Intellectual Property in Investment Agreements: More “Teeth” for Foreign Investors’ IP Rights, Less for Access to Medicines

By Adriana Benedict

Last week, Public Citizen published a Health GAP analysis entitled “Leaked TPP Investment Chapter Presents a Grave Threat to Access to Medicines,” in which Professor Brook Baker explains four ways in which access to medicines is compromised by the USTR’s leaked investment chapter proposal for the Trans-Pacific Partnership Agreement.  The problematic provisions he identifies — inclusion of intellectual property (IP) in the definition of “investment”, ambiguous scope of minimum standards of treatment, inadequate exceptions and limitations for public interest measures, and performance requirement limitations preventing development of local and sustainable production—are not new, but have been included either implicitly or explicitly in countless bilateral investment treaties (BITs) (including the U.S. Model BIT) and the investment chapters of free trade agreements (FTAs) (including virtually all US FTAs and the proposed EU-India FTA).  Such inclusion gives more “teeth” to foreign investors’ IP rights, but what of access to medicines?

The inclusion of IP rights in definitions of “investment” confers on pharmaceutical IP additional protections (generally not otherwise found in IP chapters) such as market value compensation for losses, prohibition of expropriation (including “indirect expropriation”, which refers to administrative or regulatory measures that adversely impact foreign investments), and investor-state dispute settlement through arbitration, among others.  These protections go above and beyond the requirements of the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), and are thus referred to as “TRIPS-plus” provisions.  Requiring protection of IP as foreign investments can severely restrict a government’s ability to use TRIPS flexibilities in making medicines available, accessible and affordable.  If an investor challenges a government’s use of TRIPS flexibilities, that government has to pay for and comply with the decisions of costly dispute resolution mechanisms, which have historically awarded investors billions, even when the public interest is at stake.  Moreover, under TRIPS, only another state can challenge a law as non-compliant with WTO rules.  Inclusion of IP in the definition of investment effectively eliminates this restriction, allowing any foreign investor of a contracting party to challenge an unfavorable law, either in international arbitration or local courts.

So what kinds of policies with implications for access to medicines might foreign investors challenge?  In short, any policy or decision negatively impacting a foreign investment that could be construed as a denial of “fair and equitable treatment,” an excessively broad and ambiguous standard.  This might include anything ranging from limitations on data exclusivity, to adverse decisions on IP claims, to inadequate border measures for the prevention of parallel importation, to government use and acquisition of IP, to generic prescription and reimbursement requirements, to IP law reform.  Clearly, the TPPA’s narrow exception allowing for compulsory licensing does not go far enough to protect other IP-related measures affecting access to medicines.  The inclusion of IP in investment and trade agreements’ definitions of investment effectively gives foreign investors an unparalleled power of direct administrative review over policies—and even court decisions—having implications for access to medicines.

Even if protection of the public health policy space isn’t at the top of the USTR’s agenda, shouldn’t state sovereignty be?  Is the Executive’s treaty-making power really so broad that we can trade away our ability to freely legislate, regulate and adjudicate in the interest of public health?

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