1. SAGACIOUS GENERICS UPSTAKES

2. THE UNDISPUTED PATENT REGIME
 Patent protection is designed to stimulate innovation by
guaranteeing the inventor a limited period of monopoly in
exchange for publicly disclosing how to produce or work the
invention.
 The scope of the monopoly only extends to the countries in
which a patent has been granted. A “global” patent as we all
know does not exist. Potential patent owners must therefore
determine where to invest in a patent; a choice dictated by
both economics and whether patent rights can be obtained
and effectively enforced.
 In the countries where the patent has not been granted or has
expired, generics manufacturers may legitimately take up the
slack by manufacturing the drug and supplying it domestically
and to other countries where a patent is not registered.

3. PRO-PHARMA ARGUMENTS
 Multinational pharmaceutical companies (collectively
“Pharma”) argue that a robust IP enforcement strategy is
essential to protect their investment in research and the
extraordinary costs and time to take a drug to market.
 They might ask why it is that generics companies are able to
steal the fruits of their labour and sell them on cut-price and, in
some cases, sub-standard pharmaceuticals.
 It is further be argued by Pharma companies that the practice
exposes patients to potentially harmful counterfeit
pharmaceuticals, and that cut-price generics deprive Pharma of
revenue to develop new and improved medicines to treat future
generations.

4. PRO-GENERIC ARGUMENTS
 Generics manufacturers play an important role in providing
competition in the global pharmaceutical economy and seizures
constitute anti-competitive practice on the part of “Big Pharmas”,
solely designed to sustain the market status quo and deny
opportunities to companies from growing economies.
 Such practices are also argued to be to the detriment of millions of
people in developing countries by denying them access to affordable
medicines.
 The recurrence of seizures by EU members has shaken the confidence
level of Indian drug exporters, who feel that the seizure was taking the
scope of IP laws in Europe too far.
 The overwhelming reality is that millions of people in developing
countries lack access to even the most basic medicines and this is a
situation that should not be overlooked by the more fortunate in
developed countries.

5. ETYMON OF DISPUTE
 In January 2008, a generic version of Cozaar (an
antihypertensive drug) en route from India to Brazil was
seized under EU customs regulations while in transit in the
Netherlands.
 The seizure, carried out at the behest of the patent owners
Merck and DuPont, has reignited the debate over the extent
of intellectual property (IP) rights and the availability of
patented medicines to developing countries.
 The international interest (and in some quarters, outrage) in
this case highlights the deeper rifts in respective attitudes
towards IP between the so-called developed and developing
countries.

6. CONTD
 Dutch port of Rotterdam is a major transit hub as well as key
point for Europe of exit and entry.
 The patent was absent in Brazil or India and the Dutch officials
suspended the “consignment” of the patented drug on Dutch
soil, as it deemed to be infringing the Dutch patent.
 The Dutch Authorities released the shipment after delaying it
for 36 days, where-after the shipment was flown back to India
by the generics producer (in this case Dr Reddy‟s Laboratories).
 The drugs - enough to treat 300,000 people for one month -
had been exported by India's Dr Reddys Laboratories, which
flew back to India after customs released them.

7. CONTD
 On 11th May 2010, after one year of unsuccessful negotiations, India
filed a complaint at the WTO against EU and Dutch.
 Brazil subsequently filed its own request for consultation against
the EU before the Dispute Settlement Body of the WTO.
 India and Brazil jointly held two rounds of consultations with the
EU on 7-8 July 2010 and 13-14 September 2010 in Geneva. During
these consultations, EU acknowledged that some provisions of the
EC Regulation 1383 were misinterpreted by the customs authorities
while detaining the Indian generic drugs. EU showed willingness to
resolve this dispute without resorting to the WTO dispute panel.
 Due to failure of talks between the EU and India/Brazil to reach a
settlement, the WTO arrived at a diplomatic solution, without
conclusively deciding on the extent of protection afforded by IP
laws to goods in transit.
 A final settlement was reached in July 2011.

