Innovation and Local Production Under the AfCFTA Protocol on Intellectual Property Rights: A strategic approach to intellectual property rights
The Member States of the African Continental Free Trade Area (AfCFTA) adopted the Protocol on Intellectual Property Rights (Protocol) on February 2023 during the 36th African Union Summit in Addis Ababa, Ethiopia. The preamble to the Protocol sets the stage for the protocol and outlines the overarching objectives and purposes to guide the member states. One of the primary objectives, consistent with the aspirations of Agenda 2063, is to promote inclusive growth and sustainable development underpinned by a continental market that facilitates the free movement of persons, capital, goods, and services. The protocol seeks to promote access to knowledge and technology transfer by emphasizing cooperation and the importance of using the flexibilities provided in existing international intellectual property rights regimes.
The COVID-19 pandemic has underscored the critical role of local production in addressing urgent health needs and fortifying the resilience of health systems, particularly in developing countries. With supply chains disrupted and global competition for medical supplies intensifying, reliance on imported medicines and health technologies has proven vulnerable. Local production of pharmaceuticals and other health essentials offers a strategic response. It can facilitate more prompt and equitable access to vital health products, especially in times of crisis when global supplies may be strained or monopolized by wealthier nations.
Moreover, the pandemic has served as a stark reminder of the interconnectedness of public health, economic stability, and security. Promoting local production under the AfCFTA Protocol offers a route toward more self-reliant, sustainable, and resilient health systems. However, measures promoting local production are often limited by trade and investment treaties, which also protect intellectual property rights. This article is meant to introduce policy measures states can take while not foregoing their commitments under those treaties.
Public Health Emergencies and the Local Production of Pharmaceuticals
The protocol includes a necessary provision regarding establishing local pharmaceutical production to anticipate public health emergencies (Article 21). Paragraph 1 of Article 21 of the AfCFTA Protocol seems to embody the spirit of the Doha Declaration on the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement and Public Health. This declaration, adopted by the WTO in 2001, clarifies that the TRIPs Agreement does not and should not prevent members from taking measures necessary to protect public health, thereby affirming the right of WTO members to use the flexibilities of the TRIPs Agreement for this purpose.
From a TRIPs perspective, there is a point of deviation. Articles 21(2) and 21(3) pf the Protocol emphasize the need for coherence among national policies and regional cooperation to promote local production of pharmaceutical products and other health care essentials. This local focus deviates from the TRIPs Agreement, which doesn’t specifically encourage local production.
Article 27.1 of the TRIPs Agreement states that patent rights should be enjoyable without discrimination as to the place of invention, the field of technology, and whether products are imported or locally produced. This article implies that countries cannot discriminate against imported products in favour of locally produced ones, which may limit the application of local working requirements.[1]
However, the WTO practice is not conclusive on this point. In 2000, the United States requested consultations with Brazil concerning Brazil’s 1996 industrial property law, which it argued to be inconsistent with Article 27.1 of the TRIPs Agreement. The law required local production to enjoy exclusive patent rights in Brazil. Failure to implement such a requirement will result in the issuance of a compulsory licence by the Government of Brazil. The United States and Brazil have agreed to terminate the proceeding after they decided to raise the issue regarding the law in their bilateral consultation. Hence, no legal precedent exists under the WTO’s Dispute Settlement Mechanism on the legality of local working requirements.
The Paris Convention for the Protection of Industrial Property, one of the first treaties on intellectual property, contains explicit language on the issue of local working requirements. A compulsory licence can be requested if a patented invention is not worked within a specific time limit (generally 3–4 years for patents). However, under Article 5A of the Paris Convention, importation of patented articles is considered as working the patent. This article means that if a patent holder chooses to supply a market by importing the patented product rather than manufacturing it locally, it still counts as “working” the patent under the Paris Convention.
In the context of the protocol, the provisions encouraging local production would need to be implemented in a manner consistent with these broader obligations under the Paris Convention and other intellectual property treaties. While the TRIPs Agreement and the Paris Convention don’t explicitly advocate for local production, they offer some provisions, referred to as “flexibilities,” that, when applied creatively and strategically, could stimulate domestic manufacturing in a way that’s harmonious with international commitments.
Here are a few “flexibilities” that parties to the protocol can use to encourage local production while complying with the TRIPs Agreement and the Paris Convention:
Utilizing Compulsory Licensing
TRIPs allow for compulsory licences, a mechanism by which a government allows someone else to produce a patented product or process without the patent owner’s consent under certain conditions. This tool can strategically promote local production of essential goods, like pharmaceuticals, in public health emergencies. However, the use of compulsory licences should be in accordance with TRIPs provisions in order to uphold WTO members’ international obligations.
Several conditions must be met for a compulsory licence to be issued. According to TRIPs, a compulsory licence can only be considered after efforts to obtain a voluntary licence on reasonable terms within a reasonable period have been unsuccessful. However, this requirement can be waived in national emergencies, other circumstances of extreme urgency, or in cases of public non-commercial use.
One of the most well-known cases of compulsory licensing is from Thailand. In 2006–2008, the Thai government issued compulsory licences for several drugs, including those for HIV/AIDS, heart disease, and cancer. These moves increased access to medicines that were too expensive for most of the population.
