Para 6 Solution of the Doha Declaration, Article 30 of TRIPS and Non-Prohibition of Exports under the TRIPS Agreement

Abstract:

This is an analysis of the position of exports in the TRIPS Agreement in terms of the patenting provisions existing in various countries particularly in the USA and the EC because of its direct relevance to the solution of paragraph 6 of the Doha Declaration. The analysis suggests that there was no loophole as insisted by the USA in the TRIPS Agreement regarding the absence of provisions permitting exports to the countries which do not have significant manufacturing capacities. The article starts from discussing Article 31(f) of TRIPS stipulating that manufacture under compulsory licensing is predominantly for domestic market and arguing that it cannot be read as affecting the whole of the TRIPS Agreement. The analysis of Patent Acts of various significant players in the field of intellectual property such as the US, the EC and Japan in terms of judicial decisions ranging from various judgments of the US Supreme Court and other relevant courts apart from the TRIPS Agreement confirms that the patenting is territorial which resolves into absence of any patenting monopoly on export of patented products. The analysis also confirms that the related measures like “making” and “offer to sell” are also not covered by the patenting rights as mentioned in Article 28.1 of the TRIPS Agreement and the patenting provisions of different Western countries which while excluding third party from “making” under patenting monopoly have never regarded it as absolute or total. The patenting monopoly on “making” has always been interpreted as “making for commercial purpose in the territory of the patent.” While discussing the prior art under section 102(a) of the US Patent Act, Federal Circuit refused to invalidate the patent on Ricoseal on the grounds that the circulation of this product to different parties would not constitute prior art as it was not circulated for commercial purposes.

Apart from the judgments of the US Supreme Court, the presence of exclusion rights covering export in Section 2567 of the Plant Variety Protection Act of 1970 and the introduction of 271(f) in the US Patent Act to prevent the export of components to be assembled where the total product would violate the US Patent act confirm that had there been a ban on export in the TRIPS Agreement, it would have been explicitly present as one of the rights of patent holder in Article 28.1 of the TRIPS Agreement. While introducing section 271(f) in the US Patent Act prohibiting export of components, the export of patented products was not banned. The assertion of the USA that permitting export of patented products to satisfy the requirements of compulsory licensing as against the TRIPS Agreement particularly Article 30 of TRIPS and the TRIPS compatible patenting provisions, raises a very important issue whether a country can introduce in international negotiations, provisions which are not present in its own domestic law and whether such introduction amounts to extra-constitutional method of changing or introducing an amendment in the domestic law. During the TRIPS negotiations, the USA using the proposals from the EC, extended patenting monopolies to “import”, “offer to sell” and the period of “patenting to 20 years” as part of its “obligations” and “commitments” to comply with the TRIPS Agreement through URAA. During the argument leading to the changes in its Patent Act through URAA, the USA insisted, that the TRIPS

agreement was a product of Arthur Dunkel’s draft prepared in 1993. The letter from the EC Trade Commissioner Brittan to US Congress suggests that there was a very close cooperation between these nations to extend the patenting monopolies during the TRIPS negotiations. In the context of para 6 of the Doha Declaration solution, the EC initially proposed use of Article 30 of the TRIPS Agreement to permit export of patented product to fulfill the requirements of Article 31 among a number of its suggestions. However, the USA from the beginning insisted that Article 30 of TRIPS does not permit export of patented products even under Article 30 exemptions. The interpretations of various courts both in the USA and the EC confirm that the patenting provision is totally territorial and it would not cover prohibition on the export of patented products without even resorting to any use of exemption under Article 30 of the TRIPS agreement.

The analysis also suggests that although both the USA and the EC have passed specific legislations to remove direct effect of the WTO Agreement in spite of presence of Article XVI:4 of the GATT 1994 and Article 23.2(a) of the DSU requiring compliance of their rules, regulations and administrative orders with the GATT provisions and the reports of the Panel and Appellate Body, the provisions introduced at the behest of the USA and the EC have been treated to have binding effect on the domestic legal system thereby using their duopolistic power and influence at international treaty negotiations to introduce provisions in its domestic law directly or indirectly which can only be labeled as extras-constitutional.

The relationships between export and the patenting provisions under TRIPS Agreement became a crucial issue for arriving at a solution of Paragraph 6 of the Doha Declaration which was concerned with fulfilling the requirements of nations having issued the compulsory licenses but not having sufficient or insufficient manufacturing capacities of those products. A misunderstanding pertaining to the extension of patenting monopoly both on the part of the USA and its allies and developing countries to exports led to an impasse which is yet to be resolved. The attempt by the USA and its allies to extend patenting monopoly to export raises another critical question whether the countries are free to introduce changes or interpretations in the international treaties which are not present in their internal law or which have been interpreted differently by their judicial institutions. This is an important issue as many countries although reserving the right of direct application of the provisions of the international treaties, treat the proposals introduced by them or their allies as binding.

The simple proposal from the developing countries in the Draft Ministerial Declaration1 that the nations with insufficient or no capacity to manufacture the patented product should be permitted to import the patented product took a controversial turn at Doha when the issue was referred to the Council for TRIPS for an “expeditious solution” vide Para 6 of the Doha Declaration2 which states

‘We recognize that WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the general council.’

A number of proposals were put forward by the EC3, the USA4, Brazil on behalf of developing countries5, Kenya on behalf of the African Group6 and the UAE7. Proposals were also put forward by a few academics such as Abbott8, Sykes9 and Attaran10 and

1 Ministerial Declaration on the TRIPS Agreement and Public Health, WTO/IP/C/W/312, WT/GC/W/450 dated 4 October 2001, paragraphs 5 and 9 of which says

Para. 5. A compulsory license issued by a Member may be given effect by another Member. Such other member may authorize a supplier within its territory to make and export product covered by the license predominantly for the supply of the domestic market of the member granting the licence. Production and export under these conditions do not infringe the rights of the patent holder.

Para. 9. Under Article 30 of the TRIPS Agreement, members may among others, authorize the production and export of medicines by persons other than holders of patents on those medicines to address public health needs in importing Members.”

The proposal was signed by the African group, Bangladesh, Barbados, Bolivia, Brazil, Cuba, Dominican Republic, Ecuador, Cuba Haiti, Honduras, India, Indonesia, Jamaica, Philippines, Peru, Sri Lanka, Thailand and Venezuela

2 Declaration on the TRIPS Agreement and Public Health, Ministerial Conference, Fourth Session, Doha, 9-14 November, 2001, WT/MIN(01)/DEC/W/2, dated 14th November, 2001 (hereinafter Declaration)

3 (a) Concept Paper Relating to Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, Communication from the European countries and their member States, IP/C/W/339, dated 4 March 2002

(b) Paragraph 6 of the Doha Declaration of theatrics Agreement and Public Health, Communication from the European Communities and their member States, IP/C//352 dated 20 th June, 2002

4 (a) Paragraph 6 of the Doha Declaration on the TRIPS Agreement and public Health, Communication from the United States, IP/C/W/

(b) Paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health, Second Communication from the United States, IP/C/W/358 dated 9th July 2002

5 Paragraph 6 of the Ministerial Declaration on the TRIPS Agreement and Public health, IP/C/W/355 dated 25th June 2002, Communication from Brazil on behalf of the delegations of Bolivia, Brazil, Cuba, China, Dominican Republic, Ecuador, India, Indonesia, Pakistan, Peru, Sri Lanka, Thailand and Venezuela

6 Proposal on Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public health, Joint Communication from the African Group in the WTO, IP/C/W/351 dated 24 th June 2002

7 Paragraph 6 of the Doha Declaration of the TRIPS Agreement and Public health, Communication from the United Arab Emirates, IP/C/W/354, 24 th June 2002

8 Frederick Abbott, WTO TRIPS Agreement and It’s Implications for Access to Medicines in Developing Countries, Study Paper 2a (Commission on Intellectual Property rights), p. 29 who argued that

even the ex-Prime Minster of Sweden11 which all revolved around the concept that the patenting monopoly also extends to the export of the patented product12 although Brazil did point out that Article 28.1 of the TRIPS agreement does not contain any such restriction.13

“An authorization to make and export under certain conditions might unreasonably prejudice the interests of the patent holder. An authorization to supply a high-income market might under some circumstances might unreasonably prejudice the interests of the patent holder. An authorization regarding low-income market might unreasonably prejudice the interests of the patent holder if the exports were systematically diverted to high-income markets, thereby undermining the commercial return on the patent.

IN his later argument, Abbott (Frederick Abbott, The Doha Declaration on the TRIPS Agreement and Public Health: Lighting a Dark corner at the WTO, Journal of International Economic Law, 2002, pp. 469-505) re moved the agreement pertaining to Article 30 and export completely and argued as if only Article 31(f) of the TRIPS Agreement was relevant.

9 Alan Sykes, TRIPS, Pharmaceuticals, Developing Countries, and the Doha “Solution”, 3 Chicago Journal of International Law, 1 (Spring 2002), also published as John M. Olin Law and Economics Working Paper No. 140 (2nd Series), The Law School, University of Chicago) where he denied the existence of Article 30 solution completely by asserting that “To my knowledge, developing nations have not suggested that they may rely on Article 30 to deal with the pharmaceutical issue” apart from, saying that the Doha Declaration does not have biding effect at all.

10 Amir Attaran, Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: Options for TRIPS Council, Working Paper ,Center for International Development, Harvard University who essentially proposed the US Pharmaceutical Industries suggestion of exemption on the line of Section 271(e)(1) known as Bolar Exemption where he said

“We propose that the Paragraph 6 mandate is more expeditiously satisfied by an agreement creating a rule of non -justifiability for the manufacture and export of generic versions of patented pharmaceuticals for developing countries lacking sufficient manufacturing capacity to meet their health needs.”(p. 7).

11 Bildt, Carl, Fight Poverty, Not Patents, January 6, 2003, Wall Street Journal, http://online.wsj.com/article/0, ,SB1041804607865840304-search, 00.html

The article by Carl Bildt looks like one prepared by PhRMA particularly its observation that the Doha Declaration “reaffirmed the importance of intellectual property as necessary incentive for pharmaceutical investment and innovation.” This statement was repeatedly made by Gillespie White (Lee Gillespie White, What Did Doha Accomplish? – Doha Declaration on Intellectual Property Rights and Access to Medicines: What was really achieved? http://mail.iipi.org/db/views/detail.asp?itemID=21. Bildt also insisted that “the TRIPS Agreement does not explicitly provide for the compulsory licensing process to be used for the export of medicines, but only for their production.” He just reiterated US position of simple waiver, which according to him brings in sufficient flexibility in the TRIPS Agreement.

12 All the proposal to amend or delete Article 31(f) solution is based on the assumption that patenting monopoly extends to the export of the patented products. The USA in its Second Communication IP/C/W/358 dated 9th July, 2002 specifically mentioned

“This provision (Article 30 of the TRIPS Agreement) is intended to apply to statutory exceptions already provided for in many countries’ laws at the time the TRIPS Agreement was negotiated, situations such as non-commercial experimental use aboard vessels temporarily in the territory of a Member, and prior user rights. Interpreting Article 30 to allow members to amend their patent laws to permit compulsory licenses to grant to authorize their manufacturers to produce and export patented pharmaceutical products to other countries would both unreasonably prejudice the legitimate interests of the patent owner.” (para. 31)

13 IP/C/W/355 dated 24 th June, 2002 from the developing countries in para 9 says

“Such exceptions do not unreasonably conflict with the normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner. In the context of the proposed authoritative interpretation of Article 30, the limited exceptions address public health problems outside territory of the Member and therefore do not conflict with the normal exploitation of the patent. Moreover, the acts of making, selling and exporting patented products by third parties without the consent of the patent owner to countries with insufficient or no manufacturing capacities do not unreasonably detract from

It appears that the arguments by both developing countries and developed countries are based on the assumption that the TRIPS Agreement prohibits exports. There is a related argument that if Article 28.1 does not provide for extension of patenting monopoly to export as suggested by developing countries but since it prohibits “making” by third parties, the patented products cannot be manufactured for export. This argument works on the assumption that the prohibition on making in the patent acts is total and absolute. The extension of patenting monopoly to export in the TRIPS Agreement appear to have been suggested on the basis of Article 31(f) of the TRIPS Agreement which in the context of compulsory licensing says that patented products manufactured should be predominantly for the domestic market.

The analysis below suggests that the arguments by both the developed countries and developing countries can be challenged. The examination of various existing legal provisions and their judicial interpretations shows that the export of patented product was not envisioned by the patenting acts as within the patenting monopoly of the existing patent acts including those of the USA and the EC. The analysis also suggests that patenting monopoly of excluding others from “making” or “offering for sell” would not be covered either by “making” for export or “offering for sell” in the exporting country in view of the fact that patenting provisions of excluding others from making has always been regarded by the judiciary as “making” for commercial purposes in the territory of the patent and the “offer to sell” is violated only when the actual sell infringes the patenting monopoly in the territory concerned. The non-application of monopoly on export is based on the fundamental tenet of territoriality of the patent. Any manufacture which would not be for commercial exploitation or profit in the territory of the patent would not be violating the patent rights. The territoriality of the patent has been a fundamental tenet in the TRIPS Agreement vide incorporation of Article 4bis of the Paris Convention14 in the TRIPS Agreement as well as in the existing patent acts of the major players.

the returns ordinarily earned by the patent owner. It should also be noted that the act of exporting is not enumerated among the exclusive rights conferred by the patent in Article 28 of TRIPS. Consequently, they do not unreasonably prejudice the legitimate interests of the patent owner.

14 Article 4bis [Patents: Independence of Patents Obtained for the same Invention in Different Countries]

The USA did try to introduce extraterritoriality in its patent act by introducing Section 271(f) to overrule part of the judgement by the US Supreme Court in Deepsouth Packing15 but again the interpretation by the US Courts have been that Section 271(f) is applicable only for components of patented assembled invention which when assembled abroad would violate the patenting provision in the USA.16 Similarly “offer for sell” has been interpreted as offer for those sales which would constitute infringement in the territory of the patent.17 The proposal of developing countries to permit export of the patented product under Article 30 of TRIPS has essentially been an assertion of long standing legal validation on the line of other proposals such as the use of object and purpose in international treaty interpretation. The freedom to export patented product was not a loophole but has been an integral part of the national patent laws and international treaties dealing with patenting monopolies.

The US proposal that Article 30 exemption would not permit export under the TRIPS Agreement raises a very pertinent issue in international treaty negotiations whether a country can raise an issue or a provision in international treaty negotiations when that provision is not present in its own national patent acts because it would amount to amending the national provisions through the use of international treaty negotiations particularly when the USA and the EC enjoy the position of being able to impose

(1) Patents applied for in the various countries of the Union by nationals of countries of the Union shall be independent of patents obtained for the same invention in other countries, whether members of the Union or not.

(2) The foregoing provision is to understood in an unrestricted sense, in particular, in the sense that patents applied for during the period of priority are independent, both as regards the grounds for nullity and forfeiture, and as regards their normal duration.

(3) The provision shall apply to all patents existing at the time when it comes into effect.

(4) Similarly, it shall apply, in the case of the accession of new countries, to patents in existence on either side at the time of accession.

(5) Patents obtained with the benefit of priority shall, in the various countries of the Union, have a duration equal to that which they would have, had they been applied for or granted without the benefit of priority.

15 Deepsouth Packing, 406 U.S. 518

16 Standard Havens Products, Inc. v. Gencor Indus., Inc., 953 F.2d 1360 (Fed. Cir. 1991) (the Federal Circuit held that a defendant’s foreign sales of a machine which used a patented asphalt-making process did not implicate s. 271(f) p. 1374. In Aerogroup International Inc. v. Marlboro Footworks, Ltd., 955 F. Supp. 220 (S.D.N.Y. 1997), it was held that Aerogroup’s design patent for a shoe sole had no component parts to assemble, and would not be covered by s. 271(f), p. 231

17 Quality Tubing v. Precision Tube Holdings (75 F. Supp. 2d 613, p. 623

unilaterally their will on other members of the WTO. It also raises a very pertinent issue that the countries where the international agreement is binding as in many EC Member countries such as UK and the USA, the attempt to introduce provisions overruling their acts through introduction of provisions or interpretations through the international treaty agreements would not amount to violation of the law making process either through the parliament as in the UK or of Constitution as in the USA. This analysis suggests that introduction of provisions in the international treaty negotiations which becomes binding on such countries as per the law of their land is essentially in violation of their Constitution and other law making procedures.

There is nothing in the TRIPS Agreement to suggest that the export for the patented products is prohibited. The continuous reference by the USA, the EC and academics like Abbott to Article 31(f) of TRIPS suggests that the contents of Article 31(f) saying that “any such use (Other use Without the authorization of the Right Holder) shall be authorized predominantly for the supply of the domestic market of the member authorizing such use” is being interpreted as total prohibition of export under the TRIPS Agreement. This interpretation that since compulsory licensing under Article 31 of TRIPS permits manufacture only for the domestic purpose also appear to be buttressed by Article 31(k) of the TRIPS Agreement dealing with compulsory licensing granted in case of anti-competitive effect of the patent which says that “members are not obliged to apply the conditions set forth in subparagraphs (b) and (f) where such use is permitted to remedy a practice determined after judicial or administrative process to be anti¬competitive.”

The question arises whether a condition incorporated in the special case of compulsory licensing to be issued in specific situations can be applied to the whole of the TRIPS Agreement. The phrase ‘predominately for the supply of the domestic market” cannot be construed as suggesting that the entire TRIPS Agreement is to be read as prohibiting manufacture or making for export.

There are two aspects to the analysis. One is accepting the stipulations of the patent acts as they are, is there any restriction on the export of patented products by non-patent holder? The second consideration is whether the present exemption to patent protection covered under Article 30 of TRIPS prohibits export of the patented product although

there is no exclusion of export either in the TRIPS Agreement or in the Patent Acts of major countries supporting extension of patenting monopoly to export, although there are three major exclusions in the TRIPS Agreement which may be interpreted as restricting export. These are “making”, “selling” and “offering for sale”. While excluding the right of making and selling was present in the US Patent Act, the TRIPS Agreement was apparently given as a reason to introduce “offer to sell” as one of the exclusionary activities in the US Patent Act. The analysis below would cover the issues mentioned above and analyze the question whether the law existing in these countries would prohibit export of the patented products.

The analysis is based on judicial institution’s pronouncements in the USA and the members of the EC and judicial decisions in other countries. Although the EC is going through a process of total fluidity and uncertainty as is evident from the Advocate Generals’ reliance on the US Supreme Court’s decision in Diamond v. Chakrabarty18 a decision interpreting the US Congress’ preparatory document to support EC’s Biotechnological Directive 98/44 imposed on the members.

18 Diamond v. Chakrabarty, 447 U.S. 303 (1980) in Opinion of Mr. Advocate General Jacobs delivered on 14th June, 2001, Kingdom of Netherlands v. European Parliament and Council of the European Union, [2002] All ER (EC) 97

Article 31(f) of TRIPS and Export

Abbott19 in his various articles while dealing with the issue of export to fulfil the requirements of nations having issued compulsory licensing argued extensively on the basis that Article 31(f) of the TRIPS saying

“any such use (Use Without Authorization of the Rights Holder) shall be authorized predominantly for the supply of the domestic market of the member authorizing such use” as implying that export under the TRIPS Agreement is permitted only under this provision and possibly under Article 31(k) of the TRIPS Agreement and that this exemption which is not because of the anti-competitive activities, shall be mostly for domestic purpose and only non-dominant part of which can be exported. The basic flaw in such argument is that Article 31(f) is limited only to “Other use without Authorization of the Right Holder” and has no relevance outside of Article 31 of the TRIPS agreement.

