How to Comply with the TRIPS and WTO Law the New Challenges to Vietnam’S Patent Legislation from WTO Dispute Settlement Practice

Nagoya University Graduate School of Law

Doctoral Dissertation

How to Comply with the TRIPS and WTO Law The New Challenges to Vietnam’s Patent Legislation from WTO dispute settlement practice

Name: Pham Hong Quat Name of course: Doctoral Program for Professionals Student ID No: 430303106

Main Academic Advisor: Professor SABURI Haruo Sub-academic Advisors: Professors SUZUKI Masabumi, OBATA Kaoru

Submission: December 2006 Publication: April 2007 (Available at Nagoya University Center Library and Nagoya Law School Library)

I. Vietnam and its intricacy in compliance with the TRIPS and WTO law

The question of bringing the national legislation into compliance with World Trade Organization (“WTO”) law is one of the hot issues being at the debate among the legislators and the policy makers in Vietnam. Having applied for the accession to the WTO since the beginning of 1995, the government of Vietnam is urging an active national action program for the purpose of bringing the national legislation into compliance with WTO law. As a developing country being in the transitional period from a centralized planning economy into an oriented market economy, among the others, the concern of the national policy makers extends much to the issues that are regarded being “new” to the traditional national policy makers and law practitioners. The rule of the WTO on the matter of intellectual property protection is a typical example in such perception. The study and discussion on the WTO rulings in Vietnam have not been popular in the community of the law scholars and practitioners.

Vietnam is also coping with the problems generally happened to the developing countries in the progress of making the national legislation consistent with WTO law, such as the lack of information, the insufficiency in the legal expertise and the immature of the technical and social conditions. The affect of these facts is evident in the legislation on the protection and enforcement of intellectual property rights. Almost the bureaucrats and the public are unfamiliar with the concepts of intellectual property protection and enforcement introduced by the TRIPS. In despite of that, the legislation of Vietnam in the field of intellectual property has experienced a remarkable progress. For the last decade, a large volume of the new laws and regulations were enacted in the careful consideration of the requirements of WTO law, especially those elaborated in the Agreement of Trade-Related Aspects of Intellectual Property Rights (“TRIPS”).

At present, the draft of a code of intellectual property is preparing at the great effort of the government in strengthening the national legislation for its compliance with the TRIPS and WTO law. The drafters expect that the enactment of the new law will deal with all problems existent in the current national legislation on intellectual property, which is likely to become the source of disputes with the trading partners when Vietnam enters the playing field of the WTO. Otherwise, the legislators and the public present their concern about the affect of the new intellectual property law on the competitive capacity of the infant domestic industry and the indispensable demands of the public interest. Such concern gives rise to the hard-line view of the government that Vietnam would not intend to enter the WTO “at any cost”. This view supports the idea that there is no need to make a big change in the current statutory acts. Rather, the government may issue the relevant regulations or instructions to implement the requirements of the WTO, when necessary.

Concerning the legislation on patents, in particular, the new law drafting members and most of the commentators believe that the current national legislation is satisfactory with the intrusive requirements of the TRIPS, including the incorporated provisions of the Paris Convention on Protection of Industrial Property (“Paris Convention”). The way that the drafting members and the commentators follow to identify the irrelevance of the current

© Pham Hong Quat 2 legislation is making the comparison between the textual language of the TRIPS and the relevance of the national regulations. The same manner has been done in making the national legislation consistent to the provisions of the Paris Convention. There appear some problems arisen from the preparation of the new law draft and the assessment of the current legislation in such a view.

The conception of sovereignty and compliance with WTO law in general, with the TRIPS in particular, should be perceived in the development of international economic law. Accordingly, national sovereignty may be eroded in certain aspects, including the restriction of legislative freedom to fulfill the obligations under WTO law. In this perspective, the TRIPS place the constraints on domestic legislation to the extent much more intensive than what the Paris Convention does. The rulings of the WTO panels over TRIPS-related disputes reveal that conformity with the TRIPS practically requires the national legislation to comply with not only the rules worded in the textual provisions of the TRIPS, but also the specific rules and disciplines developed from the GATT and WTO practice. The interpretation of the TRIPS provisions under the GATT jurisprudence imposes the more restrictive constraints on national legislation, on one hand. The obligations under the substantive provisions of the Paris Convention themselves are substantively changed as they are incorporated into the TRIPS and the WTO system, on the other hand.

The review of the national legislation for the purpose of securing the conformity with the TRIPS should take these elements into account. The preparation of the new law draft will be more efficient when the drafters and the legislators come up with a common understanding on the constraints that WTO law and the TRIPS place upon the national legislation in dealing with the issues of intellectual property protection. For a comprehensive and practical perception of this matter, it is worth having an investigation into both the provisions of the TRIPS and the rulings of the WTO panels on the TRIPS-related disputes in the WTO dispute settlement practice.

The analysis of the WTO panel rulings reveals that the application of the GATT jurisprudence in the interpretation of the TRIPS provisions produces the constitutive constraints on domestic legislation in compliance with the TRIPS and WTO law. Particularly, the affect of such constraints become greater before the challenges to legislation “as such” against an allegedly TRIPS-violated domestic law in the TRIPS implementing practice. It is noted that in the assessment of conformity with the TRIPS and WTO law, domestic legislation needs to be taken in consideration of the principles of WTO jurisprudence developed by the WTO panels.

1. The extension of GATT to the “incorporated” the Paris Convention

The Paris Convention on the Protection of Industrial Property1 (“Paris Convention”) exists as a primary international treaty on intellectual property protection in the World Intellectual Property Organization (“WIPO”) framework. Although the convention provides an international regime for industrial property protection in the broadest meaning,2 the decisive reason leading to the establishment of the convention was attributable to the demand for protection of inventions for foreigners, triggered by the development of international industry and trade.3 In the context of the divergence of national patent laws in patent protection, the mandate for no encroaching on the domestic legislation of the participants made the Paris Convention negotiations successful.4

Respecting the existent domestic legislation of the member countries regarding patent protection is the foundation of the national treatment principle provided to patents is regarded as a fundamental principle constituting the backbone of the Paris Convention.5 The national treatment and the rules of substantive law regarding the industrial property protection formed the main framework of the Paris Convention.6 Not straying from the rationale of the principle of national treatment, the substantive rules leaves a considerable freedom to national laws of the Paris Union members to legislate the industrial property protection pursuant to their own preferences and interests.7

The conclusion of the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) at the end of the General Agreement on Tariffs and Trade (“GATT”) negotiations in the Uruguay Round was the result of the movement of intellectual negotiations from the WIPO forum to the GATT forum.8 The TRIPS was included into the international trade system of the World Trade Organization (“WTO”) when existing as an annex of the WTO

1 See Paris Convention for Protection of Industrial Property of March 20, 1883, as revised at Brussels on December 14, 1900, at Washington on June 2, 1911, at The Hague on November 6, 1925, at London on June 2, 1934, at Lisbon on October 31, 1958, and at Stockholm on July 14, 1967, available at http://www.wipo.int/clea/docs/en/wo/wo020en.htm [hereafter “Paris Convention”]. 2 Id. art. 1(3). This article states: “Industrial property shall be understood in the broadest sense and shall apply not only to industry and commerce proper, but likewise to agricultural and extractive industries and to all manufactured or natural products, for example, wines, grain, tobacco leaf, fruit, cattle, minerals, mineral waters, beer, flowers, and flour.” 3 See Alfredo Ilardi and Michael Blakeney, International Encyclopaedia of Intellectual Property Treaties (Oxford University Press, 2004), part I, pp. 22-23. 4 See Friedrich-Karl Beier, ‘One Hundred Years of International Cooperation – The Role of the Paris Convention in the Past, Present and Future’, International Review of Industrial Property and Copyright Law (Vol. 15, 1984), p. 8. 5 Id. at 9. 6 See G.H.C. Bodenhausen, Guide to the application of the Paris Convention for the protection of industrial property (BIRPI, 1969), pp.12-13. 7 Id. at 13. 8 See Addulqawi A.Yhsuf, ‘TRIPs: Background, Principles and General Provisions’, in Intellectual Property and International Trade: The TRIPs Agreement (eds. Carlos M. Correa and Addulqawi A.Yhsuf) (Kluwer Law International, 1998) p.8.

© Pham Hong Quat 4 Agreement.9 The TRIPS incorporates the main substantive provisions of the pre-existing treaties on intellectual property, including those of the Paris Convention.10 Articles 1.3 and 2.1 of TRIPS bring the main principles and substantive provisions of the Paris Convention into the TRIPS regulation, and accordingly, the WTO system.11 Consequently, the implementation of the obligations under the principles and provisions of the “incorporated” Paris Convention is subject to the supervision of the Dispute Settlement Body and the WTO dispute settlement procedures and rules.12 The panels and the Appellate Body of the WTO have some opportunities to interpret the particular provisions of the TRIPS and the “incorporated” Paris Convention in the examination of the consistency of the relevant domestic law.13 Under the GATT principles and the TRIPS norms, this paper will discuss how WTO jurisprudence places the practical challenges to national legislation in the intellectual property protection, particularly in the patent protection.

Surprisingly, the analysis of the findings of the panels and the Appellate Body reveals that the GATT standards are applied to examine not only the obligations under the national treatment and MFN treatment of TRIPS, but also those under the national treatment of the “incorporated” Paris Convention. The intrusive extension of the GATT standards to the practice of TRIPS and the “incorporated” Paris Convention is perceived as a great challenge to the domestic legislation of the WTO Members in the patent protection. Such an extension of the GATT effect gives rise to the obligations under the substantive provisions of the Paris Convention as incorporated into the WTO system.

In the relation to the “incorporated” Paris Convention, Article 2.1 of TRIPS says that the WTO Members must comply with the substantive provisions of the Paris Convention as if they implement the TRIPS obligations. In the practice of dispute settlement, the WTO panels and the Appellate Body clarified another aspect of this provision. That is, the WTO Members must comply their implementation of the “incorporated” Paris Convention to the principles and relevant provisions of TRIPS. This implication shows the prevailing effect of TRIPS provisions over the “incorporated” Paris Convention provisions. The surveillance of TRIPS principles over the “incorporated” Paris Convention and the cumulative application of TRIPS and GATT principles are perceived as new challenges from WTO jurisprudence to national legislation in compliance with the TRIPS and WTO law.

Clarifying the disputed provisions in the TRIPS implementation, the recently developed rulings of the WTO panels and the Appellate Body introduced a new approach in understanding the nature and scope of the national treatment of the “incorporated” Paris Convention. Accordingly, the national treatment GATT standards were in measuring the

9 See Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, GATT Doc. MTN/FA/Add.1 (December 15, 1993). 10 See Trade-Related Aspects of Intellectual Property Rights Agreement [hereafter “TRIPS”], available at http://www.wto.int/english/docs_e/legal_e/27-trips.doc. 11 See Appellate Body Report, US-Section 211 Omnibus Appropriations Act of 1988 [hereafter “US-Section 211 Omnibus”], WT/DS176/R (2 January 2002), para. 125. 12 Id. at 238. 13 See Olivier Cattaneo, ‘The Interpretation of the TRIPS Agreement Considerations for the WTO Panels and Appellate Body’, The Journal of World Intellectual Property (Vol.3, 2000), p. 630. See also Daniel J. Gervais, The TRIPS Agreement after Seattle Implementation and Dispute Settlement Issues, The Journal of World Intellectual Property (Vol.3, 2000), p. 510.

© Pham Hong Quat 5 national treatment provisions of the TRIPS and the Paris Convention. Consequently, WTO jurisprudence places the new constraints on the national legislation of the WTO Members in regulating the patent protection.

2. The surveillance of GATT rules in the TRIPS practice

The prevalence of the GATT disciplines in interpreting the national treatment and most- favored-nation (“MFN”) principles and norms of the TRIPS gives rise to the burdensome of the TRIPS obligations. The provisions on the objectives and the principles inscribed in the TRIPS do not help reducing the strictness of compliance with the TRIPS, due to their ineffectiveness under the rulings of the WTO panels. The recently developed examination standards in WTO jurisprudence regarding the intellectual property protection constitute the new challenges to national legislation in compliance with the TRIPS and WTO law.

The rulings of the WTO panels and the Appellate Body recently developed in the practice of settlement of the dispute involving intellectual property protection reflect the more and more restrictive approach in examining the inconsistency of the relevant domestic law to WTO law. The unavailability of an effective implementing mechanism in a domestic legislation may be regarded a WTO violation because WTO law requires domestic law to secure positively its WTO obligations. The inconsistency of a discretionary legislation can no longer be exempted from the charge of WTO violation as it could be under the regime of GATT 1947. The intrusive examination and explanation of the WTO panels and the Appellate Body on the particular domestic regulations in the recent TRIPS related cases are also understood as the newly developed challenges for effecting national law on the intellectual property protection in the WTO framework.

The WTO panels and the Appellate Body in recent TRIPS related cases also created the specific terminologies of standards examination in dealing with the challenges of legislation “as such” and the actual application of legislation. Developed from the practice of the national treatment of GATT,14 the conception of “extra hurdle” created by the Appellate Body in a TRIPS related case is applied frequently in the different circumstances of the disputes in implementing TRIPS. Also, the development in the panel rulings on the “actual implications” is a real challenge to both statutory language and the practical application of a domestic law. The development of the panel rulings in this aspect is considered a new constraint of WTO jurisprudence regarding intellectual property protection.

Applying the perception of the constraints of WTO jurisprudence in the examination of the current legislation of Vietnam, it is explored various hidden problems in the national patent regime. Different from the general admission that Vietnam patent legislation has been fully qualified and complied with TRIPS and WTO law, some problems appear existent in the current national patent regulations. In the view of the recently developed rulings of the panels and the Appellate Body, such kinds of problems would be likely to subject to the findings of the WTO inconsistency. Under WTO jurisprudence, the elimination of the TRIPS inconsistent provisions in the domestic patent regulations should be made in both the statutory language and the implementing mechanism of the relevant domestic law. 14 The term “GATT” refers generally to GATT 1947 and GATT 1994, whose texts are available at http://www.wto.org.

© Pham Hong Quat 6 The examination of the draft of the new law on intellectual property law of Vietnam in the light of the new challenges of WTO jurisprudence identifies certain problems inherited from the current legislation on the patent protection. The purpose of compliance with the TRIPS and WTO law requires the exclusion of inconsistent provisions from the present version of the new law draft and from its implementing regulations.

3. WTO jurisprudence and international exhaustion of patent rights

The question of legality of international exhaustion of patent rights under Article 4bis of the Paris Convention and Article 6 of the TRIPS invited much debate. Should national legislation be subject to any constraints from the “incorporated” Paris Convention, the TRIPS and GATT 1994? Theoretically, various constraints are supposedly available in such regulations from different views. However, the recent development of the TRIPS and WTO jurisprudence regarding the intellectual property protection provided certain grounds that might help to eliminate some, and otherwise, to consolidate some of those. The national legislation nevertheless should take into accounts the likely challenges from WTO jurisprudence in the practice of application of international exhaustion of patent rights.