In the case of the HIV drug Efavirenz, for example, the Thai government first attempted to negotiate with the patent holder, Merck, to lower the price. When these negotiations failed, a compulsory licence was issued. As a result, the cost of the treatment dropped dramatically, from over USD 200 per patient per month to about USD 20 per patient per month, making it much more affordable for the population.
This example demonstrates how compulsory licensing can increase access to essential medicines. However, it’s important to note that compulsory licensing is often controversial. While it’s a legally recognized tool under TRIPs, it can face opposition from patent holders and some governments, particularly in developed countries with strong pharmaceutical industries. Therefore, it’s crucial that any decision to use compulsory licensing is backed by a solid legal and public health rationale and that the proper procedures under TRIPs and national law are followed.
Exploiting the Bolar Exception
The so-called Bolar exception or provision is another important flexibility in intellectual property law. Named after the U.S. court case Roche Products v. Bolar Pharmaceutical Co., the provision allows for using a patented invention in research and the regulatory approval process before the patent expires. This exception means that manufacturers can start producing generic versions of a drug as soon as its patent expires, without any delay for testing and approval.
The Bolar provision promotes competition and helps to lower prices by allowing generic products to enter the market more swiftly. This provision, in turn, can boost local production of pharmaceuticals, particularly in developing countries with significant generic drug industries.
For example, India, a major global producer of generic medicines, incorporates the Bolar provision in its national patent law. Section 107A of the Indian Patent Act allows for certain acts, such as making, constructing, using, selling, or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India or in a country other than India, that regulates the manufacture, construction, use, sale, or import of any product. This provision has greatly aided the Indian generic pharmaceutical industry to prepare and be ready to market generic versions of patented drugs as soon as the patent term ends.
By adopting and effectively using the Bolar provision, countries can foster an environment conducive to the local production of generic pharmaceuticals and reduce the time required to bring these products to market, thereby facilitating better access to essential medicines for their populations. However, as with all such provisions, how the Bolar provision is implemented can vary from country to country and should be tailored to the country’s circumstances and needs.
Leveraging Technology Transfer
Technology transfer is an essential aspect of economic development. It involves the movement of knowledge, skills, technologies, methods of manufacturing, samples of manufacturing, and facilities among governments, universities, and other institutions to ensure that scientific and technological developments are accessible to a broader range of users who can then further develop the technology into new products, processes, applications, materials, or services.
The TRIPS Agreement encourages technology transfer in its various provisions. Specifically, Article 66.2 of the TRIPS Agreement obliges developed country members to provide incentives for their enterprises and institutions to promote and encourage technology transfer to least developed countries to enable them to create a sound and viable technological base.
One example of leveraging technology transfer comes from Brazil’s aircraft manufacturing industry. In the late 20th century, Brazil was keen to develop an aircraft manufacturing capability. The government secured a technology transfer agreement with the Italian aircraft manufacturer Aeritalia. The agreement gave Brazilian engineers access to designs, techniques, and expertise and allowed for the establishment of a domestic production facility. Over time, this led to the establishment of the successful aircraft manufacturer Embraer.
A more recent example is the agreement between AstraZeneca and the Serum Institute of India to produce the COVID-19 vaccine. The agreement allowed for making one billion doses for low- and middle-income countries and committed to providing 400 million before the end of 2020. This technology transfer will not only allow for increased access to the vaccine in these countries but will also help develop the Serum Institute’s production capacity.
Leveraging technology transfer can be a valuable strategy for developing countries seeking to encourage local production. However, it’s crucial to approach such deals carefully, ensuring that they include training and capacity-building provisions, not just technology. Furthermore, technology transfer should be seen as part of a more comprehensive strategy for economic development, alongside other elements such as education, infrastructure development, and the creation of a supportive legal and regulatory environment.
Conclusion
Countries producing essential health products domestically can safeguard their populations against future health emergencies, reduce their dependence on unpredictable international supply chains, and generate local economic growth. Therefore, the strategic use of intellectual property rights to enable local production, as outlined in the protocol, is a crucial tool for strengthening health sovereignty and building long-term resilience in the face of future pandemics. The right for countries to promote local production should be kept safe and should not be reduced or prohibited by trade or investment treaties.
In conclusion, the AfCFTA Protocol on Intellectual Property Rights presents a promising tool for promoting local production, particularly in pharmaceuticals and other health essentials, in line with the broader objective of sustainable development and health sovereignty. Its emphasis on leveraging the flexibilities within the TRIPs Agreement and the Paris Convention while ensuring compliance with these international obligations provides a strategic pathway for African countries to boost their domestic manufacturing capacities and reduce their dependence on external supply chains.
As the world continues to grapple with health crises like the COVID-19 pandemic, the importance of local production capacities has become even more pronounced. By strategically employing mechanisms such as compulsory licensing, the Bolar exception, and fostering technology transfer, African countries can better equip themselves to face future health emergencies. However, these strategies must be pursued within a well-planned and integrated framework, ensuring that they contribute to building robust and resilient health systems, catalyze economic growth, and ultimately drive the realization of the African Union’s Agenda 2063.
Author
Ronald Eberhard Tundang is an International Law Advisor at IISD.
Notes
[1] “Local working requirement” refers to the condition imposed on patents or licences that the patented product or process must be used or produced in the patent-granting country