckers, supra note 975, at 145.
1012
Id. at 141-142.
1013
Id. at 142.
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WTO Member the discretion to decide its own policy regarding exhaustion. 1014 For example,
developing countries are free to adopt the policy of international exhaustion without taking
any risk under WTO law. Similarly, as for the countries wishing to follow national exhaustion
or regional exhaustion, they have freedom to take their option. 1015 Otherwise, Article 6 of the
TRIPS is not only a technical-procedural provision. Rather, it is a substantive provision in the
sense that it creates discretion for WTO Members on issue of exhaustion.1016
It is also argued that the WTO rules and especially the GATT principles are not relevant to
address the issue of exhaustion of rights mentioned in the TRIPS. The WTO mandate that
stands for open trade or trade liberalization is not appropriate to the interpretation of TRIPS
regarding the issues of intellectual property protection. 1017 In this regards, the TRIPS strikes to
the balance between trade liberalization and increased intellectual property protection. 1018 It is
reasoned that the issue of intellectual property were referred back to the GATT to decide only
on the basis of the rules for liberalization of trade, the balance recorded in the TRIPS would
not be achieved.1019
The above-mentioned argument finds some other supportive points from the text of the
TRIPS. For example, Article 28.1 in conjunction with Articles 3 and 4 of the TRIPS requires
the right to import conferred by a patent to be ensured against the discrimination based on the
nationality of the patent right holders. Concerning the exhaustion of rights, the reference in
Article 6 to Articles 3 and 4 of the TRIPS conveys the meaning that whatever the WTO
Members may decide the matter of exhaustion, they cannot discriminate between foreign and
national right holders, nor between foreign right holders.1020 That limitation on exhaustion
would not be appropriate to be reviewed and enforced under the GATT rules. 1021 It is reasoned
that while the footnote in Article 28.1 mentions the reference only to Article 6 of the TRIPS,
it does not contain any reference to the GATT provisions or the GATT dispute settlement.
1022
Therefore, the review of the performance of the patent rights, in terms of exhaustion, under
the GATT rules and the GATT dispute settlement would be outside the scope of Article 28.1
1014
Id.
To this end, the TRIPS does not contain the substantive rules on exhaustion of patent rights because the
TRIPS itself excludes the enforcement of any substantive rule in Article 6. See Macro C. E. J. Bronckers, supra
note 975, at 142.
1016
See Macro C. E. J. Bronckers, supra note 975, at 142.
1017
The statement of the Preamble of the TRIPS on the need to promote the effective and adequate protection is
specially adopted in the TRIPS. Therefore, it is arguable that this statement stands for maintaining certain
restrictions rather than eliminating them totally from international trade. See Macro C. E. J. Bronckers, supra
note 975, at 143.
1018
See Macro C. E. J. Bronckers, supra note 975, at 144.
1019
For this reason, the issue concerning increased protection of intellectual property that amounts to increased
trade restrictions needs to be reviewed under the TRIPS principles rather than other WTO principles. See Macro
C. E. J. Bronckers, supra note, at 144.
1020
See Macro C. E. J. Bronckers, supra note, at 144.
1021
It is noted that Articles I and II:4 of GATT prohibit discrimination relating to the origin of goods, rather than
the discrimination relating to the nationality of the right holders. That is the reason why Article 6 of the TRIPS
provides that the question of exhaustion will not be addressed through the dispute settlement procedures “under
this Agreement”. See Macro C. E. J. Bronckers, supra note 975, at 146.
1022
See Macro C. E. J. Bronckers, ‘The Exhaustion of Patent Rights under WTO Law’, Journal of World Trade
(Vol. 32), p. 147.
1015
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in conjunction with Article 6 of the TRIPS.1023 It is argued that it would be unreasonable to
say that the drafters of the TRIPS intended to eliminate the dispute settlement about
exhaustion, apart from the issues concerning discrimination, from the TRIPS, but allow the
litigation of that question in the context of the GATT.1024
It is also argued that for the conclusion of the TRIPS within the GATT negotiation
framework, the TRIPS reflects a more contemporary understanding of the relationship
between trade liberalization and intellectual property protection than the original, exceptional
provision of Article XX of the GATT drafting from 1947. 1025 With the inclusion of TRIPS, the
WTO has upgraded intellectual property protection in seeking the balance between trade
liberalization and the protection of intellectual property rights, and the protection of
intellectual property rights is effectively protected and not dealt with as an exception. 1026
Based on that perception, it was reasoned that the entry into force of the TRIPS diminished
the scope of application of the GATT 1994 under Articles XX (d) and XI.1027
The view in this line argued for the prevailing effect of the TRIPS regarding the issues of
intellectual property protection, including the exhaustion question. The TRIPS as a lex
specialist or sui generis agreement on intellectual property would take the absolute
precedence over the GATT as far as the matters related to intellectual property protection are
concerned.1028 Accordingly, in this view, Articles 28.1 and 6 of the TRIPS remove the issue of
exhaustion of rights, except for the question of discrimination, from the WTO dispute
settlement. Article 6 creates effectively discretion for each WTO Member to legislate this
issue upon its own policy. The WTO would not at any rate interfere with the sovereignty of
the WTO Members in deciding the option regarding exhaustion of rights.1029
1023
Arguably, it would make the footnote to Article 28.1 meaningless and therefore contradicts the fundamental
principle of effectiveness in treaty interpretation. See Macro C. E. J. Bronckers, supra note 975, at 147.
1024
In this respect, the term “under this Agreement” in Article 64(2) of the TRIPS, similar to the term used in
Article 6, supports the understanding that non-violation complaints, which concern nullification or impairment,
in respect of intellectual property would be settled in the TRIPS dispute settlement rather than in another WTO
agreement like the GATT.
See Macro C. E. J. Bronckers, supra note 975, at 147.
1025
See Macro C. E. J. Bronckers, supra note 975, at 150.
1026
The argument based on the view that in Article XX(d) the GATT 1947 recognized the protection of
intellectual property only as an exception to the trade liberalization principles inscribed in Article XI and other
provisions. See Macro C. E. J. Bronckers, supra note 975, at 150.
1027
The reason based on the fact that there was no precedent concerning international exhaustion under the
GATT 1947. In addition, there was no indication that the GATT 1994 sought to change the position of its
members on the question of exhaustion, either. If the WTO Members wished to do such a change, they should
express clearly in the language of the GATT 1994. While language of Articles XI and XX(d) are kept
unchanged, the reinterpretation of these articles would be improbable. See Macro C. E. J. Bronckers, ‘The
Exhaustion of Patent Rights under WTO Law’, Journal of World Trade (Vol. 32), p. 150.
1028
In other words, the TRIPS would govern all issues relating to intellectual property protection exclusively.
See Macro C. E. J. Bronckers, supra note 975, at 151.
1029
There is also another view in the light of the broadest meaning of Article 6 of the TRIPS. It was reasoned that
since the issue of exhaustion is excluded from the multilateral dispute settlement in the WTO, Article 6 of the
TRIPS leaves open the possibility for the WTO Members to resolve the conflicts concerning this issue under the
bilateral solutions. Article 6 does not represent the agreement to disagree. Rather, it removes the issue of
exhaustion from the WTO Agreement entirely. It is therefore impossible to read any legal obligation on the
exhaustion of intellectual property rights into the TRIPS, the GATT or any other WTO rule. Moreover, a WTO
Member might be able to place pressure on another WTO Member to change its position on exhaustion of rights.
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In general, the proponents following the broadest view in understanding Article 6 of the
TRIPS asserted that international exhaustion of patent rights was not mandated under the
TRIPS and any other rule of WTO law. A WTO Member might prohibit unconditionally or
conditionally parallel importation. It might allow the patent right holders to block partially or
totally parallel imports of patented products in certain circumstances. WTO law places no
restriction on national legislation in regulating the matter of exhaustion of rights. Because the
TRIPS is the agreement governing exclusively the issues of intellectual property protection in
the WTO system, the issue of exhaustion will not fall within the ambit of any other WTO
rule.
In this line of view, international exhaustion of patent rights would not be subject to any
challenge under the TRIPS and WTO law. The application of this principle in national
legislation would therefore be free from the constraints of the GATT rules and WTO dispute
settlement procedures.
4. Likely challenges in application of international exhaustion of patent rights
The discussion above reveals different views on the legality of international exhaustion of
patent rights under the TRIPS and WTO law. Accordingly, national legislation may be subject
to different constraints of the TRIPS and GATT rules regarding the adoption of international
exhaustion and parallel importation of patented products. Is the legality of international
exhaustion clarified in the development of the TRIPS practice? Which constraints are still the
likely challenges to national legislation from WTO jurisprudence in compliance with the
TRIPS? For seeking the appropriate answers to these questions, the discussion below is going
to examine the effect of the prevailing arguments mentioned above in the practice of the
TRIPS and the WTO panel rulings on the relationship between the TRIPS and GATT 1994.
4.1. The Doha Declaration on the TRIPS Agreement and Public Health
A significant point in the TRIPS implementation process is the adoption of the Declaration on
the TRIPS Agreement and Public Health (hereafter “Doha TRIPS Declaration”) by the
Ministerial Conference in Doha on 14 November 2001.1030 The adoption of the Doha TRIPS
Declaration recorded the great effort of the developing countries in driving the focus of the
TRIPS effect on the public health problems, particularly those resulting from HIV/AIDS,
tuberculosis, malaria and other epidemics. Paragraph 4 of the Doha TRIPS Declaration
contains an important “agreement” of the Ministers on the effect of the TRIPS on the
sovereignty of the WTO Members in regulating the issues of public health:
“We agree that the TRIPS Agreement does not and should not
prevent Members from taking measures to protect public health.
It is even alleged that a WTO Member might impose trade restrictions against the other Member to express its
displeasure on the latter’s policy of exhaustion of rights. See Adrian Otten, ‘The implications of the TRIPS
Agreement for the protection of pharmaceutical inventions’, 11 WHO Drug Information Bulletin (No. 1, 1997),
pp. 12-13, quoted by Macro C. E. J. Bronckers in ‘The Exhaustion of Patent Rights under WTO Law’, Journal
of World Trade (Vol. 32), p. 157.
1030
See Declaration on the TRIPS Agreement and Public Health [hereafter “Doha TRIPS Declaration”], available
at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.doc.
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Accordingly, while reiterating our commitment to the TRIPS
Agreement, we affirm that the Agreement 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.”1031 (Emphasis added)
Admittedly, the express agreement of the Ministers on the way to interpret and implement the
TRIPS, by the statement “we agree” in Paragraph 4 mentioned above, constitutes the legal
status of the Doha TRIPS Declaration in the WTO system. Because the Doha TRIPS
Declaration was adopted by consensus of the Ministers and the language was expressed in
form of an agreement, it would be regarded as a “decision” of the WTO Members under the
provisions of Article IX: 1 of the WTO Agreement. 1032 The Doha TRIPS Declaration therefore
may be regarded as an agreement on the method of application of the agreement and likely to
become a “subsequent agreement” of the TRIPS within the meaning of Article 31(3) (a) of the
Vienna Convention on the Law of Treaties.
Although the Doha TRIPS Declaration is not an authoritative interpretation of the TRIPS
under the provisions of Article IX: 2 of the WTO Agreement for not basing on a
recommendation of the TRIPS Council, it appears to be an “approximation” of an
interpretation of the TRIPS. 1033 By that way, the agreement of the Ministers on a method of
application of the TRIPS stated in the Doha TRIPS Declaration poses an effect on the way of
implementation of the TRIPS by the WTO Members.
Concerning the issue of exhaustion of rights, Paragraph 5(d) of the Doha TRIPS Declaration
states:
“5. Accordingly and in the light of paragraph 4 above, while
maintaining our commitments in the TRIPS Agreement, we
recognize that these flexibilities include:
(…)
(d) The effect of the provisions in the TRIPS Agreement
that are relevant to the exhaustion of intellectual property
rights 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.”1034 (Emphasis added)
The language in Paragraph 5(d) mentioned above states clearly that the TRIPS leaves each
WTO Member the freedom to legislate the issue of exhaustion. Whichever option of
exhaustion a national legislation may take, its legality would be recognized under the TRIPS.
Moreover, apart from the requirements of Articles 3 and 4, national legislation would not be
1031
Id. at 4.
See Frederick M. Abbott, supra note 968, at 493.
1033
Id.
1034
See Doha TRIPS Declaration, supra note 1030, para. 5(d).
1032
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subject to any “challenge” from any other provisions in the TRIPS. According to this
statement, the argument for the restriction of Articles 28.1 and 27.1 of the TRIPS on the
international exhaustion of patent rights and the parallel importation of patented products
appears is no longer survival.
As long as the application of international exhaustion of patent rights does not result in a
discrimination against the patent right holders, as required by the national treatment and MFN
treatment principles of the TRIPS, national legislation adopting this principle would be free
from the obligations derived from other substantive provisions of the TRIPS. The effect of the
provisions in the TRIPS, including Article 6 and the reference footnote in Article 28.1, would
not by any way create a challenge to national legislation in taking an option of the exhaustion
regime. That “effect” is unanimously “recognized” and expressly stated in the aforesaid
statement.
Regardless of Article 6 is considered as a procedural or substantive provision, the
interpretation and implementation of this article should give effect to the freedom of the
national legislation of the WTO Members in regulating the issue of exhaustion. Moreover, the
recognition of the freedom “without challenge” might provide a ground to believe that the
effect of Article 6 is not limited by the effect o the rules provided in Articles 28.1 and 27.1 of
the TRIPS. Otherwise, the substantive provisions under Article 28.1 and 27.1 would be
subject to the conditions provided in Article 6 of the TRIPS.