Although the TRIPS excluded the issue of exhaustion of rights from the TRIPS dispute settlement procedures, the likely challenges to national legislation in dealing with the issue of exhaustion of rights appear existent in the WTO framework. In the context of negotiations for the accession to the WTO, Vietnam is spending great efforts to bring the national legislation into compliance with the TRIPS and WTO law. The identification of the practical challenges and requirements from WTO jurisprudence regarding the intellectual property protection would contribute to the works being going on in Vietnam for the conforming the intellectual property legislation to the TRIPS regulation and WTO law.

Seeking the appropriate justification for the allowance of parallel importation of patented products, the recently developed judgment of the Supreme Court of Japan provided an empirical reasoning relying on the current circumstances of international trade. The judgment of the Supreme Court on this issue introduced some arguments that might be the helpful reference for Vietnam to settle the relevant debate in the drafting of the new intellectual property law. The experience of Japan might provide some suggestions for clarifying the reasoning and justification for parallel importation of patented products. However, it needs to be taken into consideration the adoption of the conditional approach in the allowing parallel importation of patented products. Alternatively, the active role of the government in controlling and promoting the parallel importation of patented products in the selected areas or circumstances may be a more effective solution in the practice of Vietnam.

The paper includes four main contents. The first content refers to the general conception of sovereignty and freedom of legislation in the WTO framework and the difference in the conception of legislative freedom under the Paris Convention and the TRIPS regulation. This content is presented in Chapter one.

The second content addresses the question of what are the new challenges from WTO jurisprudence to national legislation regarding the intellectual property protection. For this purpose, Chapter two discusses the challenges from the change in the nature and scope of the

© Pham Hong Quat 7 Paris Convention as incorporated into the WTO system. Chapter three examines the challenges from the application of GATT standards and the new developed disciplines of WTO jurisprudence in securing compliance with the TRIPS.

The third content serves the review of the law and practice of Vietnam on the patent protection under the new challenges from WTO jurisprudence. Accordingly, Chapter four examines the current regulations on the patent protection for identifying the hidden problems of the national legislation. Chapter five discusses the problems still existent and unsettled in the draft of new law on intellectual property of Vietnam, particularly the problem of exhaustion of patent rights.

The last content discusses on the legality of international exhaustion of patent rights under WTO law and the constraint of WTO jurisprudence regarding this issue. Concerning this content, Chapter six explores the practical constraints and challenges from WTO jurisprudence regarding the issue of exhaustion of patent rights to seek some implication for the case of Vietnam. This chapter also examines national practices with the focus on the practice of Japan concerning the issue of exhaustion of patent rights, for seeking an appropriate suggestion on the way to adopt the principle of international exhaustion of patent rights in Vietnam.

The new challenges from WTO jurisprudence regarding the intellectual property protection would place more burdensome on national legislation in compliance with the TRIPS. The challenges generated from the surveillance of the principle and the substantive provisions of TRIPS, WTO rules and the change in the national treatment principle of the “incorporated” Paris Convention. The recently developed rulings of the WTO panels and the Appellate Body on the inconsistency of relevant domestic law with the TRIPS provisions confirms the extension of GATT standard principles to the practice of TRIPS and the “incorporated” Paris Convention.

Not only is the nature of the national treatment obligation under the “incorporated” Paris Convention changed as a consequence of the GATT standards being applied to the TRIPS principles, but also the scope of this obligation is extended together with the change in the rule of assimilation when it functions in the WTO system. The application of the rule of anti- discrimination and the requirements for the availability and security of a legal basis in implementing the substantive provisions of TRIPS places constraints on the national legislation of WTO Members. The specific rulings developed from the TRIPS related disputes on the compliance of domestic law to WTO law pose challenges to domestic legislation in securing the TRIPS obligations under the WTO framework.

In light of the recently developed rulings of the WTO panels, the current legislation of Vietnam reserves hidden problems that would likely be subject to the challenges of WTO law inconsistency. The same situation exists in the language of the draft of the new intellectual property law. It is necessary to eliminate the discriminatory elements from the statutory language of the new law and from its implemented regulations to be in compliance with the TRIPS and WTO law. It is also advised for the new law to contain certain open provisions to make the national legislation compatible with the “incorporated” Paris Convention. The internal and external requirements of the national legal system urge clarification of the legality and justification of parallel importation of patented products in the language of the new law and in its implementing regulations.

The development of WTO jurisprudence regarding intellectual property provides some grounds to clarify the disputed issues concerning exhaustion of patent rights under the TRIPS regulation. The recent development of national practices of some WTO Members provides different arguments on the permission or the prohibition of parallel importation of patented products. The reasoning in favor of international trade allowing conditionally parallel importation of patented products is a specific experience of Japan. It is advised that the legislators and judges of Vietnam may refer to the justification and the reasoning of Japanese judges for allowing parallel importation of patented products. However, it needs to take into accounts the conditional clauses in the circumstances of Vietnam. The Government control is suggested as an alternative solution.

Sovereignty and Freedom of Legislation under WTO Jurisprudence

I. Sovereignty and WTO law

1. Loss of sovereignty

The issue of sovereignty under WTO law causes a great debate among the scholars and national policy makers, particularly in the United States and the European countries.15 There are different views on the matter of sovereignty in relation with the institutional aspects and the dispute settlement mechanism of the WTO.16 Some proponents alleged that the participation of the WTO would lead to the loss of sovereignty of the members in the legislative freedom and in the determination of the internal policies pursuing the specific national interests.17

The concern was that, on one hand, the WTO requires WTO Members to conform their domestic legislation to WTO law, including regulations that may be irrelevant to the national interests and preferences.18 On the other hand, domestic law of a WTO Member may be subject to the assessment of a WTO panel upon a challenge from any other Member.19 A WTO panel may find that the relevant domestic law inconsistent with WTO law and that the related Member being in violation of a WTO obligation.20 Accordingly, the WTO mandates the related Member to make the necessary change in the domestic legislation as far as it assures the fulfillment of the related WTO Member’s obligation.21 Some complained the super power handing over the WTO Dispute Settlement Body in interpreting WTO law.22

15 See John H. Jackson, ‘The Great 1994 Sovereignty Debate: United States acceptance and implementation of the Uruguay Round results’, in The Jurisprudence of GATT and the WTO Insights on treaty law and economic relations (Cambridge University Press, 2000), p. 367. See also Ernst-Ulrich Petersmann, ‘European and International Constitutional Law: Time for Promoting “Cosmopolitan Democracy” in the WTO’, in The EU and the WTO Legal and Constitutional Issues, (eds. Grainne De Burca and Joanne Scott) (Oxford-Portland Oregon, 2001), p. 97. 16 See generally, Kal Raustiala, ‘Rethinking The Sovereignty Debate In International Economic Law’, Journal of International Economic Law (Vol. 5, 2002), pp. 842-856. 17 Id. at 845. See also David Palmeter, ‘National Sovereignty and the World Trade Organization’, The Journal of World Intellectual Property (Vol. 4, 2001), p. 77; Gary Lyde Hufbauer, ‘International Economic Law In Times That Are Stressful’, Journal of International Economic Law (Vol. 5, 2002), p.16. 18 See Jagdish Bhagwati, ‘The Agenda of The WTO’ in Challenges to The New World Trade Organization, eds., Pitou Van Dijck and Gerrit Faber (Kluwer Law International, 1996), pp. 37, 42. See also Alice Enders, The Role of The WTO In Minimum Standards’, in Challenges to The New World Trade Organization (eds. Pitou Van Dijck and Gerrit Faber) (Kluwer Law International, 1996), p. 71. 19 See Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System International Law, International Organizations and Dispute Settlement (Kluwer Law International, 1997), p. 181. See also John H. Jackson, The World Trade Organization Constitution and Jurisprudence (The Royal Institute of International Affairs, 1998), pp. 74, 75. 20 See John H. Jackson, supra note 19, at 78, 82. 21 See Chi Carmody, ‘Remedies And Conformity Under The WTO Agreement’, Journal of International Economic Law (Vol. 5, 2002), pp. 317-319. 22 See Meinhard Hilf, ‘Power, Rules And Principles – Which Orientation For WTO/GATT Law’, Journal of International Economic Law (Vol. 5, 2002), pp. 129-130. See also Allan Rosas, ‘Joinder of Parties And Third Party Intervention in WTO Dispute Settlement’, in Improving WTO Dispute Settlement Procedures: Issues &

The supporters to the WTO raised some arguments for the integrity of the Members’ sovereignty when they decide to enter and work in the WTO framework.23 The denotation of sovereignty amounts to two aspects, that is, the internal and external relations.24 A sovereign state retains the ultimate competence in regulating all matters of the internal relationships concerning its belongings, including its residents.25 The WTO does not at any rate interfere with the sovereignty of a Member in deciding the matters of its internal relationships.26 The sovereign state also holds the supreme power that is delegated from its residents in determining the external relationships of the state.27 The state may freely decide to join or withdraw from the WTO after consideration of its rules.

When the state agrees to join the WTO, it agrees to accept and comply with WTO law. 28 Because the WTO stands for a multilateral system pursuing the fairness and the liberalization of international trade, the external relation of one Member need to be regulated in the case it involves a discriminatory action against any other.29 The compliance with WTO law of the Members is the good way to assure the overall effect that benefits them all in the end.30 In this view, some even argued that the WTO did not threaten but strengthened the sovereignty of the WTO Members.31 The argument relied on the fact of increasing interdependence among the countries in the world economic development.32 The fact that the threatening of the unilateral measures applied in the bilateral trade relationships gave rise to the good effect of a multilateral system.33 In this regards, it was argued that the traditional conception of sovereignty was out of date. The new concept of sovereignty is perceived in the coming challenges to the international trade globalization.34 The instruction of the new conception of

Lessons From the Practice of Other International Courts & Tribunals, ed. Friedl Weiss (Cameron May, 2001), pp. 77-78; Donald M. McRae, ‘The WTO in International Law: Tradition Continued or New Frontier’, Journal of International Economic Law (2000), pp. 29-30. 23 See Kal Raustiala, supra note 16, at 856, 864. 24 Id. at 845. See also John H. Jackson, supra note 19, at 102; Patrick A. Messerlin, ‘Three variations on ‘The Future of The WTO’, Journal of International Economic Law (Vol. 8, 2005), p. 300. 25 See Kal Raustiala, supra note 16, at 846. 26 Id. at 860. 27 Id. at 867-868. 28 Id. at 848. 29 See John H. Jackson, The World Trading System Law and Policy of International Economic Relations (The MIT Press Cambridge, Massachusetts, London, England, 1989), p. 134. See also Michael J. Trebilcok and Robert Howse, The Regulation of International Trade (3rded.) (Routledge Taylor & Francis Group, 2005), pp. 51-53. 30 See Peter Van Den Bossche, The Law and Policy of the World Trade Organization Text, Cases and Materials (Cambridge, 2005), pp. 22-23. See also Christopher Arup, The New World Trade Organization Agreements Globalizing Law Through Services and Intellectual Property (Cambridge University Press, 2000), p. 43. 31 See Kal Raustiala, supra note 16, at 863, 875. 32 Id. at 857-858. 33 See Abram Chayes, Antonia Handler Chayes, The New Sovereignty (Harvard University Press, 1995), pp. 103- 106; J.-G. Castel, Extraterritoriality in International Trade Canada and United States of America Practices Compared, (Butterworths, 1988), pp.22-24. See also Michael J. Trebilcok and Robert Howse, supra note 29, at 406-410; Gregory C. Shaffer, Defending Interests Public-Private Partnerships in WTO Litigation (Brookings Institution Press, 2003), p. 51. 34 See John H. Jackson, ‘International Economic Law in Times That are Interesting’, Journal of International Economic Law (Vol. 3, 200), pp. 10-11. See also Kal Raustiala, supra note 16, at 858.

3. Erosion of sovereignty

The prevailing view is that when many “players” expect to join a “club” with a common rule for maintaining a “level playing field” which provides the opportunities for everyone, the sovereignty of each needs to be eroded to certain extent to implement its obligations under the common rule.36 The WTO is designed as a supranational organization with the “rule-oriented” working mechanism.37 The conception of sovereignty therefore relates to the allocation of power in the vertical relation between the WTO Members and the WTO institution.38 Generally, the extent of sovereignty that national states shifted to a supranational organization would correspond to the extent of affects that the relevant treaty placing on national law.39 Where an agreement of the WTO Agreement has indirect effect on the domestic legislation of a Member, the legislative freedom of that Member would be less constrained by the agreement due to that Member may choosing the way to transform the WTO norms into the domestic law.40 Generally, the agreements covered by the WTO Agreement produce the indirect effect on domestic legislation in the implementing practice of the Members.41

35 See John H. Jackson, supra note 34, at 10. 36 See John H. Jackson, supra note 29, at 17. See also John H. Jackson, supra note 19, at 77. 37 See John H. Jackson, supra note 19, at 97-98. 38 Id. at 102. 39 See Peter Van Den Bossche, supra note 30, at 68-69. 40 Id. See also T. Cottier and K. Chefer, ‘The Relationship Between World Trade Organization Law, National Law and Regional Law’, Journal of International Economic Law (Vol. 1, 1998), p. 93. 41 See Robert E. Hudec, ‘The Legal Status of GATT In The Domestic Law of The United States’, in European Community and GATT (eds. Meinhard Hilf, Francis G. Jacobs, Ernst-Ulrich Petersmann) (Kluwer Deventer/The Netherlands, 1986), p. 209; Meinhard Hilf, ‘The Application of GATT Within the Member States of the European Community, with Special Reference to the Federal Republic of Germany’, in European Community and GATT (eds. Meinhard Hilf, Francis G. Jacobs, Ernst-Ulrich Petersmann) (Kluwer Deventer/The Netherlands, 1986), p. 175; Adres Moncaya Hase, ‘The Application and Interpretation of the Agreement on Trade-Related Aspects of Intellectual Property Rights’, in Intellectual Property and International Trade: The TRIPs Agreement (eds. Carlos M. Corea, Abdulquawi A. Yusyf) (Kluwer Law International, 1998), p. 140. See also Panel Report, United States-Sections 301-310 of the Trade Act of 1974, WT/DS152/R (22 December 1999) [hereafter “United States-Section 301”], para. 7.72. The Panel found: “Under the doctrine of direct effect, which has been found to exist most notably in the legal order of the EC but also in certain free trade area agreements, obligations addressed to States are construed as creating legally enforceable rights and obligations for individuals. Neither the GATT nor the WTO has so far been interpreted by GATT/WTO institutions as a legal order producing direct effect. Following this approach, the GATT/WTO did not create a new legal order the subjects of which comprise both contracting parties or Members and their nationals.” (Footnote omitted)