Normal legal understanding suggests that the ban on dominant part of export is confined to products manufactured under compulsory licensing and not to the entirety of the TRIPS Agreement. Similar case came up before House of Lords in Parke Davis & Co. v. Comptroller-General of Patents, [1954] A C 421 pertaining to the application of the conditions in the compulsory licensing to the totality of the UK Patent Act and to the Paris Convention. Section 45(3) of the UK Patents Act, 1949, provided

“No order shall be made in pursuance of any application under section 37 to 42 of this Act which would be at variance with any treaty, convention, arrangement or engagement applying to the United Kingdom and any Convention country.” Sections 37 to 42 of the UK Patent Act, 1949 dealt with issue of compulsory licenses. Section 37 enabled any person interested to apply to Comptroller for authority to exercise the patent monopoly on a number of grounds, all of which were related to the patentee’s own exercise or non¬exercise of his monopoly. Section 41 of the UK Patent Act, 1949 dealt with right to a compulsory licence not because of patentee’s exercise or non-exercise of his monopoly, but solely on account of the character of the invention, i.e. if the patent was in respect of – (a) a substance capable of being used as food or medicine or in the production of food or medicine

19 Abbott, supra note 8

Patent Act, 1949 as no restriction of three years was placed on the time at which application can be made. Parke Davis contended that Article 5A of the Paris Convention for the protection of Industrial Property, 1934, “was one of international obligations which were attracted by the subsection to all applications for compulsory licenses to work patented inventions, with the result that it protected the patentees in all cases, on whatever ground the compulsory license was sought, for an initial period of three years, since Article 5A(4) as translated provided: In any case, an application for the grant of a compulsory licence may not be made before the expiration of three years from the date of the issue of the patent … .”20 This provision is still applicable in the Paris Convention (Stockholm) and is part of the provisions under Article 5(A) of the Paris Convention dealing with compulsory licensing because of abuse of patent by patent holder and has been incorporated in the TRIPS Agreement vide Article 2.1 of the TRIPS Agreement.21

The 1934 Paris Convention differs in a very minor respect with the Paris Convention 1967 incorporated in the TRIPS Agreement, but the discussion is equally relevant in the context of the TRIPS Agreement.22 The Comptroller General of Patents the UK decided

20 Parke Davis v. Comptroller-General of Patents, [1954] A C 321

21 See Michael Halewood, Regulating Patent Holders: Local Working Requirements and Compulsory Licenses at International Law, 35 Osgoode Hall L. Journal, 243, pp. 251-52

22 Article 5A(2) of the Paris Convention 1934 reads as

“Nevertheless each of the countries of the Union shall have the right to take the necessary legislative measures to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.” The Paris Convention as modified by the Stockholm Conference says

Article 5(A)2 “Each country of the Union shall have the right to take 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 patent, for example , failure to work.”

Similarly Article 5(A)3 of the Paris Convention, 1934 version says

“These measures shall not provide for the revocation of the patent unless the grant of compulsory licenses is insufficient to prevent such abuses.”

The 1967 version of such provision is

“Forfeiture of the patent shall not be provided for except in cases where the grant of compulsory licenses would not have been sufficient to prevent the said abuses. No proceedings for the forfeiture or revocation of a patent may be instituted before the expiration of two years from the grant of the first compulsory license.

Article 5(A)(4) of the 1934 version of the Paris Convention says

“In any case, an application for the grant of a compulsory licence may not be made before the expiration of three years from the date of the issue of a the patent, and the license may only be granted if the patentee is

that Article 5A of the Paris Convention related to compulsory licenses granted on the ground of abuse by the patentee of the monopoly rights granted to him and had no reference at all to the special class of compulsory licenses under Section 41 of the Patent act, 1949 exempting inventions relating to food or medicine. The exemption given to food and medicines was a part of the public policy. In fact, the argument by counsel for Parke Davis brought out these facts in greater detail. He said, “The argument favored in the courts below was that there is a distinction between compulsory licenses granted on the ground of abuse and compulsory licenses independent of it. This was based on a contrast between sections 37 and 41 of the British Patent Act but the wide conception of abuse apparent in section 6 of the Statute of Monopolies, 1623 (21 Jac. 1, c.3), shows that it does not necessarily relate to people’s actions and that what is regarded an abuse of public interest than faulty conduct by the patentee. Sections 37 and 41 of the Act of 1949 both deal with public policy and it cannot be said that one is concerned with abuse and the other wholly divorced from it. … Under section 37, the patentee must show that there was no abuse or prejudice to public policy. Under section 41, he must show that there is good reason for refusing the application and that must include showing that there is no abuse

unable to justify himself by legitimate reasons. No proceedings for the revocation of a patent may be instituted before the expiration of two years from the date of the granting of the first compulsory license.” The 1967 version of the Paris Convention says

“A Compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application for three years from the date of grant of the patent, whichever period expires last

The 1925 Convention reads Article 5(A) reads as

“In no case can the patent be mace liable to such measures before the expiration of at least three years from the date of grant of the patent and then only if the patentee is unable to justify himself by legitimate reasons.” Lord Cohen in his judgment elaborated this point by observing

“If the measures referred to in paragraphs (2) and (3) of the h1925 convention were measures to prevent the abuses of the kind referred to in section 37, it necessarily follows that paragraph (4) dealt only with the same measures, for the expression “such measures” can refer to and refer only to the measures mentioned in paragraph (2).

23 Parke Davis v. Comptroller-General of Patents, [1954] A C 321

conditions of three years waiting period before compulsory licenses could be issued. The issue was formulated by Lord Asquith, the relevant part of which reads as

“(4) The point for decision is therefore whether an order made under section 41, and therefore (if I am right so far) not made on the ground of an “abuse of patent rights,” is invalidated by Article 5A of the 1934 Convention.

(5) It accordingly becomes crucial to decide whether article 5A is limited to orders made on the ground of “abuse”: or extends to orders made on other grounds

Interpreting the phrase “In any case” (“En tout cas”) in Article 5(A)(4) of the Paris Convention which was used as providing generality of application to the subarticle 5(A)(4) of the Paris Convention, the Court noted that it is to be read as “applying to situations ejusdem generis with those to which the earlier subarticles of Article 5A apply, is clearly directed (and limited) to objectionable conduct on the part of patentee paraphrased as “abuse””25. Lord Asquith further observed “”In any case” means “in any such case.””26 The change in the language of the Paris Convention in 1934 Convention and 1925 Convention was the introduction of phrase “in any case” and such change of language was found to be “such as was inevitable consequence of introducing the two years’ period of grace between granting of the first compulsory license and the institution of any proceedings of revocation.” Lord Cohen approvingly quoted from Jenkins L.J. ([1953] 2 Q.B. 48, 64

24 Parke Davis v. Comptroller of Patents, [1954] 671, 672-673

25 Parke Davis v. Comptroller of Patents, [1954] 671, 673

26 Parke Davis v. Comptroller of Patents, [1954] 671, 673

27 Ibid. p. 676

Article 31(f) of the TRIPS Agreement starts with the phrase “such use” which has been interpreted by the House of Lords in Parke Davis as referring only to Article 5(A) of the Paris Convention and in this case would be referring to only “Other use Without Authorization of the Right Holder” i.e. only to those compulsory licenses which has been granted under Article 31 and under no other provisions of the TRIPS Agreement. In fact the phrase “such use” has been used in each and every sub-article of Article 31 of TRIPS starting from Article 31(a) to Article 31(g) and to Article 31(l). Article 31(f) of the TRIPS Agreement cannot be read as prohibiting export of patented products outside of Article 31 to entirety of the TRIPS Agreement.

The public interest was also discussed in Germany in “Zwangslizenz”28 by the Supreme Court in relation to the Paris Convention. The case of ‘Polyferon” was argued by the plaintiff that a public interest in terms of Section 24(1) by insisting that it is applicable only if the patentee abuses its exclusive position. Article 5A was interpreted as merely granting a compulsory licensing in case of failure to work or insufficient working of the invention, not, however, compulsory licensing in consideration of public interest. The national legislators were free to prescribe other reasons, especially public interest considerations for the grant of compulsory licensing. While dealing with Article 30 of TRIPS, the German Supreme Court observed that such exceptions do not deal with a patent abuse.29

Export as a Patented Monopoly and Judicial Decisions

The argument that export of patented products is not covered by the TRIPS Agreement is supported by a number of decisions of the US courts ranging from the US Supreme Court to the US Court of Appeals for the Federal Circuit (CAFC) both before and after the TRIPS Agreement which in view of the territoriality of the patent acts has made it clear that export of the patented products does not constitute any violation or infringement of the US Patent Act, the UK Patent Act or the Japanese Patent Act. The non-extension of patenting monopoly to exports had two aspects: one pertains to the absence of the term “export” in the rights granted to the patent holder as observed in Deepsouth, and the other pertains to the territorial nature of the patent acts both as existing in the patent acts of the

28 Federal Supreme Court (BGH), 5 December, 1995, GRUR 1996, 190 – “Zwangslizenz”

29 Michael Kern, CASRIP Newsletter (V312) (1996) Europe/Germany

major players and in the TRIPS Agreement. The TRIPS Agreement while being drafted had been prepared under influence of the industry lobby groups30 and contained more stringent features than were present in the patent acts of the countries such as the USA31 and the UK32 but even then Article 28.1 did not extend the patenting monopoly to exports and Article 4.2bis of the Paris Convention reiterates the position that patenting is totally territorial in nature. In Deepsouth, the US Supreme Court clarified the territoriality of the US Patent Act. While dealing with extension of patenting monopoly to exports, the US Supreme Court observed

“We disagree with Court of Appeals for the fifth Circuit. Under the common law the inventor had no right to exclude other firms making and using his invention. If Laitram has a right to suppress Deepsouth’ export trade it must come from its patent grant, and

30 See Susan K. Sell, TRIPS and Access to Medicines: TRIPS and Access to Medicines Campaign, Proceedings of the 2002 Conference Access to Medicines in the Developing World: International Facilitation or Hindrance?, Wisconsin International Law Journal, Summer 2002, pp. 481-522. The article is based on part of her book “Private Power, Public Law: The Globalization of Intellectual Property Rights (forthcoming, 2003). The relevant para. says

“TRIPS was a product of tireless and effective agency and economic coercion. TRIPS fundamentally altered the international intellectual property regime by dramatically extending property rights globally, and reduced policy-making autonomy in intellectual property. TRIPS confronted those who did not participate in the construction of this public international law as a constraint. Suddenly, practices that had been acceptable before, such as keeping medicines off patent became unlawful. The adoption of TRIPS gradually created a polarized political climate. On the one side are the architects and beneficiaries of TRIPS seeking to preserve and extend their gains and on the other are the victims of TRIPS seeking to minimize or reverse its damaging effects. Building upon their success the TRIPS architects worked hard to further extend property rights and ensure enforcement of TRIPS. They have embarked on an aggressive course to close any existing loopholes, to prosecute non-compliance, and to promote TRIPS-plus intellectual property standards outside the World Trade Organization in bilateral, regional, and multilateral agreements. Just as the IPC (the Intellectual Property Committee consisting of Bristol-Myers, Squibb, Digital Equipment Corporation, FMC, General Electric, Hewlett-Packard, IBM, Johnson and Johnson, Merck, Pfizer, Procter and Gamble, Rockwell International and Time Warner in 1994) pursued multiple channels to get TRIPS adopted, it has pursued a multilevel strategy in the wake of TRIPS to expand its agenda.” pp. 481 -482

31 The introduction of “import”, “offer to sell” and the period of patent to 20 years from 17 years was some of the provisions not at all present in the US Patent acts which were introduced by the US Uruguay Round Agreements Act, 1994, the Act by which the US approved the WTO Agreement.

32 Similarly, Article 27.1 apparently introduced by Arthur Dunkel as per studies by 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, no. 4, pp. 721-772) and Paul Champ and Amir Attiran, (Patent Rights and Local Working Under the TRIPS Agreement: An Analysis of the U.S.-Brazil Patent dispute, The Yale Journal of International Law, Summer, 2002, 365, 378) was used to remove local working provisions present in the UK Patent Act Section 48(3) on 29th July 1999 through The Patents and Trade Marks (World Trade Organization) Regulations 1999 is another example of more restrictive provisions in the TRIPS Agreement than were present in the domestic patent acts of the major promoters of the TRIPS Agreement.

thus from the patent statute. We find that 35 U.S.C. 271, the provisions of the patent laws on which Laitram relies, does not support its claim.”33

The TRIPS Agreement essentially with few exceptions such as compulsory licensing was a reproduction of the US Patent Act. The interpretation of the US Patent Act dealing with attempted extension of monopoly to export by the US Supreme Court as observed in Dowagiac Mfg. Co. v. Minnesota Moline Plow Co. (235 U.S. 641(1913)) is

“Some of the drills, about 261, sold by the defendants were sold in Canada, no part of the transaction occurring within the United States, and as to them there could be no recovery of either profits or damages. The right conferred by a patent under our law is confined to the United States and its territories (Rev. Stat. S. 4884), and infringement cannot be predicated of facts wholly done in a foreign country.”34 This was followed by the Supreme Court in Deepsouth Packing v. Laitram 406 U.S. 518 where the US Supreme Court observed that ‘The statute makes it clear that it is not an infringement to make or use a patented product outside of the United States, 35 U.S.C. 271. See also Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641, 650 (1915) Brown v. Duchesne, 19 How. 183 (1857) Thus, in order to secure the injunction it seeks, Laitram must show a 271(a) direct infringement by Deepsouth in the United States, that is, that Deepsouth “makes”, “uses” or “sells” the patented product within the bounds of this country.35″ While dealing with the territoriality of the patent acts, the US Supreme Court further observed

In conclusion, we note that what is at stake here is the right of American companies to compete with an American patent holder in foreign markets. Our patent system makes no claim of extraterritorial effect

33 Deepsouth Packing v. Laitram, supra note 14, pp. 525-526

34 Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641, 650 (1915), 649

35 Deepsouth Packing v. Laitram 406 U.S. 518, p. 526

intent to have him seek it abroad through patents secured in countries where his goods are being used. Respondents hold foreign patents

In this respect, an important observation was made by the US Supreme Court in Brown v. Duchesne (60 U.S. 183) where a ship having parts patented in the USA entered US ports. The US Supreme Court held that

The patent laws are authorized by that article in the Constitution which provides that Congress shall have power to promote the progress of science and useful arts, by securing for limited time to authors and inventors the exclusive right to their respective writings and discoveries. The power thus granted is domestic in its character, and necessarily confined within the limits of the United States. It confers no power on Congress to regulate commerce, or the vehicles of commerce, which belong to a foreign nation, and occasionally visit our ports in their commercial pursuits. That power and treaty making power of the General government are separate and distinct powers from the one of which we are now speaking, and are granted by separate and different clauses, and are in no degree connected with it. And when Congress are legislating to protect authors and inventors, their attention is necessarily attracted to the authority under which they are acting, and it ought not lightly to be presumed that they intended to go beyond it, and exercise another and distinct power, conferred on them for a different purpose. Nor is there anything in the patent laws that should lead to a different conclusion. They are all manifestly intended to carry into execution this particular power. They secure to the innovator a just remuneration for those who derive benefits or advantage, within the United States, from his genius and mental labors.37

If there was any doubt left about the right of the patent holder to gain advantage or profit from foreign sells, it was removed by the Supreme Court by its subsequent observation. It says

“But these acts of Congress do not, and were not intended to, operate beyond the limits of the United States

The US Court of Appeals for the Federal Circuit (CAFC) which many believe39 was established to expand the monopoly of the patent holder and which definitely has been working on this line however thought it prudent not to extend the monopoly under the patent right to foreign trade. In John Hopkins University v. Cellpro (152 F.2d 1342) in 1998 i.e. after the TRIPS Agreement, the CAFC specifically observed

Neither export from the United States nor use in a foreign country of a product covered by a United States patent constitutes infringement (See 35 U.S.C. s. 271(a) (1994) (“Whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefore, infringes the patent.”)

38 Brown v. Duchesne (60 U.S. 183), pp. 195-196

39 See Robert P. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform, Berkeley Technology Law Journal, vol. 14, pp. 577-615, 1999

its ability to serve foreign markets Hopkins must rely on foreign patent protection. See Deepsouth, 406 U.S. at 531 at 774.40

In Trustees of Columbia University in the City of New York v. Roche Diagnostics, US Courts for the District of Massachusetts (150 F. Supp. 2d 191), the US District Court using Deepsouth and John Hopkins University v. CellPro, Inc. 152 F.3d 1342, 1366 (Fed. Cir. 1998) decided that “Columbia’s conception of liability equates infringing activities that occur abroad with infringing activities that occur within the U. S. However, this reading simply does not accord with the plain reading of the statute. Section 271(a) refers explicitly to infringing activities that occur within the United States. The mere ownership by a domestic actor of the products used to infringe abroad does not relocate the infringing activities to U.S. soil.”41

In Fausett (Kirk A. Fausett, et al., v. Pansy Ellen, Inc. 1990 U.S. Dist. Lexis 19373

The court observed that “Plaintiff do not provide the Court with any guidance concerning proper construction of 35 U.S.C. s. 271(a). They merely assert that storage within the United States and shipment of the Pet Net hammock from this country constitute sale within the United States. The Court concludes that defendants have the better of his argument for several reasons. First, if the Congress had intended the patent laws, to apply to products manufactured abroad but stored in the United States prior to export, it could have included such language in the statutes. As written, those laws apply to manufacture and sale within the United States and do not contain language addressing products manufactured and sold outside the United States, albeit for an American company. Second, the construction implicitly urged by plaintiffs would impose liability on American companies for activity that would fall outside the ambit of the patent laws if

40 John Hopkins University v. Cellpro (152 F.2d 1342), p. 76

41 City of New York v. Roche Diagnostics, US Courts for the District of Massachusetts (150 F. Supp. 2d 191), p. 203

their headquarters and warehouses were located in another country. The court is not aware of any reason American companies should labor under this type of competitive disadvantage. Likewise, the court sees no basis for adopting a construction of the patent laws that would encourage American companies to relocate abroad.”42

In Robotic Visions Systems, Inc. v. View Engineering, Inc. (1995 U.S. Dist. Lexis 21171

Although Deepsouth was partially overruled by US Congress in 1984 by adding an additional type of infringement through incorporation of s. 271(f), the court in Robotics Vision did not find any new definition for “make”, “use” or “sell” beyond Deepsouth’s interpretation of those terms. (Hughes Aircraft Co. v. United States, 29 Fed. Cl.197, 218 (1993).

In Enpat v. Microsoft Corp. the court observed that

“Clearly had Congress intended to prohibit U.S. Companies from exporting products which allow foreign companies to make unauthorized use of patented methods it could

42 Kirk A. Fausett, et al., v. Pansy Ellen, Inc. 1990 U.S. Dist. Lexis 19373

43 Robotic Visions Systems, Inc. v. view Engineering , Inc. (1995 U.S. Dist. Lexis 21171

have done so in clear, unambiguous language like that found in s. 271(g). Instead, we agree with Microsoft that the language and legislative history of s. 271(f) demonstrate an exclusive focus on the sale of components patented in the United States for combination into a finished product, apparatus, or invention abroad.”44

The absence of monopoly on export for the patented products is also supported by series of decisions by the judicial courts stating that while determining reasonable royalty in case of patent infringement, the sales abroad would not be taken into account. In Sutton v. Gulf Smokeless Co., 77 F.2d 439 (4th Cir. 1935), the Fourth Circuit observed “Coming to the award of damages in the sum of $, 7,145.56 with respect to the 18 tables as to which complainants elected to take general damages, we observe first that any damages with respect to the tables sold for foreign use must be eliminated. The claims of the patents relied on are process claims, and no use of the process in a foreign country would constitute an infringement

Similarly in Amstar Corp. v. Enviro Tech Corp.46 the Federal Circuit affirmed the District Court’s denial of damages for foreign sales because such sales did not infringe the patent. In Enpat v. Microsoft, again the court relying on Sutton, observed “… we find that Microsoft cannot be required to pay damages for foreign sales, which do not violate United State’s patent laws. Moreover, while we recognize that the determination of a reasonable royalty envisions a hypothetical license negotiation between the infringer and the patent owner using factors delineated in Georgia Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1119-20 (S.D.N.Y. 1970), none of those factors support a conclusion that Microsoft would pay for the right to engage in foreign sales it

44 Enpat v. Microsoft Corp., 6 F. Supp. 2d 537 decided on May 22, 1998, p.

45 Sutton v. Gulf Smokeless Co., 77 F.2d 439 (4th Cir. 1935) p. 441

46 Amstar Corp. v. Enviro tech Corp, 823 F.2d 1538, 1546 (Fed. Cir. 1987) (Fed. Cir. 1988)

already has a legal right to make. Accordingly, we conclude that Microsoft’s foreign sales may not be taken into account in any determination of a reasonable royalty.”47 Similar findings were made by New York District Court in Aerogroup International v. Marlboro 955 F. Supp. 220.48

The most important finding regarding export as non-infringing act has been discussed in Chartex49 where the District Court determined that MDPP’s overseas business arrangements did not constitute infringement. The CAFC observed that “The district court determined that MDPP’s overseas business arrangements did not constitute infringement. SEE Chartex, NO. C-90-3622-CAL, slip op. At 7-9. Making arrangements to have a device manufactured overseas for making arrangements to have it imported into a foreign country is neither an infringing “making,” “using,” or “selling” of the invention within the United States. SEE 35 U.S.C. s. 271(a). Moreover, ass the District court correctly noted, preparation to infringe does not constitute infringement under section 271(a). Laitram Corp. v. Cambridge Wire Cloth Co., 919 F.2d 1579, 1583, 16 USPQ2d 1929, 1932 (Fed. Cir. 1990), cert. Denied, 113 S. Ct. 97 (1992)

There are a number of judgments regarding the interpretation of patent rights which specifically exclude exports from the patent rights and since the TRIPS Agreement is

47 Enpat v. Microsoft, 6 F. Supp. 2d 537, pp. 539-540

48 Aerogroup International v. Marlboro 955 F. Supp. 220,

“First, the language of this section (s. 271(f)) by its terms does not apply to the patent at issue here, which ahs no “component parts” but is rather a design patent for a shoe sole. Second, Aerogroup nowhere alleges that any of the allegedly infringing waffle soles – or any component thereof – were supplied for m the United States. In fact, it is uncontested that the shoes at issue use in this case were manufactured entirely in China. Indeed, at least one court in this District has suggested that Section 271(f)(1) requires that the components be manufactured or assembled in the United States. See Windsurfing Int’l., Inc. v. Fred Ostermann GmbH, 668 F. Supp. 812, 820-21 (S.D.N.Y. 1987), aff ‘d, 1 F.3d 1214 (Fed. Cir. 1993). Finally, if this Court were to give such a broad interpretation to Section 271(f)(1), that would read out of existence Section 271(a)’s textual limitation to territorial reach, Section 271(f)(1) is a specific and targeted exception to the fact that the patent protection generally extends only within the United States. Accordingly, there is no subject matter jurisdiction as to t patent claims to the extent they encompass violations of the patent outside of the United States.” P. 232

49 Chartex International PLC v. M.D. Personal Products, NO. 92-1556, 1993 U.S. App. LEXIS 20560, at 7, 9 (Fed. Cir. Aug. 12, 1993)

50 Chartex, pp. 10-11

based on a similar structure, it can be argued strongly that patent rights cannot be construed to include exports. Article 31(f) of TRIPS in view of discussion by the House of Lords in Parke Davis, is applicable only to patented products produced under Article 31.