For that reason, the adoption of the Doha TRIPS Declaration consolidates the legality of
international exhaustion of patent rights under the TRIPS. 1035 In addition, it excludes the
concern about the challenge against international exhaustion of patent rights, as argued by
some, generated from the “inside” of the TRIPS. National legislation may be free to adopt
that principle without constraint from any TRIPS obligations, except for those provided in
Articles 3 and 4.
As for the challenges might come from the “outside” of the TRIPS, is there exist some ground
to believe that the relevance of the GATT rules is excluded from the issue of international
exhaustion and parallel importation? The answer seems to be negative pursuant to the panel
rulings on the recent TRIPS case as analysed below.
4.2. The WTO rulings on the relationship between the TRIPS and GATT 1994
4.2.1. The cumulative application of TRIPS and GATT 1994
1035
See Nick Gallus, ‘The Mystery of Pharmaceutical Parallel Trade and Developing Countries’, The Journal
of World Intellectual Property (Vol. 7, 2004), pp. 170; Daya Shanker, supra note 485, pp. 722-771; Thomas F.
Cotter, ‘Market Fundamentalism and the TRIPS Agreement’, Yeshiva University Cardozo Arts &
Entertainment Law Journal (Vol. 22, 2004), p. 307. For the opposite view (Doha TRIPS Declaration does not
have binding legal force in a WTO dispute), see Alan O. Sykes, ‘Public Health and International Law: TRIPS,
Pharmaceuticals, Developing Countries, and the Doha “Solution”’, Chicago Journal of International Law
(2002), available on http://www.Lexis.com.
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The rulings of the Panel on the double cases of EC-Geographical Indications,1036 affirmed that
the national treatment principles of TRIPS and GATT 1994, in despite of the differences,
could be cumulatively applied to the issue of intellectual property protection. From different
aspects, Article 3.1 of TRIPS and Article III: 4 of GATT 1994 could be invoked at the same
time to challenge a government regulation allegedly constituting a discrimination in the
protection of intellectual property. That perception may be drawn from the following finding
of the Panel:
“The Panel notes that there is no hierarchy between the TRIPS
Agreement and GATT 1994, which appear in separate annexes to
the WTO Agreement. The ordinary meaning of the texts of the
TRIPS Agreement and GATT 1994, as well as Article II: 2 of the
WTO Agreement, taken together, indicates that obligations under
the TRIPS Agreement and GATT 1994 can co-exist and that one
does not override the other. This is analogous to the finding of the
Panel in Canada – Periodicals, with which the Appellate Body
agreed, concerning the respective scopes of GATS and GATT
1994. Further, a "harmonious interpretation" does not require an
interpretation of one that shadows the contours of the other. It is
well established that the covered agreements apply cumulatively
and that consistency with one does not necessarily imply
consistency with them all.” 1037 (Footnote omitted and emphasis
added)
Applying the approach of the relationship between GATS and GATT, the Panel clarified that
the TRIPS and GATT 1994 have equal legal status in the sense that the obligations under
these two agreements can “co-exist” and “one does not override the other”. Accordingly, the
obligations under the TRIPS and GATT 1994 are of the same significance to the WTO
Members. The fulfilment of the obligations of a WTO Member under the TRIPS does not
escape or exempt its relevant obligations under GATT 1994. Assumedly, the obligations
under the principles of the TRIPS, which stand for the increased protection of intellectual
property, would not prevail the obligations under the principles of GATT, which stand for the
trade liberalization, and vice versa.
4.2.2. The relevance of GATT 1994
The finding of the Panel in these cases gives a negative response to the arguments in the
broadest view in understanding Article 6 of the TRIPS, which intended to exclude the effect
and the relevance of GATT 1994 from the ambit of WTO law regarding the intellectual
property protection in general, the issue of exhaustion of rights in particular. The above
finding also clarified the legal relationship between the TRIPS and GATT in dealing with the
matters of intellectual property protection within the WTO system. Accordingly, the TRIPS
could not be regarded an agreement governing exclusively the matters relating to the
1036
See Panel Report, EC-Geographical indications, Complaint by US, supra note 411; Panel Report, ECGeographical indications, Complaint by Australia, supra note 411.
1037
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.244
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intellectual property protection. Otherwise, other rules of the WTO Agreement, particularly
GATT 1994 in the above-mentioned cases, may also be applicable from the relevant aspects.
The rulings on the continuing effect of GATT 1994 over the issue of intellectual property
protection legally decline the argument that the issue of intellectual property is no longer
relevant to GATT 1994 by the existence of the TRIPS. These rulings encourage the argument
that the question of exhaustion of rights might be subject to the WTO dispute settlement and
bound by the GATT rules.
Supposed that the cumulative applicability of the TRIPS and GATT 1994 would not be
nullified by the reason of the effective interpretation that the Appellate Body has applied in
some cases. It seems reasonable to believe that the constraints regarding the question of
exhaustion coming from the GATT rules and WTO dispute settlement procedures are
existent.
4.2.3. Place of production and discrimination against imported products
The rulings on the cumulative applicability of the TRIPS and GATT 1994 with respect to the
issue of intellectual property protection contains another point that may give some implication
to the way of applying the international exhaustion principle. The connection for the
applicability of GATT 1994 in the case mentioned above is the requirement concerning place
of production of products, for purpose of intellectual property protection.1038 That requirement
1038
In dealing with the connection between the requirement regarding place of production and the discrimination
against the nationality of the right holders, the Panel rendered a significant finding. It said that the even in case
that national legislation imposes some kind of requirement no directly concerning nationality, for example
relating to place of production, it might be regarded a discrimination in terms of the national treatment
obligations under the TRIPS. The reason is that such kind of requirement may undermine the object and purpose
of the TRIPS enshrined in Articles 3.1 in conjunction with Article 1.3 of the TRIPS. In this regards, the Panel
states:
“The object and purpose of the TRIPS Agreement depends on the obligation
in Article 1.3 to accord the treatment provided for in the Agreement to the
nationals of other Members, including national treatment under Article 3.1.
That object and purpose would be severely undermined if a Member could
avoid its obligations by simply according treatment to its own nationals on
the basis of close substitute criteria, such as place of production, or
establishment, and denying treatment to the nationals of other WTO Members
who produce or are established in their own countries.” (Emphasis added)
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at
7.235.
In particular, a WTO Member may not accord the different treatments on the basis of the “close substitute
criteria”, as defined in the footnote to Article 1.3, to its own nationals and the nationals of other WTO Members.
The “close substitute criteria” include the requirements regarding place of production of products and
establishment of producers, which are similar to the criteria used for the assimilation of nationals in Article 3 of
the Paris Convention. This point may be read in the following finding of the Panel:
“The text of the TRIPS Agreement contains a recognition that discrimination
according to residence and establishment will be a close substitute for
nationality. The criteria set out in footnote 1 to the TRIPS Agreement, which
apply in the case of a separate customs territory Member of the WTO, are
clearly intended to provide close substitute criteria to determine nationality
where criteria to determine nationality as such are not available in a Member's
domestic law. These criteria are "domicile" and "real and effective industrial
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closely relevant to a discrimination against the origin of products within the meaning of
Article III: 4 of GATT 1994. The Panel found the relevance of the national treatment under
Article III: 4 of GATT 1994 regarding the protection of intellectual property products as
follows:
“The Regulation links the protection of the name of a product to
the territory of a particular country. In the case of "designations
of origin", as defined in Article 2 of the Regulation, this is the
place of production, processing and preparation of the product
and, in the case of "geographical indications", as defined in
Article 2 of the Regulation, this is the place of production,
processing and/or preparation. It is not disputed that in most
cases these criteria are sufficient to confer origin on the products.
Given that the Panel has found that the protection of names of
products from other WTO Members is contingent on satisfaction
of certain conditions of equivalence and reciprocity that do not
apply to the names of products from the European Communities,
the Regulation formally discriminates between imported
products and products of European Communities origin within
the meaning of Article III: 4 of GATT 1994.”1039 (Footnote
omitted and emphasis added)
From the reasoning on the connection between place of production and origin of products,
the Panel found that the requirement concerning place of production, subject to the
equivalence and reciprocity conditions, constituted the discrimination under the national
treatment provision of GATT 1994. Therefore, the Regulation of the EC that imposed the
requirement concerning place of production under the equivalence and reciprocity conditions
was in violation of Article III: 4 of GATT 1994: 1040
or commercial establishment". They are taken from the criteria used for the
assimilation of nationals in Article 3 of the Paris Convention (1967). It is
clear that, in using these terms, the drafters of footnote 1 of the TRIPS
Agreement chose terms that were already understood in this pre-existing
intellectual property convention. Under Article 3 of the Paris Convention
(1967), "domicile" is not generally understood to indicate a legal situation, but
rather a more or less permanent residence of a natural person, and an actual
headquarters of a legal person. A "real and effective industrial and
commercial establishment" is intended to refer to all but a sham or ephemeral
establishment.” (Footnote omitted and emphasis added)
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at
7.234.
In the above findings, with reference to the provisions of the Paris Convention, the Panel found that reciprocity
conditions in the requirement of place of production of products amount to the discrimination on basis of the
“close substitute criteria” defined in the TRIPS Agreement, and therefore, come within the application scope of
the national treatment principle of the TRIPS. In that connection, the cumulative applicability of both TRIPS and
GATT national treatment provisions was determined.
1039
See Panel Report, EC-Geographica indications, Complaint by Australia, supra note 411, at 7.264.
1040
At the same time, that Regulation was also in violation of the national treatment principle under Article 3.1
of the TRIPS:
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“[T]he Panel concludes that, with respect to the equivalence and
reciprocity conditions, as applicable to the availability of protection,
the Regulation accords less favourable treatment to imported
products, inconsistently with Article III:4 of GATT 1994”1041
(Footnote omitted)
The above findings of the Panel clarified the disputed question on the WTO jurisprudence
regarding the intellectual property protection. The rulings invalidate the arguments for the
irrelevance of GATT 1994 in regulating the issue of intellectual property. However, whether
the GATT rules are relevant in regulating the particular issue relating to international
exhaustion and parallel importation is still an open question.
Supposedly, GATT 1994 might be relevant in regulating this issue in certain aspects, the
disputable question concerning international exhaustion and parallel importation is the
applicability of GATT rules rather than the legality of this principle under GATT. To this end,
it is arguable that the constraints of WTO law regarding the application of international
exhaustion are located in the requirements of Articles 3 and 4 of the TRIPS, and likely hidden
somewhere in the GATT regulation.
5. Implications for the case of Vietnam
Supposed that the issue of exhaustion might be subject to the WTO dispute settlement
procedures, the question is that whether the application of international exhaustion of rights is
quite “safe” under GATT 1994. Or in which way the rules of GATT 1994 might constitute an
“outside” constraint with respect to national legislation in applying international exhaustion of
rights? Reviewing the practice of Vietnam in applying international exhaustion in the light of
the above rulings of the Panel may induce some suggestion in this aspect.
A general implication may be derived from the rulings of the Panel mentioned above. That is,
in case that a national regulation imposed some discriminatory requirement relating to
imported products, even for the purpose of intellectual property protection, it would likely run
risk under Article III: 4 of GATT 1994. Particularly, when the requirement constituted a less
favourable treatment or a discrimination against imported products, it might be subject to the
challenge from that article. This implication to certain extent might be meaningful for
Vietnam in seeking the safe way to adopt and implement the principle of international
exhaustion of rights.
The fact is that Decree 63 issued in the year of 1996 permits the persons who “use” the
patented products, which have been produced and marketed by the patent right holders or
“[T]he Panel concludes that, with respect to the equivalence and reciprocity
conditions, as applicable to the availability of GI protection, the Regulation
accords treatment to the nationals of other Members less favourable than that
it accords to the European Communities' own nationals, inconsistently with
Article 3.1 of the TRIPS Agreement.”
See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at
7.249.
1041
Id. at 7.272.
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with their authorization, to be free from the liability of infringement. 1042 After that, the
government issued a supplemental regulation in the year of 2001. 1043 The supplemental
regulation stipulates that the patented product having been produced and marketed in foreign
markets be also subject to the above exception.1044 Despite the lack of legal ground in the
statutory language of the Civil Code,1045 by this regulation the principle of international
exhaustion of patent rights is generally adopted in Vietnam.
Subsequently, some governmental authorities issued the administrative instructions to
implement the supplemental regulation.1046 Accordingly, these instructions required the
importers and the domestic distributors to submit the certificate to prove that the imported
products were produced and marketed in foreign markets by the relevant right holders or their
licensees. If the certificate is not furnished timely, the imported products will be detained for
the verification of the non-infringement situation of those products. In case that the importers
or the distributors did not supply the relevant documents to prove the non-infringement
situation within a defined time limit, the permission of importation or of distribution of the
imported products will be suspended.1047 This requirement is applied to certain kinds of
imported products, which are determined by the enforcement authorities. 1048 In practice, the
enforcement authorities, including customs and economic polices, conducted massively the
investigation and the detainment of imported products at the borders and in the domestic
market.1049 The products subject to the investigation included motorbikes, accessories of
motorbikes, electronic products, electronic accessories and some other kinds of industrial
products.1050 Responding to the request of the relevant domestic industries or other
government authorities, the enforcement might change their focus of investigation on
different kinds of products.1051
In fact, seeking the certification of the original source of goods is not easy work for the
importers and the domestic distributors. That requirement becomes more difficult with respect
to small importing and distributing businesses. In almost cases they could not furnish timely
the appropriate certificate upon the request of the enforcement authorities. 1052 Consequently,
1042
See Decree 63, supra note 728, art. 52.