1. Panel rulings

The compliance with WTO law of a domestic law is expressed not only in the statutory language but also in its practical effect and actual application. A challenge of a domestic legislation “as such” may lead to a panel ruling on the inconsistency of the legislation with WTO law.42 Different from the dispute settlement regime under GATT 1947, the rule- oriented dispute settlement procedures under the WTO system contain the significant change in the manner to give effect to the ruling of a WTO panel.43 The negative consensus mechanism seems to allow a panel report to be automatically adopted with the consent of at least one winning party to the dispute.44 This feature certainly produces greater pressure on the implementation and compliance with the WTO panel rulings.45

Although the requirement of compliance with WTO law becomes stricter than that posed by its predecessor - GATT 1947, the ruling of a WTO panel on a WTO-inconsistent domestic law does not preclude the optional possibility of the related Member to keep the relevant domestic law unchanged, and at the same time, opt for an alternative compliance measure available under that mechanism.46 The issues of compliance with WTO law and the panel rulings and the sovereignty of the WTO Members invited a tensional debate.47 There are different views on the legal effect of the panel rulings and the optional compliance measures under the WTO settlement dispute procedures.48 In the position of a developing country

42 See Matthias Oesch, Standards of Review in WTO Dispute Resolution (Oxford University Press, 2003), pp. 188-189. 43 See Ernst-Ulrich Petersmann, supra note 19, at 177. See also John H. Jackson, supra note 19, at 72. 44 See Ernst-Ulrich Petersmann, supra note 19, at 185. 45 Id. at 191-192. 46 Id. at 192. See also John H. Jackson, supra note 19, at 96. 47 Typically, the debate between Judith H. Bello and John H. Jackson with respect to the binding effect of the WTO panel rulings. See Judith H. Bello, ‘The WTO Dispute Settlement Understanding: Less is More’, American Journal of International Law (Vol. 90, 1996), pp. 416-418; John H. Jackson, ‘The WTO Dispute Settlement Understanding – Misunderstanding of the Nature of Legal Obligation’, American Journal of International Law (Vol. 91, 1997), pp. 60-64. 48 E.g., Judith H. Bello suggested that the WTO substantially improved the GATT rules for settling disputes, but in fact, it is only the result of the bargain among the sovereign member states. In her opinion, even with an effective ruling or recommendation of a panel, a member in question is quite possible to freely select one of three choices. First, it may come into compliance with the ruling by withdrawing the offending measure or rectifying the relevant omission. Second, it may maintain the offending measure or determine not to rectify the relevant omission but, instead, provide compensatory benefits to restore the balance of negotiated concessions. Third, it may choose to make no change in its law or measures and also refuse to provide compensation, and, instead, suffer likely retaliation against its exports, which is authorized by the WTO for the purpose of restoring the balance of negotiated concessions. Accordingly, it could be understood that a ruling of a panel is only a suggestion of one way for settling disputes. It has not legal binding effect, and the members in question remain fully their sovereignty to decide whether to obey such a ruling or not. Therefore the role of an international panel under the Dispute Settlement Understanding (“DSU”) seems unremarkable toward the sovereign national governments. And she comes to a further thinking that this scenario truly created the balance to maintain political support for the WTO Agreement by members. See Judith H. Bello, ‘The WTO Dispute Settlement Understanding: Less is More’, American Journal of International Law (Vol. 90, 1996), pp. 416-418. By contrast, John H. Jackson argued that a final panel ruling is legally binding upon the parties in question. And that

© Pham Hong Quat 13 member, however, the optional possibility given to them seems to be meaningless in reality. For example, the maintenance of the situation that a domestic law is in incompliance with WTO law often requires a high cost of compensation. The developing country members must choose the way to bring the WTO-inconsistent domestic law into compliance with WTO law pursuant to the rulings of a WTO panel, rather than opt for the payment of compensation. 49 The other alternative in terms of retaliatory measures appears difficult and impractical for the developing country members to exploit because their disadvantageous position in the market competitive capacity.50 Virtually, the WTO settlement dispute mechanism place more constraints on the domestic legislation of the developing country members than that it poses on the domestic legislation of the developed country members.51

2. Deference to national law

There was comment that the Appellate Body and the panels in some cases went beyond their delegated authority in examining the relevant domestic law.52 Accordingly, the Appellate Body and the panels should have to give more deference to the national law of the Members in interpreting the WTO obligations and assessing the relevant domestic law.53 The avocation responded that the panels and the Appellate Body do not provide the authoritative interpretation, but clarify the unclear obligations provided by WTO law. Its duty is to assure the uniformity and coherence in the clarification of the obligations of all Members under the different regulations of the WTO system.54 However, an analysis of the WTO dispute compensation or retaliation is also a kind of measures included in the ruling implementing procedure under the DSU. Compensation and retaliation should not be considered as the optional alternatives to obeying a panel ruling. It could not be understood in the meaning that the parties concerned are possible freely to take the choice of obedience or disobedience. Otherwise, the compensation or retaliation is a sort of preventive or standby measure. Such measures are respectively applicable only in the case of a member in question did not implement timely measures as required by the ruling concerned. The legally binding effect of panel reports has recognized for a long development history of the GATT. The GATT contracting parties were treating the results of an adopted panel report as legally binding. In fact, the reports often recommended a member state to bring its practice into conformity with its legal obligations under the GATT. He argued that when adopted, a panel report was treated as binding; especially this was made rather clearly in the provisions of the Tokyo Round Understanding. See John H. Jackson, ‘The WTO Dispute Settlement Understanding – Misunderstanding of the Nature of Legal Obligation’, American Journal of International Law (Vol. 91, 1997), pp. 60-64. 49 See Tshimanga Kongolo, ‘The WTO Dispute Settlement Mechanism TRIPs Rulings and the Developing Countries’, The Journal of World Intellectual Property (Vol. 4, 2001), pp. 262-263. 50 Id. 51 See Chi Carmody, supra note 21, at 324-325. 52 See Joost Pauwelyn, ‘Does the WTO Stand for “Deference to” or “Interference with” National Health Authorities When Applying the Agreement on Sanitary and Phytosanitary Measures (SPS Agreement)?’, in The Role of the Judge in International Trade Regulation Experience and Lessons for the WTO, (The World Trade Forum Vol. 4, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 175. 53 See Claus-Dieter Ehlermann and Nicolas Lockhart, ‘Standard of Review in WTO Law’, Journal of International Economic Law (Vol. 7, 2004), p. 491. See also Gary N. Horlick, ‘Deference-and Responsibility-by WTO “Judges”’, The Role of the Judge in International Trade Regulation Experience and Lessons for the WTO, (The World Trade Forum Vol. 4, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 133. 54 See William J. Davey, ‘Has the WTO Dispute Settlement System Exceeded Its Authority? A Consideration of Deference Shown by the System to Member Government Decisions and Its Use of Issue-Avoidance Techniques’, The Role of the Judge in International Trade Regulation Experience and Lessons for the WTO, (The World Trade Forum Vol.4, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 43.

© Pham Hong Quat 14 settlement practice shows that the panels and the Appellate Body are in the tendency of rendering the “de novo” assessment in interpreting the WTO obligations of the parties to the disputes.55 It was indicated that in certain cases the panels and the Appellate Body did not give much deference to the national legislation of the WTO Member in the explanation and assessment of the relevant domestic law for determining its compliance with WTO law.56

3. Challenges to developing countries

Beyond the affect of the GATT rulings on the internal policies and domestic regulations on the developing countries,57 the WTO rulings extends the broad impact of WTO law on the domestic legislation of developing countries in different areas.58 Despite the criticisms coming from different aspects, the number of disputes brought before the WTO panels is increasing in relation to various agreements covered by the WTO Agreement.59 The WTO panels and the Appellate Body expressed their powerful capacity in dealing with the disputes among the WTO Members. Though it is going with criticisms, WTO jurisprudence is extending its impact to national jurisdiction in different areas.60

Apart from the concern of sovereignty in compliance with WTO law, the implementing practice of the TRIPS invited specific claims on the constraints imposed on the domestic legislation of the WTO Members, especially the developing countries.61 By the TRIPS, WTO law extended the GATT principles and WTO jurisdiction to the substantive norms for the protection of intellectual property rights of the private parties62 rather than the negative rules against the government measures as provided in the GATT.63 As both the WTO Agreement

55 See Matthias Oesch, supra note 42, at 206. See also Claus-Dieter Ehlermann and Nicolas Lockhart, ‘Standard of Review in WTO Law’, Journal of International Economic Law (Vol. 7, 2004), p. 491. 56 See Olivier Cattaneo, supra note 13, at 652. 57 See Robert E. Hudec, Developing Countries in the GATT Legal System (Gower, 1987), pp. 166-75. 58 See A. V. Deardorff, ‘Should Patent Protection be Extended to all Developing Countries?’, in The World Trading System Critical Perspectives on the World Economy (ed. Robert Howse), p. 35. See also Michael J. Trebilcok and Robert Howse, supra note 29, at 417. 59 See John Jackson, ‘The Changing Fundamentals of International Law and Ten Years of The WTO’, Journal of International Economic Law (Vol. 8, 2005), p. 5. 60 Id. at 6, 11. 61 See Dara Williams, ‘Developing TRIPs Jurisprudence The First Six Year and Beyond’, The Journal of World Intellectual Property (Vol. 4, 2001), p.177. See also Martin Khor, ‘Rethinking Intellectual Property Rights and TRIPS’, in Global Intellectual Property Rights Knowledge, Access and Development (ed. Peter Drahos and Ruth Mayne) (Oxfam, 2002), p. 205. 62 See Karen D. Lee and Silke von Lewinski, ‘The Settlement of International Disputes in the Field of Intellectual Property’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), p. 311 (discussing the extension of WTO jurisdiction to private rights). 63 See Ernst-Ulrich Petersmann, ‘From Negative to Positive Integration in the WTO: The TRIPS Agreement and the WTO Constitution’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Minchigan Press, 2003), 21. See also Christopher Arup, The New World Trade Organization Agreements Globalizing Law Through Services and Intellectual Property, (Cambridge University Press, 2000), p. 12; J. H. Reichman, ‘Universal Minimum Standards of Intellectual Property Protection under the TRIPs Component of the WTO Agreement’, in Intellectual Property and International Trade: The TRIPs Agreement (ed. Carlos M. Corea, Abdulquawi A. Yusyf) (Kluwer Law International, 1998), p. 21; Adres Moncaya Hase, supra note 41, at 128.

© Pham Hong Quat 15 and the TRIPS require the Members to take the positive action in bringing their domestic laws and regulations into compliance with WTO law and the TRIPS provisions,64 the norms with high standards of intellectual property protection set forth in the TRIPS would create high pressure on the domestic legislation of the Members. The situation of TRIPS-inconsistency is popular as to national laws of both developed and developing countries.65

The developing countries now are suffering the pressure in the negotiations on bilateral agreements regarding the so-called “TRIPS-plus” or “WTO-plus”.66 The lack of information sources and the poor conditions of technical and human resources made the professional research and education on WTO law and jurisprudence in the developing countries very limited. That is a significant factor affected the capacity of these countries in the TRIPS implementation.67 The difficulty of the developing countries led to the call for the improvement of the WTO dispute settlement regime to provide more flexibility and favorable conditions in compliance with the TRIPS.68 It was called for the more “activist” of panels in their interpretation of the TRIPS, taking into account the TRIPS exceptions and the principles of the pre-existing treaties on intellectual property.69 There was also the suggestion for a more deference given to national laws of the developing countries in the panel assessment of domestic law under the TRIPS for their incompatible conditions in compliance with the TRIPS.70

4. Compliance with the TRIPS

For the unique features of the TRIPS, the interpretation of this agreement is regarded the difficult work from various aspects. The difficulty stays behind the contradiction in the rationale of the TRIPS, which stands for the greater protection of monopoly and the rationale of the GATT, which stands for the freer trade in goods.71 The interpretation of the TRIPS also relates to the interpretation of the pre-existing treaties on intellectual property, which exist and work under the system of the WIPO for a long before incorporating into the TRIPS. 72 The assessment of compliance with the TRIPS often requires the examination of domestic law concerning intellectual property protection and enforcement. This task seems not easy for the divergence in the traditional grounds of national legal systems in dealing with the issue of intellectual property. When a Member transforms the TRIPS norms into the national

64 See WTO Agreement, art. XI:4 and the TRIPS, art. 1. 65 See Paul Vandoren, ‘The TRIPs Agreement: A Rising Star?’, The Journal of World Intellectual Property (Vol. 4, 2001), p. 30; Tshimanga Kongolo, supra note 49, at 262-263. 66 See Peter Drahos, ’BITs and BIPs Bilateralism in Intellectual Property’, The Journal of World Intellectual Property (Vol. 4, 2001), p. 793. See also Mohammed El-Said, ‘The Road from TRIPS-Minus, to TRIPS, to TRIPS-plus Implications of IPRs for the Arab World, The Journal of World Intellectual Property (Vol. 4, 2001), p. 57. 67 Tshimanga Kongolo, supra note 49, at 260-261. 68 Id. at 270. 69 See Olivier Cattaneo, supra note 13, at 679. See also Carlos Correa, ‘The WTO Dispute Settlement Mechanism TRIPS Rulings and the Developing Countries’, The Journal of World Intellectual Property (Vol. 4, 2001), p. 253. 70 Carlos Correa, ‘The WTO Dispute Settlement Mechanism TRIPS Rulings and the Developing Countries’, The Journal of World Intellectual Property (Vol. 4, 2001), p. 254. 71 Id. at 238. See Olivier Cattaneo, supra note 13, at 631. 72 Id. See also Carlos Correa, supra note 70, at 253.

Some commentators suggested that the interpretation of the TRIPS made by the WTO panels and the Appellate Body is of “constructionist”, namely, it relies strictly on the words of the agreement.74 It was noted that, at least in one case, the Appellate Body rejected the interpretation of the panel for the reason that such interpretation went beyond the language of the TRIPS.75 Despite of that, there existed a criticism that the TRIPS interpretation of the panels and the Appellate Body was incoherent and instable over the cases, which affected the legitimacy of the TRIPS under WTO jurisprudence.76 There was a claim that the panels and the Appellate Body gave the partial deference to the relevant domestic laws in certain cases, and consequently, the domestic legislation of the developing countries suffered more suppression in compliance with the TRIPS.77

The difficulty of the developing countries led to the proposal of improving the WTO dispute settlement regime for the more favorable conditions given to them in compliance with the TRIPS.78 It was called for the more “activist” attitude of panels in their interpretation of the TRIPS, in consideration of the TRIPS exceptions and the principles of the pre-existing treaties on intellectual property.79 There was also a suggestion for the more deference given to national law of developing countries in the panel assessment of domestic law under the TRIPS, taking into account their incompatible conditions in compliance with the TRIPS.80

73 See Peter Draho, Developing Countries and International Intellectual Property Standard-Setting, The Journal of World Intellectual Property (Vol. 5, 2002), p. 766. 74 See Jerome H. Reichman, ‘The TRIPs Agreement Comes of Age: Conflict or Cooperation in the Post- Transitional Phase?’, in Intellectual Property: Trade, Competition, and Sustainable Development (The World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 118. See also Dara Williams, ‘Developing Trips Jurisprudence’, The Journal of World Intellectual Property (Vol. 4, 2001), p. 208. 75 See Appellate Body Report, India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (19 December 1997) [hereafter “India-Patent”], paras. 36, 45. 76 See Daya Shanker, ‘Legitimacy and the TRIPS Agreement’, The Journal of World Intellectual Property (Vol. 6, 2003), pp. 188-189. 77 Id. at 177. 78 See Tshimanga Kongolo, supra note 49, at 270. 79 See Olivier Cattaneo, supra note 13, at 679. See also Carlos Correa, supra note 70, at 253. 80 Carlos Correa, supra note 70, at 254.

