The Failed Trans-Pacific Partnership: What It Might Have Meant To Biotech and Pharma

The Trans-Pacific Partnership (TPP) was the latest in a series of multination international agreements aimed at reducing trade barriers and promoting global free trade. Most of these agreements are “regional,” like the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, but others have global scope (e.g., the GATT/TRIPS agreements that created the World Trade Organization (WTO)). The TPP’s goals were lofty, to “promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance, and enhanced labor and environmental protections” according to the U.S. Trade Representative.^[1] However, the subject matter scope of this agreement and the secrecy with which it was negotiated have engendered deep suspicions from a variety of groups regarding whether its goal is truly free trade or whether there are more nefarious motivations behind it. And with the election of Donald Trump, these efforts have apparently amounted to nothing.

The TPP was negotiated over the past seven years and was signed on February 4, 2016, in Auckland, New Zealand, by 12 nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam. Its principal provisions (set out in 30 chapters) included lowering tariffs and other trade barriers, providing a mechanism for disputes between investors and member states, and a variety of harmonization provisions to intellectual property (IP) law. These IP provisions have been the source of much of the political opposition to the TPP. And while some (or all) of the other nations may sign the treaty (and if enough of them do so it will come into force in those countries), the U.S. probably will not. Because of these possibilities, the provisions of the treaty remain relevant and could form the basis for an international agreement the U.S. could agree to in the future.

IP Provisions

The IP provisions of the TPP have broad scope, encompassing copyrights, trademarks, patents, and trade secrets. These provisions are aimed at establishing a minimum level of protection among the member states, and to harmonizing such protections where possible. The express aims of these sections of the TPP are to “contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.”^[2] The TPP expressly contains provisions permitting signatories to “adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development,”^[3] similar to the amendments adopted by the WTO under the Doha Declaration.^[4] The TPP also gives signatories the right to adapt their laws to “prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology” (presumably as judged by each country).^[5] Each signatory must affirm that it has ratified^[6] or will ratify^[7] several prior international agreements.^[8]

Other general provisions require equal treatment of citizens of other signatory states and signatory state nationals;^[9] transparency (e.g., regarding Internet availability of a signatory’s IP laws and regulations);^[10] and cooperation between member states with regard to intellectual property,^[11] in particular protection of “traditional knowledge.”^[12]

Trademarks

Regarding trademarks, the TPP requires that collective marks, certification marks, sounds, geographical indications, and (to the extent possible) scents must be capable of registration.^[13] Trademark exclusivity that precludes another using a mark that would raise a likelihood of confusion is recognized,^[14] but so is fair use that “take[s] account of the legitimate interest of the owner . . . and of third parties”^[15] as well as provisions for “well-known” marks.^[16] The TPP also specifies “procedural aspects” of trademark examination, opposition, and cancellation proceedings.^[17] As part of the harmonization aspects of the TPP, it requires an initial term and each renewal of a mark to last 10 years.^[18] With respect to Internet domain names, the TPP requires procedures for settling disputes according to principles approved by ICANN.^[19] Finally, several subsections relate to country names and geographical indications used as trademarks,^[20] which are directed at protectionist practices purportedly used by some countries to discriminate against products not of local origin.

Patents

The patent provisions^[21] define eligible subject matter broadly, for “any invention, whether a product or process, in all fields of technology, provided that the invention is new, involves an inventive step and is capable of industrial application.”^[22] However, signatory countries are also permitted to exclude from patent eligibility “diagnostic, therapeutic and surgical methods for the treatment of humans or animals,” and “animals other than microorganisms, and essentially biological processes for the production of plants or animals, other than non-biological and microbiological processes” (thus, there is no respite to be garnered from the TPP from the current patent ineligibility regime in the United States).^[23] The TPP (somewhat surprisingly) contains a 12-month “grace period”^[24] patterned after § 102 of the America Invents Act^[25] under a “first inventor to file”-styled regime.^[26] Transparency is the express basis for provisions regarding patent application publication and public accessibility to the file wrapper,^[27] and there are also provisions for patent term adjustment due to “unreasonable” delays in issuing a patent (defined as being longer than five years).^[28] The TPP permits signatories to restore portions of patent term expended by regulatory review (due to “unreasonable curtailment”),^[29] similar to patent term extension provisions of U.S. law, and to protect industrial designs.^[30]

Exclusivity provisions regarding agricultural chemicals and, more urgently, pharmaceuticals and biologic drugs have engendered the most controversy and opposition. Agricultural products regulated prior to marketing receive at least 10 years market exclusivity under the TPP.^[31] Regulated pharmaceutical products are entitled to at least five years of market exclusivity (subject to the provisions of the Doha Declaration),^[32] and signatories must provide a legal framework for the pharmaceutical license holder to challenge approval and marketing of any generic version of a patented drug.^[33] Biologic drugs are afforded at least eight years of market exclusivity, or at least five years combined with other regulations in a signatory country that result in at least eight years of exclusivity.^[34] All these provisions are subject to further review by the signatories after 10 years, to provide the ability to adapt the exclusivity term based on experience. The exact phrasing of these terms is important to understanding their scope. Particular measures relating to pharmaceutical products can be found in TPP Articles 18.50–18.54.^[35]

Because even these exclusivity terms—which are shorter than those available to biologic drug innovators in the United States (12 years) or Europe (10 years)—are longer than the terms (i.e., no exclusivity term) available in many of the signatory states, their inclusion in the TPP has produced opposition from nongovernmental organizations. In particular, organizations such as Doctors without Borders,^[36] Public Citizen,^[37] and others have opposed the exclusivity terms on the grounds that pharmaceutical corporate interests have been satisfied at the expense of public access to medicine, particularly in developing country signatories of the TPP.