See Decree 06, supra note 728, art. 1.23.
1044
Id.
1045
There is no provision on international exhaustion of rights in the Civil Code of 1995. See Civil Code of 1995,
supra note 749.
1046
See e.g., Official Response Letter No. 1080/PC-QL of the National Office of Intellectual Property, supra note
804; Official Response Letter No. 668/PC-QL of the National Office of Intellectual Property supra note 812;
Official Response Letter No. 1832/PC-QL of the National Office of Intellectual Property supra note 815.
1047
Id.
1048
See Official Notice of the General Customs No. 5799/TCHQ-GSQL, supra note 810.
1049
See Official Notice of the Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the
General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the Police of Hanoi City No. 312
supra note 810.
1050
Id.
1051
See Official Notice of the Police of Hanoi City No. 312 supra note 810; Official Notice of the Market
Inspection of Hanoi City No.30, supra note 810; Official Notice of the General Customs No. 5799/TCHQ-GSQL
supra note 810; Official Notice of the Police of Hanoi City No. 312 supra note 810.
1052
See Official Notice of the Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the
General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the Police of Hanoi City No. 312
supra note 810.
1043
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the importation and distribution of the related imported products are suspended to await the
verification.1053 The verification of the non-infringement status of the imported products often
takes much time for the involvement of many competent authorities and complicated
procedures.1054 As a result, the above requirement, in terms of intellectual property protection,
was likely to constitute an effective barrier to the imported products in certain areas.
Supposedly, Vietnam were a WTO Member and the application of the above regulations
created the frustration of importation with respect to certain products, as far as Vietnam
involved in a WTO litigation under the WTO dispute settlement procedures. Should such
regulations be challenged under Articles 3 and 4 of the TRIPS? Or should they amount to a de
jure or a de facto discrimination regarding origin of products within the meaning of Article
III:4 of GATT 1994? and if it were the case, would they be justifiable under Article XX(d) of
GATT 1994, as a measure necessary to secure compliance with the national law on the
intellectual property protection? It is also noted that under Article XXIII of GATT 1994
allows a WTO Member to take a WTO litigation where they consider that any benefit
accruing to it directly or indirectly under GATT 1994 is being “nullified or impaired” as the
result of the application by another Member of any measure, “whether or not it conflicts with
the provisions of this Agreement”, or even “the existence of any other situation”1055.
It is arguable that the above regulations imposed the requirements concerning certification of
place of production and of place of the first distribution with respect to imported products,
directly relating to the application of international exhaustion of rights. Such regulations did
not specify any discriminatory requirement in terms of the nationality of the right holders for
the purpose of intellectual property protection. In this regards, it seems difficult to challenge
such regulations under the national treatment and MFN requirements of Articles 3 and 4 of
the TRIPS.
The remained questions relates to the applicability of GATT 1994 with respect to the
application of national legislation on international exhaustion of rights. Certainly, there would
be no appropriate answer for these questions relying on the basis of the present WTO
jurisprudence. In the light of the mentioned-above rulings of the Panel, one suggestion may be
confident of is that, the potential challenges from Article III: 4 of GATT 1994 to a national
legislation in its practice of applying the principle of international exhaustion of rights would
not be precluded.
IV. National practices dealing with exhaustion of patent rights
1. The United States
1053
See Official Notice of the General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the
Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the Police of Hanoi City No. 312,
supra note 810.
1054
See Decree 12, supra note 728, art. 14. See also Official Notice of the Market Inspection of Hanoi City
No.30, supra note 810; Official Notice of the General Customs No. 5799/TCHQ-GSQL supra note 810; Official
Notice of the Police of Hanoi City No. 312, supra note 810.
1055
See GATT 1994, supra note 10, arts. XXIII. 1(b), (c).
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It was argued that the United States historically adopted the principle national exhaustion, and
then followed a doctrine of “modified” international exhaustion of rights in the filed of
patents.1056 However, the recent judgment of the Court of Appeals for the Federal Circuit
(“CAFC”) made in the late 2001 over the case of Jazz Photo v. ITC1057 appears to overrule the
earlier precedent on this matter. The current rule affirmed that the principle of national
exhaustion of patent rights is applied in the United States.
1.1. The U.S. Supreme Court’s decision in Boesh v. Graff in 18901058
In Boesh v. Graff, the inventor of lamp burner held parallel patents in Germany and the
United States. The U.S. patentee, Graff, held a parallel patent in Germany. 1059 Under German
law, there was a “prior use” exception that allowed a third party to lawfully manufacture and
sell a patented product in Germany. 1060 The lamp burners that were sold in Germany and sent
to the United States were made and sold by a party other than the patent holder under the prior
use exception.1061 The U.S. patent holder had not placed the goods on the market in Germany,
and had not exhausted its U.S. patent rights with respect to those goods. 1062 The Supreme
Court held that Boesch infringed the U.S. patent by importing the burners into the United
States. The Supreme Court appears to adopt the principle of national or territorial exhaustion
as to patent rights:
“The right which Hecht had to make and sell the burners in
Germany was allowed him under the laws of that country, and
purchasers from him could not be thereby authorized to sell the
articles in the United States in defiance of the rights of patentees
under a United States patent.”1063
1.2. The decision of the Court of Appeals for the Second Circuit in
Curtiss Aeroplane v. United Aircraft in 1920
In Curtiss Aeroplane v. United Aircraft,1064 a holder of U.S. patents on aircraft components
had licensed the British government to produce aircraft in Canada under its patents without
restriction (for use in the First World War). 1065 After the war, the British government sold
some of the aircraft it had produced to a third party that imported them into the United States
1056
See Margreth Barrett, supra note 919.
See Jazz Photo Corp. v. Int’l Trade Comm’n, 264 F.3d 1094, 1105 (Fed. Cir. 2001), available on
http://www.Lexis.com, at Jazz Photo Corp. v. Int'l Trade Comm'n, 264 F.3d 1094, 1105, 59 USPQ2d 1907, 1914
(Fed. Cir. 2001).
1058
See Boesch v. Graff, 133 U. S. 697, available at http://www. Lexis.com, at Boesch v. Graff, 133 U.S. 697,
701-703, 33 L. Ed. 787, 10 S. Ct. 378 (1890).
1059
Id.
1060
Id.
1061
Id.
1062
Id.
1063
See Boesch v. Graff, 133 U. S. 697, available on http://www. Lexis.com, at Boesch v. Graff, 133 U.S. 697,
701-703, 33 L. Ed. 787, 10 S. Ct. 378 (1890).
1064
See Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., 266 F.71 (2d Cir. 1920),
available on http://Lexis.com, at Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., 266 F.
71, 77-79 (2d Cir. 1920).
1065
Id.
1057
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for resale.1066 The Court of Appeals for the Second Circuit held that the U.S. patent holder, in
consenting to the use of its patent for the manufacture of airplanes in Canada, had exhausted
its right to control the importation of the resulting aircraft into the United States. 1067 The court
seems to apply the principle international exhaustion of patent rights in its judgment:
“If a patentee or his assigned sells a patented article, that article
is freed from the monopoly of any patents which the vendor may
possess. If the thing sold contains inventions of several United
States patents owned by the vendor, the article is freed from each
and all of them; and if the vendor has divided his monopoly into
different territorial monopolies, his sale frees the article from
them all. If the vendor's patent monopoly consists of foreign and
domestic patents, the sale frees the article from the monopoly of
both his foreign and his domestic patents, and where there is no
restriction in the contract of sale the purchaser acquired the
complete title and full right to use and sell the article in any and
every country.”1068
1.3. Decision of the Court of Appeals for the Federal Circuit in
Jazz Photo Fuji v. ITC in 2001
In Jazz Photo Fuji v. ITC, Fuji Photo initiated an appeal by to the CAFC against a decision
made by the International Trade Commission in an action pursuant to Section 337 of the
Tariff Act of 1930.1069 Fuji sought to prevent importation of used disposal cameras in which
third parties had replaced film. 1070 Some of those disposal cameras were first sold in the
United States and exported for film replacement, and some were first sold abroad. 1071 Fuji
holds a number of patents on the disposable cameras in the United States and other
countries.1072
The CAFC held that Fuji exhausted its patent rights concerning the disposable cameras when
they were first sold, and it could not prevent third parties from refurbishing and reselling
them. The CAFC further found that exhaustion of the patent holder’s rights only took place
regarding products that had been first sold in the United States.1073 The CAFC expressed its
intention to apply the doctrine of national exhaustion of patent rights:
“Fuji states that some of the imported LFFP cameras originates
and were sold only overseas, but are included in the refurbished
importations by some of the respondents. The record supports
1066
Id.
Id.
1068
See Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., supra note 1064.
1069
See Jazz Photo Corp. v. Int’l Trade Comm’n, supra note 1057.
1070
Id.
1071
Id.
1072
Id.
1073
See Jazz Photo Corp. v. Int’l Trade Comm’n, supra note 1057.
1067
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this statement, which does not appear to be disputed. United
States patent rights are not exhausted by products of foreign
provenance. To invoke the protection of the first sale doctrine,
the authorized first sale must have occurred under the United
States patent. See Boesch v. Graff, 133 U.S. 697, 701-703, 33 L.
Ed. 787, 10 S. Ct. 378 (1890) (a lawful foreign purchase does not
obviate the need for license from the United States patentee
before importation into and sale in the United States). Our
decision applies only to LFFPs for which the United States
patent right has been exhausted by first sale in the United States.
Imported LFFPs of solely foreign provenance are not immunized
from infringement of United States patents by the nature of their
refurbishment.”1074
The CAFC held that Fuji could not prevent importation of cameras that had first been sold in
the United States, exported for repair, and then re-imported.1075 However, because U. S. patent
rights as to cameras first sold outside the United States were not exhausted, importation of
cameras first sold and repaired outside the United States could be blocked. The CAFC held in
the conclusion of its judgment:
“The judgment of patent infringement is reversed with respect to
LFFPs for which the patent right was exhausted by first sale in
the United States, and that were permissibly repaired. (…)
LFFPs whose prior sale was not in the United States, or LFFPs
remanufactured by procedures more extensive than those we
hold to constitute repair, or whose remanufacturing procedures
were withheld or insufficiently disclosed to the Commission,
remain subject to the Commission's orders. For these products
the Commission's orders are affirmed.”1076
Clearly, in this case the CAFC reconfirmed the adoption of the principle of national
exhaustion of patent rights. This case invited much criticism for the approach running against
the earlier tendency that supported the approach of “modified” international exhaustion of
patent rights in the practice of the U. S. courts.1077
2. Exhaustion of patent rights in the EU
In Centrafarm v. Sterling Drug1078 the European Court of Justice (“ECJ”) first held that
national patent rights were exhausted with respect to products marketed in another EC
member state by the patentee or with its consent.1079 The ECJ found that in marketing the
1074
Id.
Id.
1076
Id.
1077
See Daniel Erlikhman, ‘Jazz Photo and the Doctrine of Patent Exhaustion: Implications to TRIPs and
International Harmonization of Patent Protection’, Hastings Communications and Entertainment Law Journal
(Vol. 25, 2003), available on http://www.Lexis.com.
1078
See Centrafram BV et Adriann de Pejper v. Sterling Drug Inc., supra note 926.
1079
Id.
1075
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patented products within the European Union (“EU”) first through its British subsidiary,
Sterling Drug exercised the right, which was the specific subject matter of patent protection,
and thereby exhausted its patent rights.1080 The measure that Dutch subsidiary invoked to
block the parallel imports was thus in derogation of the free movement of goods within the
EU market.1081
The decision of the ECJ in Pharmon v. Hoechst1082 reconfirmed that the first marketing of the
patented product exhausted the related patent right within the EU market. 1083 In this case, the
ECJ added the rule that sales under a compulsory license do not exhaust patent rights, because
the patentee is not freely consenting to the exercise of his rights with respect to the related
patented products.1084
Patent rights throughout the EU are exhausted by a first intra-EU sale despite the legal
preclusion of patent protection for the relevant marketed products. This principle was adopted
in the decision of ECJ in Merck v. Stephar.1085 The ECJ found that the patentee exhausted its
right to prevent importation of the goods in the case that the patent holder sold the
pharmaceuticals in a EC member state market where no patent protection was available.1086
Generally, the ECJ adopted the approach of regional exhaustion, namely, the patented
products having been first marked by the patentee or with his consent in an EC member state
market, are freely imported into the markets of other EC member states. There is no
indication that ECJ will accept the approach of international exhaustion of patent rights.1087
3. Switzerland
The Swiss Federal Supreme Court recently decided a case in which the court referred
specially to the way of understanding and applying the issue exhaustion of patent rights under
Article 6 of the TRIPS.1088 The court addressed particularly the question whether Article 6 of
1080
Id.
Id.
1082
See Pharmon BV v. Hoechst AG, supra note 926.
1083
Id.
1084
Id.
1085
See Merck & Co. v. Stephar BV, supra note 924.
1086
Id.
1087
See Domenico Sindico, ‘On Parallel Importation, TRIPs and European Court of Justice Decisions’, The
Journal of World Intellectual Property (Vol. 5, 2002), pp. 505-516; Graeme Fearon, ‘Parallel Imports – Are we
Any Closer to a Definite Rule of Law? The Possible Impact of Recent Legal Developments on European Law
and Trade’, The Journal of World Intellectual Property (Vol. 1, 1998), pp. 495-505; Maarten Meulenbelt,
‘Parallel Imports of Medicinal Products A New Balance?’, The Journal of World Intellectual Property, Property
(Vol. 1, 1998), p. 537; Macro M. Slotboom, supra note 1005, p. 439; Paul Demaret and Inge Govaere, ‘Parallel
Imports, Free Movement and Competition Rules, The European Experience and Perspective’, in Intellectual
Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier
and Petros C. Mavroidis) (The University of Minchigan Press, 2003), pp. 144-145.