8. EC LAW UNDERLYING THE CONTROVERSY
 The EC Regulation No 1383/2003 sets out rules for "customs
actions against goods suspected of infringing intellectual
property rights and the measures to be taken against goods
found to have infringed such rights", including goods in
transit through the territory of the European Union, and
provides, among other actions, for the seizure of goods.
 Dutch customs seized 19 consignments of drugs in 2008 and
2009, 16 of which were exported from India, which included
drugs for treatments of blood pressure, cardiological
conditions, HIV AIDS, schizophrenia and dementia.
 French and German Custom Authorities also seized drugs
consignment relying on the aforesaid regulation.

9. DOHA DECLARATION
 Adopted during the WTO Ministerial Conference in Qatar in
November 2001, the Doha Declaration addressed the impact
international IP was having on the public health of Members.
 It is beyond doubt that the Doha Declaration would provide
context to the dispute, in so far as parties to the dispute are
members to the treaty.
 In the relevant part, the Doha Declaration states that the TRIPS
agreement „can and should be interpreted and implemented in a
manner supportive of the WTO members‟ right to protect public
health and … to promote access to medicines for all‟.
 The confiscation is, therefore, contrary to the letter and spirit of
the Doha Declaration on TRIPS and Public Health, for which the
Dutch were a major developed country proponent.

10. ARTICLE 51 OF TRIPS
Article 51 of TRIPS on border measures require that certain
suspension procedures be made available with respect to
counterfeit trademarked and copyright pirated goods. These
provisions permit, but do not require, that suspension
procedures regarding other infringements of intellectual
property rights be made available. The latter „permissive‟ rule
preceded the Doha TRIPS and Public Health Declaration.
That document is an interpretative agreement with respect to
trade in pharmaceuticals that should preclude application of
the permissive rule in cases such as the Dutch seizure.

11. EC REGULATION – A DISCONCERT
 The EU is strategically exporting Regulation 1383/2003 to its
developing country trading partners through the negotiation of
FTAs, the ACTA and other instrumental agreements, which
increases the likelihood of such detentions and seizures by
other countries in future.
 Such detentions can undermine the ability of members to
address public health needs by means of cross-licensing
agreements to assist countries with insufficient or no
manufacturing capacity to import medicines from other
members, as permitted by Para 6 of the Doha Declaration on
TRIPS and public health.

12. SIGNIFICANT STATEMENT OF EFPIA
The European Federation of Pharmaceutical Industries
and Associations (EFPIA) prioritizes public health and
trade in generic pharmaceuticals over IPR. On the
present dispute, it said that:
“It is neither the policy nor practice of our members to
encourage Member States to use the powers of detention
available to them to prevent the flow of legitimate
generic products from manufacturer to customer outside
the EU. This applies even where goods transit through
EU countries where intellectual property legislation
could be applied …

13. CONTD
Where the product is not counterfeit and it is ascertained
that no intellectual property rights apply at either country of
origin or destination, the customs authorities should allow
the product to be released, irrespective of the intellectual
property status of the product in the EU. While it would be
possible for a panel or the Appellate Body to resolve the
Article 41 claim by interpreting and attempting to balance
the „legitimate‟ interests in trade in pharmaceuticals against
the legitimate interests of IPRs holders, it is more likely that
determination of this claim would be dependent upon the
findings in the other substantive claims, most notably
Articles 51 and 52.”

14. EU’S ARGUMENT - DISCRIMINATORY
 A recent decision by the European Court of Justice has
clarified that in most circumstances, detentions of transiting
pharmaceuticals from one EU member state to another state
will violate the EU Law.
 Thus, clearly a breach of the MFN Clause.
 In Montex v Diesel [SpA57 (C-281/05)], it was held that
there was no infringement of IPRs by virtue of goods merely
passing through a member state if the goods are not in free
circulation in the EU.

