How is Spain implementing the EU InfoSoc Copyright Directive?

Spain is one of the last European countries to implement the controversial European Directive 2001/29/EC on the harmonization of certain aspects of copyright and related rights in the information society (as well as France and Finland) and has by far failed to meet the December 2002 transposition deadline.

The current text of the bill has been passed by the lower chamber (Congress), and is now pending the approval of the Senate; it will then go back to Congress for final approval (expected sometime this year).

Raquel Xalabarder, a well-known Spanish copyright professor and lawyer, has sent us an excellent summary of the current proposed copyright law. Professor Xalabarder’s summary is very useful, not only because of its completeness, but also because it provides the political context of the proposed law.

Based on her research and according to my own reading of the proposed text, the evaluation of the Spanish implementation is heartbreaking: it is a “minimal” and "bad" implementation of the EU Directive.

Consumer groups and the technology industry have expressed their discontent with the current proposed text. Even the SGAE (the Spanish collecting society for music authors and publishers) has unexpectedly attacked the current proposal.

Among the more controversial issues is the express recognition of a private copy levy for digital copies (with a campaign against it) and the narrow language in the implementation of the exceptions and limitations.

Of special concern is the language implementing the Technological Protection Measures (TPMs). The proposed text establishes a two-step system to address possible conflicts between TPMs and exceptions & limitations (e.g. the private copy exception):

a) First, it relies on the voluntary measures adopted by the copyright-holders;
b) In the absence of these measures, the beneficiaries of the exceptions can sue the copyright-holders to ensure the full enjoyment of their exceptions/limitations.

The system is up-side-down and completely forsakes the effectiveness of limitations and exceptions in the digital world by putting the burden of the limitation and exceptions enforcement on the “potential users of works” and not on the “right holders”.

My reading of art. 6(4) of the Directive is that it creates the two-step regime that Spain is implementing but it allows for flexibility when designing the system (".... in absence of voluntary measures taken by right-holders....Member States shall take appropriate measures..."). A suggestion: Spain should create a cheap & easy arbitration system as an alternative to the current "go to court and defense your-self" proposal.

Hopefully the Senate will react to the current proposal and amend it by taking in to consideration consumers and public interest's concerns. We will keep you posted.

Pfizer's Response

Today I received a fax from Pfizer's Legal Division (NY Headquarters) answering my April 3 letter to Hank McKinnell (Pfizer CEO) on the Philippines litigation.

The fax does not comment on Pfizer suing government officials in their personal capacity; however it confirms that they are suing to prevent BFAD (the Filipino FDA) from accepting and evaluating drug applications during the pendency of patents, so that they can enter the market as soon as the patents expire. The early working of a patent (so called bolar exception), something that is completely legal in the United States, the European Union and several other countries.

Pfizer is trying to impose a higher level of patent protection on the Philippines than exists in much higher income countries, and it is pricing the drug higher than 90 percent of the Philippine population can afford. Pfizer’s real purpose is to delay the legitimate efforts of a developing country government to provide access to cheaper drugs to its citizens.

Both the early working of patents and the parallel import of cheaper drugs by developing countries, have been recommended by the World Health Organization in its recent report by the Commission on Intellectual Property, Innovation and Public Health (CIPIH) (I copied some excerpts below).

The Pfizer fax literality says: "the purpose of the proceedings is to ensure that there will be no importation of an unauthorized copy of Norvasc into the Philippines for the duration of its patent term."

As we all already know, the patent expires in June 2007 and the Philippine government owned trading company (PITC) has repeatedly said it will not sell the cheaper Indian version of the Pfizer drug to the public until the Pfizer patent expires.

Even Pfizer acknowledges this in their complaint. See Annex K, where the Department of Justice itself stated that PITC would respect the "subsisting patent rights" of Pfizer. Despite this assurance, Pfizer sued.

The Pfizer fax

The scanned copy of the fax is available here. I copied the text below:

Marguerite Sells
General Counsel, Pfizer Global Pharmaceuticals Japan, Asia, Africa/Middle East, Latin America

May 9, 2006
Judit Rius Sanjuan, Esq.
Consumer Project on Technology
1621 Connecticut Avenue, N.W.
Suite 500
Washington, D.C. 20009

Dear Ms. Sanjuan:

Re: Pfizer v. Philippines International Trading Corporation

We have received your April 3, 2006 letter sent to Dr. Hank McKinnell relating to the Norvasc lawsuit in the Philippines.

The patent on Norvasc, one of the world's leading medicines for combating high blood pressure, remains in force in the Philippines, until June, 2007. The patent on Norvasc was granted by the Philippine Government.

Despite the patent on Norvasc, the Philippine Government Authority, the Bureau of Food & Drugs (BFAD) issued regulatory documents to the Philippines International Trading Corporation (PITC), authorizing the immediate importation of an unauthorized copy of Norvasc.

PITC are relying on these documents to authorize importation and have refused to give an undertaking that they will not import generic copies of Norvasc into the Philippines, before the patent expires next year.