1088
The decision of the court in the case of Kodak v. Jumbo-Markt, 4c.24/1999/rnd (7 December 1999), quoted
by Pedro Roff in Resource Book on TRIPS and Development, (Cambridge University Press, 2005), p. 112, also
available on http://www.iprsonline.org/unctadictsd/ResourceBookIndex.htm. The case was decided earlier by the
Federal Supreme Court which also adopted the approach of national exhaustion of patent rights. However, the
reasoning of the court is that the EC member countries have the obligation of reciprocity with respect to the
regional exhaustion of patent rights, whereas the countries such as Switzerland cannot expect to benefit of
1081
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the TRIPS allows each WTO Member to adopt its own exhaustion regime in the field of
patents.1089 The court considered a number of prevailing theories of the European scholars on
exhaustion of rights and found that exhaustion and parallel importation are reserved to
national law of each WTO Member pursuant to Article 6 of the TRIPS. 1090 Based on that
argument, the Swiss Federal Supreme Court decided in favor of the national exhaustion of
patent rights based on the interpretation of the national patent law.1091
4. Japan
international exhaustion in other countries when they implement international exhaustion in their own
jurisdiction. See Ingo Meitinger, ‘Parallel Imports into Swizerland – A Spot of Global Free Trade amidst
Fortress Europe’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade
Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Minchigan Press, 2003), p. 220.
1089
See Pedro Roff, Resource Book on TRIPS and Development, (Cambridge University Press, 2005), p. 112,
also available on http://www.iprsonline.org/unctadictsd/ResourceBookIndex.htm.
1090
The following reasoning of the Federal Supreme Court stated its argument on the freedom of national law in
deciding exhaustion of patent rights under Article 6 of the TRIPS:
“3 b) Pursuant to Article 28 of the TRIPs Agreement, the patent holder has
inter alia right to prevent third parties selling patented objects and importing
such for this purpose. This provision with its protection of imports merely lays
down that the import of products that infringe the patent must be prohibited,
without itself laying down a prohibition on parallel imports. This follows not
only from Article 6 of the TRIPs Agreement but is also clarified in a reference
to Article 6 in a footnote to Article 28 of the Agreement (GATT Mesaage 1,
1994 Federal Gazette IV, p. 301/2; cf. also Bollinger, Die Regelung der
Paralellimporte im Recht der WTO, sic! 1998, p. 548; Alesch Staechelin, Das
TRIPs-Abkommen, 2nd ed., Bern 1999, p. 57 et seq. and 148/9; Cottier and
Stucki, loc. Cit., p. 52; Cohen Jehoram, International Exhaustion versus
Importation Right: a Murky Area of Intellectual Property Law, 1996 GRUR
Int., p. 284). The claim expressed occasionally in the literature that the
substantive protection of importation practically requires national exhaustion
through the TRIPs Agreement is not, on the other hand, convincing (argued by
Straus, Bedeutung des TRIPs fur das Patentrecht, 1996 GRUR Int., p. 193/4);
for the attempt to derive the exclusive application of national exhaustion from
this agreement ignores and misinterprets the objectives of the agreement to
establish the World Trade Organisation dated April 15, 1994, on element of
which is the TRIPs Agreement, namely to eliminate all kinds of trade
restrictions. One the contrary, TRIPs is intended to balance two sets of
interests, namely the demand for the freedom of trade on the one hand and an
increased protection of intellectual property rights on the other hand
(Bronckers, The Exhaustion of Patent Rights under WTO Law, Journal of
World Trade 1998, p. 144). Exhaustion, and hence the question of whether in
particular parallel imports can be prohibited by the party entitled to the patent,
is not, however, regulated by Article 28 of TRIPs, but expressly reserved to
national law pursuant to Article 6 of the Agreement (cf. also Kunz-Hallstein,
Zur Frage der Parallelimporte im internationalen gewerblichen Rechtsschutz,
1998 GRUR, p. 269/70).”
See the decision of the Federal Supreme Court in the case of Kodak v. Jumbo-Markt, 4c.24/1999/rnd (7
December 1999), quoted by Pedro Roff in Resource Book on TRIPS and Development, (Cambridge University
Press, 2005), p. 112, also available on supra note 1089.
1091
See Pedro Roff, supra note1089. The approach of national exhaustion of patent rights is also strongly
affirmed by the Germany courts. See Johann Pitz, Exhaustion of Industrial Rights from the German Perspective’,
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Japan historically adopted the principle of national or territorial exhaustion of patent rights. 1092
As discussed earlier, the recent decision of the Tokyo High Court changed this approach by
allowing international exhaustion of patent rights and parallel importation of patented
products.1093 The Supreme Court did not reverse the decision of the Tokyo High Court but
changed the reasoning of the court decision.1094 Accordingly, the patentee can prohibit parallel
importation of patented products under some conditions. Namely, when the patentee (or his
licensee), markets the patented products abroad, he needs to express his intension to prevent
parallel importation of such products by an indication on the related products and an
agreement with the buyers.1095 Where he does not express clearly his intension to prevent the
parallel importation with respect to the related products, such products may become the object
of parallel importation, for the implied license he granted to the buyers. 1096 The application of
the implied license theory is relied on the justification in favor of international trade
development.1097
There are different views on the decision of the Supreme Court. Some viewed that the
Supreme Court decision accepted international exhaustion of patent rights.1098 Some
commented that the Court adopted the “modified” or “conditional” international exhaustion
approach of patent rights.1099 The reason is that, by the implied license theory, the patent rights
of the patentee will be exhausted automatically if he does not express clearly his intension to
reserve his rights to prevent the parallel importation when he markets abroad his patented
products.1100
By contrast, the other argued that the decision of the Supreme Court might be viewed as a
decision to deny international exhaustion of patented products. 1101 The reason is that, the
possible exclusion of patent rights of the patentee with respect to the patented products having
marketed abroad, by him or his licensee, is not an exclusion coming from a provision of the
law.1102 The possibility of exclusion is determined case by case, depending on the will of the
The Journal of World Intellectual Property (Vol. 4, 2001), p. 235.
1092
See Teruo Doi, ‘The Territoriality Principle of Patent Protection and Conflict Laws: A review of the
Japanese Court Decisions’,
Fordham International Law Journal (Vol. 26, 2003), available on
http://www.Lexis.com (discussing the national exhaustion applied in the case Brunswick Corp. v. Orion Kogyo
KK, decided by the Osaka District Court in 1969). See also Nobuhiro Nakayama, Industrial Property Law,
(Vol. 1 Patent Law 2nd revised) (Koubundou Publishers, 2000), p. 366, available at
http://www.iip.or.jp/e/index.html.
1093
See Tokyo High Court Decision, supra note 957. See also Nobuhiro Nakayama, supra note 1092; Teruo
Doi, supra note 1092.
1094
See the Supreme Court Decision, supra note 947. See also Nobuhiro Nakayama, supra note 1092. Teruo
Doi, supra note 1092.
1095
Id.
1096
See the Supreme Court Decision, supra note 947. See also Nobuhiro Nakayama, supra note 1092; Teruo Doi,
supra note 1092.
1097
Id.
1098
See Teruo Doi, supra note 1092.
1099
See Daniel Erlikhman, supra note 1077. See also Tait R. Swanson, supra note 919.
1100
Similar to the argument for the earlier adopted “modified” international exhaustion in some court decisions in
the United States. See Daniel Erlikhman, supra note 1077. See also Tait R. Swanson, supra note 919.
;
Margreth Barrett, supra note 919.
1101
See Nobuhiro Nakayama, supra note 1092, at 370.
1102
Id. at 370-373.
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patentee and his express intension, by the indication on the marketed products and by
agreement with the buyers.1103 It therefore might be argued that the exhaustion of patent rights
with respect to the abroad marketed products is not a legal principle of the patent law. 1104
Otherwise, it might be viewed that the Supreme Court accepts the basis territorial nature of
the patent protection but limits the consequences of this nature for the free movement of
goods in the international trade.1105
In this respect, the disputable question may be that, among exclusive rights and the exclusion
of exclusive rights as to the patented products having been marketed abroad, which would be
termed as the legal principle and which would be considered as an exception to the other. 1106
To this point, it may be perceived that the decision of the Supreme Court did not affirm
international exhaustion of patent rights to be adopted in Japan in a certain legal ground.1107
However, the justification in favor of international trade in deciding the matter of parallel
importation of patent rights is viewed as a significant point of the court decision. 1108 This point
of the court reasoning supports the mandate of the WTO on liberalization of trade.
1103
Id.
Id.
1105
See Frederick Abbott, The International Intellectual Property System: Commentary and Materials (Springer,
1999), p. 676.
1106
Nobuhiro Nakayama, ‘Tokkyo Seihin No Heikou Yunyuu Mondai Ni Okeru Kihonteki Shiza (Basic
Viewpoint concerning the Issue of Parallel Imports of Patented Products)’, Jurist, (No. 1094), p. 68.
1107
See Mittsuo Matsushita, ‘Issues Regarding Parallel Importation of Trademarked and patented Products and
Competition Policy in Japan’, in Intellectual Property: Trade, Competition, and Sustainable Development
(World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press,
2003), p. 193.
1108
See Nobuhiro Nakayama, supra note 1092, at 371.
1104
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5. Developing countries
The national practices of the developing countries in dealing with the issue of exhaustion of
patent rights are in diversity. Some of countries are in favor of international exhaustion of
patent rights in the language of national laws or administrative regulations.1109 Others do not
express clearly their option in the statutory language. 1110 Some of them adopted the approach
of national exhaustion.1111 The Legislative Assistance provided by the WIPO in relation to
Implementation of the TRIPS reported that among 38 countries reported, 20 countries allows,
clearly or unclearly, the adoption of international exhaustion of rights. The table below will
show the recent situation of the developing countries in dealing with the issue of exhaustion:
1109
E.g., Patent Law of Thailand provides a general clause “any act in respect of products acquired in good
faith”. See Patent Law of Thailand of 1992, art. 36.2(3), in Intellectual Property Laws (compact disc) (Japan
Patent Office, 2002). This clause may be interpreted to adopt international exhaustion of patent rights. It is
reported that Thailand government recently issued a regulation that appears to be in favor of international
exhaustion of patent rights. See Tait R. Swanson, supra note 919.
1110
E.g., Patent Law of China might be interpreted in favor of international exhaustion although there is no clear
language exiting in the patent law.
“Article 63. Acts not deemed to be Infringement of Patent Right
None of the following shall be deemed an infringement of the patent right:
(1) Where, after the sale of a patented product or a product directly obtained
by a patented process that was made, imported by the patentee or with the
authorization of the patentee, any other person uses, offers for sale or sells that
product”
See Patent Law of China of 2000, art. 63.1, in Intellectual Property Laws (compact disc) (Japan Patent Office,
2002).
1111
E.g., India does not adopt the principle of international exhaustion as to patents. There is no clause allowing
parallel importation of patented products in the Patent Act of India. See Patent Act of India of 1995, in
Intellectual Property Laws (compact disc) (Japan Patent Office, 2002). It is argued that there is no prevailing
reasoning for adoption of international exhaustion of patent rights in India. See Jayashree Watal, ‘Parallel
Imports and IPR-Based Dominant Positions: Where Do India’s Interests Lie’, in Intellectual Property: Trade,
Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C.
Mavroidis) (The University of Michigan Press, 2003), p. 222. It is reasoned that Australian patent exhaustion
depends on the circumstances surrounding the first foreign sale. If an Australian patent owner makes a foreign
sale, the buyer is given an implied license to sell the patented invention in Australia. If someone other than the
patentee makes the foreign sale, then no implied license is transferred with the sale. The implied license depends
on the authority of the foreign seller to also sell in Australia, thus patent exhaustion really depends on the
circumstances of the case. Generally, domestic patent exhaustion appears to apply, unless the Australian patent
owner makes the first sale without any express restrictions. See Tait R. Swanson, supra note 919.
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The list of the developing countries adopting national/international exhaustion of rights1112
Country
National
Antigua & Barbuda
Argentina
Barbados
Belize
Bolivia
Botswana
Brazil
Chile
China
Colombia
Congo
Costa Rica
Dominican Republic
Egypt
El Salvador
Gabon
Ghana
Guatemala
Honduras
India
Indonesia
Jamaica
Kenya
Malaysia
Mauritius
Mexico
Morocco
Namibia
Nicaragua
Nigeria
Paraguay
Philippines
Republic of Korea
South Africa
Thailand
Tunisia
Trinidad & Tobago
Exhaustion of rights
International
X(1)
X
X
X
X
X
X
N/A
N/A
X
X(2)
X
X
X
N/S
N/A
X(3)
N/S
X
X(2)
X(2)
X
X
X
N/S
N/A
N/S
X(1)
X
X
X
X
X(1)
N/A
N/S
X(4)
N/A
X
X
N/S
X
X(4)
1112
This date is quoted from the date list prepared in 2001 by The Legislative Assistance provided by the WIPO
in relation to Implementation of the TRIPS, available at http://wipo.int/cfdiplaw/en/trips/index.htm.
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Venezuela
Vietnam
N/A
X
N/A
* notes:
N/A Information not available on the matter.
