5/4/23, 10:50 PM Analysis of the 12th WTO Ministerial Conference Decision on the TRIPS Agreement

Analysis of the 12th WTO Ministerial Conference Decision on the TRIPS Agreement
ejiltalk.org/analysis-of-the-12th-wto-ministerial-conference-decision-on-the-trips-agreement/

By Jayashree Watal July 8, 2022

The MC12 TRIPS Decision makes available a new waiver, with respect to COVID-19 vaccines, of
an existing obligation contained in TRIPS Article 31(f) that states that exports under a compulsory
licence must be restricted to the non-predominant part of the authorized amount. However,
paragraph 9 of the Decision explicitly states that it is without prejudice to existing flexibilities under
the TRIPS Agreement, except with respect of paragraph 3(b) that sets out the new waiver. This
means inter alia that neither Article 31(f), which still allows the non-predominant part of supply
under a compulsory licence to be exported, nor Article 31bis, which incorporates the first waivers
given of Article 31(f), are superseded by this Ministerial Decision. Thus, these two options remain
open, there being no restriction on products under Article 31 and pharmaceuticals, being the only
products covered under Article 31bis.     

It is unclear why instead of further simplifying Article 31bis, WTO Members chose to add a third
option through this Decision on COVID-19 vaccines. The waiver of Article 31(f) contained in this
Decision is qualified and is subject to several conditions, as is the case in Article 31bis. The analysis below will try to throw light on how
the Decision differs from existing two options from the perspective of developing country Members. This blog first sets out the features
of the MC12 TRIPS Decision that are favourable, or at least neutral vis-à-vis the existing options, and then details those that are less
favourable or even more restrictive than the existing options. No claim is made to comprehensiveness.

Features of the MC 12 TRIPS Decision that are favourable or neutral vis-à-vis existing options for compulsory licensing under
TRIPS

Alternative instruments to grant use without authorization: It has been clarified in paragraph 2 of the Decision that the “law of a Member”
referred to in the chapeau of Article 31 is not limited to legal provisions on compulsory licensing, but also includes other acts, such as
executive orders, emergency decrees, and judicial or administrative orders. While use of such alternative instruments may not have
been ruled out in Article 31 nor Article 31bis, this appears to have been a useful clarification for some developing country Members.

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No requirement of prior authorisation of right owner: Unlike in Article 31bis, developing country Members that use this Decision need not
require the proposed user in their jurisdictions to make efforts to obtain a voluntary licence under reasonable commercial terms within a
reasonable period of time as set out in Article 31(b). In practice, Members implementing Article 31bis did have the flexibility to
incorporate very short periods of time to try to obtain such licences.

Notifications required but different: The notification requirements to the WTO for developing country Members that use this Decision,
either as importers or as exporters, are set out in its paragraph 5 and the corresponding footnote. Unlike in Article 31bis, both sets of
Members will have to notify the name and address of the authorized entity, the products for which the authorization has been granted
and the duration of the authorization. In addition, the quantities for which the authorization has been granted and the countries to which
the products are to be supplied must be notified (presumably by the exporting Member) as soon as possible after the information is
available.  However, unlike in Article 31bis, importing country Members do not have to notify their intention to be importing Members, nor
self-declare (if they are not least developed country Members) that they do not have manufacturing capacity to make these vaccines
themselves.

No distinctive marking for exported COVID-19 vaccines: An important difference with Article 31bis is that exporting developing country
Members do not have to require exporters to specifically label or mark their products to distinguish them from originator products.
Perhaps, this requirement was removed since there is now an absolute requirement on importing Members to prevent re-exportation
(see below). Consequently, exporting country Members do not have to notify the WTO of the distinguishing features of their labelling
and marking of COVID-19 vaccines. Since all manufacturers do have to mark and label their exports, the advantage gained may be
debatable. 

Features of the MC12 TRIPS Decision that are less favourable vis-à-vis existing options to export under a compulsory licence
under TRIPS

Use limited to developing country Members: Unlike in Article 31 and Article 31bis, only developing country Members of the WTO are
eligible to use the Decision either as an importing or as an exporting Member. Indeed, developing country Members with existing
capacity are encouraged in footnote 1 of the Decision to make a binding commitment not to avail themselves of the Decision. China’s
statement in the General Council meeting on 10 May 2022 is taken as one such binding commitment. The reasoning behind this
restriction – whether realistic or not – appears to be that since the goal of the proponents of the original waiver proposal (in IP/C/W/669
and its revision) was to encourage local manufacture in developing countries, the Decision should be used more by those that do not

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currently have manufacturing and export capacity for COVID-19 vaccines. The goal under Article 31bis differed – it was to supply
generic medicines under export compulsory licences to Member countries that lacked manufacturing capacity, irrespective of where
these were manufactured.