Notwithstanding the political considerations of the panels needed in rendering their rulings over particular cases,81 there exist some practical grounds to believe that the TRIPS obligations are getting more burdensome as to the developing countries since the surveillance of the GATT disciplines in securing compliance with the TRIPS. 82 Regardless of the absence of a chapeau provision in TRIPS as it exists in GATT, the GATT practice disciplines are strictly adopted in the interpretation of the TRIPS without any modification. The GATT practice disciplines are also applied in securing the obligations under the Paris Convention as incorporated into the TRIPS. This causes the substantial change in the nature of the obligations under the incorporated Paris Convention. Otherwise, the objectives and principles inscribed in the text of the TRIPS appear no practical effect in the TRIPS implementation. Certainly, the surveillance the GATT disciplines in securing the TRIPS would place more constraints on the domestic legislation of the developing countries. The rulings of the panels and the Appellate Body over the recent TRIPS disputes also revealed some new examination standards, which were applied in examining the consistency of the relevant domestic law with the TRIPS regulation. Such newly developed examination standards together with the strict requirements of WTO law would be the additional challenges to national legislation in compliance with TRIPS. These challenges will be discussed in the subsequent chapters.

Before exploring the question of how the GATT and the WTO jurisprudence places the practical challenges to the national legislation of the WTO Members in compliance with the TRIPS, it is worth having an understanding on the issue of freedom of legislation under the regulations of the Paris Convention and the TRIPS. The discussion bellow will examine this issue in the development from the Paris Convention to the TRIPS, or the movement of intellectual property attention from the WIPO framework to the WTO framework. The main principles and substantive rules regulating national legislation regarding the patent protection under each treaty are of the focus.

81 See Thomas Cottier and Petros C. Mavroidis, ‘Concluding Remark’, in The Role of the Judge in International Trade Regulation Experience and Lessons for the WTO, (The World Trade Forum Vol. 4, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 353. See also Matthias Oesch, supra note 42, at 31. 82 The panel rulings in some recent TRIPS cases substantiate this point, which will be discussed in the following chapters.

Freedom of legislation under the Paris Convention and the TRIPS regulation

II. Freedom of legislation under the Paris Convention

1. The same treatment as to advantages

The Paris Convention is the primary international treaty on protection of industrial property, including patents trademarks and the other objects of industrial property rights.83 The first international congress to discuss the issue of international protection for inventions was the Vienna Congress in 1873 held on the occasion of the Vienna International Exposition.84 The congress adopted a number of resolutions, one of which stated the fundamental principles to be applied in the national legislation of the “civilized nations” in the protection of patents. National legislation was required, among others, to provide patent protection to foreigners and apply the principle of the independence of national in the protection of patents.85 These principles served as the primary mandate for the subsequent negotiating conferences.86 After three conferences held in Paris in 1878, 1880 and 1883, the Act of the Paris Convention on the Protection of Industrial Property was virtually adopted on 20 March 188387.And it became the first multilateral intellectual property convention. The Convention was regarded as a model for subsequent international intellectual property agreements in certain aspects, including the principles of national treatment and priority, the establishment of an open

83 Article 1(2) of the Paris Convention provides that the following objects of industrial property rights be under its regulation: patents, utility models, industrial designs, trademarks, service marks, trade names, indications of source or appellations of origins, and the repression of unfair competition. See the Paris Convention, art.1(2). 84 An important fact prior to the Vienna International Exposition 1873 was that the threat of a boycott of the event by US inventors and manufactures since the Austrian Patent Law did not provide satisfactory protection for foreign inventors. The Austro-Hungarian Government then enacted a special law for provisional protection of articles introduced at the Vienna Exposition. However, the US Government insisted on the Austro-Hungarian Government dealing with the problem of protection for foreign inventors through mutual treaty stipulations rather than through temporary national enactments. The above-mentioned events led to the Vienna Congress of 1873 on the occasion of the Vienna International Exposition to discuss an international solution to the question of patent reform. The participants included representatives from 18 countries: Germany, Austria, Belgium, Brazil, Canada, Denmark, France, Greece, Hungary, India, Italy, Japan, Russia, Netherlands, Sweden, Switzerland, UK, and USA. See e.g., article in Scientific American dated 23 December 1871, reproduced in USA, Congressional Papers, Papers Relating to the Foreign Relations of the United States, 1872, 42nd Cong., 3rd Sess., H of R, Ex Docs VI, part 1, pp. 48-49, quoted by Alfredo Ilardi and Michael Blakeney, in International Encyclopaedia of Intellectual Property Treaties (Oxford University Press, 2004), p.23. 85 The first resolution of the congress declared the “reasons” to justify the demand of protection of inventions in the national legislation of the civilized nations. The second resolution set forth the basic principles on which an “effective and useful patent law should be based”. Among others, these principles required that “a patent should not be refused to a foreigner” and the application of independence of nationality. See T.Webster, Vienna Universal Exhibition 1973: Report on the International Patent Congress (UK, Parliamentary Papers, 1874), 399 at 343-344, 350-351, quoted by Alfredo Ilardi and Michael Blakeney, supra note 84, at pp.24-25. 86 Although the Vienna Congress was an unofficial meeting, it placed the patent issue on the international diplomatic agenda and provided a negotiating basis for the Paris Conferences of 1878, 1880 and 1883. See Alfredo Ilardi and Michael Blakeney, supra note 84, at p.25. 87 For more details of the process of the Paris Conferences and the adoption of the Paris Convention 1883, see Alfredo Ilardi and Michael Blakeney, supra note 84, at 25-31.

© Pham Hong Quat 19 Union,88 and the possibility of revision and the extension of membership.89 The Convention was subject to several revisions by the diplomatic conferences, however, the member states are free to decide whether to join the new versions or not.

At the time of negotiations of the Convention, the situation of national legislation regarding industrial property protection was very different in the member states. Some countries did not have legislation of patent protection. 90 Some others granted very limited or no protection for trademarks and industrial designs. 91 Since there was a diversity of national laws, from the very beginning, the mandate for negotiating the national treatment provision was that the Convention should not aim at unifying national patent laws, nor trespass on the domestic legislation of the Union countries.92 The option for the preparation of the national treatment provision were that the Convention should respect the internal legislation of the Union countries and restrict itself to the obligations regarding national treatment of foreigners in patent protection.93 The concern was that the obligation to provide national treatment to foreigners when great differences existed in national patent laws would certainly result in inequality among the members in the provision of patent protection.94 This gave rise to the proposals on the reciprocal applicability of national treatment. However, those proposals were withdrawn in the end and the Convention affirmed that its principle of national treatment be applied independently by each member without reciprocity. 95 Regardless of the differences and imbalances in the domestic legislation of the members regarding patent protection, the

88 The Convention establishes a Union for the protection of industrial property, including the countries to which the Convention applies. See the Paris Convention, supra note 1, art.1(1). 89 See Alfredo Ilardi and Michael Blakeney, supra note 84, at 31. 90 See Friedrich-Karl Beier, ‘One Hundred Years of International Cooperation – The Role of the Paris Convention in the Past, Present and Future’, International Review of Industrial Property and Copyright Law (Vol. 15, 1984), p. 8 (for examples, Switzerland and Netherlands had no legislation for patent protection). 91 Id. 92 Id. at 8, 9. 93 In the very first negotiating session for the Paris Convention in 1880, where the concept of national treatment was first introduced as an initial basis to form the convention, it was admitted that the Conference could not achieve a complete international treaty of industrial property because of the difficulty of unifying national laws. The Conference was to strive to find the means to constitute a union which, without encroaching on domestic legislation, would assure national treatment and lay down a number of uniform general principles. In the negotiations, the idea inserted in the initial draft of the convention was that the convention would have to respect the internal legislation of all contracting parties as much as possible, and to restrict itself to an obligation to extend national treatment to foreigners, quoted in Comments of the United States on the Reply of the World Intellectual Property Organization To the Panel’s Letter, September 28, 2004, p.2, available at http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute_Settlement/WTO/Dispute_Sett lement_Listings/asset_upload_file664_5560.pdf. 94 E.g., regardless of the lack of a patent protection regime under the national laws of certain countries, nationals of these countries were still able to benefit from national treatment in the patent protection of other members of the Union, quoted in Comments of the United States on the Reply of the World Intellectual Property Organization To the Panel’s Letter, supra note 93. 95 In the course of discussions, the national treatment obligation was clarified by the deletion of the word “reciproquement” from the original draft, quoted in Comments of the United States on the Reply of the World Intellectual Property Organization To the Panel’s Letter, supra note 93. In subsequent revisions, several proposals to include a reciprocity element in the obligation found no support and were withdrawn. Id. See also G.H.C. Bodenhausen, Guide to the application of the Paris Convention for the protection of industrial property (BIRPI, 1969), p.29.

The Convention provides for the principle of national treatment. The basis rule implied in this principle is that the nationals of each Union country shall enjoy in all other Union countries the advantages that their respective laws grant, or may grant in the future, to their own nationals in the protection of industrial property.97 Furthermore, the principle of national treatment of the Convention extends to the so-called “assimilation with nationals”.98 The Convention also requires that nationals of a country outside the Union who are domiciled or have real and effective industrial or commercial establishments in the territory of one country of the Union must also be treated in the same manner as that given to nationals of the Union countries.99

The Convention sets forth an important reservation to the principle of national treatment. This provision reserves “expressly” the provisions of the laws of the Union countries relating to judicial and administrative procedures and to jurisdiction, and to the designation of an address for service or the appointment of an agent.100 Accordingly, the national law of a Union country is allowed to reserve the discrimination against nationals of other member countries as to the aforesaid procedural matters in the industrial property protection.101 It was noted that the reservation of procedural discrimination in the national laws of the member countries was introduced and adopted at very early stage of the Convention negotiations.102

Under Article 2(1) of the Convention, the requirement of the “same treatment” of the Convention as to nationals of the other Member is applicable only to the “advantages” that the respective law of a given Member “now” grants or “may hereafter” grant to its own nationals. It is argued that the provision of national treatment of the Convention, on the face of it, does not oblige the Members to protect inventions or grant patent rights.103 There is no word in this provision requiring the Members to introduce in their domestic legislation a legal regime of patent protection. A Member, therefore, may decline to grant patent rights to foreigners in regards of inventions in all or in certain fields of technology, provided that it also does the same to the nationals of its own.104 A foreigner may not claim a patent for his invention of pharmaceutical, for example, when the national patent law of the related Member precludes generally the inventions in this field from the patentability. For that feature, it was suggested that the provision of national treatment did not restrain the Members from taking the de facto discrimination against foreigners in the patent protection.105

96 See the Paris Convention, supra note 1, art. 2(1). See also G.H.C. Bodenhausen, supra note 95, at 29. 97 See the Paris Convention, supra note 1, art. 2(1). 98 See G.H.C. Bodenhausen, supra note 95, at 12. 99 See the Paris Convention, supra note 1, art. 3. 100 Id. art. 2(3). 101 See G.H.C. Bodenhausen, supra note 95, at 32. See also WIPO Intellectual Property Handbook: Policy, Law and Use (WIPO, 2004), p. 243. 102 See G.H.C. Bodenhausen, supra note 95, at 32. 103 See Nuno Pires de Carvalho, The TRIPS Regime of Patent Rights (Kluwer Law International, 2002), p. 65. 104 Id. See also Ituku Elangi Botoy, ‘From the Paris Convention to the TRIPS Agreement A One Hundred-and- Twelve-Year Transitional Period for the Industrialized Countries’, The Journal of World Intellectual Property (Vol. 7, 2004), p. 120.

© Pham Hong Quat 21 Since the lack of mandatory obligation in the patent protection and the non-reciprocity in the application of national treatment, the Convention stands for the so-called asymmetry of national patent laws.106 Namely, the Convention does not prevent a difference in the standards of patent protection existent in the national laws of the Union countries.107 National laws may decide on the patentability of inventions, the conditions for the patent grant and determine the content, scope and term of patent protection.108 Otherwise, the Members may formulate their national legislation to different strategies in using the patent system as a tool to achieve specific public policy objectives, 109 for examples, for promoting technology transfer and foreign direct investment, or only for protecting domestic industries against the competition of foreign industries.110 The lack of reciprocity and the territorial nature of protection are regarded as a substantial weakness of the principle of national treatment of the Convention. The national treatment principle does not mandate the uniformity of protection nor require an equal level of protection in all Union countries. The same invention or trademark may be protected in various Union countries according to different systems and rules.111

Concerning the procedural matters, Article 2(1) of the Convention contains a conditional clause of the principle of national treatment. This clause says that foreigners must “observe the formalities and conditions imposed upon nationals”.112 As indicated in the practice, there exist different kinds of procedural requirements in the national laws of the Members that constitute the discrimination against foreigners.113 The discriminatory requirements are located in both judicial and administrative procedures relating to the protection and enforcement of industrial property rights.114

It is alleged that the principle of national treatment of the Convention in fact did not discipline the discriminatory practices in the industrial property protection. Otherwise, the provision on national treatment leaves the country members a leeway to provide or reserve the differences and, sometimes, the discriminatory treatments against foreigners in the patent protection. 115 Accordingly, there was no legal obstacle to the country members in determining the variety of

105 See Robert Howse, The Regulation of International Trade (3rded.) (Routledge Taylor & Francis Group, 2005), p. 403; Hanns Ullrich, ‘Technology Protection According to TRIPs: Principles and Problems’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), pp. 367-368. 106 See Nuno Pires de Carvalho, supra note 103, at 66. 107 See Friedrich-Karl Beier, supra note 90, at 9. 108 Id. at 11. 109 See Hanns Ullrich, supra note 105, at 367. See also Nuno Pires de Carvalho, supra note 103, at 66. 110 See Nuno Pires de Carvalho, supra note 103, at 66. See also Ituku Elangi Botoy, supra note 104, at 120. 111 See Friedrich-Karl Beier, supra note 90, at 11. 112 See the Paris Convention, supra note 1, art. 2(3). 113 See G.H.C. Bodenhausen, supra note 95, at 32. See also M. J. Trebilcock and Robert Howse, supra note 29, at 404. 114 See M. J. Trebilcock and R. Howse, ‘Trade-related Intellectual Property (TRIPs)’, in The World Trading System Critical Perspectives on the World Economy (ed. Robert Howse) (Routledge London and New York, 1998), p. 58. 115 See M. J. Trebilcock and Robert Howse, supra note 29, at 404. See also M. J. Trebilcock and R. Howse, supra note 114, at 58.