N/S The law provides for exhaustion of rights, but does not specify whether it is national or
international.
(1) Draft legislation notified to the WTO.
(2) Regional exhaustion of rights.
(3) Law from 1989 and notified to the WTO.
(4) This law was enacted in the year 2000, but has been not yet notified to the WTO.
In summary, national practices of developed and developing are divergent in dealing with the
issue of exhaustion of patent rights. In some developed countries, the courts in certain
circumstances are in favor of international exhaustion approach. The tendency of the U.S.
court practice shows that the United States is not going to adopt the international exhaustion
principle of patent rights. The judicial practice of Japan relating to exhaustion of patent rights
does not show clearly that the principle of international exhaustion of patent rights is accepted
in Japan. The EC member countries appear to endorse the national exhaustion, except for the
case where the reciprocity application of regional exhaustion among the EC member countries
is applied. The ECJ adopted the regional exhaustion approach in dealing with the cases
relating patents, which allows the free movement of patented products within the EU market.
While some developing countries tend to adopt international exhaustion of patent rights, a
number of them are still following the national exhaustion approach.
This situation reflects the fact that, even international exhaustion of patent rights may be
regarded being appropriate to the mandate of liberalization of trade under the WTO, each
country follows specific preferences and interests to decide its option. It might be said that, in
the legal aspect, the likely challenge to national legislation in the application of international
exhaustion of patent rights is not totally excluded from WTO jurisprudence. The actual
challenge seems to be difficult to execute in the current situation of national practices
regarding this issue. In this respect, the legal justification under WTO jurisprudence appears
realizable, in despite of some seldom challenge having been not precluded in the practice of
applying international exhaustion of patent rights.
The next relevant question is how this policy may be adopted in the circumstances of
Vietnam. The recent decision of the Japanese Supreme Court referred to a significant
justification in favor of the development of international trade in consideration of the interest
of the patentee. From different aspects, the Supreme Court decision has a certain influence on
the national practice of the other WTO Members. 1113 Though inviting much discussion on the
uncertainty, 1114 the decision of the Japanese Supreme Court might be regarded as a specific
1113
See Tait R. Swanson, supra note 919. See also Darren E. Donnelly, supra note 922; Ako Shimada Williams,
supra note 920.
1114
See Mitsuo Matsushita, ‘Issues Regarding Parallel Importation of Trademarked and Patented Products and
Competition Policy in Japan’, in Intellectual Property: Trade, Competition, and Sustainable Development,
World Trade Forum, (Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press,
2003), p. 193; Jinzo Fujino, Parallel Imports of Patented Goods, The Supreme Court Talks About Its Legality,
available at http://www.okuyama.com/c3v01ok.htm.
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national court judgment expressed the view supporting the international trade development in
dealing with issue of exhaustion of patent rights. 1115 To this point, it might be worth
examining the justification developed by the Japanese Supreme Court for seeking some
implications for the case of Vietnam.
V. Reasoning for parallel importation of patented products
1. Clarifying legal reasoning in the new law draft of Vietnam
An important matter that should be taken into account in this aspect is that the Japanese courts
are vested the discretion of law interpretation to an extent much larger than that of the courts
Vietnam. As discussed in the previous chapter, the courts of Vietnam have very limited
jurisdiction in the interpretation of the statutory provisions. The courts cannot invoke any
legal grounds other than those that are specifically mentioned in the relevant statutes. This
rule is also applied to the People’s Supreme Court. In judging a case, this court may not
interpret the law in a way of creating any new legal theories or legal grounds that are not
clearly stipulated in the language of the statutes. The authority for clarifying the general
provisions or principles provided in the law language is otherwise vested to the government.
When the government does not issue in time a detailed regulation of the implementing the law
on a specific issue, the courts become confused in the handling of the related case due to the
lack of legal grounds and reasoning available in the law.
This problem would be worse but for the fact that the judges of Vietnam are regarded as
having less experience in dealing with matters of patent protection. Unless concrete
justifications are made clear in the relevant legal documents, the courts cannot be empowered
with sufficient reasoning to find properly the merits of case. In such a situation, in order to
enable the courts to introduce an appropriate regime of parallel importation with respect to
patented products in Vietnam, it is indispensable to clarify all particular justifications
underpinning this regime, together with the reservations or exceptions in its implementation.
The clarification needs to be first available in the language of the new law, and when
necessary, in the detailed regulations of the government for implementing the law after its
enactment.
In consideration of the concerns of Vietnam in favor of parallel importation in the particular
circumstances of the country, the next discussion will place the focus on selected aspects in
analyzing the judicial experience of Japan and the other countries, where it is relevant. Those
1115
See e.g., Tait R. Swanson, supra note 919.
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accounts that are assumedly helpful for the current consideration of the legislators and judges
of Vietnam in the application of parallel importation policy may be the interests of the
domestic consumers and patent holders, the development of industry, the security of the
society and the integration into the international trade. The consideration of these accounts
pursuant to the view of Japanese courts will be analyzed below.
2. Reasoning in favor of international trade
2.1. The balance between patent value and the public interest
In finding the rationale for parallel importation of patented products, the courts of Japan first
considered the basic reasoning based on the balance between the interest of the patent holder
and that of the public and the development of industry. It is noted that this balance is
measured by the courts in the absence of the particular provisions of the patent law on this
issue. The attitude of the court in dealing with the particular case, therefore, is very important.
In the relation to the BBS case, the Tokyo High Court expressed its view on the balance
between the patent protection and the public interest.
In its findings, the court affirmed that a patent right is exhausted after the first sale of the
patented product that the patent right is adherent to. The reasoning for that is the balancing of
the patent value with the public interest, including the development of industry. If the patent
right was extended to the patented product after its first sale, the balance would be broken. In
particular, the extension of the patent right in such a case would provide the related patent an
unfair increase of value at the expense of the public interest. 1116 The development of industry
would also be damaged because of the unfair increase in the value of the patent. The court
declined the extension of the patent right to the patented product as long as such a product has
been legitimately marketed. For the purpose of exhaustion, the court required that the
patented product should be put into the market in a legitimate way. It is noted that these
findings of the court stand in a line with the view of the continental law courts and the United
States courts. The Supreme Court mentioned the balancing interest as a principle for
interpreting the concept of exhaustion of patent rights.1117
2.2. Implied license of reselling the marketed products
Although it is reasoned on the basis of the balance of the public interest, the Tokyo High
Court did not specify the legal reasoning in declining the extension of a patent right to the
patented product after its first sale. Moreover, the court did not clarify in which way the
development of industry would be affected by that extension. In this respect, the Supreme
Court made it clearer in its findings.1118 The Supreme Court stated clearly the legal reasoning
1116
The Court considered that extending the scope of patent law beyond the lawful putting into circulation would
make patent right exceeding strong, thereby upsetting the balance of protection public interest accomplished
through industrial development. The stability of trade would also be affected, the free movement of the patented
products impeded and thereby great damage inflicted on economic development. See the Tokyo High Court
Decision, supra at 552.
1117
See the Supreme Court Decision, supra note 947.
1118
The Supreme Court referred to the implied license in the sense that when the patented products are
distributed on the market, the transferee obtains an object from the patentee whose exercise of the right suggests
that the right in further acts of re-sale has been transferred as well. See the Supreme Court Decision, supra note
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to explain why the first sale of patented product exhausts the patent right adherent in it. That
is, the movement of a patent right is accompanied by the sale of the patented product. The
view that the patent right is transferred together with the patented product is generally
recognized by the courts in both the common law and continental law countries. However, the
conception that the seller of a patented product passed all the rights he has over the product to
the buyer when he sold the product is prevailing in the court practice of the continental law
countries. Otherwise, the idea that the buyer received from the seller the implied license of
reselling the purchased patented product is well acknowledged in the practice of the courts in
the United States.1119 Under the implied license, the seller may retain some right over the
product after selling if he wishes so and expresses his intension through an agreement or a
notice provided in advance to the buyer. The implied license is the legal reasoning for the
courts to recognize the right of the seller to prevent the buyer from reselling or importing the
purchased product by a contractual agreement or notice on the product. On this point, the
reasoning of the Supreme Court of Japan goes in the same vein with the reasoning of the
courts in the United States.
2.3. The development of industry and trade-related aspect of patent right
As for the reasoning regarding public interest and the development of industry, the findings of
the Supreme Court made it clearer in some points. 1120 The Supreme Court reasoned that the
extension of the scope of a patent right to the patented product after its first sale would
impede industrial development. The court also indicated the way that the extension scope of a
patent right would impede the public interest is that the free circulation of the patented
product would be circumvented by the control of the patent holder. The extension of the scope
of the patent right in such a case, therefore, would contradict the purpose of the national
patent law. The Supreme Court mentioned the affect on trade in goods as the first reasoning
for the recognition of exhaustion of a patent right after the first sale of the patent product.
This point indicates that the Supreme Court weighted the trade-related aspect of a patent right
for the purpose of exhaustion. In this respect, the similar justification regarding the balance of
interests may be also found in the practice of the courts of the United States. 1121 Nevertheless,
947, at 332.
1119
The concept “implied license” exhaustion is used in relation to the “doctrine of first sale” and in distinction
with “doctrine of exhaustion”. It is argued that under the "doctrine of exhaustion," sale of a patented product
exhausts the patentee's rights with respect to the product even if the parties intended otherwise, while under the
"doctrine of first sale," exhaustion of rights is a default rule that applies when the parties to the sale expressed no
intention to the contrary. The U.S. courts generally adopt the conception of “implied license” exhaustion in the
term of the doctrine of first sale. While the courts in the continental countries acknowledge the doctrine of
exhaustion. See Margreth Barrett, supra note 919; Christopher Heath, ‘Parallel Imports and International Trade,’
International Review of Industrial Property and Copyright Law (Vol. 28, 1997), pp. 625-627 (distinguishing
between continental or "absolute" exhaustion and common-law or "implied license" exhaustion).
1120
The Supreme Court found that if any acts of marketing patented products must be subject to the consent of
the patentee, the free movement of gods would be seriously impeded, the smooth distribution of patented
products would be hampered, and as a result, the interest of the patentee himself would suffer. It seems not
necessary to provide the patentee or the licensee rights beyond the first act of marketing and give unnecessary
double reward in the course of distribution. See the Supreme Court Decision, supra note 947, at 333.
1121
See Margreth Barrett, supra note 919.
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the courts of the United States considered the reasonable reward to the patent holder as the
first reasoning for the exhaustion.1122
2.4. Reasonable reward to the patent holder
As for the reward to the patent holder, the Supreme Court reasoned that the patent holder is
provided with a sufficient opportunity to collect the necessary remuneration by the first sale
of the patented product. In other words, the public has reasonably rewarded the patent holder
for the disclosure of his invention to the public after the patent holder marketed his patented
product.1123 The Supreme Court endorsed the finding of the lower court and added that the
reward to the patent holder is considered to be sufficient when he collected a royalty from
granting a license of the patent instead of selling the patent product.1124 The court found that:
As reasoned by the Supreme Court, the balance between the interest of the patent holder and
that of the public has been achieved after the first sale of a patented product. For that reason,
there is no need to provide another opportunity to the patent holder to get double profits for
the product at the expense of the public. Although the court did explain clearly, it is supposed
that the public interest in this case should first be the interest of the consumers. The court
also supplemented that the royalty that the patent holder receives from granting a patent
license is also regarded the reasonable reward for the public disclosure of his invention. The
first sale of the patented product that was marketed by the patent licensee, therefore, would
also exhaust the patent right of the patent holder embedded in that product.
In consideration of the reasonable reward to the patent holder, the court referred generally to
the first sale of a patent licensee in relevance to the domestic market. There is no mention to
the difference between an exclusive licensing and a non-exclusive licensing, nor different
interests of the patent holder obtained from to the sale of the licensing patented product in the
different cases. In this respect, the reasoning of the court is similar to that of the courts of the
United States in finding the exhaustion of the patent holder’s patent right after the first sale of
the licensee. However, in evaluating the reasonable reward to the patent holder, the courts of
the United States seem to follow a more careful approach in considering the benefit the
patent holder in the case of the patented product being sold under licensing. 1125 The conflict
between the interests of the patent holder and his patent licensees may become greater and
more complicated in the context of international trade, where the movement of the marketed
patented products is sometimes stuck in the overlap of the different patent right holders.
In sum, the Japanese courts raised two important points in the reasoning for the balance of
interests as the rationale for the exhaustion of a patent right, domestically. The first is the
trade promotion of the patented products after its first sale. The second is the reasonable
reward to the patent holder having been obtained in the first sale of the patented products. A
more important question is how this rationale is applied internationally to seek justification
1122
Id.
See the Supreme Court Decision, supra note 947, at 333.
1124
The Supreme Court found that by making the invention available to the public, the patentee would have
opportunity to obtain reward from selling the product or granting licensing fee. See the Supreme Court Decision,
supra note 947, at 333.
1125
Margreth Barrett, supra note 947.
1123
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for the parallel importation of the patented products. This question is discussed in detail
below.