The non-presence of monopoly extending to export in various patent acts as well as in the TRIPS Agreement also derives support from the Plant Variety Protection Act of 1970 (PVPA) where the patenting monopoly has specifically been extended to export and from s. 271(f) of the US Patent Act. The PVPA reads as

“Except as otherwise provided in this subchapter, it shall be an infringement of the rights of the owner of a novel variety to perform without authority, any of the following acts in the United States, or in commerce which can be regulated by Congress or affecting such commerce, prior to expiration of the right to plant variety protection but after either the issue of the certificate or the distribution of a novel plant variety with the notice under section 2567 of this title:

“(1) sell the novel variety, or offer it or expose it for sale, deliver it, ship it, consign it, exchange it, or solicit an offer to buy it, or an y other transfer of title or possession of it

“(2) import the novel variety into, or export it from, the United States

“(3) sexually multiply the novel variety as a step in marketing (for growing purposes) the variety

“(4) use the novel variety in producing (as distinguished from developing) a hybrid or different variety therefrom

…

“(8) instigate or actively induce performance of any of the foregoing acts.”

The issue of export and patenting has also been discussed by the UK courts.

In Salbutomol51 case, the Patent Court decided that there couldn’t be any ban on exports other than to countries where parallel patents are in force. Similarly in the cimetidine52 case, Falconer, J. rejected the argument to ban export to countries from where imports were being made. A ban on the exports of patented products was also not imposed because of the patentees’ apprehension that they might lose export sales. In cimetidine,

51 Allen & Hanburys Ltd.’s Patent [1987] RPC 327

52 Smith Kline & French Laboratories Ltd. [1990] RPC 203

there was little manufacture in the UK whereas in fenbufen53, the patentee argued for a broader ban on export but the patent officer did not accept the argument and decided that UK manufacture by the patentee would be affected to any significant extent by the exports on the part of the licensees to countries where the patentees did not have patent protection.

The territoriality and non-application of patenting provision to export has also been discussed recently by the Japanese Supreme Court in Akira Fujimoto v. KK Newlon.54 In this case the Japanese Supreme Court affirmed a Tokyo District Court’s decision denying an injunction and claims for damages against a defendant who was accused of inducing infringement of US Patents by manufacturing and exporting infringing products where the US patentee did not have a Japanese patent covering the product. The question of territoriality was discussed by the Japanese Supreme Court which confirmed that granting an injunction based on the US Patent law conflicts with the Japanese Patent law’s principal of territoriality. “No international agreement requires Japanese courts to recognize the exclusive rights of a US Patent.”55 Doi56 The Japanese Supreme Court concluded that granting an injunction based on a provision of US patent law conflicts with public policy under Article 33 of Horei. (Art 33 of Horei provides in case the law of a foreign country is to govern, the application of the provision of such law is contrary to the public policy or good morals, those provisions shall not apply). The continuing reiteration in the Japanese Supreme Court’s decision was that neither Japanese patent law nor international agreements provide for infringement in such cases and because of territorial nature of the patents acts, such acts of inducing infringement outside the territory of the patent would not be illegal. Horei (Law concerning Application of Laws in General

53 American Cyanamid Co. [1991] RPC] 409 and [1990] RPC 309

54 Akira Fujimoto v. KK Newlon, reported on line (Sup. Ct., 1st Petty Bench, Sept. 26, 2002)

55 Takenaka, Toshiko, Japanese Manufacturer’s Act of Inducing Infringement of US Patent is Allowed, CASRIP Newsletter, Autumn 2002, p. 20

56 Teruo Doi, The Territoriality Principle of Patent Protection and Conflict of Laws: A Review of the Japanese Court Decisions, Fordham International Law Journal, 26, pp. 377-395

which prevents the application of a foreign law if the act is unlawful only in a foreign country and is not proscribed under Japanese law. (Art. 11, para 2).

The absence of export from the patent acts of all the major practitioners of patents as well as from Article 28.1 of the TRIPS Agreement confirms that export as a process of sending the goods as well as actual sell of the patented product outside of the US patent territory would not constitute infringement.

The Concept of “Make” in Patent Acts and Export

The export of patented products can be questioned on the express reading of the term “make” or its resolution into “use” in the TRIPS Agreement. An examination of the term “make” through various judicial interpretations discussed below shows that the patenting monopoly on “make” is not an absolute one and a prohibition on make has never been regarded as total and the term “make” in the patent acts has always been interpreted as “making of the patented product for commercial exploitation in the territory of the patent.”

In Microchem v. SmithKline & French [1972] S.C.R. 506, the Canadian Supreme Court while dealing with alleged patent infringement observed that since the alleged patented medicines had “never entered into commerce so that no damage was suffered by plaintiff and no profits made by the said defendant as a result of these experiments”, they would not constitute infringement. While discussing the decision of Walsh J.57 that a small amount kept of trifluoperazine which never entered into commerce and no damage was suffered by respondent and no profit was made by Microchem, the Canadian Supreme Court observed “In my view he was in error in holding as he did that an experimental user without a licence in the course of bona fide experiments with a patented article is in law an infringer. The reasoning of Jessel M.R. in Frearsono v. Loe ((1878), 9 Ch. D. 48) and approved by Vice-Chancellor Bristowe in Procter v. Bayley & son ((1889), 6 R.P.C. 106 at 109) is applicable. Jessel M.R. said at pp. 66-67:

“The other point raised was a curious one, and by no means free from difficulty, and what occurred with regard to that was this, that the defendant at various times made screw blanks, as he said, not in all more than 2lbs., by various contrivances by which no doubt

57 Smith Kline v. Microchemicals, Exchequer Court of Canada, 60 C.P.R. 193

crew blanks were made according to the Plaintiff’s patent of 1870, as well as that of 1875

The reason Walsh J. gave for regarding such experimentation as infringing was that Microchem’s experiment were not carried out for the purpose of improving the process but to enable Micro to produce it commercially as soon as the license it had applied for could be obtained. The Canadian Supreme Court observed that “I cannot see that this sort of experimentation and preparation is an infringement. It appears to me to be the logical result of the right to apply for a compulsory license. While it may not be necessary in each case to be in a position to show capacity to manufacture, it is, I think, a reasonably prudent thing for an applicant to be able to do so. It is true, as Thurlow J. said in

Hofman-La Roche Limited v. Delmar Chemicals Limited, that:

“”… there is no statutory requirement that he prove that he is competent to produce the food or medicine or that he is possesses of the equipment, know-how and resources to do so, though the Commissioner may consider it of some importance, depending on the facts of the case to be informed of the applicant’s qualifications and if he thinks necessary to inquire into them.” ([1965] 1 Ex. C. R. 615, 43 C.P.R. 93, 46 D.L.R. (2d) 140).”59 Canada subsequently introduced sections 55.2(1) and 55.2(2)60 to incorporate the

58 Microchem v. SmithKline & French [1972] S.C.R. 506, 519

59 MicroChem v. SmithKline [1972] S.C.R. 506

60 Section 55.2(1) of the Canada Patent Acct – “It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product.” This was interpreted by the EC as – to carry out experiments and tests required (proof of safety and bioequivalency) to obtain marketing approval of the copy of an innovative medicine before the expiration of the relevant patent in order to

Canadian Supreme Court’s decision in the above case in the Canadian Patent Act which became a subject of dispute between Canada and the EC before the DSU and resulted in the WTO Panel decision in Canada-Patent Protection of Pharmaceutical Products which has been extensively discussed by Daya Shanker.61

Similar decisions were made in the USA. These decisions including those of Roche Products, Inc. v. Bolar Pharmaceuticals Co. (572 F. Supp. 255 (1983)) were again based on the concept of making and use in the patent acts of various countries.

The US Supreme Court in Brown v. Duchesne (60 U.S. 183) observed that

“But so far as the mere use is concerned, the vessel could hardly be said to use it while she was at anchor in the port, or lay at the wharf. It was certainly of no value to her while she was in the harbor

The US Supreme Court while trying to work out the damage to the plaintiff, was only concerned with the use of the patent only in US water and concluded that during such

ensure market access immediately following the patent expiry (in particular Section 55.2(1) of the Patent Act)

Section 55.2(2) “”It is not an infringement of a patent for any person who makes, construct, constructs, uses or sells a patented invention in accordance with submission (1) to make, construct o ruse the invention, during the applicable period provided for the regulations, for the manufacture and storage of articles intended for sale after the date on which the term of the patent expires.” The EC interpreted this as – manufacture and stockpile patented products for a period of up to six months before patent expiry (in particular section 55.2(2) of the Patent act in conjunction with the ‘Manufacturing and Storage of Patented Medicines Regulation’ as put by the EC in Canada-Patent Protection of Pharmaceutical Products, Request for the Establishment of a Panel by the European Commission, WT/DS 114/5, dated 12 November 1998

61 Daya Shanker, “Brazil , Pharmaceutical Industry and the WTO, Journal of World Intellectual Property, 2002, Vol. 5, No. 1, pp. 53-104

– ‘India, the Pharmaceutical Industry and the Validity of TRIPS, Journal of World Intellectual Property, 2002, Vol. 5, No. 3, pp. 315-372

– 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, NO. 4, August 2002, pp. 721-772

62 Brown v. Duchesne (60 U.S. 183)

voyage the damage sustained by the patent holder was “incapable of any appreciable value.” i.e. if the use made of such a patent was not affecting the profit of the patent holder in the USA, it would not be infringing the patent. This interpretation, the US Supreme Court reached on the basis of its observation not to read the words “use” in the clause literally. The US Supreme Court in Brown v. Duchesne, the US Supreme Court further observed

“The general words used in the clause of the patent laws granting the exclusive right to the patentee to use the improvement, taken by themselves, and literally construed, without regard to the object in view, would seem to sanction the claim of the plaintiff. But this mode of expounding a statute has never been adopted by any enlightened tribunal – because it is evident that in many cases it would defeat the object which legislature intended to accomplish. And it is well settled that, in interpreting a statute, the court will not look merely to a particular clause in which general words may be used, but will take in connection with it the whole statute (or statutes on the same subject) and the objects and policy of the law, as indicated by its various provisions, and give to it such a construction as will carry into execution the will of the Legislature, as thus ascertained, according to its true intent and meaning.”63

A very pertinent observation the US Supreme Court made was that the law is to be interpreted in terms of the general welfare of the community. The Court said

“Neither will the court, in expounding a statute, give to it a construction which would in any degree disarm the Government of a power which has been confided to it to be used of the general good – to the community – unless plain and express words indicated that such was the intervention of the Legislature.”64

The term “make” was also discussed in Deepsouth v. Laitram (406 U.S. 518) by the US Supreme Court, which observed

“The Court of Appeals, believing that the word “makes” should be accorded “a construction in keeping with the ordinary meaning of that term, “443 F.2d, at 938, held against Deepsouth on the theory that “makes” means what it ordinarily connotes – the substantial manufacture of the constituent parts of the machine.” Id., at 939. Passing the

63 Brown v. Duchesne (60 U.S. 183), p. 195

64 Brown v. Duchesne (60 U.S. 183) (p. 195).

question of whether this definition more closely correspond to the ordinary meaning of the term than that offered by Judge Swain in Andrea 35 years earlier (something is made when it reaches the state of final “operable” assembly), we find the Fifth Circuit’s definition unacceptable because it collides head on with a line of decisions so firmly embedded in our patent law as to unassailable absent a congressional recasting of the statute.”65

In its own inimitable way, the US Court of Appeals For Federal Circuits tried to overrule this definition of “make” in Paper Converting Machines Co. v. Magna Graphics Corp. 745 F.2d 11, 19-20 in an unfortunate mocking of its Supreme Court but since as per the US Constitution, the US Supreme Court is the final arbiter of the law, the opinion of the Court of Appeals would be per incuriam.

Other judgments dealing with non-infringement while making or using a patented product for experimental purposes are Dugan v. Lear Avia, Inc. 55 F. Supp. 223, p. 229 affirmed 156 F.2d 29 (2d Cir. 1946)

In Chesterfield v. United States, 141 Ct. Cl. 838, 159 F. Supp. 371 (Ct. Cl. 1958), the Claims Court observed “Moreover, if these two claims are construed to be valid over the prior art and to be definite, the claims are not infringed by the accused S-816 alloy

65 Deepsouth Packing v Laitram, p. 528

66 Deuterium Corporation v. United States, 19 Cl. Ct. 624, 1990 U.S. Ct. Cl. LEXIS 61

67 Embrex v. Service Engineering Corp. 216 F.3d 1343, 2000 U.S. App. LEXIS 15036

68 Madey v. duke University, 307 F.3d 1351, 2002 U.S. App. LEXIS 20823

claims are not infringed by the use of the accused 422-19 alloy, and the claims are not infringed by the use, if any, of all 6059 alloys.”69

This observation, the Court of Claims made after its observation in para 44 made it clear that the decision of the Court of Claims was not an obiter dictum but a well thought out proper judicial decision. The Court of Claims in para 44 said

“The defendant has admitted that it procured, within the accounting periods set forth in finding, a total of 3,679 pounds of an alloy designated as 422-19. The defendant has admitted that some of the foregoing 422-19 alloy was formed into 101 turbo-supercharger buckets delivered to an agency of the defendant for experimental use and testing. There is no evidence that defendant’s use, if any, of the remainder of said 422-19 alloy was other than experimental.70”

The Court of Claims’ observation in Pitcairn71 and its subsequent reproduction by the Federal Circuit in Roche Products72, by trying to overrule a well thought out judgement as ‘obiter dicta’ appears to be more of an attempt to arrive at a preconceived decision rather than result of a disciplined judicial analysis.

In Pitcairn, the Court while trying to overrule Chesterfield and others observed “Defendant’s reliance on the Court’s opinion in Chesterfield, supra, is likewise without merit. The Court’s statement in its opinion there that experimental use does not infringe constituted pure obiter dictum. The Court’s opinion specifically stated:

“Where the court finds as a fact that the patent claims in suit are clearly invalid *** it may not be necessary to consider the issue of infringement. 141 Ct. Cl. At 840.”73 The Court of Claims in Pitcairn further observed

The court’s reference to experimental use was clearly unnecessary to the disposition reached in Chesterfield. It is also noted that in Chesterfield the defendant procured by purchase, not by manufacture or for the Government, certain alloys, which had been developed and used for supercharger buckets, and blades. In Chesterfield, the claim arose from

69 Chesterfield v. United States, 141 Ct. Cl. 838, 159 F. Supp. 371 (Ct. Cl. 1958), pp. 865-866

70 Chesterfield v. United States, 141 Ct. Cl. 838, 159 F. Supp. 371 (Ct. Cl. 1958), p. 863

71 Pitcairn v. United States, 212 Ct. Cl. 168

73 Pitcairn v. United States, 212 Ct. Cl. 168, p. 199

defendant’s use of purchased alloys. In the present case, the infringing aircraft’s were clearly manufactured for the defendant.

Plaintiff has excluded from its present claim static test mechanisms manufactured for defendant. Numerous research and development contracts were entered into by the defendant and various manufacturers for the design, development and manufacture of experimental helicopters and none of those specific helicopters are the subject of this litigation. Defendant urges the court to exclude from compensation any aircraft used by the defendant for testing, evaluational, demonstrational or experimental purposes. Use for such purposes is use by or for the Government and is compensable. Obviously every new helicopter must be tested for lifting ability, for the effect of vibration on installed equipment, flight speed and range, engine efficiency, and numerous other factors. Tests, demonstrations, and experiments of such nature are intended uses of the infringing aircraft manufactured for the defendant and are keeping with the legitimate business of the using agency. Experimental use is not a defense in the present litigation.74

The Chesterfield ‘s opinion quoted by in Pitcairn is not appropriate as the concerned sentence did not deal with the decision at all. The sentence has been picked up from the paragraph of the Commissioner’s opinion, which reads as

“Two issues are before the court, first, the validity of the two claims in suit, and, second, whether the defendant has infringed said patent claims. It is recognized that, of those two issues, validity has the greater public importance. Sinclair & Carroll Co. Inc. v. Interchemcial Corp. 325 U.S. 327, 65 USPQ 297. Where the court finds that the patent claims in suit are clearly invalid for want of invention, it may not be necessary to consider the issue of infringement. The Dow Chemical Company v. Halliburton Oil Well Cementing Company, 324 U.S. 320, 64 USPQ 412” 75

74 Pitcairn v. United States, 212 Ct. Cl. 168, p. 200

75 Chesterfield v. United States, 141 Ct. Cl. 838, 159 F. Supp. 371 (Ct. Cl. 1958), p. 840

What has been quoted by the Pitcairn court was not the opinion at all but just a principle of interpretation in terms of Supreme Court judgments. The opinion is in paragraph 52, which says

“Summarizing, claims 5 of the ‘934 patent and claim 4 of the ‘935 patent are found to be invalid over the prior art and to be invalid for indefiniteness. Moreover, if these two claims are construed to be valid over the prior art and to be definite, the claims are not infringed by the accused S-816 alloy

Conclusion of Law

Upon the foregoing findings of fact, which are made a part of the judgement herein, the court concludes as a matter of law that claim 5 of plaintiff’s patent 1,698, 934 and claim 4 of plaintiff’s patent 1,698,935 are both invalid. It is also found that the claims are not infringed by the defendant. Plaintiff is not entitled to recover and his petition is dismissed.”76

The decision in Chesterfiled does not leave it in doubt that the experimental use of the patented product having commercial implications does not amount to infringement. This discussion becomes little dissembling one when it is discussed in Roche Products by the Federal Circuit where the Federal Circuit observed

“Pitcairn, the most persuasive of the Court of Claims cases concerning the experimental use defense, sets forth the law which must control the disposition of this case: “tests, demonstrations, and experiments *** which are in keeping with the legitimate business of the *** alleged infringer” are infringements for which “experimental use is not a defense.”77 This essentially amounts doctoring a paragraph to construct an entirely new sentence. What Pitcairn had observed that these test meant for testing of helicopters for stability and vibrations etc would not qualify as experimental use. The word used was “such nature” which was removed by the Federal Circuit from its quote to suggest that any test, demonstration and experiments would not qualify for experimental exemption. The judgement in Roche Products was one of the classical examples of judicial

76 Ibid. p. 866

77 Roche Products, p. 863

lawlessness as described by Farnsworth78 where not only relevant judicial pronouncements were ignored although they were present before the judges the judicial pronouncements were reconstructed to come to a motivated conclusion.