Copyrights

The copyright provisions^[38] of the TPP have also caused controversy, particularly from groups like the Electronic Frontier Foundation that oppose copyright restrictions in almost any form.^[39] The basic term is set at not less than the life of the author plus 70 years;^[40] exceptions include “legitimate purposes such as, but not limited to: criticism; comment; news reporting; teaching, scholarship, research, and other similar purposes; and facilitating access to published works for persons who are blind, visually impaired or otherwise print disabled.”^[41] The TPP provides penalties not only for unauthorized reproduction but also for “circumvention of effective technological measures that authors, performers, and producers of phonograms use in connection with the exercise of their rights and that restrict unauthorized acts,” including criminal penalties (albeit ones that exempt “a non-profit library, museum, archive, educational institution, or public non-commercial broadcasting entity”).^[42] Similar remedies are included for violation of “rights management information.”^[43]

IP Enforcement

The TPP also contains enforcement provisions for protecting IP rights, aimed at “permit[ting] effective action against any act of infringement of intellectual property rights covered by this Chapter, including expeditious remedies to prevent infringements and remedies that constitute a deterrent to future infringements,” available in equal measure for patent, copyright, or trademark infringement.^[44] In addition to damages and the possibility of an injunction against future infringement, the TPP empowers signatories to destroy infringing articles, particularly counterfeit goods,^[45] and there are particular provisions relating to counterfeit articles identified at a signatory’s borders.^[46]

Also of note is that the TPP provides, for the first time in an international trade agreement, criminal penalties for trade secret theft.^[47]

Contained in the criminal enforcement provisions for willful trademark or copyright infringement are penalties for counterfeiting^[48] and for intercepting or transmitting without authorization an encrypted program-carrying cable signal,^[49] and provisions relating to Internet service providers with regard to preventing unauthorized use of copyrighted materials.^[50]

Other TPP Features

Regarding specifics of the other important provisions of the agreement, the TPP is estimated to have reduced or eliminated immediately upon ratification about 18,000 tariffs, including those on all U.S. manufactured goods and almost all U.S. farm products. These provisions were intended to benefit the United States as an exporter, where for example high tariffs on American automobiles and other products have keep those items out of foreign markets to the country’s detriment. The “investor-state dispute settlement” provisions provide a path for an individual or private company to sue a foreign government, which is prohibited under international law absent such an agreement.^[51] While this would permit a company to have legal recourse through arbitration to protest unfair treatment, fears have been raised that it could be used by multinational companies to challenge environmental protection and labor laws. Tobacco was expressly excluded from the scope of these provisions due to fears the tobacco companies would do just that and bring actions against laws in member states restricting tobacco use (such as those in the United States).

According to the U.S. Trade Representative, the TPP would have benefited the United States by opening foreign markets while protecting the “nearly 40 million American jobs [that] were estimated to be directly or indirectly attributable to ‘IP-intensive’ industries in 2012.”^[52] The signatory countries (and perhaps other countries in the region that have evinced an interest in becoming signatories in the future, such as Korea and China) are a growing part of the globe and are expected to comprise the world’s fastest growing market over the next 10–20 years for “film, medicines, and new digital products for consumers, [and] civil aircraft and satellites.”^[53] These opportunities are balanced by the challenges of piracy, cyber theft, and counterfeiting, all issues that the TPP was intended to address.

TPP Ratification

The agreement cannot come into effect unless it is ratified, either by all 12 nations or by enough of them to constitute 85 percent of their combined gross domestic product (GDP) (these nations comprise about 40 percent of global GDP). In the United States, President Obama was able to get so-called “fast track” ratification authority, wherein Congress must bring the treaty to a vote within 90 days of the treaty being formally sent to Congress for ratification, and there can be no amendments, under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which was passed on June 24, 2015, and signed into law on June 29, 2015.^[54] Nevertheless, a significant number of disparate groups exerted sufficient political pressure against ratification to have delayed a vote until the lame duck session of Congress that convenes after the election.

Even if ratified, the effects on U.S. law would be minimal (although it could intensify pressure for a reduction in the term of biosimilar exclusivity, which President Obama has been trying to reduce from twelve years to seven ever since the biosimilar law^[55] was passed). The largest benefits to U.S. industry would be in redressing apparent discrimination against American goods in certain of the signatory countries, such as those chronicled each year in the U.S. Trade Representative’s Special 301 Report.^[56] But no matter what the actual advantages might have been to the TPP for the U.S., Mr. Trump’s election has all but doomed any chance Congress will ratify the TPP (and President Obama has conceded as much). The real question is whether treaties such as the TPP are still politically feasible or whether the Trump administration will succeed in having America withdraw from such agreements no matter what the consequences for American global trading interests.

© 2016 McDonnell Boehnen Hulbert & Berghoff LLP

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