2.5. Reasoning in favor of the development of international trade
The Supreme Court of Japan considered the development of international trade as a
justification for application of implied license theory internationally. 1126 The court said it is
necessary to consider the relationship between the free movement of goods in international
trade and interests of the patentee. The free movement of goods is placed in the priority
position at the expense of the double reward of the patentee. The court reasoned that it cannot
be argued that although selling the products under a parallel patent would give a double
reward.1127 Because the current context of the international trade development, even if
economic transactions have been made abroad, generally the transferee obtains not only the
object as such, but also the rights vested in that object, including the right to undertake the
further transactions with third parties, including the importation and distribution into domestic
market of Japan.1128
2.6. Notice of restriction or reservation
In the application of the implied license theory in the international context, the Supreme Court
made some reservations. The Supreme Court found that if the patented were marketed abroad,
then it could be naturally expected that such goods may be imported into Japan if the patentee
puts such goods into circulation broad without any reservations at the time of transfer. 1129 The
transferee or any subsequent purchaser is understood that they have purchased that goods
without any restriction and might import or distribute in Japan. 1130 Otherwise, if the patentee
reserves his rights at the time of transfer for the distribution of such goods in Japan, he should
agree with the transferee that the sale or use of the products in Japan should not be permitted.
In addition, if the patentee displays the clear indication of restriction on the products the
subsequent purchasers should be subject to such restriction.1131
By such findings, the Supreme Court decision allows the patentee to exercise his patent right
to prohibit parallel importation in certain conditions. The restriction is effective when there
exists an explicit agreement between the buyer and the seller and a clear indication on the
related products, which excludes the Japanese market from parallel importation. The
restriction of international exhaustion in the same vein may be found in the reasoning of a
local court in the United States, though the Supreme Court or the Appellate Courts of the
United States has not ever confirmed that reasoning.1132
1126
See the Supreme Court Decision, supra note 947, at 334.
Id.
1128
Id.
1129
Id.
1130
See the Supreme Court Decision, supra note 947, at 334.
1131
Id.
1132
See Darren E. Donnelly, supra note 922. See also Tait R. Swanson, supra note 919; Hillary A. Kremen supra
note 920.
See Margreth Barrett, supra note 919. See also Darren E. Donnelly, supra note 922; Hillary A. Kremen, supra
note 920.
1127
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The findings on the reservations given to the patentee on restriction of parallel importation of
patented products triggered a controversy among the scholars. Some criticized the uncertainty
in practicing the decision and the negative effect of the decision on parallel importation of
patented products in the Japanese market. 1133 Nevertheless, the empirical significance of the
court decision on the justification in favor of parallel importation in the current context of
international trade cannot be denied.
2.7. Concerns with technology transfer and quality of parallel importation goods
Although there is no relevant endorsement in the findings of the Supreme Court, the Tokyo
High Court expressed its assessment of the concern that the parallel importation of patented
products would affect the expectation of obtaining patent licenses under foreign patents. The
court examined the practice of parallel importation in Japan and found that there is no
evidence that technological development have been adversely affected by the parallel
importation of patented products.1134 Therefore, there does not exist any practical grounds for
the argument that permitting parallel importation into Japan has weakened the incentive for
Japanese companies to obtain licenses under foreign patents. 1135
The assessment of the Tokyo High Court provides a practical view of national judicial
authority in support of the argument favoring parallel importation under the WTO. As
reported, there is no empirical study that confirmed the allegations regarding the adverse
effects of parallel importation on technology transfer.1136
In regards to the argument of insufficient quality control in the case of parallel importation,
the court stated that the quality control of products is not a matter of patent law. It is rather a
matter of business morality and relates to the good faith of the partners in a business
transaction.1137
Absence of guarantees of service and insufficiency of quality control are the negative aspects
of parallel importation as suggested by some commentators. However, in the view of the
Tokyo High Court, this concern is outside the realm of patent law regulation. It may be
subject to the self-regulation of entrepreneurs, or to some extent, the regulation of the law in
the other fields.
2.8. Scope of regulation
As to the scope of applying the regulation on parallel importation with respect to the patented
products, the Supreme Court clarified that there is no distinction between a product sold by
the patent holder and that sold by an entity subject to the control of the patentee. The patented
1133
See Mittsuo Matsushita, supra note 1107.
See the Tokyo High Court Decision, supra note 957, at 555.
1135
Id.
1136
See Jayashree Watal, ‘Parallel Imports and IPR-Based Dominant Positions: Where Do India’s Interests Lie’,
in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds.
Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 222.
1137
See Tokyo High Court Decision, supra note 957, at 555.
1134
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products marketed abroad in both cases are regarded as the object of parallel importation
under the findings of the court.1138
In short, the findings of the Tokyo High Court and the Supreme Court on the BBS case
revealed the prevailing opinion of the Japanese courts, to different extent, in favor of patented
product parallel importation. Weighing the public interest, the courts supposed that the reward
to the patent holder is reasonably obtained after the first sale of the patented product. The
consideration of reasonable reward in the case of patented product marketed abroad needs to
be taken into account the interest of the traders in the international markets. The implied
license for the resale of the purchased product in the context of the globalization of trade is an
important reasoning for acceptance of parallel importation of patented products. The
justifications of the decision of the Supreme Court relied on the development of international
trade is of significance supporting the mandate of the WTO on liberalization.
VI. Implications for parallel importation in Vietnam
The examination of the issue of international exhaustion of patent rights under the Paris
Convention, the TRIPS, and GATT revealed that its legality could be confident. However, the
likely challenge from WTO jurisprudence, in certain aspects, to the application of this
approach is not precluded yet. The national legislation still takes into account the way of
applying international exhaustion of patent rights in the particular circumstances.
For the purpose of seeking an appropriate answer to the question of how international
exhaustion could be adopted in the circumstances of Vietnam, the above section discussed the
legal reasoning and justifications for the adoption of parallel importation in the recent
judgments of the Japanese courts. The adoption of this policy in the new intellectual property
law of Vietnam, however, should take into consideration the particular situation of Vietnam
and the concerns of the legislators from different aspects, such as patent holders, consumers
and society, and international trade integration. To a certain extent, the analysis of the
findings of the Japanese courts may lead to some suggested justifications for the policy of
parallel importation of patented products in the new intellectual property law of Vietnam. The
following points need to be clarified in the language of the new law.
1. Towards the balance of patent rights and the public interest
1138
The Supreme Court found that in the case that the marketing abroad have been taken by an affiliated
company, a subsidiary or an equivalent to the patentee, the case should be treated as if the patentee himself had
marketed the patented products. See the Supreme Court Decision, supra note 947, at 335. On this point, the
Tokyo High Court found that when the product is sold outside Japan by a subsidiary or an affiliated company
which can be regarded as an entity identical to the patentee, such transactions should be deemed as the sale of the
patented product by the patentee itself. See the Tokyo High Court Decision, supra note 957, at 554.
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The current patent regulations of Vietnam contain no provision for the purpose and principle
of the patent protection, which may be interpreted as the legal basis for balancing patent
protection and the public interest. There is no such provision in the present draft of the new
intellectual property law. This absence would certainly be a difficulty in interpreting the legal
provisions for the purpose of adopting parallel importation of the patented products.
The first necessary provision to be added in the new draft law is the statement on the general
purpose and principle of the national patent law. Accordingly, the ultimate objective of the
patent law should be the benefit of the public, for example, the development of industry or the
promotion of inventive creation. On the balance, the patent holder is granted the exclusive
right in controlling the first sale of the patented product. It is perceived as a reasonable reward
from the public to compensate for the disclosure of the invention to the public and promote
inventive contribution to the development of industry. The purpose of the patent law,
therefore, prevents the patent holder from receiving an extra reward from the subsequent
transaction after the first sale of a patented product.
The control of the patent holder over the subsequent transaction of a patented product
therefore should be considered an excessive exercise of a patent right. The extension of a
patent right provides the patent holder the right to approve every transaction relating to the
patented product. The extension of a patent right, therefore, affects the public interest in the
sense that it interrupts the normal distribution of goods in the market place. For that reason,
the principle of balancing the public interest in patent protection does not allow the extension
of the scope of a patent right to the commercial transactions subsequent to the first sale of a
patented product.
Providing with the judges a clear reasoning in handling the intellectual property cases is
considered a significant duty of the new law. The provisions on the purpose and the principle
of patent protection therefore should be made available and transparent in the language of the
new law and its implementing regulations.
2. Implied license and the first sale of a patented product
It is suggested that there be a clarification of the reasoning for the exhaustion of a patent right
after the first sale of the patented product in the particular provisions of the new law. The
implied license principle may be applied with the assumption that the buyer receives all rights
of the patent holder, which has been implicitly transferred to the buyer by the first sale of the
patented product. The buyer therefore has the right to engage in the transactions relating to the
purchased patented product without interference from the patent holder.
The implied license also contains the meaning that the patent holder cannot retain his patent
right in the control of a patented product after the first sale of that product. However, if the
implied license is applied, it should be optional for the patent holder to make a reservation of
the purpose and the scope of use in respect of the patented product in the deal. The legitimate
expectation of the buyer is therefore protected in the consideration of the lawful negotiation of
the patent holder. In such a case, the particular conditions on an explicit agreement and a clear
indication may be required to make a reservation valid.
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When the implied license is applied with respect to the patented product marketed abroad, it
would be a good opportunity for the patent holder to restrict the parallel imports of patented
products in many cases. Consequently, it might destroy almost all of the effects of
international exhaustion in the end. In the view of the protectionist, that option would provide
young domestic industry an effective measure of self-protection against the flood of the
competitive products flowing from neighboring countries. However, in the view of the public
interest, the protection of the domestic consumers should prevail in the consideration of that
option.
In the situation of Vietnam, if the implied license is chosen, the allowance of a reservation for
international exhaustion made by the patent holder should be done in with very careful
consideration. It is advised that the new law does not necessarily allow the patent holder to
have the possibility of reservation in the language of the law. Instead, the law should
empower the government to appropriately interference to support the patent holder in the case
of necessity. For example, the government may issue a temporary regulation to allow the
patent holder to restrict the parallel importation of patented products in certain areas. It is
noted that, in terms of the exhaustion of patent rights, Article 6 of TRIPS only requires the
national policy on parallel importation to comply with the national treatment and MFN
treatment obligations of TRIPS. The wording of this article, together with the reference to it
in the footnote inserted in Article 28.1 and, to some extent, in the footnote of Article 51.1 of
TRIPS, exempts national legislation on parallel importation of patent products from the
requirement of the anti-discrimination rule under Article 27.1 of TRIPS. Accordingly, the
government may consider the current circumstances of the economy and society to impose a
restriction on the parallel importation of a particular product during a certain period, when
necessary.
3. International trade and the principle of independence of patents
The principle of independence of patents allows the national legislation to be independent in
considering an opportunity for the patent holder to obtain double profits for a patented
product marketed abroad. In other words, this principle does not prevent at any rate the
national patent law from either permitting or restricting the patent holder in the enforcement
of his patent right against the patented product subject to a corresponding patent in the
territory where the first sale took place. However, the argument for the possibility of receiving
double profits may be a justification for the assumption regarding the independent rewards
should be obtainable from the independent patents for the same invention.
In dealing with such an argument, the rationale for international trade development should be
weighed in the consideration of the balance between the interests of the public and that of the
patent holder. In addition, the legitimate expectation of the buyer and the effect of the implied
license in response to the patented product marketed abroad needs to be admitted in the
context of international trade. In this event, the context of international trade may be used as a
reason to overcome any constraints to patented product parallel importation that may be
argued on the basis of the principle of the independence of patents.
It is suggested that the new law may have some words to inscribe the development of
international trade as a justification for the adoption of parallel importation with respect to the
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patented products. The application of the public interest principle in the context of
international trade would be a good rationale for the new law to encourage parallel
importation of the patented products in the areas indispensable to public demands. In the
circumstances of Vietnam, the greatly significant products needed in the first place would
include pharmaceuticals, medicines, food-stuffs for persons and animals, and chemical
products for agriculture and aquaculture.
The law may contain a particular statement allowing the government to issue a special
regulation applied to the parallel importation of patented products in the important areas. An
open conception of international exhaustion and the most convenient conditions may be made
available in that case. Accordingly, it is unnecessary to apply any condition or limitation
relating to the parallel importation of indispensable products. The government may follow the
broadest approach in defining a parallel importation to facilitate the importation of such
products.
4. Concerns of product quality and social security
As discussed in the previous chapter, parallel importation may result in products of low
quality with resultant problems of social security. These are practical concerns in the case of
Vietnam. The flow of cheap products, in terms of the parallel importation of patented
products, may cause not only great pressure on the domestic industry, but also the concern of
the consumers and society regarding insufficient control of quality and assurance. The
concern of product quality is realistic when there is no indication in relation to the patent
holder or his patentee on the products. The consumers in many cases cannot identify the
primary source of the parallel importation patented products. The enforcing authorities,
otherwise, may not initiate control measures that it may apply to products that are illegal or
counterfeit. These concerns may be true, however, they do not fall into the spectrum of patent
law.
The law and regulations in other fields may be invoked to deal with the concerns mentioned
above. For example, the government may issue a regulation to apply a particular measure to
control the quality of parallel importation products when it relates to the security of society
and the consumers. Government regulation may require the importers of parallel importation
patented products to display detailed indication on the products, which would provide
sufficient information to the consumers on the source of the products. In addition, the
regulation may allow the enforcing authorities to request that the importers provide the
necessary information regarding the source of products when it receives claims of low quality
or lack of safety in imported goods.
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Chapter Seven
General Conclusions
Viewing from the development of WTO jurisprudence, the new challenges to national
legislation in compliance with the “incorporated” Paris Convention, the TRIPS and WTO law
are disclosed in different aspects. The implications from clarifying the new constraints of
WTO jurisprudence serves for a review of the national patent legislation of Vietnam for the
purpose of bringing it into conformity with TRIPS and WTO law. The review reveals certain
problems are existent in the current patent legislation of Vietnam. Such problems can no
longer be justifiable under the “incorporated” Paris Convention as well as the TRIPS
regulation. The streamline of arguments presented in different sections of this paper may be
summarized in the following points:
I. Under WTO jurisprudence, the conception of sovereignty needs to be perceived in the
context of globalization and interdependence of trade and economic interests. Departure
from the Paris Convention, the TRIPS requires an intensive erosion of sovereignty in freedom
of legislation in different aspects, especially with respect to the less-developed countries.