Based on Sawin v. Guild, 1 Robb, Pat. Case. 47, Fed. Cas. No. 12,391, the Court in Bonsack Machine. Co. v. Underwood (73 F. 206) observed

“The defendant denies the plaintiff’s right to maintain this suit on the grounds of license and privilege. He says plaintiff permitted him to make the one machine that he made, and that he has never used that machine for commercial purposes. It is true that, if an infringing machine is made or used as an experiment merely, it does not infringe former patents. And it has been held that the making of a machine for an experiment, and its exhibition as simply a model or illustration, do not of themselves constitute an infringement. Machine Co. v. Teague, 15 Fed. 390. To constitute an infringement, the making must be with intent to use for profit, and not for the mere purpose of philosophical experiment.”79

In Kaz Manufacturing Co., Inc. v. Chesebrough-Pond ‘s Inc., 211 F. Supp. 815 (S.D.N.Y. 1962), affirmed 317 F.2d 679 (2d Circuit, 1963), the court was very emphatic that “The cases, however, do make clear that an unauthorized construction of a patented article is not infringement per se, but that it is necessary to look beyond the fact of construction to the use to which the constructed article is, or is intended to be put.80”

Based on Amdur’s Patent Law and Practice, 608-609, 795 (1935), the court observed “The question here, therefore, is whether the use made, or intended to be made, by defendant of the constructed vaporizer disturbs the ‘possession use and enjoyment of the exclusive privileges secured by … Letters Patent’ to plaintiff.”81

The court in Kaz quoted from Ruth v. Stearms Roger Manufacturing Co., 13 F. Supp. 697, 713 (D.C. Colo. 1935) (reversed on other grounds 87 F.2d 35 (10th Circuit, 1936) ‘The use of the patented machine for experiments for the sole purpose of gratifying a

78 Farnsworth, W. 2001: “‘To Do a Great Right, Do a Little Wrong’: A User ‘s Guide to Judicial Lawlessness”, Working Paper Series, Public Law and Legal Theory Working Paper No. 01-18, School of Law, Boston University

79 Bonsack Machine. Co. v. Underwood (73 F. 206), p. 211

80 Kaz Manufacturing Co., Inc. v. Chesebrough-Pond ‘s Inc., 211 F. Supp. 815 (S.D.N.Y. 1962), affirmed 317 F.2d 679 (2d Circuit, 1963), p. 817-818

81 Kaz Manufacturing Co., Inc. v. Chesebrough-Pond ‘s Inc., 211 F. Supp. 815 (S.D.N.Y. 1962), affirmed 317 F.2d 679 (2d Circuit, 1963), p. 818

philosophical taste or curiosity or for instruction and amusement does not constitute an infringing use.’ In Ruth, the interpretation was based on wrong reading of Sawin v. Guild82 where Justice Story had actually observed

“… the making of patented machine to be an offence within the purview of it, must be the making with intent to use for profit, and not for the mere purpose of philosophical experiment, or to ascertain the verity and exactness of the specification. Whittemore v. Cuttter [Case No. 17,600]. In other words, that the making must be with an intent to infringe the patent right, and deprive the owner of the lawful rewards of his discovery.”83 The intention of the maker is to make profit in the territory of the patent and not to “deprive the owner of the lawful rewards of his discovery.” In fact, in Ruth, the Court further stated “”See Popenhusen v. Falke, 4 Blatchf. 493, Fed. Cas. No. 11, 279

In Kaz, the court further elaborated the concept of making and use in the US patent act by observing

“In general terms, (a) patentee should be able to reserve and preserve his monopoly over the commercial use of his patented invention

In Kaz, the court further observed that “The concept of use extends beyond the physical acts performed and includes as well the purpose for which the acts are performed. It should be noted, again, that the cases cited above, stating that the various acts described

82 Sawin v. Guild,

83 Sawin v. Guild, p. 555

84 Ruth v. Stearns-Roger Mfg. Co. 13 F. Supp. 697, p. 712

85 Kaz Manufacturing Co., Inc. v. Chesebrough-Pond ‘s Inc., 211 F. Supp. 815 (S.D.N.Y. 1962), affirmed 317 F.2d 679 (2nd Circuit, 1963), p. 818

do not constitute an infringement turn on the purpose to which the construction is directed.”86

The significance of the purpose for which the constructed article is intended to be used is reflected in the principle that ‘to constitute an infringement there must be substantial identity in result, means and mode (Life Manufacturing Co. v. Stanford Engineering Co., 299 F. 2d 223, 226 (7th Cir., 1962).

Based on the above discussed judgments, the Court in Beidler v. Photostat Corporation (10 F. Supp. 628) observed that mere “possession as a model does not constitute actual or threatened infringement in the absence of proof that the machine is held for the purposes of profit in violation of the exclusive right to the patentee to make, use and sell the patented invention, where there has been no invasion or threatened invasion of the patentee’s monopoly after the grant. “87

In Maxono Premix Burner Co. v. Eclipse Fuel Engineering Co., 471 F.2d 308 (7th Cir. 1972), the experimental construction of a prototype even paired with a sale was considered de minimis and insufficient to support an action for threatened infringement. The commercial implications of the patented provision in the patent act are also evident by the discussion of the Panel in Canada-Patent Protection. Canada in its argument while dealing with legitimate interests of third parties argued that “… if the interests of third parties in other countries were not to be taken into account, the interests of the patent owner in those countries also should be taken into account. If the country in question was a Member, the interests of the patent owner in that country would be protected in accordance with that country’s intellectual property laws, which had to conform to the TRIPS Agreement as it applied to that country. If the country in question was not a Member and did not protect intellectual property rights, the patent owner had no interests in that country to protect.”88

There have been decisions in the USA and to say that making for export would constitute an infringement of the patent act89 but all of them have ignored decisions in Sawin v.

86 Kaz Manufacturing Co., Inc. v. Chesebrough-Pond ‘s Inc., 211 F. Supp. 815 (S.D.N.Y. 1962), affirmed 317 F.2d 679 (2d Circuit, 1963), p. 818-819

87 Beidler v. Photostat Corporation (10 F. Supp. 628), p. 630

88 Canada Patent protection of pharmaceutical products, WT/DS 114/R dated 17th March, 2000

89 Bullock Electric v. Westinghouse, 129 F. 105 (1904), Ketchum Harvester v. Johnson Harvester, 8 F. 586 (1881). Another judgement is in Packard Instrument v. Beckman Instrument, 346 F. Supp. 408

Guild and other decisions discussed above and have tried to follow ordinary literal meaning of the term make which the US Supreme Court in Deepsouth specifically overruled. In Bullock Electric v. Westinghouse, 129 F. 105 (1904), the Court of Appeal observed

“While it is true that the monopoly of the plaintiff’s patent did not extend beyond the limits of the United States, yet it would be no defense to say that the patented article had been made in the United States only for the purpose of being sold and used in a country to which the protection of the laws of the United States did not extend.”90 Similar observations have been made in Adriance, Platt v. McCormick Harvesting Mach. 55 F. 28891 (1893) and Ketchum Harvester v. Johnson Harvester, 8 F. 586 (1881). Another judgement is in Packard Instrument v. Beckman Instrument, 346 F. Supp. 408, which tried to distinguish Deepsouth by saying that

“Defendant manufactures the accused device only in its plant in the United States, and that plant is the sole source of all the accused devices, it is infringed whenever defendant makes a device and ships it to a foreign country for sale and use there.”92

But all of them are based on the ordinary meaning of making and concept of monopoly on making as absolute which these courts have been enjoined not to make and in case they have done, it has been overruled since then.

The relationship of export and manufacturing was mentioned in note 404 of the Canada-Patent Protection where Canada gave an assurance that it would “not permit commercial disposition of such products, even after the patent terms had expired, whether for export or for domestic sales.”93 The basis for Canadian assurance regarding either export or domestic sale after the expiry of the patent had not been mentioned anywhere either in the parties argument or in the Panel Report but Article 3.2 and Article 19.2 of the DSU prohibits any addition or subtraction of the rights and obligations provided for in the

90 Bullock Electric v. Westinghouse, 129 F. 105, p. 109

91 Adriance, Platt v. McCormick Harvesting Mach. 55 F. 288 “It follows that the machines containing the inventions, which the defendants have made in this country, and have sold in England, France, and Germany, have been made in infringement of the rights of the complainant under the patents

92 Packard Instrument v. Beckman Instrument, 346 F. Supp. 408, p. 411

93 Canada-Patent Protection, note 404

covered agreement and since the covered agreement does not cover export, the Panel Report would not be applicable in the interpretation of the TRIPS Agreement. Even otherwise, Canada-Patent Protection Panel report has become per incuriam because of the reaffirmation in the Doha Declaration to interpret provisions of the TRIPS Agreement in terms of its object and purpose, which the Panel in Canada-Patent Protection specifically disregarded while interpreting international treaty provisions.

Although, the Panel tried to follow a constructionist approach in Canada Patent Protection by insisting that both theoretically and legally additional market benefits for extended monopoly of the patent were a mater of right for the patent holder it did not give any justification for its argument and tried to support its assertion theoretically by observing “In theory, the rights of the patent owner are generally viewed as right to prevent competitive commercial activity by others, and manufacturing for commercial sale is a quintessential competitive commercial activity, whose character is not altered by a mere delay in the commercial rewards,”94 the emphasis always stayed with commercial nature of the rights and that commercial nature of the rights pertains only to the territory of the patent.

Roche Products Judgement and Bolar Exemption

The right of excluding third parties from of ‘making’ or ‘use’ of patented product in an exceptionally restrictive manner was arrived at by the US Court of Appeals for the Federal Circuit which many consider was specifically established to extend the patenting monopoly in the name of bringing uniformity and harmonization in the interpretation of patent act interpretation, in Roche Products, Inc. v. Bolar Pharmaceutical Co. 733 F.2d 858 where the Federal Circuit reconstituted observation in Pitcairn and ignored judgements of superior courts to arrive at a very narrow interpretation of experimental use by eliminating any experimental use which had commercial application. Whether, such allegations are true or not but the record of judicial lawlessness (misinterpreting the US Supreme Court’s judgment) and judicial dishonesty (by ignoring the US Supreme Court’s judgments) shown by the Court of Appeals support the contention that judicial and fair decisions were possibly not the purpose behind its establishment. In Bolar, while reversing the judgment of District Court, The Court of Appeals after quoting Cabell v.

94 Canada-Patent Protection, para. 7.35

Markham, affirmed, 326 U.S. 404, 66 S. Ct. 193, 90 L. Ed. 165 (1945) that “it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary

patentee or licensor.” Id. At 784-85, 198 U.S.P.Q. (BNA) at 98).”95

However, the construction of experimental use as confining to “philosophical experiments, or for the purpose of ascertaining the sufficiency of the machine to produce the described effects” was against the decisions of the Supreme Court Justice Story but the Court of Appeals appear to be mocking at the said judgment when it stated

“The so called experimental use defense to liability for infringement generally is recognized as originating in an opinion written by Supreme Court Justice Story while on circuit in Massachusetts. In Whittmore v. Cutter, 1 Gall. 429, 29 F. Cas. 1120, 1121 (C.C.D. Massachusetts. 1813) (No. 17,600), Justice Story sought to justify a trial judge’s instruction to a jury that an infringer must have an intent to use a patented invention for profit, stating:

“It could never have been the intention of the legislature to punish a man who constructed such a machine merely for philosophical experiments, or for purpose of ascertaining the sufficiency of the machine to produce its described effects.’

95 Roche Products, p. 861

Despite skepticism, see e.g. Byam v. Bullard, 1 Curt. 100, 4 F. Cas. 934 (C.C.D. Mass. 1852) (No. 2,262) (opinion by Justice Curtis), Justice Story’s seminal statement evolved until, by 1861, the law was “well-settled that an experiment with a patented article for the sole purpose of gratifying a philosophical taste, or curiosity, or for amusement is not an infringement of the rights of the patentee.” Poppenhausen v. Falke, 19 F. Cas. 1048, 1049 (C.C.S.D.N.Y. 1861) (No. 11,279).””96

While discussing the above cases, as has become the practice with the CAFC, it did not mention the interpretation of Whittemore v. Cutter, in Sawin v. Guild (21 F. Cas. 5541813 (Case NO. 12,391) where Justice Story of the US Supreme Court himself interpreted the judgement in Whittmore v. Cutter by observing

“This court has already had occasion to consider the clause in question, and upon mature consideration, it has held that the making of a patented machine to be an offence within the purview of it, must be the making with an intent to use for profit, and not for the mere purpose of philosophical experiment, or to ascertain the verity and exactness of the specification. Whittmore v. Cutter [Case No. 17, 6001]. In other words, that the making must be with an intent to infringe the patent-right, and deprive the owner of the lawful rewards of his discovery.”97

The CAFC also made a wrong claim that the law pertaining to experimental use was well settled

This is a very common theme followed by the CAFC where it picks up judgments with particular tendency and then uses it to construct interpretation with tendency to enhance monopolistic content of the patents. The skepticism of Justice Curtis in Byam v. Bullard is

“Nor can I find any solid foundation on which to rest the right of a patentee to support an action on the case for the violation of his exclusive right, except that settled and reasonable common-law basis of all such actions, injury and damage

96 Roche Products, Inc. v. Bolar Pharmaceutical Co. 733 F.2d 858 p. 862

97 Sawin v. Guild, p. 555

a machine for a philosophical experiment, or to test the sufficiency of the specification, would not be an infringement

The interpretation of experimental use exception of Whittemore v. Cutter by Justice Story himself in Sawin v. Guild, 1 Gall. 485 was ignored by the CAFC in Roche Products although it is referred to in Byam v. Bullard. The exception to absolute or nearly absolute monopoly on making goes much more than Justice Story’s observation in Whittemore. In Steam Stone Cutter co. v. Sheldons, (21 F. 875, 1884) Justice Wheeler confirmed Sawin v. Guild by observing

“The mere sale of materials of a machine, complete and fit for operation, would not be an infringement of the patent on the machine, unless the sale was for use. Sawin v. Guild, 1 Gall. 485

A series of decisions laying down the law in the USA makes it apparent that simple making does not constitute an infringement unless it means making for profit at the expense of the patent holder in the territory of the patent.

The reliance by the Court of Appeals in Roche Products on Poppenhusen v. Falke as laying down the law on experimental was not correct as it (observation in Poppenhusen

98 Byam v. Bullard, , 1 Curt. 100, 4F Cas. 934 (C.C.D. Mass. 1852 No. 2262)

99 Steam Stone Cutter co. v. Sheldons, (21 F. 875, 1884, p. 877

100 Bonsack Mach. v. Underwood (73 F. 206, 1896) supra note 74, p. 211

limiting experiment to “… an experiment with a patented article for the sole purpose of gratifying a philosophical taste, or curiosity, or for mere amusement is not an infringement of the rights of the patentee) was based on misrepresentation of observation of Justice Story in Sawin v. Guild which held that “making of a patented machine to be an offence within the purview of it must be the making with an intent to use for profit, and not for mere purpose of philosophical experiment or to ascertain the verity and exactness of the specification.”101

The experimental use was also discussed in a number of Court of Claims decisions. There was a consistent approach till Pitcairn (Pitcairn v. United States, 212 Ct. Cl. 168) where the Claims Court did not overrule the previous decisions of the Court of Claims but tried to distinguish them from the facts of Pitcairn by suggesting that “In present case there is no evidence in defendant’s offer of proof that any of the helicopters to which defendant’s “experimental use” contentions pertain were build solely for experimental purposes.” Similarly, the waiver of remuneration for using alloys for experimental use for supercharger buckets and blades, was attempted to be distinguished by the Court of Claims in Pitcairn by distinguishing procurement by purchase, not by manufacture by or for the Government, and used. In Bolar, the CAFC virtually copied the observation of the Court of Claims in Pitcairn without giving an appearance of having a look at the judgments mentioned. Pitcairn at worse does not remotely suggest that experimental use exceptions are not permitted.

What it said was “Defendants urges the court to exclude from compensation any aircraft used by the defendant for testing, evaluational, demonstrational or experimental purposes. Use for such purposes is use by or for the Government and is compensable. Obviously every new helicopter must be tested for lifting ability, for the effect of vibration on installed equipment, flight speed and range, engine efficiency, and numerous other factors. Tests, demonstrations, and experiment of such nature are intended uses of the infringing aircraft manufactured for the defendant and are in keeping with the legitimate business of the using agency. Experimental use is not a defense in the present litigation.”102

101 Sawin v. Guild, p. 555

102 Pitcairn, pp. 199-200

It did not make it a rule or tried to overrule previous judgments of the higher courts as argued by the CAFC in its assertion by selectively quoting the above paragraph “tests, demonstrations, and experiments [which] are in keeping with the legitimate business of the [alleged infringer]” are infringement for which “experimental use is not a defense.”

However, in spite of its tendentious use and non-use of judgments, the Court of Appeals in Roche Products observed

“We cannot construe the experimental use rule so broadly as to allow a violation of the patent laws in the guise of “scientific inquiry”, when that inquiry has definite, cognizable, and not insubstantial commercial purpose.”103 The ultimate observation of the CAFC is based on the substantial “commercial” purpose behind the use of a patented product.

The interpretation of Section 102(b) of the US Patent Act dealing with invalidation by sale of a product a year prior to the application date has been interpreted by the US Supreme Court in Pfaf v. Wells Electronics, Inc. where in a reverse situation than what has been discussed here, the court observed, “for a patent to be invalid due to the on-sale bar, “first, the product must be the subject of a commercial offer for sale” 525 U.S. 55, 67, 142 L. Ed. 2d 261, 119, S. Ct. 304 (1998). In Group One, Ltd. v. Hallmark Cards Inc. 254 F. 3d 1041, 1047, 59 U.S.P. 2d 1121 (Fed. Cir. 2001), the CAFC held that

“As a general proposition, we will look to the Uniform Commercial Code (“UCC”) to define whether, as in this case, a communication or series of communications rise to the level of a commercial offer for sale. As this court has previously pointed out, “the UCC has been recognized as the general law governing the sale of goods and is another useful, though not authoritative, source in determining the ordinary commercial meaning of “terms used by the parties …The Supreme Court’s formulation of a “commercial offer for sale” in Pfaff also supports consulting the UCC. The Supreme Court also cited the Restatement of Contracts with approval in the commercial contract law context.”104 In Minnesota Mining and Manufacturing Company v. Chemque, Inc. 303 F. 3d 1294, 64 U.S.P.Q.2d (BNA) 1270, CAFC observed “The evidence in the record, however, only indicates that Ricon has sent samples of Ricoseal to various companies. Providing potential customers with samples of a product, without providing any other terms, is not a

103 Roche Products, p. 863

104 Group One, Ltd. v. Hallmark Cards Inc. 254 F. 3d 1041, 1047, 59 U.S.P. 2d 1121 (Fed. Cir. 2001), pp. 1047-1048

commercial offer for sale, because the recipient could not act in such a way that would create a contract.”105 The provisions of the patent act were interpreted as only those which have sound commercial implications although the purpose was to validate a patent which was already in the market but the CAFC decided that unless such offer for sale crosses the threshold of “commercial offer” it would not invalidate the patent.

The discussion above points out that even including judgment of the CAFC in Bolar, the making and use does not infringe the patent if the making is not for commercial purpose to harm or damage the interests of the patent holder in the territorial limits of the patent.

Section 271(e) (1) of the US Patent Act and Commercial Exceptions

The Bolar judgment led to the amendment of the US Patent Act when US Congress added Section 271(e)(1) to the US Patent Act explicitly to reverse the Federal Circuit’s decision in Roche Products, Inc. v. Bolar Pharmaceuticals Co. 733 F.2d 858106 . In 1984, US Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984, 98 Stat. 1585 (1984) Act), which amended the patent laws in several important respects along with certain amendments of the Federal Food, Drug, and Cosmetic Act (FDCA) Section 271(e)(1) of the US Patent Act as originally enacted, provided

“It shall not be an act of infringement to make, use, or sell a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March, 1913) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs.” 35 U.S.C. s. 271(e)(1) (1982 ed., Supp. II).

This section popularly known as the Bolar Exemption was an important issue in Canada-Patent Protection dispute as the EC did not question Bolar exemption present in the US Patent Acts on the ground that the US Patent Acts provides for extension of patent in case of delay in regulatory approval. The panel however, did not agree with the EC’s contention.

105 Minnesota Mining and Manufacturing Company v. Chemque, Inc. 303 F. 3d 1294, 64 U.S.P.Q.2d(BNA)1270, p. 1308

106 Roche Products, Inc. v. Bolar Pharmaceuticals Co. 733 F.2d 858 cet. denied, 469 U.S. 856, 83 L.Ed. 2d 117, 105 S. Ct. 183 (1984).

The term “patented invention” in section 271(e)(1) became a controversial issue when Elli Lilly interpreted the statutory phrase, “a Federal law which regulates the manufacture, use, or sale of drugs” to refer only to those individual provision of federal law that regulates drugs, whereas Medtronic interpreted it as referring to entirety of any Act (including FDCA)) where some of the provisions regulate drugs.

Based on the CAFC’s observation that the manufacture, use, or sale of a patented invention during the term of the patent constituted an act of infringement of s. 271(a), even if the sole purpose of conducting the tests and developing information necessary to apply regulatory approval led to the extension of de facto monopoly for a substantial long period. The 1984 Act also included enactment of Section 201 of the US Patent Act which established extension for patents relating to certain products that were subject to lengthy delays and could not be marketed prior to regulatory approval. The product was defined as

(1) The term ‘Product’ means

(A) A human drug product

(B) Any medical device, food additive, or color additives subject to regulation under the Federal Food, Drug, and Cosmetic Act.