2. Rules of substantive law

The Convention contains the provisions requiring and permitting the Members to legislate specific matters in the field of industrial property. For examples, Article 4 (D) requires and allows the Members to regulate the particular matters relating to the right of priority. Article 5A (2) grants the Members the right to legislate against abuses which might result from the exercise of the exclusive rights conferred by a patent. Article 5bis (2) grants the Members the right of restoration of patents which have lapsed by reason of non-payment of fees. Article 11 requires the Members to grant temporary protection to patentable inventions, utility models, industrial designs and trademarks, in respect of goods exhibited at official or officially recognized international exhibitions held in the territory of any of them. 117 While the permitting provisions reserves to the large extent the rights of the Members in regulating the particular matters relating the protection of industrial property objects. The requiring provisions are subject to the loose implementing provision of Article 25 as discussed below. Virtually, the provisions leave the Members the remarkable freedom to legislate the protection of industrial property.

The Convention also contains a group of provisions stipulating the rules of substantive law in the industrial property protection,118 which regulate the rights and obligations of private parties. The provisions of this kind could be found in the number of articles. For examples: the definition of industrial property in Article 4; the right of priority in Article 4; the independence of patents in Article 4bis; the right of inventor to be mentioned on the patent in Article 4ter; the limitation of the possibilities of refusal and annulment of patents in Article 4quater; the regulation of the obligation to exploit patents; trademarks, etc. in Article 5 (with the exception of Article 5(A)(2) providing for the right of the Members to legislate against the abuses of exclusive patent rights); the period of grace for the payment of maintenance fees in Article 5bis(1); the exemption, under certain circumstances, from infringement of patents in Article 5ter; the rights of the patentee in respect of a process of manufacture in Article 5quater; the conditions of registration and independence of trademarks in Article 6; etc.119

In the sense that the above-mentioned provisions set out the rules regulating rights and obligations of private parties in the industrial property protection, they have a significant effect on the domestic legislation of the Members. Depending on the constitutional provisions of the Members, these provisions may influence directly or indirectly the administrative and judicial decision of the Members in dealing with a relevant situation. Where the constitutional provisions of a Member recognizes and permits the direct application of the provisions of an international treaty, which are considered self-executing, these rules may be directly applied

116 See Hanns Ullrich, supra note 105, at 368. 117 For understanding on the history and detailed contents of these provisions, see G.H.C. Bodenhausen, supra note 95. 118 See Friedrich-Karl Beier, supra note 90, at 8. 119 There exist some more provisions concerning the substantive protection of trademarks, trade names, industrial designs, geographical indications and the prevention of unfair competition contained in the Paris Convention. In more details, see G.H.C. Bodenhausen, supra note 95.

© Pham Hong Quat 23 in handling the cases without any further intervention by the national legislator. 120 Otherwise, these provisions need to be introduced into the domestic legislation of a Member to be applicable to private parties where its constitutional provisions so require. In any case, the Convention obliges the Union countries to respect the common rules of substantive law regarding the industrial property protection.121 However, the Convention leaves a considerable freedom to the Union countries in legislating specific issues concerning the particular industrial proper subject matters.122

Though the common rules regarding the industrial property protection provided in the Convention are of great significance, these rules are very limited in their scope and leave considerable freedom to the Union countries to legislate the particular issues of the industrial property protection pursuant to their interests and preferences.123 The framers of the Convention recognized the rules of national legislation regarding industrial property rights for the concern of the Union countries regarding the impairment of domestic market and legal certainty.124 With regard to patents, the Convention gives entirely freedom to the Union countries in determining the patentable subject-matters, the patentability of products and processes, the criteria of patentability, the term of patent protection, the rights conferred to the patentees, etc.125

Regarding patents, the most important rules in practice are concentrated in Article 4 of the Convention regarding the right of priority.126 Besides, the rule on independence of patents under Article 4bis requires the patents granted in member countries to their nationals or residents to be treated as independent of patents obtained for the same invention in other

120 Annette Kur, ‘TRIPs and Trademark Law’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), p. 93 (for instance in Germany). 121 See Friedrich-Karl Beier, supra note 90, at 11, 12. 122 See generally, G.H.C. Bodenhausen, supra note 95. For the practice of application, see Annette Kur, supra note 120, at 93; Roland Knnaak, The Protection of Geographical Indications According to the TRIPs Agreement, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), p. 119-120; Annette Kur, ‘TRIPs and Design Protection’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), pp. 144-145; Rudolf Krasser, ‘The Protection of Trade Secrets in the TRIPs Agreement’, in From GATT to TRIPs – The Agreement on Trade – Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), p. 216. 123 See G.H.C. Bodenhausen, supra note 95, at 15. See also Joseph Straus, ‘Implications of the TRIPS Agreement in the Field of Patent Law’, in From GATT to TRIPs – The Agreement on Trade –Related Aspect of Intellectual Property Rights (II Studies eds. Vol. 18, Firedrich-Karl Beier and Gerhard Schricher) (The Max Plank Institute for Foreign and International Patent, Copyright and Competition Law, Munich, 1996), p. 171. 124 See Friedrich-Karl Beier, ‘One Hundred Years of International Cooperation – The Role of the Paris Convention in the Past, Present and Future’, International Review of Industrial Property and Copyright Law (Vol. 15, 1984), p. 8. 125 See Joseph Straus, supra note 123, at 172-173. See also Hanns Ullrich, supra note 105, at 367. 126 See Joseph Straus, supra note 123, at 172.

© Pham Hong Quat 24 countries.127 This rule is regarded as the principle of mutual independence of patents generally applicable to the grant of patents, including those for the same inventions and the different inventions granted in different countries.128 The principle requires the Union countries to consider their patents independent of other patents obtained for the same invention, even if those patents are granted in the countries outside the Union.

The principle of patent independence is to be understood in the broadest sense.129 Accordingly, the grant of a patent for a given invention in one country does not oblige any other member country to grant a patent for the same invention.130 The principle also requires that a Union country cannot refuse, invalidate or terminate a patent on the ground that the corresponding patent for the same invention has been refused or invalidated or terminated in any other country.131 However, the principle does not provide any specific rule with respect to granting patents to inventions or conferring certain rights to patentees. In this respect, the Convention does not restrain the member countries from providing different levels of protection to inventions and patents in different fields of technology.132 The Union countries may set up different grounds for determining and calculating the term of patent protection, provided that the equal duration should be given to the patents granted with the claim of the right of priority and those granted without the claim of the right of priority.133

In consideration of the limitations specified in Articles 4quarter and 5(A), the Union countries may introduce into their national laws different grounds for refusal, invocation, invalidation and termination as to patents. The prevailing argument in favor of the principle of independence of patents is that national laws and administrative and judicial practices on the patent protection are quite different from country to country.134 In this respect, the principle of patent independent does not oblige the Union countries to eliminate the difference and the discrimination permissible under the principle of national treatment of the Convention.135

Another example is the rule on the obligation of exploitation of patents and compulsory licenses provided in Article 5(A) of the Convention. Article (A)(1) requires that importation by the patentee into the country, where the patent has been granted, of articles covered by the patent and manufactured in any of the member countries will not entail forfeiture of the

127 See the Paris Convention, supra note 1, art. 4bis. 128 See the Paris Convention, supra note 1, art. 4bis(2). See also G.H.C. Bodenhausen, supra note 95, at 62; WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245. 129 See the Paris Convention, supra note 1, art. 4bis(2). See also WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245. 130 See G.H.C. Bodenhausen, supra note 95, at 62. See also the Paris Convention, supra note 1, art. 4bis(2). See also WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245. 131 See the Paris Convention, supra note 1, art. 4bis(2). See also G.H.C. Bodenhausen, supra note 95, at 62; WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245. 132 See Friedrich-Karl Beier, supra note 90, at 10. 133 See the Paris Convention, supra note 1, art. 4bis(5). See also WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245. See G.H.C. Bodenhausen, supra note 95, at 63. See Joseph Straus, supra note 123, at 172. 134 See the Paris Convention, supra note 1, art. 4bis(5). See also WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245. 135 Provided that the requirement of equal duration for patents granted with and without the right of priority. See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 245, 246.

© Pham Hong Quat 25 patent.136 Accordingly, the Members may not apply the measures to terminate a patent, whether such measures are made in the terms of forfeiture, revocation, repeal or annulment, on the ground of importation of patented articles by the patentee.137 However, the provision leaves the member countries the freedom to regulate the importation of patented articles by other means and in other circumstances than those stated in the above-mentioned provision. Different from the viewpoint that this article is no longer relevant to the current problems of national legislation,138 it is argued that it is still significant to national legislation in some cases. For example, national legislation would be free to decide other measures having effect to prevent importation of patented articles, such as administrative sanctions, fines or suspension of rights, etc.139

Article 5(A)(2) states that each member country shall have the right to take the 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 patents, e.g., failure to work or insufficient working.140 The argument for this provision relates to the expectation of domestic exploitation of the granted patents, rather than only grant of the right to the patentees to block the working of the invention or to monopolize importation of patented articles into the country granting the patents.141 Otherwise, the domestic exploitation of a patent in the country granting the patent needs to be considered in various aspects, including the relevant economic conditions and the question of time. The provision on compulsory licenses strikes the balance between those considerations. It provides the member countries with the right to legislate against the abuses of the exclusive rights conferred by the patents by the regulation of compulsory licenses.142

Such regulation should be subject to the rule mentioned in Articles 5(A) (4). The rule regarding compulsory licenses in this article refers to a certain limitations to the national legislation of the Members. For examples, compulsory licenses for non-working or insufficient working of the invention may not be requested before the expiration of a certain period as from the filing date of the patent application or the granting date of the patent.143 The compulsory license for non-working or insufficient working shall be a non-exclusive license shall not be transferable, unless the compulsory license is transferred together with the part of the enterprise or the goodwill that exploits such license.144 The reasoning for these limitations is to prevent a compulsory licensee from getting the benefits that go beyond the 136 See the Paris Convention, supra note 1, art. 5(A)(1). 137 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 246. See also G.H.C. Bodenhausen, supra note 95, at 69; Joseph Straus, supra note 123, at 173. 138 See Joseph Straus, supra note 123, at 173. 139 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 246. See also G.H.C. Bodenhausen, supra note 95, at 69. 140 See the Paris Convention, supra note 1, arts. 5(A)(2) and (4). 141 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also G.H.C. Bodenhausen, supra note 95, at 70. 142 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also G.H.C. Bodenhausen, supra note 95, at 71. 143 Compulsory licenses against a patent cannot be granted before the lapse of the prescribed period, namely, three years from the date of granting the patent or four years from the date of filing the patent application. See the Paris Convention, supra note 1, arts. 5(A)(4). 144 See the Paris Convention, supra note 1, arts. 5(A)(4). See also WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also G.H.C. Bodenhausen, supra note 95, at 72.

It is argued that the rule provided in Article 5(A) (4) applies only to compulsory licenses for non-working or insufficient working. As for the other types of compulsory licenses, the national legislation of the member countries is free to regulate without the binding of that rule.146 Compulsory licenses may also be applied for reasons of the public interest, in the situation that does not necessarily relate to the abuse of the exclusive rights by the patentees, e.g., for the reasons of national security or public health. The granting of compulsory license may be necessary in the case of preventing the unjustified restriction on technological progress that comes within the term of protection of the public interest. When the exploitation of an invention cannot be carried out without using another invention, which is often subject to a so-called dependent patent, may justify the request of granting a compulsory license for using the latter.147 These kinds of compulsory licenses are outside the application scope of the limitations on the waiting time, on the non-exclusive and on non-transferable nature of compulsory licenses.148 In this respect, the Convention gives the member countries the freedom to legislate all types of compulsory licenses other than those for non-working and insufficient working pursuant to their own considerations, without subjection to the rule stipulated in Article 5(A)(4).149

In the same vein of the principle of patent independence, the rule regarding compulsory licenses leaves remarkable freedom to the national legislation of the Union countries in regulating the specific questions concerning the existence of patents and the exercise of patent rights. As reflected in the provisions of the national treatment principle, the Convention provides for the common rules in very limited scope rather than the standard norms regarding the patent protection.150 For such purpose, the Convention leaves the national legislation of the Union countries considerable freedom to formulate their patent laws pursuant to specific considerations and circumstances.151

3. Reservation in dispute settlement procedure

The mechanism for settlement of disputes between the Union countries is mentioned in Article 28 of the Convention. Article 28(1) provides for the referral of a dispute between two or more member countries on the interpretation or application of the Convention to the

145 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also G.H.C. Bodenhausen, supra note 95, at 73. 146 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. 147 Id. See also Joseph Straus, supra note 123, at 173. 148 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. See also Joseph Straus, supra note 123, at 173. 149 See WIPO Intellectual Property Handbook: Policy, Law and Use, supra note 101, at 247. However, this possibility is eliminated by the TRIPS. The TRIPS stipulates more intensive requirements applicable to a wide range of compulsory licenses, which are defined in the term of “other use without authorization of the right holder”. See the TRIPS, supra note 10, art. 31. 150 It does not mean that the Paris Convention contains no certain substantive standards regarding protection of trademarks, trade names etc. and some obligations to protect industrial design and repress unfair competition. See Nuno Pires de Carvalho, supra note 103, at 77. 151 See Friedrich-Karl Beier, supra note 90, at 10.