Stricter obligation on re-exportation: Those developing country Members that do import under this Decision have a binding obligation to
undertake all reasonable efforts to prevent the re-exportation of the products manufactured under this Decision. The Decision allows in
footnote 3 that, “in exceptional circumstances”, such an importing Member may re-export COVID-19 vaccines to another developing
country Member for humanitarian and not-for-profit purposes, as long as such transactions are notified to the TRIPS Council. In
contrast, in the terms set out in in paragraph 3 of the Annex to the TRIPS Agreement, this same obligation was heavily negotiated and is
qualified. Here importing Members are only obliged to take measures to prevent re-exportation when such measures are 1) reasonable,
2) within their means, 3) proportionate to their administrative capacities, and 4) proportionate to the risk of trade diversion.

No double remuneration exemption: Compulsory licences – whether issued in the exporting or importing country Members – are subject
to adequate remuneration under Article 31(h). However, unlike paragraph 2 of Article 31bis, which exempts the importing Member from
paying remuneration once it has already been paid in the exporting country for the same products and quantities, this Decision makes
no mention of this “no double remuneration” clause. This means that those importing developing country Members that use this
Decision to import COVID-19 vaccines under a compulsory licence are not explicitly exempted under it from paying adequate
remuneration, unlike under Article 31bis. Since importing Members have to change domestic laws to be exempt from paying patent
owners, legal certainty on this point is important.

New standard for remuneration: Deviating from language used in Article 31bis where remuneration has to be based on the economic
value of the authorisation to the importing Member, this Decision makes it optional to take into the account the humanitarian and not-for-
profit purpose of the specific vaccine distribution programs aimed at “providing equitable access to COVID-19 vaccines in order to
support manufacturers in eligible Members to produce and supply these vaccines at affordable prices for eligible Members.” (Emphasis
added).  Thus, a new standard of requiring a humanitarian, not-for-profit royalty rate, which results in both supporting local production in
exporting developing countries as well as affordable prices in importing developing countries, is set in this Decision. It is unclear why
footnote 4 was added since the paper referred to therein does not explain how such a balance could be found.

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Ambiguity on test and other data protection: Paragraph 4 of the Decision states – as if it is a fact – that it is understood that TRIPS
Article 39.3 does not prevent a developing country Member from enabling rapid approval for use of a Covid-19 vaccine produced under
this Decision. Article 39.3 in TRIPS itself does not mandate regulatory data exclusivity and allows such data to be disclosed in public
interest. Article 31 and Article 31bis are silent about the relationship between the test data and compulsory licence provisions, giving
Members the freedom to suspend any data exclusivity provisions in place to benefit the compulsory licensee. In any case, those
Members that have introduced regulatory data exclusivity, pursuant to bilateral/plurilateral Free Trade Agreements, may have less
flexibility unless those commitments are amended separately.

No special waiver for Regional Trade Agreements with majority LDC membership: Unlike the provision in paragraph 3 of Article 31bis
that was aimed at benefiting African countries in that they need not notify the WTO of use if it was within a RTA with majority
membership of least developed countries, there is no corresponding provision in this Decision. This second waiver of Article 31(f) has
never been used but was seen as valuable in those negotiations.

Limited duration of the Decision: Unlike in Article 31 or Article 31bis where there are no time limits, developing country Members can
issue authorisations under this Decision for a period of five years from the date of adoption of this Decision. This period could be
extended by the General Council taking into account the “exceptional circumstances” of COVID-19 at that time. Presumably, a limited
waiver was warranted for a time-limited pandemic. Even the proponents of the original waiver sought the duration of three years in
IP/C/W/669/Rev.1, albeit for a much broader waiver of several TRIPS provisions. However, it is unclear whether the authorisations
already issued by this date to private companies/third parties could continue to be valid beyond this date as there appears to be no time
limit laid down for such authorisations, other than the logical limit up to patent expiry, just as in the case of Article 31 (except a generic
requirement to rescind these once the purpose is met) or in Article 31bis.

Conclusion

To conclude, this Decision includes provisions that, on the one hand, facilitate use without the authorisation of the right holder for the
export/import of COVID-19 vaccines and, on the other hand, either includes those that are stricter or cause more legal uncertainty than
the existing provisions, or ignores several existing provisions in Article 31bis that are favourable for developing countries.  Thus, it is
legitimate to question whether, on balance, this Decision makes the terms and conditions of waiving Article 31(f) more or less favourable
for developing country Members for the export and import of COVID-19 vaccines than those already available inter alia under Article
31(f) and 31bis. Since these existing legal avenues for export under a compulsory licence remain open, it remains to be seen if the

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Decision will be acted upon by developing country Members. However, the clarification of points of legal uncertainty may need to be
borne in mind when WTO negotiations, which are to be concluded within six months, begin on the inclusion of COVID-19-related
diagnostics and therapeutics.

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