Bolar Pharmaceuticals had obtained from a foreign manufacturer a generic drug covered by a domestic patent in order to test bioequivalency tests necessary for the FDA Approval. The 1984 Act, enacted after Roche decision, attempted to establish a streamlined procedure for the Food and Drug Agency (FDA) approval of generic drugs to hasten their introduction in the market to apparently correct two distortions that had crept in 17 year patent term because of the stipulation that certain products receive pre-market regulatory approval. The US Court in Intermedics, Inc. v. Ventritex (775 F. Supp. 1269) discussed these two reasons in terms of the US Supreme Court decision in Eli Lilly v. Medtronic (110 S.Ct. 2683

First, as a practical matter, the holder of a patent related to a device or

drug that is subject to regulatory approval could not reap financial rewards

during the term of a patent because the patented product was kept out of

the marketplace until substantial testing and regulatory approval was

completed. Section 201 of the 1984 Act sought to eliminate this distortion by establishing patent term extension for patents related to certain products that were subject to lengthy regulatory delays and that could not be marketed prior to regulatory approval. Eli Lilly, 110, S. Ct. At 2688

The second distortion addressed by the 1984 Act occurred at the other end of the patent term. Section 271(e)(1), enacted as section 202 of the 1984 Act, responded to congressional concern that under Roche the arrival of generics on the market place would be unduly delayed if the bioequivalency testing required by the FDA could not begin until expiration of the patent. Since, under Roche, testing which made use of a patented product couldn’t begin after expiration of the competitor’s patent term, the patentee’s monopoly would continue, often for a substantial period of time, until the competitor obtained regulatory approval. In order to eliminate this distortion Congress passed s. 202 (271(e)(1) ) which allows competitors, prior to the expiration of a patent, to engage in otherwise infringing activities related to obtaining regulatory approval. Id. At 2689

Some of the developments leading to amendment of Section 271 and Section 156 of the US Patent act was dealt with by the Federal Court of Appeals in Eli Lilly & Co. v. Medtronic (872 F.2d 402, 405) which mentions that the additions were made to pending legislation providing for abbreviated testing procedures for generic drugs. H.R. 3605, 98th Cong., 1st Sess. (1983) (“Drug Price Competition Act of 1983”). The Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585, signed into law in 1984 took into consideration the attempt by the generic manufacturer to permit testing for FDA approval and pending bill for extension of the patent for the products requiring FDA approval.

The CAFC decided that the amendment was done solely to reverse its interpretation of experimental use interpretation and since that interpretation was meant for each and every

107 Intermedics, Inc. v. Ventritex (775 F. Supp. 1269, pp. 1273-1274

patented invention and not for drugs alone, the amendment leading to enactment of s. 271(e)(1) would overrule each and every observation of the CAFC in Roche.108 The CAFC agreed that Congress repealed the Roche interpretation of the language of S. 271(a) and since Roche interpretation covers other products apart from drugs, the repealation would remove infringement from every other activity of product i.e. Congress set aside the Roche interpretation in all its ramifications.

The court in Intermedics made certain very important observations regarding the purpose behind introduction of s. 271(e)(1). It observed “In the legislative battles that ensued, it was clear that a principal purpose of the generic drug interests was to position themselves to be able to market their products on a massive commercial scale just as soon as the patent rights expired on the drugs which the generics incorporated.109” The Intermedics court strengthened its argument subsequently by stating that

“We believe that in enacting this exemption Congress clearly decided that it wanted potential competitors to be able to ready themselves, fully, during the life of the patent, to enter the commercial marketplace in a large scale way as soon as the relevant patents expired. Only by permitting this preparation to enter the market meaningfully could Congress achieve its goal of assuring the public prompt access to new medical products at the lowest commercially feasible prices.”110 In Intermedics, the court further extended this concept by extending its discussion by observing “..by enacting this exemption, congress has said to the public: “You may commit acts of infringement only so long as those acts are solely for uses reasonably related to gaining FDA approval to market your product. If you engage in infringing activities for other uses, the exemption will not protect you. But if you engage in non-infringing acts for other uses, you do not lose the benefits of this statutory amendment… . Thus the exemption Congress provided is not lost simply as a result of a showing that the defendant has engaged in non-infringing acts whose “uses” fall outside those permitted

108 Congress explicitly states: “The provisions of section 202 of the bill [i.e. the amendment of Title 35 adding section 271(e)] have the net effect of reversing the holding of the court in Roche.” H.R. Rep. No. 857, 98th Congress., 2d Sess., pt. 2 at 27, reprinted in 1984 Code Cong. & Admin. News 2647, 2711.

109 Intermedics, Inc. v. Ventritex (775 F. Supp. 1269), p. 1276

110 Intermedics, Inc. v. Ventritex (775 F. Supp. 1269), p. 1277

by the statute.”111 These uses constituted business activities like raising capital, establishing distribution network which are required by the firms trying to enter the commercial market in a significant way.

The CAFC in its last judgment pertaining to Eli Lilly v. Medtronic (915 F.2d 670) reiterated its observation in Lang v. Pacific Marine and Supply Co. (895 F.2d 761, 13 U.S.P.Q.2D (BNA) 1820 (Fed. Cir. 1990, ‘Section 271 does not cover acts other than an actual making, using, or selling of the patented invention’) that ‘A threat of sale does not constitute an act of infringement’.112

The Intermedics court while discussing the purpose of non-infringing activity of the party also said

“…Congress clearly intended, by enacting this exemption, to create a legal environment in which potential competitors of patent holders would be free, through non-infringing activities like raising capital, to position themselves to enter the market in a commercially significant way just as soon as the relevant patents expired. And at least with respect to products like those in issue here, products that are extremely sophisticated, that will carry a large price tag if they reach the retail stage, and that are very expensive to develop, potential competitors must engage in considerable “business” development and promotion activity just to meet the FDA’s requirements, let alone to be in a position to market their products meaningfully when the various legal barriers have been overcome.”113 These observations of Intermedics court was repeated in NeoRx Corp. v. Immunomedics (877 F. Supp. 202, 205) and in Chartex International PLC v. M.D. Personal Products, NO. 92-1556, 1993 U.S. App. LEXIS 20560, at 7, 9 (Fed. Cir. Aug. 12, 1993).

111 Ibid, pp. 1277-78

112 Eli Lilly v. Medtronic (915 F.2d 670, p. 673

113 Intermedics Court further expanded its proposition by observing “Moreover, we are confident that congress understood that in the real world of high-tech medicine, at least, it is “business purposes” that inspire the kinds of infringing activities that the exemption clearly covers. Congress could not have intended the exemption to apply to only those whose purposes were purely scientific, or to those who were motivated simply by a driving curiosity. The common law already provided shelter for persons so motivated.” P. 1279

The Federal court in Chartex did not find that sections 155 and 156 as limiting section 271(e)(1) of the US Patent Act.114 In Chartex, the Federal Court of Appeals also supported observation in Intermedics v. Ventritex, that MDPP could use the data derived from those devices for more purposes than for the FDA approval. This observation in Chartex by the Court of Appeals was based on its observation in Telectronics Pacing Sys., Inc. v. Ventritex Inc., 982 F. 2d 1520, 1524, 25 USPQ2D 1196, 1199 (Fed. Cir. 1992) where the CAFC reasoned

“If Congress intended to make [immediate competition at the end of the patent term] more difficult, if not impossible, by preventing competitors from using, in an admittedly non-infringing manner, the derived test data for fund raising and other business purposes, it would have made that intent clear. The statute contains no such provision.”115

It repeatedly affirmed the judgement in Intermedics v. Ventritex (775 F. Supp. 1269, 1278, 20 USPQ2D1422, 1428 (N.D. Cal. 1991), affirmed , 991 F.2d 808 (Fed. Cir. 1993) (non-precedential decision) that “non-infringing activities, by definition, do not constitute infringement.” 116 and “do not require the shield of the FDA exemption.”117

(FDA has its own requirement that prohibit sponsors of medical devices from promoting, test marketing or commercializing, investigational devices. 21 C.F.R. s. 812.7(b) (1989). Commercializing a device means charging the subjects or investigators more than the costs of manufacturing, researching, developing, and handling the device. 21 C.F.R. s. 812.7(b) (1989))

A very relevant observation made by the CAFC in Telectronics during the development of section 271(e)(1) was that “As the House of Representative Committee on Energy and Commerce stated, “the Constitution empowers Congress to grant exclusive rights to an inventor for a limited time. That limited time should be a definite time and, thereafter,

114 The Court of Appeals observed that “Although section 156 and section 271(1e)(1) of title 35 passed Congress as sections 201 and 202 of the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417 ss. 201, 202, 98 Stat. 1585, 1598-1603 (1984), this court declines to read possible limitations from one section into another.”

115 Telectronics Pacing Sys., Inc. v. Ventritex Inc., 982 F. 2d 1520, 1524, 25 USPQ2D 1196, 1199 (Fed. Cir. 1992), p. 1525

116 Chartex International PLC v. M.D. Personal Products, NO. 92-1556, 1993 U.S. App. LEXIS 20560, at 7, 9 (Fed. Cir. Aug. 12, 1993), p. 8

117 Chartex International PLC v. M.D. Personal Products, NO. 92-1556, 1993 U.S. App. LEXIS 20560, at 7, 9 (Fed. Cir. Aug. 12, 1993). P. 8

immediate competition should be encouraged.” H.R. Rep. No. 98-857 n(i), 98th Congress., 2d Sess. 46 (1984), reprinted in 1984 U.S.C.C.A.N. 2647, 2679. If Congress intended to make that more difficult, if not impossible, by preventing competitors from using, in an admittedly non-infringing manner, the derived test data for fund raising and other business purposes, it would have made that intent clear. The statute contains no such provisions.”118

Intermedics argued that infringing activities permitted under s. 271(e)(1) was “solely for uses reasonably related to the development and submission of information under a federal law, which regulates the manufacture, use, or sale of drugs.”

The Court in Intermedics observed that the primary concern of US Congress behind enactment of s. 271(e)(1) “was to create legal environment that would enable new, medically beneficial, cost-competitive products to reach the general marketplace in meaningful volume just as soon as the undistorted operation of the patent laws would permit (i.e., as soon as the 17-year life of relevant patent expired).”119 The Court in Intermedics further observed that

“The emphasis in other words should be on the positive, not the negative. And it would be inconsistent with the positive goal of maximizing post¬patent availability for lower priced new products to artificially limit the exemption only to those parties who would (or could) not enter the market place until after the patents expired.

There are additional, arguably more telling difficulties with plaintiff’s position. We note first that Congress explicitly rejected an effort by Representative Moorehead to limit the availability of the exemption to the last year of the term of any relevant patent. (See Legislative History at

118 Telectronics Pacing Sys., Inc. v. Ventritex Inc., 982 F. 2d 1520, 1524, 25 USPQ2D 1196, 1199 (Fed. Cir. 1992), p. 1525

119 Intermedics, p. 1273, The court in Intermedics quoted from the opinion of the United States Court of Appeals for the Federal Circuit in Roche Products that the experimental use exception was not broad enough to protect manufacturers of generic drugs while they were conducting the extensive field tests of their products that were necessary to generate the data that the FDA required before granting permission to market the drugs commercially. The emphasis was on commercialization of the patented product in the territory of the patent. In the legislative battle that ensued between generic drugs manufacturers and the main manufacturers, “it was clear that a principal purpose of the generic drug interests was to position themselves to be able to market their products on a massive commercial scale just as soon as the patent rights expired on the drugs which the generics incorporated.”

2692). Thus, it is clear that the issue of limiting the availability of the exemption was squarely considered by the legislative Branch. Yet that Branch did not even remotely intimate in the statute that it enacted that it wanted any such limitation imposed. This fact should make the judiciary extremely reluctant to superimpose a substantial reduction in the scope of the statute that has no basis in statutory language.”120

Based on the US Supreme Court’s observation in Eli Lilly, the US court observed that medical devices do not have to be compared to its patented prototype as is the case with bioequivalency testing of generic drugs. “Such a manufacturer, though subject to FDA approval and theoretically engaged in activities “solely for uses reasonably related” to such approval, may not believe that it is infringing, and therefore may have no reason to wait until the expiration of the allegedly infringed patent to begin commercial marketing.121″

A very pertinent observation raised by Intermedics was regarding constitutionality of s. 271(e)(1) as it would amount to “taking” without compensation. The court in Intermedics observed “Congress extensively considered whether the interference with a patent holder’s rights contemplated by the statute would amount to an unconstitutional taking. (See Legislative History at 2711-2714). Subsequently, the Supreme court considered whether the inclusion of medical devices along with drugs within the scope of the statue would create a taking. The Court concluded that it would not, noting along the way that the competitive injury resulting from the exemption statue would be de minimis in some cases although “surely it is substantial in others.” Eli Lilly and Co. v., Medtronic, Inc., 110 S. Ct. 2683, 2692, n. 5, 2693, n. 7, 110 L.ED. 2d 605, 15 U.S.P.Q.2D (BNA) 1121.”122

However, in the follow up the Intermedics Court made it clear that the court would “maintain the patent holder’s rights to exclude others (including defendants) from the general commercial marketplace, the harms that a patent holder may suffer because of a competitor’s use of s. 271(e)(1) are substantially the same regardless of when the defendant hopes to conclude testing.” It is the protection of the patent holder from the

120 Intermedics, p. 1273

121 Intermedics, n. 2, p.1273

122 Intermedics, n. 2, p.1275

“commercial marketplace” and the harms that a patent holder may suffer in the territory of the patent that is the substantial issue, not the general making of the patented product. In Amgen v. Hoechst Marion Roussel (3 F. Supp. 2d 104), the court discussed export of a quantity from Batch 07 by Hoechst to its Japanese affiliate in early part of 1997. The argument given by Hoechst was that this export was to be “used as a standard reference in studies being conducted to evaluate an alternative manufacturing process”.123 Amgen objected to this export as the shipment apparently bore no reasonable relationship to FDA approval because no approval had been sought for the alternative process. The Amgen court observed

“There is no question but that an alternative manufacturing process would require separate FDA approval. See 21 C.F.R. s. 601.12 (b) Moreover, the FDA Guidelines contemplate the use of a reference standard sample from one manufacturing process to evaluate the effects of alternation in that process. See Center for Biological Evaluation and Research and Ctr. For Drug Evaluation and Research, FDA Guidance Concerning Demonstration of Comparability of Human Biological Products 3-6 (1996) at 3-6, App. Defs.’Mem. Supp. Mot. Summ. J. (hereinafter “Def. App.” Tab 25. The defendant’s efforts to evaluate that process were therefore within the class of activities protected by the statute, regardless of whether they had sought FDA approval at the time. See Abtox, 122 F.3d at 1027, 1029-30. Amgen cannot defeat application of the statute merely by questioning the Defendant’s sincerity, and thus has raised no genuine issue of material

fact.” 124

In Amgen, the court also discussed the question of commercial production of patented products by Generic manufacturer. The argument was based on Amgen’s assertion that Hoechst had planned a total of five batches of commercial scale production of GA-EPO as required by Japanese and European regulatory agencies and had produced at least three commercial scale production apart from batch 07. However, the court observed

123 Amgen v. Hoechst Marion Roussel, 3 F. Supp. 2d 104, p. 108

124 Amgen v. Hoechst Marion Roussel, 3 F. Supp. 2d 104, p. 108

“The FDA requires that a manufacturer demonstrate the consistency of its manufacturing process by producing three consecutive batches within certain tolerances of a standard reference. See, FDA, Guidance Concerning Demonstration of Comparability at 19, Def. App. Tab. 25. The Defendants acknowledge that the first two batches were consistent with one another, Unwin II Tr. At 12-14, but that they were not satisfied with the potency of the batches, and do not plan to submit them to the FDA in satisfaction of the consistency batch requirement. Amgen asserts that the Defendants abandoned a successful effort to demonstrate consistency because of their commercial disappointment in the product quality.”125

The court in Amgen observed that Hoechst was protected by section 271(e)(1) if the production of three batches of GA-EPO was objectively likely to generate useful information, even if the results were discarded for reasons unrelated to FDA approval. The court specifically observed that retention of the GA-EPO manufactured is not an activity that could constitute infringement under section 271(a) as was observed in Telectronics at p. 1523-24.126

The CAFC in Abtox, Inc. v. Exitron Corporation 122 F.3d 1019

125 Amgen, p. 110

126 Amgen court observed “The exemption is not so ephemeral that it will be lost as a result of conduct which postdates the making, using, or selling of the patented product. Telectronics, 982 F.2d at 1524. The retention of the GA-EPO following its manufacture is not an activity that could constitute infirmnent under Section 271(a). Cf. Id. At 1523-24.” p. 110

127 Abtox, Inc. v. Exitron Corporation 122 F.3d 1019

Some of the courts have given different interpretations of s. 271 of US Patent Act these interpretations invariably ignored the judgements of the superior courts as has already been discussed.

Infigen (Infigen v. Advanced Cell Technology, Inc. 65 F. Supp. 2d 967) and Scripps Clinic v. Genentech (666 F. Supp. 1379) have given contradictory opinions but they appear to have ignored practically all the decisions discussed above particularly judgements of Federal Court of Appeals in Chartex and Apotex regarding the interpretation of the US Supreme Court’s judgement in Eli Lilly v Medtronics. This has become a unique feature of the US judiciary, which instead of following judicial discipline as envisaged in the US Constitution consider themselves institutions promoting the perceived national cause. In Scripps,128 the Court tried to use a paragraph from the House Committee Report to justify a restrictive interpretations of s. 271(e) of the US Patent Act. The relevant part of the House Committee Report says

“a generic drug manufacturer may obtain a supply of a patented drug product during the life of the patent and conduct tests using that product if the purpose of those tests is to submit an application to FDA for approval. … the only activity which will be permitted by the bill is a limited amount of testing so that generic manufacturers can establish the bioequivalency of a generic substitute. The patent holder retains the right to exclude others from the major commercial marketplace during the life of the patent. Thus, the nature of the interference with the rights of the patent holder is not substantial.” (pp. 2689-2692).129

The only relevant phrase limiting the scope of section 271(e)(1) is “major commercial marketplace during the life of the patent” which can be read as permitting generic manufacturers to do everything except to disturb the major marketplace during the term of the patent. Scripp has been overruled by the CAFC in Telectronics, Chartex, Abtox and Intermedics and by the US Supreme Court in Eli Lilly v. Medtronic.

In Infigen (Infigen v. Advanced Cell Technology, 65 F. Supp. 2d 967), the District Court for Western District of Wisconsin made two inconsistent observations pertaining to relationship between products under section 156 and 271(e)(1) and experimental use.

128 Scripps Clinic v. Genentech, 666 F. Supp. 1379

129 See H.R. Rep. No. 98-857, 98th Cong., 2nd Session, reprinted in 1984 U.S. Code Cong. & Ad. News 2647, 2689-2692

Both of them it read incorrectly and against the series of decisions of the superior courts. Regarding total symmetry between products in sections 156 and 271(e)(1), it observed “My own research shows no cases granting the s. 271(e)(1) exemption from the otherwise infringing use of any product other than those drugs, medical devices, food and color additives defined specified in section 156. See, e.g., Eli Lilly, 496 U.S. 661, 110 L.Ed. 2d 605, 110 S.Ct. 2683 (implanatable cardiac defebrillator)

It is unfortunate that with so much of research, Judge Crabb did not take into consideration Eli Lilly v. Medtronic properly nor its interpretation by the Federal Circuit which specifically says that section 156 is not to be read as limiting the exemption under Section 271(e)(1). Another pronouncement by Infigen court is regarding experimental use where based on limited research, the court did not appreciate the fact that Whittemore v. Cutter, 1 Gall. 429 F. Cas, 1120, 1121 (C.C.D. Mass. 1813) was interpreted by Justice Story himself in Sawin v. Guild.131

The relationship between Section 271(e)(1) and Section 156 has been discussed by the US district Court in Bristol-Myers Squibb v. Rhone-Poulenc Rorer (2001 U.S. Dist. EEXIS 19361) on the basis of US Supreme Court observation in Eli Lilly v. Medtronic, 496 U.S. 661, 665 to hold that “nothing in text of Section 271(e)(1) indicates that Congress intended to restrict the scope of term “patented invention” to those products

130 Infigen v. Advanced Cell Technology, 65 F. Supp. 2d 967, pp. 980-981

131 Sawin v. Guild, 21 F. Cas. 554, p. 555

covered by Section 156″132. The court in Bristol discussed the narrow interpretation of s. 271(e)(1) in Scripps and pointed out the misplaced observation by the Scripps court. It said

” … the statement cited by RPR (Rhone Poulenc Rorer) was made by the Committee of the Judiciary in response to a failed amendment, offered by one of its members, Mr. Moorhead. Mr. Moorhead recognized that the language of Section 271(e)(1) was so broad that it would apply to all drug patents, not merely those that are covered under Section 156, and only disallow commercial use of a patent. (1984 U.S. C.C.A.N. at 2719-20). Despite the broad scope of the language used in Section 271(e)(1) having been expressly brought to the attention of members of Congress, no attempt was made to refine or narrow the language used in the text of Section 271(e)(1).”133 The Court in Bristol also quoted from the House Committee on Energy and Commerce to discuss the balance of bringing new generic drugs to the market with the need to uphold the rights of patent

134

owners.