1. The conception of sovereignty is changing for the development of international trade and
the globalization. There exist different views on the issue of sovereignty of the WTO
Members and the freedom of legislation under WTO jurisprudence. Some thought that they
would loss sovereignty when attended the WTO. By contrast, others argue for the
strengthening of sovereignty of the member states by the WTO. The prevailing view contends
the erosion of sovereignty in compliance with WTO law. The challenges to sovereignty may
come from different aspects, especially the rule-oriented dispute settlement mechanism of the
WTO. Generally, the prevailing is that the good governance of an international organization
requires the member states to comply with the common rules with certain erosion of
sovereignty.
2. However, at any rate, the developing countries must be subject to a more intensive pressure
in the WTO framework. The TRIPS is one typical example for the burden of the WTO
obligations with respect to the developing countries. Some complaints come from different
angles. The author looks into this problem in the development from the Paris Convention to
the TRIPS regulation, and then, in the development of WTO jurisprudence. It reveals that
WTO jurisprudence is extending some new challenges to the freedom of legislation the
developing countries in compliance with the TRIPS, the incorporated Paris Convention and
WTO law.
II. The new challenges to compliance with the incorporated Paris Convention are reflected in
the change of nature and scope of the Paris Convention as incorporated into the WTO
system.
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3. The WTO rulings place certain constraints on the freedom of legislation under the Paris
Convention as incorporated into TRIPS. As the Paris Convention is incorporated into TRIPS
and thereby, the WTO system, the implementation of the incorporated substantive provisions
of the Paris Convention must comply with the principle of national treatment and MFN of the
TRIPS, the surveillance of GATT and the WTO rulings of WTO and patents is subject to the
regulation of the TRIPS and the WTO rules. The first constraint on national legislation comes
from the “incorporated” Paris Convention itself. The findings of the Appellate Body affirm
the application of GATT standards in terms of less favorable treatment, as provided in TRIPS,
is extended to the examination of the consistency with the national treatment obligation of the
“incorporated” Paris Convention. At the very least the extension of the GATT standards is
practical in the application of the standard examination of an “extra hurdle”, without
distinction between a treatment “not less favorable than”, as required by Article 3.1 of TRIPS,
and the same treatment, as required by Article 2(1) of the Paris Convention. In other aspects,
the WTO panel also endorsed the extension of the national treatment principle and the rule of
assimilation with nationals under Articles 2 and 3 of the Paris Convention, as qualified by
Article 1.3 of TRIPS, to the WTO system. The change in the nature and scope of the national
treatment obligations of the Paris Convention may be regarded as the new challenges to
national legislation in compliance with the TRIPS regulation under the WTO rules.
III. National legislation runs risk under the surveillance of the GATT practice in interpreting
the TRIPS obligations and the newly concepts developed in examining the compliance of
domestic law with the TRIPS regulation and WTO law.
4. The second constraint generates from the obligations under the main principles and norms
of TRIPS. The extension of rules of non-discrimination to the exceptions and limitations of
patent rights nullifies the special effect of these exceptions for the public interest as some
might expect. Strict requirements on patent term protection and the extension of effect of this
norm to the “existing subject matter” get national legislation to apply “retroactively” the
requirement of patent term protection. The disciplines that the WTO panels and the Appellate
Body developed from the practices of GATT and TRIPS makes the national treatment and
MFN treatment obligations under TRIPS greater burden in regards with domestic legislation.
The new concepts developed by the panels and the Appellate Body in examining domestic
law in the TRIPS related cases place more contingent challenges to national legislation in
both language and application of law. The “extra hurdle”, “fundamental thrust and effect”,
“possible application”, “practical implication” give rise to the difficulty of fulfilling the
obligations under these principles. Domestic patent legislation is also getting more risky in
compliance with the TRIPS before the challenge of legislation “as such” (i.e. in terms of its
actual wording) in TRIPS practice.
5. The requirement for the availability and security of a legal basis in domestic legislation is
also one constraint to national legislation in compliance with the incorporated Paris
Convention. This requirement becomes more burdensome for domestic patent legislation in
the fact that TRIPS is a specific regime in the WTO system, which contains many substantive
provisions on the protection of intellectual property rights. For many reasons, the lack of or
the soundlessness of the legal basis in a given domestic law on a particular aspect of the
patent protection may result in the relevant national legislation being subjected to an adverse
ruling from a WTO panel on the grounds of its inconsistency with TRIPS obligations. The
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security requirement of the legal basis does not exempt any national legislation from the
obligation to implement adequately and effectively the TRIPS standards. Different from the
Paris Convention, TRIPS does not give much meaning to the differential or preferential
treatment provided to the members who are less-developed and developing countries. The
narrow differential treatment becomes thinner under the WTO rulings on the TRIPS
obligations. The non-working effect of the objectives and principles stated in the TRIPS did
not help to modify any TRIPS obligations as some often predict or suggest.
6. The recent development of the rulings of the WTO panels in examining the compliance of
domestic law to WTO law is a significant constraint on the national legislation. The rulings on
the possible violation of discretionary legislation and the detailed examination of the WTO
panels with respect to domestic law have a special effect on domestic legislation in terms of
the implementation of the TRIPS substantive norms. The possibility of taking an independent
explanation of a particular provision of the relevant domestic law is actually the challenge to
domestic legislation in interpreting and implementing the TRIPS obligations. Not only the
statutory language but also the national administrative and judicial practices may be subject to
the detailed examination of a WTO panel and the Appellate Body, when it is necessary for
assessing the compliance of domestic law with WTO obligations. Additionally, the
requirement for an active response to compliance with WTO law is an actual challenge to
domestic legislation, something that never happened in the mandate of the Paris Convention.
IV. Hidden problems are still existent in the current patent legislation of Vietnam from the
view of WTO jurisprudence
7. Different from the perception regarding the full compliance of the current patent legislation
with TRIPS and the WTO, the examination of the patent related regulations of Vietnam in the
light of WTO jurisprudence regarding TRIPS and the “incorporated” Paris Convention,
revealed certain problems in the national regime of patent protection. The identified problems
in the current national legislation that may be justified under the mandate of the Paris
Convention would not be the case under TRIPS. For examples, the unavailability and
insecurity of the legal basis in the patent protection for pharmaceutical product inventions is a
problem that can be no longer permitted under the requirement of Article 27.1 of TRIPS.
Similarly, the lack of procedure for judicial review of the revocation of a patent in the
national legislation system may make the domestic legislation be subject to a challenge on the
basis of the legislation “as such”, for its inconsistency with the obligations under the
requirements of Article 32 of TRIPS.
8. The additional procedure applied to the renewal of term protection with respect to the
patents with the priority claim granted in the old regulation may be regarded as an “extra
hurdle”. This “extra hurdle” may constitute a less favorable treatment to foreign patents.
Under the rule of anti-discrimination, the rationale of independence of patents seems unlikely
to advocate this kind of discriminatory treatment towards foreign inventions. The existence of
the “extra hurdle” in the particular practice of patent protection in Vietnam may also invite a
claim on the basis of its inconsistency with the requirement of national treatment of TRIPS.
Moreover, when the GATT standards are also applied in examining the national treatment
obligation of the “incorporated” Paris Convention, that “extra hurdle” may violate at the same
time the national treatment obligation under Article 2(1) of the Paris Convention, as
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incorporated by Article 2.1 of TRIPS. If the fact that only foreign patentees hold the patents
subject to the “extra hurdle” is proved, the patent renewal procedure will be subject to the
rulings of the WTO panels on de facto discrimination, pursuant to the practice of Article III: 4
of GATT and Article 3.1 of TRIPS.
9. A challenge of inconsistency with the MFN treatment obligation of TRIPS may come with
the discriminatory treatment in the provision of the legal grounds of patent revocation. The
difference in the language of the bilateral trade agreement with the United States and in the
domestic patent regulations may create a less favorable treatment to foreign countries other
than the United States in patent revocation. In this connection, the regulation regarding patent
revocation as an administrative sanction may be subject to a challenge of legislation “as
such”. The ruling of “fundamental thrust and effect” may be applied in that case for the reason
that it causes the actual effects or the practical implications of an inequality of opportunities
in the protection of patents.
10. The requirement for displaying the source indication on products produced under a
foreign licensing is likely to face a claim of inconsistency with the rule of anti-discrimination
on the place of invention. At the same time, that requirement may also be subject to the
argument of inconsistency with the national treatment principle of TRIPS. Not only the
discriminatory language in the related regulations may face a challenge of legislation “as
such”, but also the actual application of these regulations may be criticized under the claim of
discrimination against foreign originated patents and foreign patent holders. The argument for
the public interest under the principles provided in Article 8.1 of TRIPS seems unjustifiable
because the discriminatory requirement itself is not consistent with the other provisions of
TRIPS. Where the standards of less favorable treatment is practically applied to measure the
national treatment obligation of the Paris Convention, the “extra hurdle” caused by the
imposition of the discriminatory requirement may also be a violation of the national treatment
obligation under Article 2(1) of the Paris Convention, as incorporated by Article 2.1 of
TRIPS.
11. For the change in the scope of the national treatment principle and the rule of assimilation
of the “incorporated” Paris Convention, the current regulation on the claim of the priority
right of Vietnam becomes incompatible with the requirement of the extended rule, as it works
in the WTO system. The principles and particular provisions of the regulations on patent
protection do not support any possibility of extending the application of the privilege on the
claim of the priority right under the Paris Convention to the WTO system. This incompatible
point in the current domestic legislation may call for a challenge of the legislation “as such”
for its likely inconsistency with the national treatment principle and the rule of assimilation
under Articles 2.1 and 3 of the Paris Convention, as affected in the WTO system by Articles
1.3 and 2.1 of TRIPS. A less favorable treatment in relation to the claim of the priority right
may subject the domestic legislation to the findings on the violation of the national treatment
and MFN treatment obligations under TRIPS, as well.
12. The requirement of reciprocity in according the patent protection to the nationals of the
countries outside the Paris Union is incompatible with the national treatment of the TRIPS
and WTO. The lack of procedure for reviewing the administrative decisions on compulsory
licenses, the narrow scope of regulation on compulsory licenses, and the greater protection in
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controlling the exportation of goods might be the disputable problems existing in the legal
system. The inconsistency on the face of the domestic law may result in some complaints
under a number of provisions of the TRIPS, including Articles 1, 3, 4, 31, 34, 42 of the
TRIPS. In addition, the situation of abuse of intellectual property protection for the purpose of
prevent arbitrarily the importation of certain types of products to a large extent might lead to a
challenge from WTO jurisprudence for the cumulative application of the TRIPS regulation
and GATT 1994 rules. Such problems might be dealt with in the language of the new law to
certain extent to avoid the direct inconsistence with the TRIPS and WTO law. In a long term,
it requires to amend some basic laws of Vietnam, including the Civil Code and Law in
Customs. In this respect, the sovereignty and the freedom of legislation sometime need to be
eroded for its compliance with the TRIPS and WTO law.
13. In the same situation as mentioned above, the draft of the new law on intellectual property
contains potentially problems similar to those existing in the current legislation. The drafters
may invoke the rationale of the principle of independence of patents to advocate the defects in
the draft of the new law concerning the different aspect of patent protection. However, with
the appearance of the constraints from TRIPS, the incorporated Paris Convention and the
WTO rules, that rationale may not help to advocate those defects any more after Vietnam has
entered into the WTO system. For such reasons, the problems protected under the rationale of
that principle should be excluded totally. Any solution for eliminating the identified problems
from the current legislation should take into account the strict requirement for an active
response to compliance with TRIPS and WTO law. The non-discrimination standards should
be secured not only in the statutory language of the law, but also in the implementing
mechanism. The drafters of the new law are advised to pay in full the attention to the
problems implicated in the specific provisions of the current drafts. One of the issues is now
in debate is the problem of international exhaustion of patent rights and parallel importation.
Examining the legal justification and the challenges under WTO jurisprudence may help the
legislators being more confident of what they wish to decide.
V. The legal justification of international exhaustion under WTO jurisprudence might be
confident for the development of the TRIPS. However, the likely challenges from the GATT
rules, the TRIPS and the “incorporated” Paris Convention are still available.
14. The controversies around the legality of international exhaustion of patent rights under the
Paris Convention have been not ended yet. There are different views on the inconsistency of
international exhaustion of patent rights under the Paris Convention, the TRIPS and the WTO.
Some argue for the exclusion of international exhaustion due to it goes against the Paris
Convention and the TRIPS. Some argue for the obligation of applying international
exhaustion which comes from the GATT and WTO rules and mandate. Others view that
exhaustion of patent rights is outside of the Paris Convention regulation or outside the GATT
1994 relevance. Viewing from the development of the TRIPS may be found that the legality
of international exhaustion of patent rights is not excluded by any obligations under the
TRIPS and GATT and the Paris Convention. However, the likely challenges from the Paris
Convention and GATT appear to be existent.