© Pham Hong Quat 27 International Court of Justice, if the dispute cannot be settled by negotiation and the countries concerned do not agree on some other method of settlement.152 However, a Union country is free to decide whether or not it is bound by this provision. The reservation recorded in Article 28(2) says that a member country, at the time of signature, ratification or accession, may declare that it does not consider itself bound by the dispute settlement mentioned in Article 28(1).153 When a Union country makes that declaration, the dispute settlement provisions of the Convention will be not applicable to any dispute between that country and any other member country.154

The reservation on non-applicability of the dispute settlement clause, on the face of it, undermines the effect of the dispute settlement mechanism of the Convention. In the concern for the ineffectiveness of the judgments made by the International Court of Justice, the dispute settlement provisions of the Convention appear ineffective in practice. In practice, there is no case having been brought before the International Court of Justice under the provisions of Article 28(1) of the Convention.155 It was reasoned that the ineffectiveness of this system is due to the general reluctance on the parts of states to take international disputes to the courts.156 It was also the expression of the dissatisfaction with the proceedings of the International Court of Justice.157 The ineffectiveness of the dispute settlement procedures of the Convention in fact weakened the effect of the substantive rules provided in the Convention and that was regarded as one of the most important reasons for the inclusion of intellectual property in GATT.158

4. Reservation of obligations

Concerning the effect of the Convention, Article 20(2) of the Convention provides an important reservation. This provision stipulates that any Union country may make a declaration in its instrument of ratification or accession that its ratification or accession shall not apply to the one of two groups of articles.159 This reservation clause permits the Union countries to accept only one, or on the basis of one by one, of the groups of articles stipulated in the Stockholm Act of the Convention, which was added the procedural provisions.160 By

152 See the Paris Convention, supra note 1, art. 28(1). 153 Id. art. 28(2). See also G.H.C. Bodenhausen, supra note 95, at 217. 154 See also G.H.C. Bodenhausen, supra note 95, at 217. 155 See Provisions on Enforcement in International Agreements on Intellectual Property Rights, GATT Doc. MTN.GNG/NG11/W/18, Feb. 10, 1988 [hereafter “Compilation on Enforcement of IPRs”], at para. 42 (it was cited from the WIPO Guide to the Rome Convention). 156 See Karen D. Lee and Silke von Lewinski, supra note 62, at 284. 157 Id. It was reported: “In fact, in the intellectual property field, no case has ever been referred to the International Court. In any case, judgments of the Court never condemn either party; they simply pronounce on the law, leaving the States to make of the judgment what they will.” See Compilation on Enforcement of IPRs, supra note 155, at para. 42, cited from the WIPO Guide to the Rome Convention. 158 See Michael J. Trebilcok and Robert Howse, supra note 29, at 409. See also Karen D. Lee and Silke von Lewinski, supra note 62, at 282. 159 See the Paris Convention, supra note 1, art. 20(1). This article provides that any country of the Union may declare that it will not be bound by the group of articles from 1 to 12 or by the group of articles from 13 to 17 of the Act after having been revised and added in the Revision Conference of Stockholm 1967. See G.H.C. Bodenhausen, supra note 95, at 195. 160 For a member country excluding from its ratification or accession Articles 1 to 12 of the Stockholm Act (adopted at the Revision Conference of Stockholm in 1967), it will be bound by the administrative provisions

© Pham Hong Quat 28 this reservation, the legislation of the Union countries is provided with a great flexibility in executing the optional group of rules under the Convention. The Union countries are free to decide on the question of whether to be bound by certain obligations under the Convention.161

Concerning the implementing obligation, Article 25 contains the statement on the implementation obligation of the Union countries. This article refers to this obligation in the term of a general commitment or an understanding rather than a strict requirement of compliance with the Convention. 162 This article states that the Union countries undertake to adopt the measure necessary to ensure the application of the Convention, “as far as” such measure is in accordance with the constitutional provisions of the Union countries. It provides generally that when a country deposits its instrument of ratification or accession, the country “will be” in a position under its domestic law to give effect to the provisions of the Convention. The article does not determine any specific time or limit of time for bringing domestic law into compliance with the Convention.163 This loose language provides the Union countries with a leeway to implement the Convention.

In sum, the Paris Convention leaves considerable freedom to the Union countries to legislate the industrial property protection in general, the patent protection in particular. In certain aspects, the national treatment principle of the Convention does not preclude, legally and practically, the different and discriminatory treatments existent in national law and practice regarding the patent protection. The Convention does neither purpose to set up the substantive norms nor oblige the Union countries to secure their obligations under the Convention consistently and uniformly. Otherwise, it sets out the common rules of substantive law in very limited scope regarding the industrial property protection. The Union countries are entitled to make certain reservations regarding the Convention effect and the dispute settlement procedure. The general commitment regarding the implementing obligation gives rise to the flexibility of the common rules stated in the Convention.

III. Freedom of legislation under the TRIPS regulation

1. From the Paris Convention to the TRIPS

For the perspective of certain effects arising from intellectual property rights in international trade, the TRIPS is included into the international trade system of the WTO. The establishment of TRIPS may be generally attributed to three main factors. The first is the stipulated in Articles 13 to 17 and Articles 18 to 30 of the Stockholm Act. In addition, where the substantive provisions are of concern, it will continue to be bound by Articles 1 to 12 of the earlier relevant Act of the Convention, which has been bound it before its acceptance of the Stockholm Act. Otherwise, where a member country precludes from its ratification or accession Articles 13 to 17, it will be bound only by Articles 1 to 12 and Articles 18 to 30 of the Stockholm Act of the Convention. See the Paris Convention, supra note 1, arts. 20(2) and (3). See also G.H.C. Bodenhausen, supra note 95, at 196. 161 It is noted that Article 2.1 of TRIPS incorporated the provisions provided in articles from 1 to 19 of the Stockholm Act (1967) of the Paris Convention. The flexibility under the reservation made in Article 20 of the Paris Convention is curtained in the sense that the TRIPS does not contain any provision on such kind of reservation. 162 See the Paris Convention, supra note 1, art. 20. See also G.H.C. Bodenhausen, supra note 95, at 209. 163 The general commitment under the Paris Convention is quite different from the TRIPS, which sets forth specifically the deadlines for bringing national legislation into compliance with the TRIPS provisions. See the TRIPS, supra note 10, arts. 65, 66, 70.

© Pham Hong Quat 29 influence of the United States in urging to strengthen internationally the protection of intellectual property rights and to bring them into the negotiations within the forum of GATT. The second is the trade-offs between developed countries and developing countries, often called the North-South debate. The third is the bargaining of trade interest in intellectual property rights among developed countries, often called the North-North debate in the framework of GATT negotiations at the Uruguay Round. 164

1.1 The influence of the United States

In the late 70’s and early 80’s, domestic pressure on the US government built up in the disadvantageously international context forcing the United States to call for the strengthening of international law on intellectual property protection. The process of revising the Paris Convention to which the United States was a party,165 under the auspices of WIPO was blocked and seemed to moving in a direction to favor the interest of developing countries.166 The US government had to seek the unilateral measures for improving the foreign markets to respond to the pressures from their domestic IPR production industries.167 This option was reflected in the enactment of the Trade Act of 1984,168 which made intellectual property protection explicitly actionable under Section 301 of the Trade Act of 1974 allowing the US President to seek elimination of unjustifiable or unreasonable trade practices by taking action, including retaliations by restricting imports into the US market.169 Actually, the effect of Section 301 was more intensive, especially in backing bilateral negotiations between the United States and other trading partners.170

After the launch of GATT negotiations at the Uruguay Round, the United States implemented a stronger measure to force the trading partners to improve their own laws on intellectual property for assuring the US industries’ interests in foreign markets. The Omnibus Trade and Competitiveness Act of 1988 contain a section so-called “Special 301”. 171 The Special 301 provides the authority and responsibility with the United States Trade Representatives (USTR) for identifying and investigating the countries likely to be detrimental to US economic interests due to the lack of adequate and effective systems of intellectual property protection.172 By the Special 301, the US government may receive double advantages. On one hand, the Special 301 responded timely to the demand of the domestic industries to improve

164 See Addulqawi A.Yhsuf, supra note 8, at 6-8. See also Michael J. Trebilcok and Robert Howse, supra note 29, at 405-410; John Croome, Reshaping the World Trading System A History of the Uruguay Round (Kluwer Law International, 1999), pp. 109-111, 119-123, 276-277. 165 See Terence Postwar, GATT Uruguay Round A Negotiating History (1986-1992)(Vol. II: Commentary) (Kluwer Law and Taxation Publishers, 1993), p. 2255. 166 Id. at 2249, 2253. See also Addulqawi A.Yhsuf, supra note 8, at 5; Michael J. Trebilcok and Robert Howse, supra note 29, at 405; John Croome, supra note 164, at 109-110. 167 See Michael J. Trebilcok and Robert Howse, supra note 29, at 407; John Croome, supra note 164, at 111. 168 See Trade and Tariff Act of 1984, Pub. L. No. 98-573, 98 Stat. 2948 (1984). 169 In reality, the unilateral trade retaliations applicable under Section 301 were imposed on South Korea and Brazil. See Terence P. Stewart, supra note 165, at 2256. 170 In fact, the broad undertakings on improvement of the laws on patents, trademarks and copyrights protection were accepted by Taiwan and Singapore. See Terence P. Stewart, supra note 165, at 2256-57. 171 See Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, 1301, 102 Stat. 1107, 1164 (1988). 172 See Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418,1301, 301(b)(2) Stat. 1107 (1988).

© Pham Hong Quat 30 the protection of their intellectual property in foreign markets.173 On the other hand, the US government used the Special 301 as a big stick to give rise to the pressure on the negotiation table as to the issue of intellectual property in the Uruguay Round, especially in response to the obstinate trading partners among developing countries.174

In the first phase of the negotiations of 1987, the United Sates proposed suggestions calling for the effective measures for the enforcement, the standards and norms for the adequate protection, and the extension of international dispute settlement procedures in the intellectual property area.175 The United States proposed that not only border measures, but also internal enforcement remedies were necessary for effective action against the entry of infringing goods.176 Its proposal required the significant additions to standards available in the pre- existing international intellectual property conventions.177 Accordingly, the signatories should adopt new laws and amend existing laws to provide the additional protection in line with the proposed norms of intellectual property rights.178 Without attention to the burden that less developed countries may suffer from those requirements, the United States argued that the adherence to the agreement of its proposed contents would create additional rights and obligations under GATT among the parties to the agreement, which would serve as an incentive for other government to join.179 During the negotiations, aimed at setting intellectual property rights under the regulation of GATT, despite the strong reaction from developing countries, the United States insisted constantly on the broad conception of the trade-related aspects of intellectual property rights and the connection between the TRIPS and GATT.180 Together with pressure from the applicability of the unilateral actions,181 the insistence of the United States led to concessions gradually given into by developing countries during the TRIPS negotiation.182 It was a fact that almost all developing countries preferred a multilateral

173 In December 1991 Thailand undertook to improve its law on copyrights, January 1992 China accepted to improve its laws on IPRs, mid 1992 Taiwan committed to strengthen the enforcement of copyrights on computer software as well as sound and video recordings. See Terence P. Stewart, supra note 165, at 2259. 174 Many criticisms on the imposition of Section 301 and Special 301 of the United States were raised in the meetings of the Negotiating Group on TRIPS, especially on the fact of United States took a unilateral action against Brazil for the claim concerning inadequate protection of IPRs during the Uruguay Round. See Meeting of Negotiating Group of 17-21 October 1988, GATT Doc.MTN.GNG/NG11/10(Nov. 30, 1988), para. 27 [hereafter “Meeting of 17-21 October 1998”]; Meeting of Negotiating Group of 3-4 July 1989, GATT Doc.MTN.GNG/NG11/13(Aug. 16, 1989), para.4 [hereafter “Meeting of 3-4 July 1989”]; Meeting of Negotiating Group of 12-14 July 1989, GATT Doc.MTN.GNG/NG11/14(Sep. 12, 1989), para 5 [hereafter “Meeting of 12-14 July 1989”]. 175 See Suggestion by the United States for Achieving the Negotiation Objective, GATT Doc.No.MTN/NG11/W/14 (Oct. 20, 1987) [hereafter “Suggestion by the United States”]. 176 Id. 177 The proposal required the protection for service marks to the same extent that given to trademarks, and the protection should extended to computer programs and databases, trade secrets, semi-conductor chip design layouts. See Suggestion by the United States, supra note 175. 178 See Suggestion by the United States, supra note 175. 179 Id. 180 See Meeting of the Negotiating Group of 28 October 1987, GATT Doc.MTN.BNG/NG11/4 (Nov.17, 1987) [hereafter “Meeting of 28 October 1987”]. 181 It was the fact that when the multilateral negotiation was going on, the United States took a unilateral action against Brazil for the claim of inadequate protection under the patent law of this country. See Meeting of the Negotiating Group of 17-21 October 1988, supra note 174, at 27. 182 In the beginning developing countries objected to connect both counterfeit trademarked goods and the protection of copyrights and patent with GATT. Then, they accepted to adopt the effective border enforcement, including measures against counterfeiting trademarked goods and pirated goods. Next, they agreed to undertake

© Pham Hong Quat 31 system in dealing with the complicated problems arising from intellectual property rights, rather than directly in a bilateral way.183 In addition to the rigid attitude in taking unilaterally retaliations, the insistence of the United States on including a broad range of intellectual property rights into GATT spectrum had great effects on the TRIPS negotiations. In other words, the increasing concerns of the US industries in ensuring their interest in protecting their intellectual property rights abroad were part of the logic implied in the establishment of TRIPS in the framework of GATT.

1.2 The North-South tension on intellectual property

Apart from the influence of the United States, the trade-offs between developed countries and developing countries before and during the Uruguay Round led to the subjection of intellectual property protection and enforcement to the trade regulation of GATT. The North- South tension in the multilateral trade negotiations was an important element that resulted in the broad concessions on the issue of intellectual property at the end of the Uruguay Round.184 The North as the main exporter of intellectual property products argued that intellectual property is a private right that should be protected as any tangible property.185 By contrast, as the main importers of the intellectual property products, the South viewed intellectual property as a public good that should be used to promote economic development. 186 This paradox was reflected in the separate approaches to amend the pre-existing intellectual property conventions: the former sought provisions that would protect their industries from piracy and counterfeiting, while the later sought provisions that would stimulate economic development and technological advancement.187 The failure of the movement to revise the intellectual property conventions under the auspices of WIPO induced developed countries into seeking an alternative way to assure their interests in intellectual property protection.188

the improvement of internal enforcement remedies and the extension of protection to some categories even being in discussion in the World Intellectual Property Organization (WIPO), such as integrated circuits layout designs and computer programs. Finally, they must accept most norms proposed by the United States, including the subject matter not covered by any pre-existing international conventions like trade secrets. See Communication from Argentina, Brazil, Chile, China, Colombia, Cuba, Egypt, India, Nigeria, Peru, Tanzania, Uruguay and Pakistan, GAT Doc. MTN.GNG/NG11/W71(May 14, 1990) [hereafter “Draft Text of Developing Countries”]; Standards and Enforcement of Intellectual Property Rights, Communication from Korea, GATT Doc.MTN.GNG/W/48(Oct. 26, 1989) [hereafter “Submission of Korea”]; Standards for Trade-Related Intellectual Property Rights, Submission from Hong Kong, GATT Doc.MTN.GNG/NG11/51(Nov. 29, 1989) [hereafter “Submission of Hong Kong for Protection”]; Enforcement of Intellectual Property Rights, Submission from Australia, GATT Doc.MTN.GNG/NG11/W53(Dec.6, 1989) [hereafter “Submission of Australia”]; Enforcement of Intellectual Property Rights, Submission from Hong Kong, GATT Doc.MTN.GNG/NG11/W/54(Dec. 7, 1989) [hereafter “Submission of Hong Kong for Enforcement”]; the TRIPS supra note 10, art.39. 183 See Meeting of Negotiation Group of 11, 12 and 14 December 1989, GATT Doc.MTN.GNG/NG11/17(Jan. 23, 1990) [hereafter Meeting of 11, 12 and 14 December 1989], para.10. 184 See Carlos M. Correa, Intellectual Property Rights, the WTO and Developing Countries: The TRIPs Agreement and Policy Options (Zed Books Third World Network 2000), p. 3; Addulqawi A.Yhsuf, supra note 8, at 9. 185 See Terence P. Stewart, supra note 165, at 2255. 186 Id. See also John Croome, supra note 164, at 110. 187 See Terence P. Stewart, supra note 165, at 2255. See also John Croome, supra note 164 at 111. 188 See John Croome, supra note 164, at 112. See also Michael J. Trebilcok and Robert Howse, supra note 29, at 409;