Experimental Use in Germany

Three cases having direct relevance to the concept of total ban on the “making” as narrated in Article 28 of the TRIPS Agreement in Germany are “Klinische Versuche I” (Federal Supreme Court of Germany [1997] RPC 623, LEXIS UK Patent Cases 32, (BGH), 11th July, 1995, GRUR 1996, 109 – “Klinische Versuche”), Klinische Versuche II [1998] RPC 423, Lexis UK Patent Cases 32 and “Zwangslizenz” (Federal Supreme Court (BGH), 5 December, 1995, GRUR 1996, 190 – “Zwangslizenz”). In Klinische I, the defendant had developed a drug called Polyferon for treating classic rheumatoid arthritis by experimenting with human interferon resulting in an approval by the German

132 In Eli Lilly v. Medtronic, the US supreme court observed that “The term patented invention in 271(e)(1) is defined to include all inventions , not drug-related inventions alone. See 35 U.S.C. s. 100(a) (when used in this tittle unless the context otherwise indicates … the term “invention” means invention or discovery.)” p. 665

133 Bristol-Myers Squibb v. Rhone-Poulenc Rorer (2001 U.S. Dist. EEXIS 19361), p. 10

134 Ibid. 11, “Section 271(e)(1) provides that it shall not be an act of infringement to make, use or sell a patented invention for use reasonably related to the development and submission of information under a federal law which regulates the approval of drugs. The section does not permit the commercial sale of a patented drug by the party using the drug to develop such information, but it does permit the commercial sale of research quantities of active ingredients to such party. The information which can be developed under this provision is the type which is required to obtain approval of the drug. A party which develops such information, but decides not to submit an application for approval, is protected as long as the

Federal Department of Health. They had also been granted compulsory licenses ( see 24 IIC 397 (1993)) after the plaintiffs had rejected their request for a license. Some support the notion that the defense of experimental use only extends to testing the functioning of the patented invention while others argue that experiments extend to experimental activities that go beyond the actual research i.e. for “obtaining approval by a regulatory body and thereby preparing for commercial exploitation.”135

Section 11(2) of the German Patent Act introduced in 1981, permits acts done for experimental purposes relating to the subject matter of the patented invention which was essentially based on Community Patent Convention (CPC 1975

development was done to determine whether or not an application for approval would be sought.” 1984 U.S.C.C.A.N. at 2678

135 Michael Kern, Recent Federal Supreme Court decisions on Experimental Use and Compulsory Licensing, CASRIP Newsletter (V. 312) Europe/Germany

136 Klinische I, “”… the wording of the Act when examined naturally rather indicates that s. 11 No. 2 of the Patents Act in principle exempts all experimental acts as long as they serve to gain information and thus to carry out scientific research into the subject-matter of the invention, including its use. There are then included, for example, utilization acts for experimental purposes undertaken with the subject matter of the invention in order to discover the effects of a substance or possible new uses hitherto unknown. Since the provision makes no limit, either qualitative or quantitative on the experimental acts, it cannot matter whether the experiments are used only to check the statements made in the patent or else to obtain further research results, and whether they are employed for wider purposes, such as commercial interests.”

discovered by third parties whilst using the patented substance may severely encumber the patent’s exclusive exploitation.”137 The German Supreme Court observed that Section 11(2) exempts all acts from the effects of a patent that are done for experimental purposes relating to the subject matter of the patented invention, “the permissibility of such experiments cannot be contingent on what the purposes they are to achieve, be they pure scientific or regulatory in nature.” The German Supreme Court rejected the argument of diminishing the economic value of the patent because of such experimental use by observing that the patent protection for further uses “does not flow from the experimental use exemption but is inherent in the patent system.”138 While for the new use of the patented product there is no ban but the dependent patent can be exploited only by the consent of the patent holder.

In Klinshce II, the German Supreme Court dealt with the experimental use where the results from the experiments were utilized for third party submission.

The German Supreme Court Decision in Klinische II was between Ortho Pharmaceuticals, an exclusive licensee of Kirin-Amgen Inc. (USA) v. Merckle which used “rHu EPO Merckle” which contains recombinant human erythropoietin as the active ingredient to conduct clinical tests. The test was done to find out whether the said product was marketable and whether it differed from the existing EPO product in a clinically relevant manner. Since the experimental acts were in the form of clinical tests, they also provided necessary data for the health authority approval as a drug. In its decision of April 17, 1997, the German Supreme Court reiterated reasons given in Klinische I and observed that all experimental acts are exempted irrespective of whether or not the tests produce purely scientific or predominately industrially exploitable results. It was immaterial whether the experiments were aimed at obtaining a substance” approval as a drug enabling the defendant to launch this drug right after the expiration of the patent.

137 Michael Kern, p.

138 Michael Kern, p.

Experimental use in Japan

In Ono Pharmaceuticals Co., Ltd. v. Kyoto Pharmaceutical Industries, Ltd.139, the Japanese Supreme Court discussed this issue of experimental use exemption and generic drugs. Section 69(1) of the Japanese Patent Law provides exemption for “the working of the patented invention for experiment and research”. Ono asserted that Kyoto Pharmaceutical is selling the drugs of same efficaciousness as the patented drug during the patent term for the purpose of obtaining data that accompany an application for the approval of manufacture under section 14 of the Pharmaceutical Affairs Law. The Japanese Supreme Court decided that the use of drugs having the technical scope of the patented invention is “working of the patented invention for experiment and research” provided in Section 69(1) of the Japanese Patent Law and would not constitute patent infringement because

a. The patent system is to encourage inventive activities by providing those who disclose inventions with monopolizing rights for the use of the inventions during a certain period of time, and give third parties opportunities to use the disclosed inventions, so that it contributes to the development of industries. In consideration of this, it is one of the basis of the patent system that after the patent term expires, anyone should be able to freely use the inventions, so that the society in general would benefit.

b. The Pharmaceutical Affairs Law stipulates that a prior approval by the Minister of Health and Welfare is to be obtained for the manufacture of drugs for ensuring safety, etc., and that upon carrying out various experiments, data, etc. on the experimental results must accompany an application when requesting such an approval. … If under the Patent law such experiments are not be interpreted as “experiments” stipulated in Section 69(1) of the Patent Law and therefore such manufacture, etc. are not possible during the patent term, the third party cannot, as a result, freely exploit the invention for a substantial period of time even after the term of the patent expires. This result is against the basis of the patent system mentioned above.”

139 Ono Pharmaceuticals Co., Ltd. v. Kyoto Pharmaceutical Industries, Ltd, Case No. 1998 (ju) 153 delivered on 16 April, 1999

c. … If it is possible to exclude others from carrying out manufacture, etc. for the experiments required in applying the patent term for a substantial period of time, such extension of the patent term goes beyond what is expected under the patent law as benefits to be given to the patentee.”

The above examination of a series of decisions from a number of countries show that “making” in the patent acts has never been recognized either in the USA or in the EC or in Japan, the major users of patent rights as absolute and in a literal sense and that making monopoly excludes others only from the commercial market place of the patent and not from any other purpose which would not affect the commercial market place of the patent holder and his profit in the territory of the patent.

Offer to Sell and Export

Another important issue related to extension of patenting monopoly to exports is that of “offer to sell” introduced in the US Patent Act s. 271(a) as a result of the TRIPS Agreement which Agreement itself was the result of what the US persistently “”sought to include” and which was at the top of our (USA’s) trade agenda and was considered to be an essential ingredient for a successful agreement” (GATT negotiations).140 It has been extensively discussed in 3DSys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 48 USPQ2D 1773 (Fed. Cir. 1998), Rotec Industries v. Mitsubishi International Corporation (215 F.3d 1251) and in Quality Tubing v. Precision Tube Holdings (75 F. Supp. 2d 613), Cybotronics Ltd. v. Golden Source Electronics, Ltd., 130 F. Supp. 2d 1152, 1167-73 (C.D. Cal. 2001), Cybotronics Ltd. v. Golden Source Elecs., Ltd. No. 99CV 10522, 2001 WL 327826, at 8-9 (C.D. Cal., Feb. 26, 2001), Star Scientific Inc. v. R. J. Reynolds Tobacco Co. 174 F. Supp. 2d. 388 (D. Md. 2001) and in Recycling Sciences International, Inc. v. Soil Restoration & Recycling, L.L.C.141 in the USA. In Rotec, the

140 Memorandum of December 15, 1993, for the US Trade Representative: Trade Agreements Resulting from the Uruguay Round of Multilateral Trade Negotiations, 58 Fed. Reg. 67, 236, 67, 289 (1993) (hereinafter memorandum of Dec. 15, 1993).

Senate Report 104-394, 104th Cong. 2nd Sess. Accompanying Pharmaceutical Industry Special Equity Act of 1996 describes in detail the extraordinary effort of the USA to push for these provisions in the TRIPS Agreement when it stated “There is no question that disagreements over intellectual property rights deadlocked negotiations at times during the lengthy 7-year process. Our trade negotiators experienced ardent opposition from a number of developing countries, and even from certain developed countries in the European Community. This was an unacceptable piracy of U.S. creativity and innovation.” The accompanying note specifically mentioned Brazil and India two countries responsible for the extraordinary effort made by the USA to

141 No. 00 C 0331, 2001 WL 969040 (N.D. Ill. Aug. 24, 2001

government of the People’s Republic of China (“PRC”) asked for bid proposals for five units of concrete placings system to be used in the Three Gorges Dam Project on the Yangtze River. Mitsubishi International formed a partnership with Potain, a French corporation and C.S. Johnson. Johnson engaged Defendant Tucker Associates, Inc. as an independent contractor to prepare the design work for the project. On 16th December, 1996, Potain, Mitsubishi and TGDPC signed a purchase and sale agreement of two of the complete concrete placing systems. Although the agreement was between parties who had nothing to do with the USA but Rotec inter alia asserted that

1. the offering parties met several times in the USA

2. A Chinese delegation visited Johnson’s headquarters in Champaign, Illinois just before the agreement was signed

3. Tucker prepared pricing information and worked on finalizing design and financial aspects of the bid proposal at his offices in Oregon

4. the offer provided that non-staple components were to be made in the USA by a designated U. S. supplier.

In 1998, the District Court granted summary judgment motions to the Defendant as the ground narrated by Rotec would not constitute “offer to sell” which had been introduced in the US Patent Act as the US commitment to TRIPS which as per the Federal Court of Appeals in Rotec, “the United States agreed to the broader protections provided by others, suggesting that the amendment to s. 271(a) reflects the approaches of the other signatory nations.” 142

The above observation of the Federal Circuit may raise few eyebrows as the TRIPS Agreement is normally perceived a result of the US unilateral effort and regarded by its

142 Rotec Industries v. Mitsubishi International Corporation (215 F.3d 1251), p. 1251, “The statutory history of s. 271(a) may be divided into two distinct periods: before the GATT Uruguay Round Trade Related Aspects of Intellectual Property (“TRIPS) agreements, and after. Before the TRIPS Agreements, s. 271(a) granted patent holder the right to exclude others only from “,a making, using or selling the patented invention throughout the United States.” This court had construed this grant strictly, so that “neither intent nor preparation [to sell] constitute[d] infringement.” Laitram Corp. v. Cambridge Wire Cloth co., 919 F.2d 1579, 1583, 16 USPQ2d 1929, 1932 (Fed. Cir. 1990). In addition, a party could not be held liable for threatening infringement, contracting to make infringing devices, or even beginning construction of infringing devices. AS we noted in Eli Lilly & Co. v. Medtronic Inc., 915 F. 2d 670, 673, 16 USPQ2d 2020, 2023 (Fed. Cir. 1990), s. 271(a) did not cover acts other than an actual making , using or selling of the patented invention in its completed form. Moreover, the Supreme Court held in Deepsouth Packing Co. v. Laitram corp. , 406 U.S. 518, 527 (1972), that s. 271(a) excluded various activities prior to an actual sale.

officials as great success against the opposition from the developing countries led by Brazil and India. The attempt to extend patenting monopoly in this respect appear to be a dissembling stance of certain countries, which has used the TRIPS negotiations to introduce amendments in their patent acts.143

Using Pfaf v. Wells Elecs. Inc., 525 U.S. 55 (1998) analysis of s. 102(b), Federal court of Appeals concluded that norms of traditional contract law should be the basis for s. 271 analysis and “the product must be subject of a commercial offer for sale.” (Pfaff at 67, 48 USPQ2d at 1646). The majority in the Federal Court of Appeal did not “reach the issue of whether patent infringement under the “offer to sell” language requires that both the offer and the sale it contemplates occur in the United States.”144 Judge Newman in her concurring judgment however, affirmed the decisions in Quality Tubing by sating that “However, an offer to sell a device or system whose actual sale can not infringe a United States patent is an infringing act under s. 271. … It is clear, however, an infringing offer to sell, s. 271(i), must be of an item that would infringe the United States patent upon the intended sale.”145

In Quality Tubing v. Precision Tube Holdings, 75 F. Supp. 2d 613 the court agreed with the argument of Quality Tubing that offer to sell where actual sell did not take place in

The court found that “sales rhetoric and related indicia such as price” could not infringe a patent unless the patentee proved the defendant was “selling patented invention.” Id.

143Rotec Industries v. Mitsubishi International Corporation (215 F.3d 1251), “In 1993, however, the United States completed negotiations on the TRUIPS Agreements. As a result of these negotiations, the United States agreed to amend its patent law to impose additional infringement liability for “offer to sell.” In 1994, Congress enacted a statute to satisfy the nation’s pledge under TRIPS. The statutory language of the amendment to s. 271(a) provided that, after January 1, 1996, “whoever without authority makes, uses, offers to sell or sells any patented invention, within the invented states … infringes the patent.” Unfortunately, other than stating that an “offer to sell” includes only those offers “in which the sale will occur before the expiration of the term of the patent,” 35 U.S.C. s. 271(I) (Supp. 1997), Congress offered no other guidance as to the amending of the phrase. .. As mentioned above the amendment to s. 271(a) served to implement our nation’s commitment under the TRIPS Agreements. Accordingly we must recognize one of the agreement’s declared purposes: harmonizing worldwide patent law. See Lisa B. Martin & Susan L. Amster, Intellectual Property Protections in the New GATT Accord 2 J. Proprietary Rights, 9, 9 (1993).Before the TRIPS Agreements, the United States stood apart from its trading partners in limiting infringement protection only to actual “sales, ” as opposed to “offers for sale.” Indeed, our first draft proposal during the TRIPS negotiations reflected our unique approach in setting forth only “making, using or selling” patented inventions as acts of infringement. See U.S. Draft Agreement on Trade Related Intellectual Property Rights, Presented at GATT Uruguay Round negotiations in Geneva May 14, 7 International Trade Rep. (BNA) 708, 711 (may 16, 1990). Ultimately, however, the United States agreed to the broader protections provided by others, suggesting that the amendment to s. 271(a) reflects the approaches of other signatory nations. ” (pp.1251-52)

144 Quality Tubing v. Precision Tube Holdings (75 F. Supp. 2d 613), p. 623

145 Rotec Industries v. Mitsubishi International Corporation (215 F.3d 1251), p. 1257-1258

the United States would amount to expanding the reach of the United States laws into foreign markets, “placing an unfair burden on United States companies in competing with companies that have foreign plants.”146 The Court in Quality Tubing observed “The secondary sources echo these arguments. As one commentator has noted, “to prohibit [a] hypothetical N.Y. businessman from making the phone call [to sell a German manufactured widget to an Australian customer] is to regulate engagement in the legal act of foreign manufacturing and selling of a U.S. patented product … The U.S. Patent holder would, in effect, obtain international exclusive rights vis a vis American based businesses .” Edwin D. Garlepp, An Analysis of the Patentee’s New Exclusive Right to “offer to Sell”,” 81 J. Pat. & Trademark Society 315, 326 (1999). Chisum on Patents notes that the “offer to sell” language extends the scope of a patentee’s rights to unauthorized promotional activities that fall short of actual sale, making or use.” 5 Donald S. Chisum on Patents s. 16.02[1], at 16-9 (1988).”147 The Court in Quality Tubing made this point clear that the expansion of the statute to include the earlier stage of an infringing activity, the offer to sell as well as the actual sale, means that the sale for which the offer is made must itself be an act of infringement. Deriving support from s. 271(I) which defines the offer to sell as “that in which the sale will occur before the expiration of the patent.” 35 U.S.C. s. 271(i), the court observed that “an offer to sell is infringing only if the sale it contemplates would also be infringing.”148 The court further observed that “Such a construction avoids confusion over whether an offer to sell a product in a foreign market, made during an international telephone call or in an electronic mail transmission in or faxed in the United States, is an act of infringement.”149 Quoting Deepsouth Packing, 406 U.S. at 531, the Court in Quality Tubing observed that a reading of the term “offer to sell” within the United States to infringe s. 271(a) may be an impermissible expansion of the territorial scope of U.S. patent laws. Garlepp, supra, at 326. The reading Quality Tubing advocates “would place a burden on American

146 Quality Tubing v. Precision Tube Holdings (75 F. Supp. 2d 613, p. 623

147 Quality Tubing v. Precision Tube Holdings (75 F. Supp. 2d 613, p. 623

148 Quality Tubing. 624, n. 10

149 Quality Tubing, p. 625

businesses that would not exist for foreign competitors, [and that] courts are sensitive to such competitive burdens.” Garlepp, supra, at 326-27.”150

In Cybotronics, the court held that “liability under s. 271(a) does not extend to “offers to sell” which do not contemplate actual “sales” of goods to be consummated within the United States. The addition of the “offer to sell” language to 271(a) was not intended to add a whole new substantive basis for liability to the [Patent Act] language to the [Patent Act], but … merely … to incorporate into the state coverage of activities that might pre¬date the actual consummation of sale within the United States.”151

The “offer to sell” has been an issue in the European patent acts for quite some time. In Kalman v. PCL Packaging (U.K.) Ltd., 1982 F.S.R. 406 (at 1982 WL 221922) the UK court decided that “offers to dispose off” the patented product “must be read as meaning “offers in the United Kingdom to dispose off the product in the United Kingdom.” The relevant sections in the Members of the EC are United Kingdom Patents Act 1977 s. 60 (banning “offers to dispose of”)152, French Patent Law art. 29 (forbidding “offer[s] to supply”)

decisions. Gerber Garment Technology Inc. v. Lecra Systems Ltd.,154 decided in 1995

was actually used by majority in Rotec to suggest that even advertising could constitute infringement under “offer to sell”. However, here the actual sale and delivery had taken

150 Quality Tubing v. Precision Tube Holdings (75 F. Supp. 2d 613, p. 625

151 Cybiotronics, p. 1171 quoting Quality Tubing , 75 F. Supp. 2d at 623-24

152 United Kingdom Patents Act 1977 s. 60 reads in part:

[A] person infringes a patent for an invention if, but only if, while the patent is in force, he does any of the following things in the United Kingdom in relation to the invention without consent of the proprietor of the patent, that is to say-(a) where the invention is a product, he makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise …

Section 60(1)(b) deals with inventions that are processes . It reads in part [W]here the invention is a process, he uses the process or he offers it for use in the United Kingdom when he knows, or it is obvious to a reasonable person in circumstances, that its use there without the consent of the proprietor would be an infringement on the patent …

Section 60(2) reads in part

[A] person (other than the proprietor of the patent) also infringes a patent or an invention, if, while the patent is in force and without the consent of the proprietor, he supplies or offers to supply in the United Kingdom a person other than a licensee or other person entitled to work the invention with any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows, or it is obvious to a reasonable person in the circumstances that those means are suitable or putting, and are intended to put, the invention into effect in the United Kingdom.

153 John P. Sinnott and William Joseph Cotreau, World Patent Law and Practice: Patent Statutes, Regulations and Treaties, Mathew Bender/Lexis Law Publishing, (2000)

154 1995 WL 1082938 (United Kingdom Patents Court Mar. 20, 1995)

place in the United Kingdom and only confirm that offer to sell is related to sell in the territory of the patent holder. Justice Jacob in Gerber observed that Section 60 of the United Kingdom is intended to have effect similar to the corresponding provisions in the Community Patent Convention (CPC)155 and not to reflect the English law of contract.156 Kalman v. PCL Packaging (UK) Ltd.157 was cited by Judge Newman in her concurrence in Rotec Industries.158 In Kalman, PCL purchased filter used in a plastics extruding process covered by Kalmans’ United Kingdom patent.159 Kalman sued both PCL and Berlyn, the US supplier for infringement. Two filters were sold and delivered to PCL in Massachusetts with PCL responsible for moving it to the United Kingdom and involved at least one communication directly from Berlyn to PCL in the United Kingdom.