There have been a number of attempts to remedy the situation with the Philippine Government and with the PITC, but in the absence of legal assurance that our patent would not be violated, Pfizer filed legal proceedings in the Philippines on March 1, 2006. The legal proceedings are in accordance with the provisions of the Philippine intellectual Property Code.

The purpose of the proceedings is to ensure that there will be no importation of an unauthorized copy of Norvasc into the Philippines for the duration of its patent term.

Pfizer believes in the importance of encouraging innovation by protecting the rights of those who discover and develop life-saving medicines. Pfizer also believes in the obligation of Government to respect the intellectual property rights they have granted.

Sincerely,

Marguerite Sells


Excerpts from the WHO CIPIH Report

(page 142)

“PARALLEL IMPORTS
....

In practice, this means a situation, for example, where a wholesaler in Country A makes available to a purchaser in Country B a product patented in both countries, at a lower price than it is available in Country B. If Country B allows parallel imports, then the purchaser could import the product at a lower price than the product is available locally. Thus, in principle, parallel imports are a means to reduce the cost of medicines where there are significant intercountry differences in prices. Whether they actually do so depends on a number of assumptions, in particular that any price reductions obtained are passed on to patients rather than absorbed in the distribution chain.

TRIPS explicitly says that nothing in the agreement “shall be used to address the issue of the exhaustion of intellectual property rights.” This means that countries can choose whether to allow or forbid parallel imports as they think best, without fear of a dispute settlement case being brought in the WTO.

As regards parallel trade between developed countries, taken as a group, and developing countries, taken as a group, there is little doubt that restrictions on parallel imports, which exist in the laws of most developed countries, are beneficial as they help to preserve price differentials through market segmentation that potentially benefit developing countries, and help maintain lower prices in those countries. The benefits and costs of parallel trade between developing countries, or parallel imports by developing countries from developed countries, require close consideration. Free trade principles would suggest that restrictions on parallel trade should be avoided wherever possible. However, some developing countries have opted to restrict parallel imports for reasons other than public health considerations. Developing countries should be free to benefit from the gains available from international trade.”

Recommendation:
“4.19 The restriction of parallel imports by developed countries is likely to be beneficial for affordability in developing countries. Developing countries should retain the possibilities to benefit from differential pricing, and the ability to seek and parallel import lower priced medicines.”

(page 147 and 148)

“FACILITATING THE ENTRY OF GENERIC COMPETITION ON PATENT EXPIRY
Facilitating the entry of generic competition after the expiry of a patent is one means of potentially bringing down the price of health-care products. Countries can employ a number of intellectual property measures or exceptions, consistent with the TRIPS agreement, to promote rapid market entry of generic products after patents on products expire. One measure of importance is a provision that exists in most countries' legislation (commonly known as the "early working" exception) which allows prospective generic producers to make use of a patented product within the patent period for the purposes of obtaining regulatory approval of their product as soon as the patent expires. The “early working” exception14 constitutes jointly, with parallel imports and compulsory licences, one of the flexibilities that the TRIPS agreement permits, with an aim to get a balance between private and public interests, as set out in articles 7 and 8 of the agreement.

This policy has been used very successfully in the United States and other jurisdictions to facilitate generic entry as soon as the patent expires. It has recently been introduced in the European Union. In the United States the generic share of the market (by volume of prescriptions) has risen from 19% to over 50% since this legislation was introduced in 1984 as part of the Hatch–Waxman Act. Evidence from the United States shows that, especially where there are several generic producers (and hence competition), this will result in very substantial price declines on patent expiry (75). But this outcome may depend on the size of the market (76). In developing countries where markets are small, this mechanism may work less effectively to reduce prices significantly and it needs, hence, to be supplemented by other measures, including those to promote generic competition and regulate prices.

In some countries, companies (both the originator and generic producers) may differentiate their off-patent original or generic products through branding and promotion to obtain higher prices. Whereas consumers may prefer a more expensive brand-name food product to an equivalent and cheaper supermarket own-label, for rational or irrational reasons, there is no reason to purchase a medicine accordingly if both the brand and generic have been properly approved by the health authority for marketing. Several developed countries have introduced policies that allow doctors to prescribe medicines by generic names, or for pharmacists to substitute approved generics for brand-name drugs prescribed by doctors. One answer to this problem is appropriate legislation in relation to prescribing, and the education of pharmacists, doctors and patients in the availability of brand-name and generic products and their pricing (77).”

Recommendations:
“4.24 Countries should provide in national legislation for measures to encourage generic entry on patent expiry, such as the "early working" exception, and more generally policies that support greater competition between generics, whether branded or not, as an effective way to enhance access by improving affordability. Restrictions should not be placed on the use of generic names.
4.25 Developing countries should adopt or effectively implement competition policies in order to prevent or remedy anti-competitive practices related to the use of medicinal patents, including the use of pro-competitive measures available under intellectual property law."