© Pham Hong Quat 32 Initiated by the United States, developed countries found that GATT was the appropriate forum for them to realize their expectations to improve the enforcement and protection of intellectual property rights.189 In the preparatory process for the Uruguay Round, the suggestions produced by the United States were soon consented to by Japan, whose view of inclusion of a broader program on intellectual property was not limited to counterfeit goods.190 In contrast, developing countries were of the opinion that not only counterfeit trademarked goods went beyond the jurisdiction of GATT, but also that the extension of GATT to substantive provisions on intellectual property protection was impossible.191 In despite of that, the mandate for the new negotiation round still included the issue of intellectual property.192

1.3. From the WIPO forum to the GATT forum

The negotiation on intellectual property was known as one of the most contentious and important elements of the Uruguay Round.193 The North argued that the revenue of their industries was lost due to not only the practice of counterfeiting, but also inadequate intellectual property protection.194 Therefore, they insisted constantly that the adequate protection and effective enforcement of the intellectual property rights should obligate all parties to GATT, and the enforcement should be improved in both the border measures and internal procedures, the dispute settlement regime of GATT, instead of the ineffective dispute settlement under the WIPO system, should be applied to settle the intellectual property rights related disputes.195

By contrast, the South sought to restrict the scope of the negotiations and opposed the connection of intellectual property to GATT and the setting standards of protection, or the raise of the level of protection.196 They concerned that their access to modern technology might be prevented from the excessive protection of intellectual property rights, since the elaboration of new and more rigid standards for intellectual property would benefit

189 See Terence P. Stewart, supra note 165, at 2259. See also John Croome, supra note 164, at 113; Michael J. Trebilcok and Robert Howse, supra note 29, at 409. 190 Significantly, the Swiss-Colombian compromise proposal, presented the views of forty delegations, was in line with the suggestions of the United States. See Preparatory Committee, Record of Discussion of 17-20 March 1982, GATT PRE.COM(86)SR/3(Apr. 11, 1986), para. 12; Preparatory Committee, Record of Discussion of 8-31 July 1986, GATT Doc.PRE.COM(86)SR/3(Aug. 26, 1986) [hereafter “Preparatory Committee, Record of 8-31 July 1986”] paras. 11-12; Preparatory Committee Draft Ministerial Meeting, Revision, GATT Doc. PRE.COM(86)W/47/Rev.2(July 30, 1986) )[hereafter “Preparatory Committee, Draft of July 1986”]. 191 Brazil was of the view that intellectual property protection was a “non-GATT issue”. India emphasized that the protection of intellectual property was “outside the competence of GATT”. Argentina added that WIPO, not GATT, was the appropriate forum for the resolution of intellectual property disputes. See Preparatory Committee, supra note 190. 192 See Preparatory Committee, supra note 190, at 11-12; Preparatory Committee Draft Ministerial Meeting, supra note 190; Ministerial Declaration on the Uruguay Round, GATT Doc.MIN.DEC (Sept. 20, 1986). 193 See Jim Keon, ‘Intellectual Property Rules for Trademarks and Geographical Indications: Important Parts of the New World Trade Order’, Intellectual Property and International Trade: The TRIPs Agreement (Kluwer Law International, 1998), p.165. 194 See Meeting of the Negotiating Group of 10 June 1987, GATT Doc.MTN.GNG/NG11/2(June 23, 1987) [hereafter “Meeting of 10June 1987”]. See also Meeting of 28 October 1987, supra note 180. 195See Compilation of Written Submissions and Oral Statements, Revision, GATT Doc.MTN.GNG/NG11/W/12/Rev.1(Feb. 5, 1988) [hereafter “Compilation of Submissions of 5 February 1988, Revision”]. 196 See Preparatory Committee, Record of 18-31 July 1986, supra note 190.

© Pham Hong Quat 33 technological-advanced countries, at the expense of developing countries that used technology as an irreplaceable tool in the development process.197 It was also claimed that their own social and development needs were more or equally as important as the interests of the owners of the intellectual property rights, therefore, the balance should be striking between the exclusive rights conferred upon owner of intellectual property rights and his obligations to the developmental needs of society.198

In connection to GATT, the South argued that because intellectual property protection in nature is the protection of monopoly rights, it could not be regarded as an instrument for the promotion of international trade.199 In such a perspective, developing countries were reasonable in questioning the judicial adequacy of GATT and arguing that the proper forum for debate of intellectual property must only be the WIPO.200

1.4. The cross-linkage of negotiations

The access to the market of developed countries was an important element for developing countries considering the concessions on intellectual property.201 Especially, the chairman of the negotiating group on intellectual property in the second round produced the initiative of linking the negotiation on each subject matter of intellectual property with the negotiation on the other responding area, for examples, the linkage between negotiations on agriculture and geographical indications, textiles and trademarks, and industrial designs and enforcement.202 In the context of a packaged multilateral discussion, the technique of cross-linking negotiation seemed an effective method to speed up the progress of the negotiation on intellectual property. As a result, the North and the South had reached the agreement on intellectual property at the end of the second round, irrespective of the hot disputes having not ended until the final stage of the TRIPS negotiations in late 1992.203

The difference in the national interests among developing countries themselves seemed also a reason for facilitating the negotiation progress on intellectual property. Since the increase of level in protection of intellectual property rights appeared also to benefit to some extent the

197 See Meeting of 17-21 October 1988, supra note 181, at 9. 198Id. See also Meeting of Negotiating Group of 30 October-2 November 1989, GATT Doc.MTN.GNG/NG11/16(Dec. 4, 1989) [hereafter Meeting of 30 October 1989], paras. 14,15. 199 See Meeting of 30 October 1989, supra note 183, at 9; Meeting of 12-14 July 1989, supra note 174, at 5. Furthermore, even supposed that inadequacies and excesses of intellectual property protection might cause some advert trade effects, this did not necessarily mean they should be discussed under GATT, because it was true that many of practices identified had trade effects. If GATT were to deal with all issues having trade effects, there would be virtually no limit to the scope of GATT’s activities. See Meeting of Negotiating Group of 23 September 1987, GATT Doc.MTN.GNG/NG11/3(Oct. 8, 1987)[hereafter “Meeting of 23 September 1987”], para. 5. 200 See Preparatory Committee, Record of 8-31 July 1986, supra note 32, at 11-12; Preparatory Committee, Draft of July 1986, supra note 32; Ministerial Declaration on the Uruguay Round, GATT Doc. .MIN.DEC (Sept. 20, 1986). 201 See Meeting of 3-4 July 1989, supra note 15, at 5; Meeting of Negotiating Group of 11-13 September 1989, GATT Doc.MTN.GNG/NG11/15(Oct. 26, 1989)[hereafter Meeting of 11-13 September 1989], para. 44; Meeting of Negotiating Group of 10-21 September 1990, GATT Doc.MTN.GNG/NG11/25(Oct. 8, 1990)[hereafter “Meeting of 10-21 September 1990”], para. 8. 202 See Terence P. Stewart, supra note 165, at 2280; 203 Id. at 2286.

© Pham Hong Quat 34 growing industries in the industrializing countries,204 in addition to the pressure from the unilateral action of the United States, the various national interests induced these countries to raise the proposals in light of the suggestions of the developed countries.205 That provided a comfortable room for the argument of setting standards for protection and enforcement of intellectual property under the framework of GATT.

In short, the North-South trade-offs in the context of the “packaged” multilateral negotiation, in which market access was employed as a bargaining chip for the more intensive protection of intellectual property rights, were the important reasons leading to the success of TRIPS. The pressure of strengthening of intellectual property protection from the North, added by the ambitious expectation of some growing industrializing countries, and the concern over market access of the South reflected other logical reasons implied in the establishment of TRIPS.

1.5. The North-North bargains at the expense of the South

The focus of the negotiation on intellectual property in the later phase of the Uruguay Round shifted from the North-South debate to the North-North debate due to the disagreement on the particular contents of intellectual property protection.206 The North-North discussions on the criteria of protection of intellectual property rights led to the wording of the substantive provisions included in the TRIPS. Accordingly, almost the contents of those provisions were the result of the bargains among the leading developed countries in different areas of intellectual property. Consequently, various norms of intellectual property at high level of protection were adopted in the TRIPS, covering generally copyrights, related rights, patents, trademarks, geographical indications and some other objects. Significantly, the TRIPS obliges the developing countries to secure the obligations on the high standard protection of intellectual property rights to the same extent to those applicable to the developed countries.

In sum, the establishment of TRIPS under the umbrella of GATT was the consequence of the great impact by the United States in its attempt at improving the international law on intellectual property protection for their industry interest in intellectual property rights. It is also the result of the North-South trade-offs concerning the trade interests in IPR products and those in the agriculture and textile industries. As the main producers and exporters of technology, the North expected to extend the scope of protection and strengthen the enforcement of intellectual property rights. The South needed market access for their agriculture and textile products. This became the bargaining chip for developed countries to increase their intellectual property protection standards.207 In total, the South had to pay a high

204 See Addulqawi A.Yhsuf, supra note 8, at 4. 205 This could be seen in the fact that when most of developing countries expected to apply the principle of freedom in level protection and urged the discussion of protection standards in WIPO, South Korea proposed a setting of standards for protection: “patents should be granted for products and processes… include chemical and pharmaceutical products and micro-organisms… The term of patent should not exceed 20 years from filing”. See Submission of Korea, supra note 182; Submission of Hong Kong for Protection, supra note 182. Furthermore, when the opposition to setting standards for internal enforcement was raised by most of developing countries, the proposal of Hong Kong called for setting strict standards for both border and internal enforcement. See Submission of Hong Kong for Enforcement, supra note 182. See also Meeting of 11,12 and 14 December 1989, supra note 183, at 51. 206 See Terence P. Stewart, supra note 165, at 2287. 207 See J. H. Reichman, Universal Minimum Standards of intellectual Property Protection under the TRIPs Component of the WTO Agreement, [Intellectual Property and international Trade: The TRIPs Agreement]

© Pham Hong Quat 35 price in the acceptance of almost all demands on intellectual property rights from the North. Furthermore, the TRIPS was virtually founded on the compromise of the different interests in the North. The combination of selected national rules on IPR protection and enforcement being in force in some countries in the North became the obligatory international standards for intellectual property rights upon the South. These events elucidate the factual reasons behind the development from the Paris Convention into the TRIPS, or the movement of the substantial intellectual property contents from the WIPO system into the GATT framework. Certainly, the perception of sovereignty and freedom of legislation regarding intellectual property of the developing countries under the TRIPS regulation needs to be grounded on this important understanding.

2. Not less favorable treatment and minimum standards

2.1. Adoption of GATT-standards principles into the TRIPS

During the TRIPS negotiations, there were different arguments on the applicability of GATT principles. Some insisted that the basic principles of GATT, such as the principles of MFN and national treatment, could be applicable to intellectual property rights with some adaptations, and should form the important part of the TRIPS.208 By contrast, others argued that among the generally recognized basic principles of GATT such as MFN, national treatment, protection through tariffs, stable basis for trade, transparency, and differential and more favorable treatment of developing countries, only the latter two principles were relevant for intellectual property rights.209 Most of those were inapplicable to intellectual property rights because GATT sought to freer trade and fair competition whereas the essence of the intellectual property system was its monopolistic and restrictive character. It was emphasized that the basic principles enshrined in the main intellectual property conventions such as the Paris Convention and Berne Convention were freedom on scope and level of protection, national treatment, balance of rights and obligations, primacy of public interests, non- reciprocity and independent protection.210 However, the basic principles of GATT such as MFN, national treatment, and transparency were virtually adopted into TRIPS in the end.

2.2. Not less favorable treatment

During the TRIPS negotiations, there was an argument for the application of the GATT national treatment to intellectual property rights. This argument based on the legal grounds that Article III.4 of GATT concerned all laws, regulations and requirements affecting the internal sale, offering sale, purchase, transportation, distribution or use of goods.211 The reasoning of this argument was that there was no need to make the distinction between the national treatment principles as applied to goods and to persons. In many cases, the equal treatment of goods required equal treatment of persons, since it was often not be possible to

(Kluwer Law International 1998), p.23. 208 See Meeting of 11-13 September 1989, supra note 201, at 9. 209 Id. at 3. 210 Id. 211 Id. at 9.

© Pham Hong Quat 36 grant national treatment for imported goods without doing so for foreign nationals.212 For such reasons, the transposition of national treatment from GATT into the TRIPS was possible.213

In contrast, another argument said that national treatment of GATT was inapplicable to intellectual property rights, because this treatment of GATT aimed at preventing discrimination between imported products and domestically produced products, while the national treatment included in intellectual property conventions aimed at preventing discrimination between nationals and foreigners in protection of intellectual property rights.214 This argument referred to two aspects of the rationale for the application of national treatment concept in intellectual property conventions. First, it recognized that the differences in national intellectual property laws could remain. Second, it implied that protection of intellectual property for foreigners in a country was not accorded on the basis of reciprocity.215 Another point of the argument is that the national treatment in the intellectual property conventions was applied together with the non-reciprocity principle, while GATT admitted the material reciprocity in goods.216 That point supported the view that the national treatment principle of GATT was inapplicable to regulate the issue of intellectual property rights.

In despite of that, the language of the national treatment principle under Article III: 4 of GATT was transformed into TRIPS. Article 3.1 of the TRIPS requires each Member to accord to the nationals of other Members treatment “no less favorable than” that it accords to its own nationals regarding the intellectual property protection. The GATT standard national treatment adopted in TRIPS is extended to both adequate protection and effective enforcement of intellectual property rights, which was out of the area of application of national treatment in the pre-existing intellectual property conventions, including the Paris Convention.217

With regards to the contents of the TRIPS national treatment, the obligations under Article 3.1 is provided in the context of Article 1.3 of the TRIPS.218 This article requires that the Members shall accord to the nationals of other Members “the treatment provided for in this Agreement”. Accordingly, the national treatment in TRIPS is subject to the limitation of Article 1.3, that is, all minimum standards fixed in TRIPS should accord to foreigners, regardless of whether those are provided for nationals. This means that, in any case, the interests of foreigners in intellectual property rights are fully ensured, at the equivalent level of, or higher standards of adequate protection and effective enforcement stimulated in TRIPS.219 Different from the Paris Convention, a national legislation under the TRIPS may not justify, for example, the decline of the patent protection in regards of pharmaceuticals for foreigners for the reason that it does the same to its nationals.220 By the mandatory requirement of the minimum standards, the TRIPS draws clearly the minimum limit to the

212 Id. 213 Id. at 13. 214 See Meeting of 3-4 July 1989, supra note 201, at 9. 215 Id. 216 See Meeting of 11-13 September 1989, supra note 201, at 22. 217 The Paris Convention does not provide what are the contents of rights conferred by a patent and how the patentee can exercise those rights. 218 See the TRIPS, arts. 1.3, 3.1. See also Nuno Pires de Carvalho, spa note 103, at 66. 219 See Abdulqawi A. Yusuf, supra note 8, at 16. 220 See Nuno Pires de Carvalho, supra note 103, at 76.