Justice Falconer in Kalman decided that the sale had taken place in the United States noting :

“[the filters were sold by Berlyn corporation in the United States of America f.o.b. shipping point. The sale was completed there, the title had passed to the buyer and on delivery to the shipping points Berlyn Corporation had parted with actual and constructive possession and had no rights thereafter in either filter.”160

Regarding “offer to dispose” Justice Falconer observed that “If I am right as to that, it seems to me that the expression “offers to dispose of” must be read as meaning, ‘offers in the united Kingdom to dispose of the product in the United Kingdom.'”161

In Benton v. Latour,162 Justice Dillon observed

What is said is that within Section 60 of the Patents Act, 1977, it is an offer to dispose of the infringing machines

155 Gretchen Ann Bender, Clash of the Titans: The Territoriality of Patent Law vs. The European Union, 40 IDEA, 49, 59 (2000). Article 29 of the convention deals with an infringement, stating in part: “A Community patent shall confer on its proprietor the right to prevent all third parties not having his consent) from making, offering, putting on the market or using a product which is the subject –matter of the patent …” Community Patent convention 76/76/EEC, 1976 O.J. (L 17), art. 29

156 Gerber Garment Tech., 1995 WL 1082938, at 411

157 1982 WL 221922. (United Kingdom Patents Court Mar. 8, 1982)

158 Rotec Indus., 215 F.3d at 1259 (Newmann J. concurring)

159 1982 WL 221922. (United Kingdom Patents Court Mar. 8, 1982) at 408-09

160 Kalman v. PCL Packaging (U.K.) Ltd., 1982 F.S.R. 406 (at 1982 WL 221922) at 410

161 1982 WL 221922. (United Kingdom Patents Court Mar. 8, 1982) At 418. Rotec Industries Inc., v. Mitsubishi Corp., 215 F.3d 1246, 1259 (Fed. Cir. 2000)(Newmann, J. concurring).

162 Benton v. Latour,162 Court of Appeal April 21, 1993, (LEXIS, UK Cases, Combined Courts).

judgment, recorded at page 5-G that it is settled that is section 60 only covers acts which take place in the United Kingdom. He referred to a decision of Mr. Justice Falconer, where Mr. Justice Falconer held that where the property and title to the goods passed outside this country there was no disposal within the United Kingdom and thus no infringement. Mr. Justice Aldous commented that, in Mr. Justice Falconer’s case, the property passed in the United States and the goods were sold FOB. As to the present case Mr. Justice Aldous considered that it was wholly speculative as to whether any disposal of the Latour machines will take place in the United Kingdom as opposed to France. Even if the letter can be taken as an offer to dispose of the machines, it cannot be taken as an offer to dispose of the machines in the United Kingdom, he said.

Whereas throughout Rotec Industries, the Court argued that the USA in recognition of the TRIPS Agreement which was based on similar provisions in certain European countries, introduced the term “offer to sell” was in the US Patent Act, Sulkis163 argued that offer to sell is not to be linked to sell in its territoriality because each right in the US Patent Act interpretation in terms of Adam v. Burke164, is a separate substantive right and it cannot be linked together. He also quoted from the dissenting opinion of Justice Blackmun in Deepsouth Packing noting

Use of International treaty to introduce changes in the domestic law

The issue of bringing export of patented products within the prohibition of patenting monopoly as insisted by the USA,165 Abbott166 and Bildt167 while asserting that the TRIPS Agreement even with exemption under Article 30 of TRIPS does not permit export of patented products to fulfill the requirements under Article 31 of the TRIPS Agreement as against the existing provisions in the internal or domestic law of these countries has a deeper and a wider implications whether a country which considers it as its obligation to accept the provisions in the international treaty as overriding its

163 Sulkis, David,, (2001), Patent Infringement by Offer to Sell: Rotec Industries, Inc. v. Mitsubishi Corporation, Houston Law Review, vol. 38, pp. 101-130

164 Adam v. Burke, 84 U.S. 453 (1873)

165 Communication from the USA, supra note 4

166 Abbott, supra note 8

167 Bildt, supra note 11

domestic provisions is not resorting to extra–constitutional method of introducing changes in its domestic law by forcing introduction of provisions or an interpretation of a particular provision in international treaty like the TRIPS Agreement which is not available in its domestic legal system. Whether members of the EC or country like the USA follows the doctrine of direct effect where individuals could move the court for implementations of the provisions of an international treaty entered in by the countries concerned or accepts provisions of international treaty as providing dominant context is a question that has been recently discussed by a number of scholars.168 Some of the countries have the provision of direct effect in their laws.169 However, the issue of Article 16.4 of the GATT 1994 and Section 23.2(a) of the Dispute Settlement Understanding directs such action by the nations concerned.

The effect of the provisions of the WTO and its various agreements and understandings whether already present or attempted to be incorporated in WTO Member countries domestic law has two aspects. One is in terms of Article XVI:4 of the GATT 1994 that enjoins

each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations [under WTO Agreements]” and the other Article 23.2(a) of the DSU which says “In such cases Members shall (a) not make a determination to the effect that a violation has occurred that benefits have been nullified or impaired or that attainment of objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or

168 Judson Osterhoudt Berkey, The European Court of Justice and Direct Effect for the GATT: A Question Worth Revisiting, European Journal of International Law, 9 (1998), pp. 626-657, Gerard Conway, Breaches of EC Law and the International Responsibility of member States, European Journal of International law, Vol. 13, No. 3, pp. 679-695, Naboth van den Broek, Legal Persuasion, Political Realism, and legitimacy: The European Court’s Recent Treatment of the Effect of WTO Agreements in the EC Legal Order, Journal of International Economic Law (2001) pp. 411-440

169 For example, the relevant section dealing with the effect of International treaty in the UK says

Section 53(5) No order or entry shall be made in pursuance of an application under 48 to 51 above which would be at variance with any treaty or international convention to which the United Kingdom is a party.

Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding.” A member of the WTO shall conform its laws and regulations and administrative procedures to the provisions of the WTO and its annexed Agreements and Understandings and also to the clarification of such provisions by the Panel or Appellate Body. Article XVI:4 as per the US explanation to the Panels’s question in U.S. Sections 301-310 says that Article XVI:4 of the GATT 1994 “provides an overarching statement in the WTO Agreements, clearly applicable to all annexed agreements and not just the GATT 1994, that no measures are grandfathered. Article XVI:4 thus serves to remove any doubt which might have existed in its absence that all measures must be brought into conformity as from January 1, 1995.170

It has another implication where if the negotiating countries introduce provisions in the WTO or its Agreements a particular interpretation, that attempt would amount to introducing a particular provision directly in their domestic laws or indirectly through its obligations in terms of Article XVI:4 of the GATT 1994. The interpretation of Article XVI:4 was discussed by the WTO Panel in US Sections 301-310171 where the EC argued that Article XVI:4 of the GATT 1994 provides for a more far-reaching and novel obligation upon WTO Members when compared to Articles 26 and 27 of the Vienna Convention on the Law of Treaties or to the legal situation existing under the GATT 1947. The GATT Article XVI:4 when read along with Article 3.2 of the DSU provides certain important consequences.172 These are

a. A conflict between incompatible domestic legislation and any obligation under the covered agreements must be resolved in favor of the latter. The Appellate Body in India – Patents (US) stipulates that there is no exception to such rule.173

b. The obligations under Article XVI:4 include legislation as well as administrative procedures and domestic regulations which enjoin the executive authorities to either modify their administrative instructions in the light of international obligations.

170 US 301-910, para 4.472, p. 112

171 United States-Sections 301-310 of the Trade Act of 1974, WT/DS152/R dated 22 Dec. 1999

172 United States-Sections 301-310 of the Trade Act of 1974, WT/DS152/R dated 22 Dec. 1999

173 Appellate Body Report on India – Patents (US), para 81

c. The terms “ensure” and “conformity” in Article XVI:4 taken together in their context

and in terms of WTO’s object and purpose obliges all executive authorities to act in

consonance with WTO law and to structure their law in a manner to ensure

predictability that the provision of the covered agreements will be achieved.

d. The principle of “good faith” as enshrined under Article 26 of the Vienna Convention

on the Law of Treaties along with Article 3.2 of the DSU requires domestic

legislation to be brought into conformity with the international obligations.

The advisory opinion rendered by the International Court of Justice (ICJ) on 26th April 1988, stated unequivocally that “it is “the fundamental principle of international law that it prevails over domestic law” and that “the provisions of municipal law cannot prevail over those of a treaty.”174

However, the true position adopted by the proponents of TRIPS and its modifications is what has been pronounced by the European Court of Justice (ECJ) in Portugese Republic case. The ECJ in para 49, which is the most crucial para for this discussion, and made it clear that unlike other international treaties, the provisions of the WTO along with its Agreements and Understandings cannot be applied directly except

“… where the Community intended to implement a particular obligation assumed in the context of the WTO, or where the Community measures refers expressly to the precise provision of the WTO agreements, that it is for the Court to review the legality of the Community measures in question in the light of the WTO rules (See, as regards GATT 1947, Fediol, paragraphs 1 to 22, and Nakajima, paragraph 31)”175 Similarly, while dealing with the effect of international obligations accepted by the USA pertaining to the USA, it is only those provisions which have been proposed by the USA and its allies are accepted to be relevant.

The negotiating history of Article XVI:4 is important to throw light on the actual meaning of this provision. The earliest text was prepared by Mr. Julio Lacartye-Muro,

174 1988 ICJ REP. 12, 34, para. 57 (Advisory Opinion of 26 April, 1988). The Observer Mission of the Palestine Liberation Organization was created by GA Res. 3237, 29 UN GAOR Supp. (No. 31) at 4, UN Doc. A/9631, 1974. The closure of the mission was required by the Anti-terrorism Act of 1987, Title X of the Foreign Relationship Authorization Act, 1988 and 1989, Pub. L. No. 100-204, Title X, S. 1001, 101 Stat. 1331, 1406 (codified at 22 U.S.C. A. S. 5201-5203 (West Supp. 1988))

175 Portuguese Republic v. Council, Case C-149/96 EC Reports 1999 p. I-08395, para 49

Chairman of the Negotiating Group on Dispute Settlement on 19th October 1990, which says

“The contracting parties shall:

(i) abide by GATT dispute settlement rules and procedures

(ii) abide by the recommendations, rulings and decisions of the CONTRACTING PARTIES

(iii) not resort to unilateral action inconsistent with GATT rules and procedures

(iv) for the purpose of (iii), undertake to adapt their domestic trade legislation and

enforcement procedures in a manner ensuring the conformity of all measures with

GATT dispute settlement procedures”.

The negotiating history of Article XVI:4 throw a proper light on the extent of a WTO Member’s obligations to conform its domestic law as per the WTO Agreements. The draft Agreement Establishing the Multilateral Trade Organization stated in its Article XVI:4

“The Members shall endeavor to take all necessary steps, where changes to domestic laws will be required to implement the provisions of the agreements annexed hereto, to ensure the conformity of their laws with these agreements”.176

However, the clause “best-endeavors” applicable only to cases requiring changes to domestic laws was replaced by an unqualified obligation in the final version of Article XVI:4 which says

“Each member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements”.

The EC’s attempt to remove “endeavor’ with mandatory obligations were objected to by the Brazil and other Latin delegations whose legal systems provided for “direct incorporation” of certain international agreements into their law and by Canada and the USA on the basis of federal system of government which may have brought discrepancy in the language of Article XVI:4 and Article XXIV:12 of GATT 1994 and GATS I:3(a) respectively which dealt with measures of regional and local governments requiring national governments to take “such reasonable steps as may be available to it” to ensure

176 Informal note by the Secretarial “Draft Agreement Establishing the Multilateral Trade Organizations” (No. 462 dated 12 March 1992), page 254

compliance. The EC then proposed in November 1993 that “The Members shall take all necessary steps to ensure the conformity of their laws, regulations and administrative procedures with provisions of the annexed agreements, in accordance with their individual constitutional or legal systems” which was rejected by the USA and others on the basis that it would have weakened the duty under international law to implement agreements.177

The EC on November 12, 1993 modified the proposal as

“The members shall ensure the conformity of their laws, regulations and administrative procedures with the provisions of the annexed Agreements” The draft Agreement Establishing the Multilateral Trade Organization of 24 the November 1993 incorporated the phrase “obligations as provided in the annexed agreements” which was agreed to by the Members.

Kuyper, the EC legal expert and Chief GATT Lawyer in the EC legal Service178 did try to explain to Brazil and others that Article XVI:4 does not provide more obligations than Article 26 of the Vienna Convention. In India – Patents (US), the Appellate body observed that Article XVI:4 would be applicable to the TRIPS Agreement by observing “India’s argument must be examined in the light of Article XVI:4 of the WTO Agreement.”179

The other is regarding the degree of effect in terms of various Constitutional as well as judicial pronouncements in member countries i.e. whether the provisions of international treaties such as the WTO would have direct effect so that private parties can move the courts for enforcement of the provisions of the WTO and its sister agreements and understandings or whether these provisions provide dominant context for domestic provisions interpretations including the judicial interpretations in favor of international treaty provisions. In any case, if the provisions have ‘preciseness’, they would be binding. There is no doubt that major proponents of the WTO have all kept reservations in their acts not to apply the provisions of WTO in their domestic law and countries like

177 Daily Report from the US Negotiator on MTO Issues, including Article XVI:4 (November, 1993) in US-301-310, n. 270, p. 109

178 Pieter-Jan Kuyper, The New WTO Dispute Settlement System: the Impact on the Community, in the Uruguay Round Results, A European Lawyer’s perspective 87, 110 (Jacques H.J. Boourgeois, Frederique Berod & Eric Gippini Fournier eds. 1995 publishing the papers of a conference held in Bruges in October 1994.

the USA180 has specifically provided in its law that the WTO provisions would be irrelevant if it contradicts any of the domestic provisions of the USA. However, the provisions either incorporated at the behest of the USA or its allies i.e. the EC have always been incorporated in the domestic provisions suggesting that the international treaty negotiations have been used to incorporate the provisions in the domestic act as if these provisions have direct effect. The issue is whether members of the WTO can push for provisions in the international treaty which are not present in their domestic law and thereby include such provisions in their domestic law apparently on the basis of their commitments and obligations to the said international treaty. Such developments appear to be an extra-constitutional method of incorporating a new provision or bypassing general law making procedures prescribed in their own law or their constitution. Some of the developments in the TRIPS Agreement such as incorporation of ‘import’, ‘offer to sell’ and extension of patenting period to 20 years in the US Patent Act as apparently part of its commitment to the TRIPS Agreement were introduced by the EC through its draft TRIPS Agreement.181 The US originally proposed patenting monopoly only for ‘making’, ‘selling’ or ‘using’ but allowed itself to be persuaded to include ‘import’, ‘offer to sell’ and the period of twenty years from the date of filing of the patent application.182 The Circuit Court in Rotoc observed

“In 1993, however, the United States completed negotiations on the TRIPS Agreements. As a result of these negotiations, the United States agreed to amend its patent law to impose additional infringement. Liability for “offers to sell”. In 1994, Congress enacted a statute to satisfy the nation’s pledge under TRIPS. The statutory language of the amendment to s. 271(a) provided that, after January 1, 1996, “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States….

179 Appellate Body Report on India – Patents (US), para 79

180 Section 102(a() of the US Uruguay Round Agreements Act 1994 stipulates that

“(1)UNITDE STATES LAW TO PREVAIL IN CONFLICT – No provision in any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect.

(2) Construction. –Nothing in this Act shall be construed -…

(A) to limit any authority conferred under any law of the United States, including section 301 of the Trade Act of 1974 unless specifically provided of in this Act”.

181Draft Agreement on Trade Related Aspects of Intellectual Property Rights, received from the delegation of the European Communities, MTN.GNG/NG11/W/68 dated 29th March 1990 182 Rotoc Industries v. Mitsubishi, 215 3d 1246

infringes the patent.””183 The concept of the US commitment to the TRIPS Agreement was further elaborated by the Rotoc Court by noting that

” …the amendment to s. 271(a) served to implement our nation’s commitments to the TRIPS Agreements. Accordingly, we must recognize one of the Agreement’s declared purposes: harmonizing worldwide patent law. See Lisda B. Martin & Susan L Amster, International Intellectual Property Protection in the new GATT Accord, 2 J. Proprietary Rights, 9, 9 (1993). Before the TRIPS Agreements, the United States stood apart from its trading partners in limiting infringement protection only to actual “sales” as opposed to “offers to sell.” Indeed, our first draft proposal during the TRIPS negotiations reflected our unique approach in setting forth only “making, using or selling” patented inventions as acts of infringement. See U.S. Draft Agreement on Trade–Related Intellectual Property Rights, Presented as GATT Uruguay Round Negotiations in Geneva May 14, 7 Int’l Trade Rep. (BNA) 708, 711 (May 16, 1990). Ultimately, however, the United States agreed to the broader protections provided by others, suggesting that the amendment to s. 271(a) reflects the approaches of the other signatory nations.”184

The USA understood the problem associated with such extension of monopoly through international treaty negotiations and subsequently claimed that the patent amendment of its patent law was necessitated because of its international obligations in TRIPS which was neither proposed by itself nor by the EC but was at the instance of Arthur Dunkel185 and the USA similarly accepted it through SAA (Statement of Administrative Action) as its obligations to the international treaty which was brought in the Uruguay Round by the USA and carried through by use of the Special Section 301 and other persuasive and sometimes coercive methods. Daya Shanker has discussed this aspect of use of force and coercion by the USA on developing countries to agree to the TRIPS provisions in ‘Legitimacy and the TRIPS Agreement’.186 Daya Shanker187 and Amir Attaran188 have

183 Rotoc Industries v. Mitsubishi, 215 3d 1246, pp. 1249-1250

184 Rotoc Industries v. Mitsubishi, 215 3d 1246, p. 1251

185 The Committee on the Judiciary Report accompanying S. 1277 (pharmaceutical Industry Special Equity Act of 1996), 104th Congress

186 Daya Shanker, Legitimacy and the TRIPS Agreement, Working Paper No. 1, Department of Economics, University of Wollongong, 2002, (forthcoming). Also available in SSRN Journals and IDEAS as Working Paper.

discussed the role of Arthur Dunkel leading to the finalization of the TRIPS Agreement and how the whole agreement was turned into an unilaterally imposed obligation for developing countries when each and every proposal from the developing countries was removed by Arthur Dunkel and Anell from the TRIPS Agreement. However, the fact that it was part of an understanding and a very close one between the USA and the EC becomes apparent from the letter from Commissioner Brittan mentioned in the Committee report189 .

In the present proposal pertaining to Para 6 Solution of the Doha Declaration coming from the USA190, no such inhibition has been shown by the USA. Its proposal that Article 30, forget the whole of the TRIPS Agreement does not permit export of patented product is introduction of ‘export’ as one of the monopolizing extension of the US patent act through its incorporation in the international treaty. Its advocacy by the EC, Canada and other Western countries along with Japan point to the fact that that it is being done in a well concerted manner.

In such circumstances proposing a particular interpretation and a new provision or a set of provisions not compatible with existing provisions would amount to nothing but a unconstitutional method of law making in the domestic context. Similarly using the Dispute Settlement System of the WTO to push for an interpretation that is not available in the domestic legal system would amount to misuse of the Dispute Settlement System

187 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 Wold Trade, Vol. 36, No. 4 August 2002, pp. 721-772

188 Paul Champ and Amir Attaran, Patent Rights and Local Working Under the WTO RIPS Agreement: An Analysis of the U.S.-Brazil Patent Dispute, The Yale Journal of International Law, Summer, 2002, p. 365, p.378 saying “Negotiators came under pressure to conclude the TRIPSW Agreement by the end of 1991. With just over a month to go, Arthur Dunkel, the director general of the GATT and chairman of the Trade negotiating Committee, distributed a paper giving his overview of the negotiations and listing the challenges that remained ahead for negotiators. He noted that the “parties needed to determine the availability of patents without discrimination with regard to … whether the product is imported or locally produced.”

189 “However, we must also note that the Committee has received a letter from the Vice President of the European Community, Sir Leon Brittan, who stated the bill “would contradict high and secure protection for the huge investments made by EC and US research-based pharmaceutical companies” and “send a negative and highly visible sign to those numerous countries which are still in the process of preparing new legislation on the protection of pharmaceutical inventions.” (104 Senate Report 394, 2nd Sess. accompanying ‘Pharmaceutical Industry Special Equity Act of 1996, Committee on the judiciary, October 1, 1996)

190 Second Communication from the USA, n. 4

to incorporate changes or obtain interpretations through extra-constitutional methods. The initiation of dispute by the EC in Canada-Patent Protection likewise appear to be an attempt to overrule the decision of the German Supreme Court which had interpreted the experimental use provision in the Community Patent Convention (CPC) as providing unlimited manufacturing to gain the regulatory approval because the experimental use can be done for any purpose. The question of direct effect was discussed by the Panel in United States – Sections 301-310 of the TRADE Acts of 1974.191 The USA argued that international obligation statute in its law and the Constitution removes any danger of presence of any act violative of WTO obligations. The Panel in US-Sections 301-310 rejected this notion by giving the example in the EC “where EC norms may produce direct effect and thus give far greater assurance, an EC Member State is not absolved by this fact from its duty to bring national legislation into compliance with its transnational obligations under, say, an EC directive (Commission v. Belgium, Case 102/79, [1980] European Court Reports 1473 at para 12 of the judgement.”192

The question of extent of effect of international treaty obligations on domestic laws has been dealt with by Eeckhout,193 Berkey194, Petersmann195, Hilf196, Kuilwijk,197 Bontinck198 and Conway199 . Normally there are four principles governing domestic legal

191 United States – Sections 301-310 of the TRADE Acts of 1974 Report of the Panel WT/DS 152/R dated 22 December 1999

192 The WTO Panel Report in United States-Sections 301-310 of the Trade Act of 1974, WT/DS152/R dated 22 December 1999, n. 660

193 P . Eeckhout, The Domestic Legal Status of the WTO Agreement: Interconnecting legal Systems, Common Market law Review, 1997, p. 11

194 Judson O. Berkey, The European Court of Justice and Direct Effect for the GATT: A queen Worth Revisiting, European Journal of International Law 9 (1998), pp. 626-657

195 Ernst-Ulrich Petersmann “The EEC as a GATT Member – Legal Conflicts between GATT Law and European Community Law’, in M. Hilf, F. G. Jacobs and E.-U. Petersmann (eds), The European Community and GATT (1986), ‘Strengthening the GATT Dispute Settlement System: On the Use of Arbitration in GATT’ in M. Hilf and E.-U. Petersmann (eds) The New GATT Round of Multilateral Trade Negotiations (1991)

196 M. Hilf, The Application of GATT within the member States of the European Community, with Special Reference to the Federal Republic of Germany, in Hilf, Jacobs and E.U. Petersmann, supra

Lee and Kennedy “The Potential Direct Effect of GATT 1994 in European Community Law, 30 Journal of World Trade (1996) 67 not approving giving direct effect to GATT 1994.