15. CONTD.
 In Nokia Corporation v Her Majesty‟s Commissioners of
Revenue & Customs (HMRC), the UK Court dismissed
application for judicial review of HMRC‟s refusal to detain a
consignment of 400 counterfeit Nokia phones and accessories
through the UK on their way from Hong Kong to Colombia.
 The Court held that because the goods were in transit and there
was no risk that the goods would be released into the market in
the UK or within EU, there was no trademark infringement in
the EU. Thus, the goods could not deemed to be counterfeit
within the meaning of Regulation 1383/2003 and therefore
could not be seized.

16. CONTD
 The NOKIA dispute was then clubbed with a similar seizure case
of Philips v. Lucheng Meijing Ind. Co. and was adjudicated by the
ECJ.
 The ECJ issued its decision on December 2, 2011, that in normal
circumstances, EU IPRs do not apply to goods in transit. In this
regard, the Court ruled that the domestic authorities of Member
States cannot apply a „legal production fiction‟ to goods in transit.
 ECJ ruled that goods in Customs suspensive procedures, including
warehousing and external transit, that are suspected of violating
trademark, copyright and design rights under the EU Member
State Law could not even be temporarily detained in the absence
of evidence that the goods had been sold, offered for sale or
advertised in the EU or that there were other indications that
operators are about to direct the goods towards European Union
consumers or were otherwise disguising their commercial
intentions.

17. EFFECT OF THE ECJ DECISION
 While it can be stated that ECJ has limited the use of EU IPRs
in the case of transiting goods, it has not entirely prohibited
their relevance or use.
 It is unquestionable that the trade in generic pharmaceuticals is
legitimate trade. Therefore, it would be implausible to assert
that legitimate trade in a particular good must circumvent the
EU in order to avoid WTO consistent detention/seizure for
infringement of EU IPRs.
 Furthermore, public health has attained prime importance at
the WTO and a decision allowing detention of in transit
generic pharmaceuticals would seem to undercut the intention
and spirit of the Doha Declaration & implementation.

18. RECENT DEVELOPMENTS IN THE MATTER
 On 28th July 2011, the Ministry of Commerce and Industry of India
entered into an “Understanding” in principle with the EU, pursuant to
which the EU will no longer intercept in-transit generic medicines
unless there is adequate evidence to satisfy custom authorities that there
is a substantial likelihood of diversion of such medicines to the EU
market.
 In addition, EU agreed to India‟s request for adoption of guidelines
which would confirm the principles agreed to in the Understanding
with a view to give greater and immediate legal certainty for producers
and traders.
 EU also agreed to reflect the principles contained in the Understanding
in its proposal for a new Regulation to replace Regulation 1383/2003. In
return the EU sought an assurance that India would refrain from further
steps in the ongoing dispute. However, India retains the option to
revive the dispute if the EU does not abide by the core principles agreed
to in the Understanding.

19. EU’S PROPOSED REGULATION
 Covers a wider range of IPRs than existing EU regulation 1383.
 Continues to authorize application of the law of the transit country
and the use of production fiction, thereby permitting seizure of
generic drugs in transit even if it is lawfully produced in the
country of manufacture and destined for legal use in the country of
import.
 Provides for criteria of “substantial likelihood of diversion onto the
EU market”, but does not provide any parameters for determining
the same. Nevertheless, mere suspicion of diversion should not be
sufficient.
 Allows 3 working days to the declarant/right-holder to express its
views, after the suspension is communicated.
 No recourse provided for temporary detentions/seizures.

20. CONCLUSION : SUGGESTION
 Production fiction deployed by EU is defective.
 Public health enshrined in Doha Declaration and in other
binding human rights instruments should be adhered to.
 European Parliament should reject the Proposed Border
Regulation in its current form.
 The product pipeline should flow from knowledge-based
economies and return on investment are an essential part of
that pipeline. The solution lies in government, Pharma and
NGO backed initiatives and partnerships.
 Multi-tier pricing by BIG PHARMAs for different economic
zones and also use of the development funds to subsidize cost
of medicines in third world and developing countries.

21. THANK YOU!
For further information, please feel free to write on:
trademark@unitedipr.com
Gaurav Gogia (Associate)
M/s United Overseas Trade Mark Company
M/s United Overseas Patent Firm