VI. The disparity in national practices would prevent a possible challenge under WTO
jurisprudence regarding exhaustion of rights. The justification in favor of parallel
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importation of the Japanese courts provides some reasoning for the adoption of parallel
importation of patented products in Vietnam
15. National practices concerning international exhaustion are in the disparity. It might be a
factual ground for a suggestion that there is little possibility of happening an actual challenge
to national legislation in this respect under the WTO dispute settlement procedures. To a
certain extent, the experience of Japan, as an internationally influential court precedent in
dealing with the issue of parallel importation of patented products, the empirical reasoning of
the Supreme Court of Japan regarding international trade development would help some
developing country like Vietnam to be more confident of the acceptance of international
exhaustion and parallel importation of patented products under WTO jurisprudence.
---------------------------
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Table of Contents
Introduction
I. Vietnam and its intricacy in compliance with the TRIPS and WTO law
1
II. New challenges from WTO jurisprudence in compliance with the TRIPS
3
1. The extension of GATT to the “incorporated” the Paris Convention
3
2. The surveillance of GATT rules in the TRIPS practice
5
3. WTO jurisprudence and international exhaustion of patent rights
6
Abstracts
8
Chapter One
Sovereignty and Freedom of Legislation
under WTO Jurisprudence
I. Sovereignty and WTO law
9
1. Loss of sovereignty
9
2. Strengthening of sovereignty
10
3. Erosion of sovereignty
11
I. II. Compliance under WTO Jurisprudence
12
1. Panel rulings
12
II.
2. Deference to national law
13
3. Challenges to developing countries
14
4. Compliance with the TRIPS
15
5. Challenges from WTO jurisprudence
17
Chapter Two
Freedom of legislation under the Paris Convention and
the TRIPS regulation
II. Freedom of legislation under the Paris Convention
18
1. The same treatment as to advantages
18
2. Rules of substantive law
22
3. Reservation of dispute settlement procedure
27
4. Reservation of obligations
28
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II. Freedom of legislation under the TRIPS regulation
1. From the Paris Convention to the TRIPS
29
29
1.1 The influence of the United States
29
1.2 The North-South tension on intellectual property
31
1.3 From the WIPO forum to the GATT forum
32
1.4 The cross-linkage of negotiations
33
1.5 The North-North bargains at the expense of the South
34
2. Not less favorable treatment and minimum standards
2.1 Adoption of GATT-standards principles into the TRIPS
35
35
2.2 Not less favorable treatment
36
2.3 Nondiscrimination and MFN
38
3. Statements on objectives and principles
41
3.1 Public interest
41
3.2 Balance of rights and obligations
42
4. Norms and restrictive rules
42
4.1 Patentable subject matters
43
4.2 Rights and obligations of patentee
44
4.3 Criteria of exceptions and limitations of exclusive rights
45
4.4 Minimum standard of the term of protection
46
5. Limitations of the special and differential treatment
46
6. Enforcement of rights
47
6.1 Enforcement obligations
47
6.2 Enforcement supervision
49
7. Application of WTO dispute settlement mechanisms
50
7.1 WTO jurisdiction over intellectual property right
50
7.2 Specified dispute settlement procedures
51
Conclusion
52
Chapter Three
New Challenges from WTO jurisprudence to
the “incorporated” Paris Convention
I. Incorporation of the Paris Convention into the TRIPS
1.Incorporation of the contents and context
(United States - Section 110(5) of the US Copyright Act)
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53
253
2.Incorporating beyond the TRIPS negotiating history
(United States - Section 211 Omnibus Appropriations Act 1998)
II. Compliance with the TRIPS norms and WTO dispute settlement rules
1. Incorporated provisions and the TRIPS principles
59
63
63
1.1 Prevailing effect of TRIPS national treatment and MFN principles
(United States - Section 211 Omnibus Appropriations Act 1998)
63
1.2 Impracticability of the objectives and principles under Articles 7 and 8 of TRIPS
(Canada - Patent protection of pharmaceutical products;
European Communities - Geographical indications)
66
2. TRIPS substantive provisions prevailing the incorporated provisions
(United States - Section 110(5) of the US Copyright Act;
United States – Section 211 Omnibus Appropriations Act of 1998)
68
3. Subject to the WTO dispute settlement procedures
(United States – Section 211 Omnibus Appropriations Act of 1998)
70
III. The extension of the GATT practice to the “incorporated” Paris Convention
72
1. “Effective equality of opportunities” and “no less favorable” standards
(United States - Section 211 Omnibus Appropriations Act of 1998)
72
2. Extension of the rule of assimilation
(European Communities – Geographical indications)
81
Conclusion
84
Chapter Four
Increasing Risky in Compliance with the TRIPS
under WTO Jurisprudence
I. Securing the obligations under the TRIPS norms
1. Rule of anti-discrimination
(Canada - Patent protection of pharmaceutical products)
85
85
2. “Availability” and “extra” term of patent protection
(Canada - Term of patent protection)
90
3. Availability and security of legal basis
(India - Patent Protection for Pharmaceutical and Agricultural Chemical Products)
96
II. GATT standards for securing the TRIPS obligations
1. Challenge of legislation “as such” and “extra hurdle”
(United States - Section 211 Omnibus Appropriations Act of 1998)
104
105
1.1 National treatment obligation
105
1.2 MFN treatment obligation
108
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2. Adaptation of the GATT “fundamental thrust and effect”
(European Communities - Geographical indications)
111
2.1 The TRIPS national treatment obligation
111
2.2 TRIPS MFN treatment obligation
118
III.III. Domestic law under WTO Jurisprudence
1. Possible WTO law violation of discretionary legislation
120
121
1.1“Chilling effect” of domestic legislation
124
1.2 Article XVI:4 of the WTO Agreement
126
2. Detailed examination and independent assessment of the WTO panels on domestic law
129
2.1 Detailed examination of the panels regarding the relevant domestic law
130
2.2 Detailed examination of the Appellate Body regarding the relevant domestic law
132
3. Independent explanations of the panels on the domestic law in question
134
Conclusion
138
Chapter Five
Hidden Problems of the Patent Legislation of Vietnam in Compliance with the TRIPS and WTO
Rulings
140
I. Vietnam Patent Legislation under the Paris Convention
141
1. Unavailability and insufficiency in the protection of patents
141
2. Legal grounds for refusal of patents
142
3. Legal grounds and procedures for revocation and invalidation of patents
143
4. Term of patent protection
144
5. Different treatment for inventions of foreigners
144
II. Establishment of legal framework in conformity with the TRIPS
146
1. The Civil Code of 1995
146
2. The Governmental Regulations
147
2.1 Decree 63 on industrial property regulation
147
2.2 Revision of Decree 63 and supplemental regulations
148
3. Substantive provisions on patent protection
3.1 Patentability
149
149
3.2 Patent rights
150
3.3 Exceptions of patent rights
150
3.4 Enforcement of patent rights
151
III. The hidden problems of the current patent legislation
1. Patentable subject matters: absence of detailed examining procedures
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152
255
2. Revocation of patents: uncertainty of legal basis and problem of MFN obligation
153
(i) 2.1 Incompatibility with Article 32 of TRIPS
153
(ii) 2.2 Problems with MFN treatment requirements
157
3. Term of protection of patents: “extra hurdle” in renewal procedure
162
4. Requirement of source indication with respect to foreign licensing
163
5. The right of priority: incompatible with the extended rule of assimilation
170
6. Reciprocity in the protection of patent for foreigners
172
7. Incompatible requirements regarding compulsory licenses
173
8. Absence of procedures for enforcement of patent rights
175
9. Procedural burden and ex officio enforcement
176
10. Greater protection
177
Conclusion
IV. Compliance of the New Intellectual Property Law Draft of Vietnam with the TRIPS
and WTO Law
1. The problems inherited from the current regulations
178
179
180
1.1 Ineffective examining regime for patents of pharmaceuticals
180
1.2 Incompatibility and discrimination in revocation of patents
181
1.3 Procedural requirement for renewal of patent duration
181
1.4 Irrelevant regulations on the priority right
182
1.5 The source indication requirement regarding “foreign licensing”
182
1.6 Other problems
183
2. Unsettled issue in the new law draft -parallel importation of patented products
2.1 Systematic problems in the current domestic legislation
184
185
2.1.1 Lack of statutory provisions in settlement of intellectual property disputes
185
2.1.2 Lack of professional judges
187
2.2 Limited jurisdiction in interpreting substantive law
189
2.3 Problems in handling the issue of parallel importation
189
2.3.1 Unsound legal grounds
189
2.3.2 Unclear instructions for implementation
190
2.3.3 Fluctuations in the wordings of the new law drafts
193
Conclusion
194
Chapter Six
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International Exhaustion of Patent Rights under WTO Jurisprudence
– Implications for Vietnam
I. Parallel importation and international exhaustion of patent rights
196
1. The absence of a general definition
196
2. Exhaustion of patent rights
198
IV. II. Legality of international exhaustion under the Paris Convention
202
1. The Paris Convention prohibiting international exhaustion
204
2. The Paris Convention without relevance with exhaustion of patent rights
205
III. The Relevance of the TRIPS and GATT
207
(iii) 1. The TRIPS precluding international exhaustion of patent rights
209
2. The TRIPS and GATT mandating international exhaustion of patent rights
211
3. The TRIPS leaving freedom to national laws without the relevance of GATT
213
4. Likely challenges in application of international exhaustion of patent rights
216
4.1 The Doha Declaration on the TRIPS Agreement and Public Health
216
(iv) 4.2 The WTO rulings on the relationship between the TRIPS and GATT 1994
219
(v)
4.2.1 The cumulative application of TRIPS and GATT 1994
219
4.2.2 The relevance of GATT 1994
220
4.2.3 Place of production and discrimination against imported products
220
5. Implications for the case of Vietnam
IV. National practices dealing with exhaustion of patent rights
1. The United States
222
225
225
1.1 The U.S. Supreme Court’s decision in Boesh v. Graff in 1890
225
1.2 The decision of the Court of Appeals for the Second Circuit in Curtiss Aeroplane v.
United Aircraft in 1920
226
1.3 Decision of the Court of Appeals for the Federal Circuit
in Jazz Photo Fuji v. ITC in 2001
226
2. Exhaustion of patent rights in the EU
228
3. Switzerland
229
4. Japan
230
5. Developing countries
232
V. Reasoning for parallel importation of patented products
235
1. Clarifying legal reasoning in the new law draft of Vietnam
235
2. Reasoning in favor of international trade
236
2.1 The balance between patent value and the public interest
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257
2.2 Implied license of reselling the marketed products
236
2.3 The development of industry and trade-related aspect of patent right
237
2.4 Reasonable reward to the patent holder
238
2.5 Reasoning in favor of the development of international trade
239
2.6 Notice of restriction or reservation
239
2.7 Concerns with technology transfer and quality of parallel importation goods
240
2.8 Scope of regulation
241
VI. Implications for adoption of parallel importation in Vietnam
241
1. Towards the balance of patent rights and the public interest
242
2. Implied license and the first sale of a patented product
242
3. International trade and the principle of independence of patents
243
4. Concerns of product quality and social security
244
Chapter Seven
General Conclusions
245
Bibliography
I. Cases
251
1. WTO cases
251
1.1 Panel Reports
251
1.2 Appellate Body Reports
252
2. Domestic Cases
252
II. Primary materials
254
1. WTO documents
254
2. International treaties, reports and foreign laws
255
3. Legislation
257
4. Governmental letters
258
5. Court findings and case-related materials
260
6. Domestic Reports
261
III. Secondary materials
262
1. Books and collections of essays
262
2. Articles
267
3. Internet, newspapers and others
271
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Appendices
Appendix 1. The Fourth Daft of the New Law on Intellectual Property Law of Vietnam
273
Appendix 2. The Civil Code of 1995 of Vietnam (Abstract)
380
Appendix 3. Decree No. 63/CP detailed regulation on industrial property, as amended by Decree 06/CP
of 2001
385
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Acknowledgements
I would like to express my gratitude to my academic supervisor, Professor SABURI Haruo,
who gave me great supports and invaluable advice and lectures during all time of my study in
the Graduate School of Law, Nagoya University, and preparation of this dissertation as well.
Without his excellent supports and instructions, I could never complete this academic research
work.
My special thanks to my sub-supervisors, Professor SUZUKI Masabumi and Professor
OBATA Kaoru. Their comments and instructions on the draft of dissertation actually
lightened me the questionable points in the arguments and discussions I included in the
dissertation.
I am greatly thankful for very kind assistance and great time I received day by day, both in
study and daily life, from Assistant Professor OKUDA Haruo. I never forget the days in the
Graduate School of Law, Nagoya University together with the warm smile and voice of hers
in my life.
I owed much Mss. Haiyashi, a nice friend and good staff of Administration Office of the
Graduate School of Law, who provided me everything possible to help me to make easy the
studying the school and living in Nagoya city.
All my thanks to the MONBUSHO scholarship program, without its significant financial
support, I may not finish the hard and expensive study of mine in Japan for such a long
period.
I am grateful to the AIPPI Japan, Kannosuke Nakamatsu Funding, Kyosei International Patent
Office Japan, the VCCI Japan, the Ministry of Science and Technology of Vietnam, the
National Office of Intellectual Property of Vietnam. The material supports of yours enable me
to complete my difficult duty of research in Japan.
I would like to thank very much all professors, tutors, assistants, librarians, administration
officers, classmates and study-roommates of mine. All have kindly extended to me
indispensable guidelines and assistance to my study job in the school, particularly in
preparation of this dissertation.
Finally, I would like to give my love and great thanks to my family, my mother, father, young
brother and sister, and my wife and lovely son and daughter for everything they did for me
during I studied and prepared this dissertation. Their love and assistance given to me
everyday encouraged me to go to the end of this work.
Nagoya, 20 December 2006
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