197 Kuilwijk, K. J., The European Court of Justice and the GATT dilemma, (1996)

198 Gaelle Bontinck, The TRIPS Agreement and the ECJ: A New Dawn?: Some Comments About Joined Cases C-300/98 and C-392/98, Parfums Dior and Assco Geruste, Jean Monnet Working Paper 16/01, New York University School of Law

199 Gerard Conway (2002), Breaches of EC Law and the International Responsibility of Member States, EJIL, Vol. 13, No. 3, pp. 679-695

effect of international agreements. These principles are (a) direct application, (b) direct effect, (c) supremacy and (d) interpretation although many authors have combined direct application and direct effect together in their analysis.200 The ECJ did not grant direct effect in case of International Fruit Company201, an Article 177b preliminary reference decision prohibiting individuals to enforce GATT 1947 provisions because the agreement lacked direct effect. Berkey found that although the ECJ adopted “a monist conception of direct application so that international agreement and the Community law form part of a single legal system”202 it did not follow this concept with respect to the GATT 1994 because the GATT 1994 does not provide sufficient preciseness and predictability.

The European Court of Justice held that since the ‘GATT 47’ is based on principles of negotiations undertaken on the basis of “reciprocal and mutually advantageous arrangements,” [and] is characterized by the great flexibility of its provisions in particular those conferring the possibility of derogation from the measures to be taken when confronted with exceptional difficulties, and the settlement of conflicts between the contracting parties, the GATT 47 did not provide direct effect rights to individuals which could be invoked in the national courts.203 This argument was used by the ECJ to observe that member States could not enforce the GATT 47 provisions in Article 173(1) actions before the ECJ.204 However, the ECJ held that the GATT 47 and by implication the

200 Carlos D. Esposito, The Role of the European Court of Justice in the Direct Applicability and Direct Effect of WTO Law, with a Dantesque Metaphor, [1998] Berkeley J. International Law (16), 138, 141 and Gaell Bontinck, p. 1, note 5.

201 ECJ Joined Cases 21-24/72, International Fruit company v. Produktschap voor Groents en Fruit (1972) ECR 1219

202 Berkey, supra note 138, note 3, where Berkey further observed “See case 181/73, R&V. Haegeman v. Belgian State[1974] ECR 449, and Joined Cases 21-24/72, International Fruit Company NV and others. Produktschap voor Groenten en Fruit, [1972] ECR 1219. The ECJ also held that international agreements are supreme over all Secondary Community law. See Case 104/81, Hauptzollamt Mainz v. C.A. Kupferberg & Cle. Kga. A., [1982] ECR 3641, and International Fruit Company. Finally the ECJ held that similarly worded provisions contained in both the EC treaties (the European Community (EC) Treaty and the Treaty on European Union (Maastricht Treaty) will hereinafter be referred to collectively as the “Treaty”) and international agreements do not have to be interpreted in the same manner. SEE Case 270/80, Polydor Limited and RSO Records Inc. v. Harlequin Record Shops Limited and Simons Records Limited, [1982] ECR 329, and Case 70/87, EEC Seed Crushers’ and Oil Processors’ Federation (FEDIOL III) v. EC Commission, [1989] ECR 1781″

203 ECJ Joined Cases 21-24/72, International Fruit company v. Produktschap voor Groents en Fruit (1972) ECR 1219

International Fruit Company, at 1227

204 Case-280/93, Federal Republic of Germany v. Council of the European Communities, [1994] I ECR 4973 at 5073

GATT 1994 provisions could be used to interpret the meaning of Community legislation like anti-dumping which expressly referred to those provisions205 as the regulation was adopted in accordance with existing international obligations, in particular those arising from Article VI of the General Agreement and from the Anti-Dumping Code’.206

The DSU does not appear to have replaced intergovernmental negotiations as discussed by Lee and Kennedy,207 where the dispute between Japan and the USA over Car and Car parts was resolved through negotiated settlement which suggests that ‘far from becoming a strictly legal device, the dispute resolution system retains its flexible nature and that negotiation, rather than formal legal complaint, will remain the most common form of conflict resolution.’

The Helms-Burton Act, which took effect on 12 March 1996, granted private right of actions against foreign companies that ‘traffic’ in property confiscated by the Cuban government from US nationals. The EC filed a WTO complaint leading to the formation of a panel but the USA insisted on boycotting the panel because it did not ‘believe anything the WTO says or does can force the U.S. to change its laws’.208

While the USA has specifically directed that GATT 94 provisions would not have direct effect209, Japanese Courts including its Supreme Court have decided that ‘a violation of a provision of GATT pressures the country in default to rectify the violation by being confronted with a request from another member country for consultation and possible retaliatory measures. However, it cannot be interpreted to have more effect than this.

205 Case 70/87, Federation de l’indusrtrie de l’builerie de la CEE v. Commission of the European Communities (FEDIOL III), supra note – at 1831

206 Nakajima All Precision Co. Ltd. v. Council of the European Communities, [1991] I ECR 2069 at 2178

207 Philip Lee and Brian Kennedy, The Potential Direct Effect of GATT 1994 in European Community Law, 30 Journal of World Trade 67 (No. 1), 1996

208 Sanger ‘U.S. Won’t Offer Trade Testimony on Cuban Embargo’, NY Times, 21 February, 1997, Section A, at 1.

209 The US implementing legislation, 19 U.S.C. s. 102© says

“No person other than the United States (A) shall have any cause of action or defense under any of the Uruguay Round Agreements or by virtue of congressional approval of such an agreement, or (B) may challenge, in any action brought under any provision of law any action or inaction by any department, agency, or other instrumentality of the United States, any State or any political subdivision of a State on the ground that such action or inaction is inconsistent with such agreement.”

Therefore, it cannot be held that the legislation in question is contrary to the GATT and null and void.’210.

Berkey’s article was essentially a critique of Kuilwijk211 who alleged that the ECJ is doing nothing but trying to follow a protectionist agenda to oblige its domestic industry and his arguments were essentially based on the academics like Bello and others known for their conservative views.212

Jackson has however argued that adopted Panel Reports are legally binding and that 11 clauses of the DSU support the notion that a panel report imposes an international law obligation on the members to perform the recommendations of the panel particularly in violation cases.213 The Commission’s proposal stated that

“It is important for the WTO Agreement and its annexes not to have direct effect [because] without an express stipulation of such exclusion in the Community instrument of adoption a major imbalance would arise in the actual management of the obligations of the Community and other countries.”214

As against Berkey, Conway has held that international agreements have direct effect in EC law, that is, they do not need “Community implementing legislation to be justiciable before the Community Courts.215 McGoldrick also argued on line of Berkey that direct effect to be effective is that the provisions should be clear, precise and affording individual rights.216

210 J. H. Jackson, W. J. Davey and A.O. Sykes, Jr., Legal Problems of International Economic Relations (3rd Edition, 1995), at 224-226

211 Kuilwijk, The European Court of Justice and the GATT Dilemma (1996).

212 Judith H. Bello argued that the GATT94 like GATT 1947 was nothing but a balance of rights and obligations of benefits and burdens, “achieved among members through negotiations .. [so that] a government could renege on its negotiated commitment not to exceed a specified tariff on an item, provided it restored the overall balance of GATT concession through compensatory reductions in tariffs on other items.” “The WTO Dispute Settlement Understanding: Less is More, 90 AJIL (1996) 416, at 417

213 Jackson, ‘Editorial Comment: The WTO Dispute Settlement Understanding-Misunderstandings on the Nature of Legal obligations’, 91 AJIL (1997) 60 at p. 61,62

214 COM(94) 414 final endorsed by the Council – Council Decision 94 (800) EC, OJ 1994 L336 (22 December 1994)

215 Case 181/73, Haegmean v. Belgium [1974] ECR 449, at 459-460

216 D. McGoldrick, ‘EU Law and International Law: The Interface for the New Millennium’, in I. Cameron and A. Simoni (eds), Dealing with Integration, vol. 2 (1998) 133

Although, the ECJ made an exception to direct effect in case of application of the provisions of the GATT 1947217 and correspondingly the GATT 94 but held that if the regulations are adopted in accordance with its international obligations, ‘in particular those arising from Article VI of the General Agreement and from the Anti-Dumping Code’218, the direct effect on the EC domestic law would be applicable. The patenting provisions in the EC thus would qualify to be directly applicable in the members’ domestic patent law.

Conway identified some of the instances showing direct application of international treaty by the ECJ (or the Court of First Instance).219 Broek220 has discussed some of the pronouncements of the ECJ in this respect. Some of the recent pronouncements of the ECJ in the field of application of provisions of the GATT and its interpretations are discussed in Portuguese Republic v. Council,221 Parfums Christian Dior v. Tuk Consultancy222 and Schieving-Nijstad v. Robert Groenveld223. In Portuguese Republic, the Portuguese Government claimed that there was a breach of rules and fundamentals principles of the WTO in particular those of GATT 1994, the ATC (Agreement on Textiles and Clothing) and the Agreement on Import Licensing Procedures. It further observed “Although the Court (The ECJ) held in Case C-280/93 Germany v. Council 1994 ECR I-4973, paragraphs 103 to 112, that the GATT rules do not have direct effect and that individuals cannot rely on them before the courts, it held in the same judgment

217 International Fruit Company NV and others v. Produktschap voor Groenten en Fruit, [1972] ECR 1219

218 Case 69/89, Nakajima All Precision Co. Ltd. v. Council of the European Communities, [1991] 1 ECR 2069, at 2178.

219 Gerard Conway, n. 14 “Generally among the rules of general public international law that the ECJ (or the Court of First Instance) has applied, or accepted the status of, are law making international treaties to which it is not a party, including rules concerning treaty interpretation (e.g. Hauptzollamt Mainz v. CA Kupferberg & Cie KG [1982] ECR I-3641

220 Naboth van den Broek, Legal Persuasion, Political Realism, and Legitimacy: The European Court’s Recent Treatment of the Effect of WTO Agreements in the EC Legal Order, Journal of International Economic Law (2001), pp. 411-440

221 Portuguese Republic v. Council, Case C-149/96 EC Reports 1999 p. I-08395

222 Parfums Christian Dior v. TUK Consultancey, Joined Cases C-300/98 and C-392/98

223 Schieving-Nij stad v. Robert Groenveld, Case C-89/99, ECR 2001 I-05851

that that does not apply where adoption of the measures implementing obligations is assumed within the context of the GATT.

The EC practice had two implications. Where the member countries have power to negotiate and conclude an agreement with a non-member country, they are free to agree with that country regarding the effect the provisions of the agreement are to have in internal legal order. All the EC members have signed the WTO Agreement in their individual capacity. The ECJ also noted that in terms of general rules of international law there must be bona fide performance of every agreement although each contracting party is “free to determine the legal means appropriate for attaining that end in its legal system, unless the agreement, interpreted in the light of its subject matter and purpose itself specifies those means224 (Hauptzollamt Mainz v. Kupferberg 1982 ECR 3641, para 18).

The main argument of the Portuguese decision was based on the possibility in Article 22(2) of arriving at a mutually acceptable compensation which would deprive “the legislative or executive organs of the contracting parties of the possibility afforded by Article 22 of that memorandum of entering into negotiated arrangements even on a temporary basis. (para 40) and the scope for manoeuvre enjoyed by their counterparts in

the Community’s trading partners (para 46).”225 Thus the ECJ decided that “having

regard to the nature and structure “of the WTO agreements and “in the light of their subject matter and purpose”, the WTO agreements are not “among the rules in the light of which the Court is to review the legality of measures adopted by the Community institutions.”226 The ECJ also used the final recital in the preamble to Decision 94/80227 to support its contention that “the Agreement establishing the World Trade Organization including the annexes thereto, is not susceptible to being directly invoked in Community or member State Courts”228

In Dior v. Tuk, the ECJ reiterated its position in Portuguese Republic by asserting that the provisions of the WTO Agreement is not among “the rules in the light of which the Court

224 Portuguese Republic v. Council, Case C-149/96 EC Reports 1999 p. I-08395, para 35

225 Ibid., paras. 40 and 46

226 Ibid, para 47

227 Agreements establishing the WTO, approved on behalf of the Community by Council Decision (Council Decision 94/800 (1994) OJ L 336/1) of 22 Dec. 1994concenring the conclusion on behalf of the European Community, as regards matters within its competence, of the Agreements reached in the Uruguay Round multilateral negotiations (1986-1994), available at http://www.wto.org/english/docs_e/legal_e/final_e.htm

228 Portuguese Republic v. Council, Case C-149/96 EC Reports 1999 p. I-08395, para 48

is to review measures of the Community institutions pursuant to the first paragraph of Article 173 of the EC Treaty (now, after amendment, the first paragraph of Article 230 EC)”229 although the international agreement in general “must be regarded as being applicable when, regard being had to working, purpose and nature of the agreement, it may be concluded that the provision containing a clear, precise and unconditional obligation which is not subject , in its implementation or effects, to the adoption of any subsequent measure ( See, in that regard, Case 12/86 Demirel v. Stadt Schwabisch Gmund 1987 ECR 3719, paragraph 14, and Case C-162/96 Racke v. Hauptzollamt Mainz 1998 ECR I-3655, paragraph 31)”

Broek tried to read more in Dior v. Tuk, but the ECJ’s interpretation of application of TRIPS Article 50(6)230, it is nothing but reiteration of the ECJ’s position in Portuguese Republic. While interpreting Dior v. Tuk in Schieving-Nijstad v. Robert Groenveld, the ECJ again reiterated “that the provisions of TRIPS do not have direct effect, in as much as they are not such as to create rights upon which individuals may rely directly before the national courts by virtue of Community law”231. The arbitrary discrimination introduced in its Article 228(2) of the Treaty which say that “the member states are bound, in the same manner as the institutions of the Community, by the international agreements which the latter are empowered to conclude they fulfil, in ensuring respect for Commitments arising from an Agreement concluded by the community institutions, an

229 Dior v. Tuk, para 43.

230 Dior v. Tuk, para 49 says “”…in a field to which TRIPS applies and in respect of which the Community has already legislated, the judicial authorities of the member States are required by virtue of Community law when called upon to apply national rules with a view to ordering provisional measures for the protection of rights falling within such a field, to do so as far as possible in the light of the wording and purpose of Article 50 of TRIPS, but in a field in respect of which the Community has not yet legislated and which consequently falls within the competence of the Member states, the protection of intellectual property rights, and measures adopted for that purpose by the judicial authorities do not fall within the scope of Community law. Accordingly, Community law neither requires nor forbids that the legal order of a member States should accord to individual’s right to rely directly on the rule laid down by Article 50(6) of TRIPS or that it should oblige the courts to apply that rule of their own motion.” Para. 49

231 Schieving-Nijstad v. Robert Groenveld, para 52: It subsequently observed that “The answer to the first question must therefore be that the procedural requirements of Article 50(6), are not such as to create rights upon which individuals may rely directly before the Community courts and the courts of the Member States. Nevertheless, where the judicial authorities are called upon to apply national rules with a view to ordering provisional measures for the protection of intellectual property rights falling within a field to which TRIPS applies and in respect of which the Community has already legislated, they are required to do so as far as possible in the light of the wording and purpose of Article 50(6) of TRIPS, taking account , more particularly, of all the circumstances of the case before them, so as to ensure that a balance is struck between the competing rights and obligations of the right holder and of the defendant.” (para 55)

obligation not only in relation to the non-member country concerned but also and above all in relation to the Community which has assumed responsibility for the due performance of the agreement” by the ECJ is nothing but the introduction of realpolitik in the international legal relations as has been consistently done by the US Courts. The decision in Hauptzaullamt232 by the ECJ to having been overturned in subsequent cases pertaining to the GATT 1994 and the related agreements by the ECJ which merely confirms that the latter decisions excluding the WTO Agreements along with its annexes from direct application depended a lot on the nature of obligations rather than the nature and structure of the WTO which prevented the ECJ from permitting direct effect of the WTO Agreements. Broek233 also suggested that the grounds which the ECJ constructed to distinguish the WTO Agreements along with its other annexes are similarly present in practically all the international treaties, the EC has entered into i.e. the Yaounde Convention234 and the EC-Morocco Cooperation Agreement235 and many other similar treaties are examples which show that excluding provisions of the WTO along with its annexes from any direct application when “the WTO system has actually restricted the possibilities for parties to use negotiations to reach solutions”236 is the indulgence by the ECJ in realpolitik rather than “depriving the legislative or executive organs of any legal marge de Manoeuvre.”237 Judgments of these courts do not appear to be based on valid

232 In Hauptzollamt these the question of preciseness and definitiveness was answered by the ECJ by stating

a. para 20. “The mere fact that the Contracting parties have established a special institutional Framework for Consultations and negotiation inter se in relation to the implementation of agreement is not in itself sufficient to exclude all judicial application of that agreement. The fact that a court of one of the parties applies to a specific case before it a provision of the agreement involving an unconditional and precise obligation and therefore not requiring any prior intervention on part of the joint committee does not adversely affect the powers that the agreement confers on the committee.

b. Para 21. As regards the safeguard clauses, which enable the parties to derogate from certain provisions, and as a general rule after consideration within the joint committee in the presence of both parties. Apart for specific situations, which may involve their application, the existence of such clauses, which moreover, do not affect the provisions prohibiting tax discrimination, is not sufficient in itself to affect the direct applicability which may attach to certain stipulations in the Agreement.

233 Broek, supra note 214

234 Bresciani Case 87/75

235 ECJ Case C-18/90, Onem v. Kziber (1991)

236 Broek, p. 434

237 Broek, p. 434

legal interpretations but rather than on political considerations. Broek also reached the same conclusion.238

The Panel in US-Sections 301-310 confirmed that Article XVI:4 goes beyond Article 27 of the Vienna Convention in requiring WTO Members actually to ensure the conformity of its internal laws with its WTO obligations and not merely to precluding pleadings conflicting domestic law with its WTO obligations. The Panel in US Sections 301-310 observed “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 of dispute. Article XVI:4, though not expanding the material obligations under WTO Agreements, expands the type of measures made subject to these obligations.”

Although the Tokyo Round Agreement on government procurement subsidies, licensing procedures, civil aircraft and anti-dumping each contained provisions similar to Article XVI:4 which have been taken over into the final provisions of the corresponding WTO Agreements while Article XVI:4 extends the WTO-conformity requirement to all agreements and legal instruments in Annexes 1, 2 and 3 of the WTO Agreement as per Article II.1 of the WTO Agreement.239 In the international law, states are generally free to choose manner of implementation240 but not formally, it is to ensure that its laws, regulations and administration procedures are in compliance with its obligations.

In US Sections 301-310, the US tried to explain the meaning of Article XVI:4 of the GATT 1994 by discussing the dictionary meaning of “ensure” which is “make certain” or “make sure” (Oxford English Dictionary). As per the USA, “Members were thus

238 Broek, p. p. 438

239 Article IX.4(a) of the Agreement on Government Procurement, Article 19.5(a) of the Agreement on Import Licensing Procedures, Article 9.4.1 of the Agreement on Trade a in civil Aircraft, and article 16.6 of the Agreement on Implementation of Article VI during the Tokyo Round Agreements. Their presence in the final agreements as Article XXIV.5(a) , Article 32.5 of the Agreement on Subsidies and Countervailing Measures, Article 8.2(a) of the Agreement on Import Licensing Procedures, Article 9.4.1 of Agreement on Civil Aircraft, and Article 18.4 of the Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.

240 Oppenheim’s International Law, 9th Edition at 82-83 (footnote omitted, “From the standpoint of international law states are generally free as to the manner in which domestically , they put themselves in the position to meet their intentional obligations