© Pham Hong Quat 37 legislation of the Members in providing treatment to foreigners. In this respect, the TRIPS national treatment requires the national legislation of the WTO Members to adopt a higher level of protection in comparison with the national treatment of the Paris Convention.

Different from the requirement of Article 2(1) of the Paris Convention as to the “same treatment” regarding the “advantages” that national legislation currently grants or may afterward grant to nationals, Article 3.1 of the TRIPS requires that, in any case, a treatment “not less favourable than” that accords to nationals must be given to foreigners.221 As denoted in the term “not less favourable than”, Article 3.1 of the TRIPS obliges the Members to observe the national treatment obligations in the light of the national treatment provided in Article III:4 of GATT. Accordingly, both de jure and de facto discrimination against foreigners in the intellectual property protection, except for the exceptions provided in Article 3.2 of the TRIPS is required to be excluded from the national legislation of the Members.222

Article 3.2 of the TRIPS provides for the exceptions to the national treatment obligations under Article 3.1, which repeats the exceptions contained in Article 2(3) of the Paris Convention.223 Article 3.2 allows the Members to make available the exceptions to the national treatment in relation to judicial and administrative procedures, including the designation of an address for service or the appointment of an agent within the jurisdiction of a Member. However, these exceptions are not “reserved expressly” as worded in the Paris Convention. Otherwise, they must be subject to the some limitations. Article 3.2 of the TRIPS requires that such exceptions are permissible only where they are necessary to secure compliance with relevant national laws and regulations, which are not inconsistent with the provisions of this Agreement.224 Moreover, the application of such exceptions is also subject to the general rules of GATT.225 As stipulated in Article 3.2 of the TRIPS, the relevant practices cannot be applied in a manner, which would constitute a disguised restriction on trade. It is noted that the Article XX of GATT 1994 contains the similar language.226 In this

221 There are different views on the compatibility of the national treatment in the text of the TRIPS and the national treatment in the text of the Paris Convention. One perceived that if the national treatment of the TRIPS was interpreted only as a language reflecting a minimum standard character of the agreement, there would be no difference between the two texts, in the sense that the Paris Convention can also be interpreted as a minimum standard agreement. See Carlos M. Correa, ‘Patent Rights’, in Intellectual Property and International Trade: The TRIPs Agreement (Kluwer Law International, 1998) p. 190. Other reasoned that the provision on the national treatment under the Paris Convention is different from that under the TRIPS. This explains the reason why Articles 2.1 2.2 of the TRIPS refer to different sections of the TRIPS in providing the relation of the TRIPS and the Paris Convention (for avoidance of the conflict in applying the principle provisions of the two texts. See Nuno Pires de Carvalho, supra note 103, at 74. In the WTO dispute settlement practice, there are also different views regarding this issue. The Appellate Body interpreted the national treatment of the TRIPS in light of the GATT disciplines and applied the same requirement to the national treatment of the Paris Convention. The panel in another case is of opinion that these principles are not the same. This point will be discussed in Chapter 3 of this paper. 222 This point will be discussed in the following chapter. 223 See the TRIPS, supra note 10, art. 3.2, and the Paris Convention, supra note 1, art. 2(3). 224 The exceptions is applicable “only where such exceptions necessary to secure compliance with laws and regulations which are not inconsistent with the provisions of this Agreement“ are shall be “not applied 225 The exceptions shall be “not applied in a manner which constitute a disguised restriction on trade”. See the TRIPS, supra note 10, art. 3.2. 226 See GATT 1994, supra note 14, art. XX. This article provides: “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination

© Pham Hong Quat 38 regards, the express reservation under the Article 2(3) of the Paris Convention, as incorporated into the TRIPS, is subject to the limitations from the TRIPS provisions and GATT rules.227

2.3. Nondiscrimination and MFN

During the TRIPS negotiations, there was the argument that the non-discrimination principle but not the MFN principle228 embodied in GATT could be applicable to the protection of intellectual property rights, since GATT principles related to goods and rules on intellectual property rights that related to persons.229 The MFN of GATT was also inapplicable in the enforcement of intellectual property rights because it concerned governmental measures at the border affecting international trade in goods. Whereas, in the case of intellectual property rights, except the issue of counterfeiting related to the use of border measures in controlling counterfeit imported goods, the concern was protection of the intangible rights of private parties within national boundaries.230 The national treatment provisions of intellectual property conventions applied to persons and not to products would appear to have been considered adequate to prevent undesirable discrimination, therefore the question of a rule forbidding discrimination between foreign nationals in protection of intellectual property rights had not been raised.231

It was also argued that the MFN of GATT applied only to products. The buyers and sellers of goods in question are the beneficiaries but not the objects of the application of the MFN of GATT.232 The MFN of GATT applied to goods was logically irrelevant to intellectual property rights, a kind of private rights always attached with persons. It was the fact that because of the differentiation in the object and nature of regulation on intellectual property protection, the MFN had been not appeared in any pre-existing intellectual property

between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (…) (d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices;” (Emphasis added) 227 See Daniel Gervais, The TRIPS Agreement Drafting History And Analysis (London Sweet & Maxwell, 2nd ed. 2003), p. 101. 228 See Meeting of 11-13 September 1989, supra note 201, at 12. In the practice of TRIPS, as discussed in Chapter 3, there appears no disctintion in the conception and application of these terms. The standards of no less favorable treatment in examining the compliance with the TRIPS national treatment obligations are also applied to measuring the compliance with the TRIPS MFN obligations of the WTO Members. 229 See Meeting of 11-13 September 1989, supra note 201, at 9. 230 Id. at 11. 231 According to the explanation of the representative of WIPO at the Negotiating Group on TRIPS, see Meeting of Negotiating Group of 5-6 January 1990, GATT Doc.MTN.GNG/NG11/18(Feb. 27, 1990) [hereafter “Meeting of 5-6 January 1990”], para.21. 232 Id.

© Pham Hong Quat 39 conventions.233 Otherwise, some argued for the applicability of the MFN of GATT into TRIPS. It was suggested that with some adaptations GATT principles would be relevant to intellectual property rights.234 In the legal percepts, rights always attached to persons and not to goods, even in GATT, where rights were attached to sellers and buyers of goods and not to the goods themselves, therefore there was no distinction between GATT principles and the rules on intellectual property rights.235 However, after the trade-offs under the pressure from the North, in despite of the irrelevance broadly perceived, the unconditional MFN principle of GATT was included in TRIPS with a list of exceptions.236

With regards to the contents of the TRIPS MFN principle, Article 4 of the TRIPS provides that a Member shall accord immediately and unconditionally to the nationals of all other Members any advantage, favor, privilege or immunity that it grants to the nationals of any other country regarding the protection of intellectual property. The MFN provision under Article 4 of the TRIPS is read in the context of the national treatment principle provision in Article 3.1 of the TRIPS. 237 Article 3.1 of the TRIPS requires a WTO Member to accord to foreigners the treatment “not less favorable than” that it gives to its own nationals. Therefore, that Member may accord to foreigners the treatment more favorable than that it gives to its own nationals. In such a case, the MFN principle obliges that Member to extend “immediately and unconditionally” such more favorable treatment to all nationals of other WTO Members. It is noted that the obligations under the MFN principle must be observed when a Member gives the more favorable treatment to the nationals of any other country, but not any other Member. It means that the MFN principle also applies to advantages, favors, privileges and immunities granted to nationals of countries that are not WTO Members.238

Article 4 of the TRIPS stipulates a range of exceptions to the MFN obligations. As stated in Article 4.d, the MFN principle will not apply to the advantage, favor, privilege or immunity deriving from international agreements related to the protection of intellectual property which entered into force prior to the entry into force of the WTO Agreement. However, this exception must observe the conditions that such earlier international agreements must be notified to the Council for TRIPS, and that they do not constitute an arbitrary or unjustifiable discrimination against nationals of other Members. Accordingly, any favorable treatment generated from a bilateral agreement between a Member and any other country regarding the intellectual property protection that goes into force after the effective date of the WTO Agreement or is not notified to the Council for TRIPS, shall be subject to the MFN obligations under Article 4 of the TRIPS.

In this respect, the MFN obligations would create much pressure on the national legislation of the WTO Members in the arrangement of bilateral agreements regarding the intellectual property protection. This situation is quite different from that existed under the Paris Convention framework. Article 19 of the Paris Convention states expressly that the countries of the Paris Union reserve the right to make separately between themselves special

233 Id. 234 See Meeting of 11-13 September 1989, supra note 201, at 9. 235 Id. 236 See TRIPs Agreement, supra note 10, art. 4. 237 See J. H. Reichman, supra note 207, at 25. 238 See the TRIPS, supra note 10, art. 4. See also Nuno Pires de Carvalho, supra note 103, at 86.

© Pham Hong Quat 40 agreements regarding the industrial property protection, as far as these agreements do not contravene the provisions of the Convention.239 Accordingly, the Union countries are free in arrangement of bilateral agreements regarding industrial property protection, which may provide for the greater protection in comparison with that set forth in the Paris Convention.240

It is also noted that, in securing the MFN obligations under Article 4, the application of the principle of transparency under Article 63.3 of the TRIPS may be in the relevance.241 Article 63.3 allows a Member, when having reason to believe that a specific judicial decision or administrative ruling or bilateral agreement in the area of intellectual property rights affects its rights under the TRIPS Agreement, to request in writing to be given access to or be informed in sufficient detail of such judicial decision or administrative ruling or bilateral agreements.242 For that requirement, the transparency principle gives rise to the burden of the MFN obligations on the national legislation of the WTO Members.

3. Statements on objectives and principles

After the long insistence of developing countries, some specific principles applied to intellectual property rights existing in intellectual property conventions, such as the public interest principle, the balance of rights and obligations were included in the TRIPS.243 Articles 7 and 8 provide for the objectives and the principles, respectively, which are applicable to the intellectual property protection. It is argued that although the provisions in Article 7 and 8 are titled “objectives” and “principles”, they are only the specific objectives and principles of the intellectual property protection and enforcement in general. They do not imply the main objectives and principles of the TRIPS Agreement, which are rather referred to in the provisions in the preamble and Articles 3 and 4.

3.1. Public interest

In the negotiation of the TRIPS, it was suggested that the public interest principle was a fundamental basis of intellectual property right system.244 Thereby, the exclusive rights conferred on the right owner should be made in the balance to secure the public interest. This principle based on the ground that the intellectual property conventions based on to grant the freedom in determining the level of intellectual property protection in line with the situation of each country.

By contrast, the opponent view was that the public interest of all countries was best served by providing for higher levels and more effective protection of intellectual property and thus eliminating trade distortions.245 It was up to each country to determine what its public interest needs were, but it should be assumed that international obligations in respect to the nationals and products of other countries might also serve public interest needs.246 Therefore, the

239 See the Paris Convention, supra note 1, art. 19. 240 See G.H.C. Bodenhausen, supra note 95, at 193. 241 See the TRIPS, supra note 10, art. 4. See also Nuno Pires de Carvalho, supra note 103, at 88. 242 See the TRIPS, supra note 10, art. 63.3. 243 See Daniel Gervais, supra note 227, at 117, 118. 244 See Meeting of 11-13 September 1989, supra note 201, para.18. 245 See Meeting of 11-13 September 1989, supra note 201, para.19. 246 Id.

© Pham Hong Quat 41 concept of public interest should be viewed in the large perspective, rather than from the view allowing unilaterally determined exceptions to international disciplines.247 In other words, the public interest, in the broad view, should not necessarily go along with the freedom in level protection, otherwise, need to be subject to the internationally specified limitation.248 For a balance, the principle of public interest was adopted in TRIPS with the control of the consistency test, which was added following the insistence of the developed countries.249

Article 8.1 of the TRIPS provides that the WTO Members, in formulating or amending their laws and regulations, may adopt measures necessary to protect public health and nutrition, and to promote the public interest in the sectors that are vital importance to their socio- economic and technological development.250 However, the last phrase of this provision put a lock to the application of such measures. It requires that any measure for such purposes must be “consistent with the provisions of this Agreement.” Certainly, the consistency test places the significant limitation on the freedom of national legislation in applying any measure by invoking the principles mentioned in Article 8.1 of the TRIPS.251

3.2. Balance of rights and obligations

In the TRIPS negotiations, it was argued that the principle of the balance of rights and obligations required that obligations had to be undertaken by intellectual property right owners in return for the exclusive rights conferred on them, and allowed governments to take certain remedial measures in the case of non-fulfillment of these obligations so that the intellectual property rights could promote industrial creativity to the benefit of society in general.252 This principle was generally recognized in pre-existing intellectual property conventions in national laws of many countries.253 The acceptance of this principle was aimed at assuring the access of developing countries to modern technology, eliminating non-use, misuse or abusive use of intellectual property rights, especially with a view to avoiding trade distortions, and allowing the flexibility in the intellectual property protection for the public interest and the developmental and technological needs of developing countries. Therefore, the principle of balance of rights and obligations should be formulated in the form of obligations on the IPR owners and the State Members of the TRIPS.254 It was also suggested that the TRIPS should take into account the application of the GATT principle securing a balance of rights and obligations among the parties.255 In that view, the balance should be

247 Id. 248 Id. 249 See Daniel Gervais, supra note 227, at 117, 118. Abdulqawi A. Yusuf, supra note 8, at 13. 250 It was reasoned that this article is limited by provisions in Article 27 of the TRIPS. Accordingly, Article 8.1 will not stand for any exclusion other than those provided in Article 27.3 of the TRIPS. See Michael Blakeney, Trade Related Aspects of Intellectual Property Rights: A Concise Guide to the TRIPS Agreement (London Sweet & Maxwell, 1996), p. 43. 251 See Daniel Gervais, supra note 227. See also Abdulqawi A. Yusuf, supra note 8, at 13. 252 See Meeting of 11-13 September 1989, supra note 201, para.20. 253 Id. 254 Id. 255 Id. at 21.

As a result of the North-South trade-offs, the principle of balance of rights and obligations was enumerated in TRIPS with some limitations. Article 8.2 of TRIPS allows the application of appropriate measures to prevent the abuse of intellectual property rights and the practices distorted trade or adversely affected the international transfer of technology.256 However, as in the case of the principle of public interest, the application of the principle of balance of rights and obligations was adopted with the lock of the consistency test. As worded in Article 8.2, any measure taken under the umbrella of this article must be “consistent with” the provisions of the TRIPS Agreement. Moreover, to which extent a practice is regarded “unreasonably” restraining trade or “adversely” affecting the international transfer of technology, and to which extent a national response against such practice is regarded an appropriate measure are ambiguous questions under this article.257 These unclear conditions leave room for the interpretation but, otherwise, give rise to the difficulty in the application of the principle of balance of rights and obligations.

4. Norms and restrictive rules

The TRIPS incorporates the Paris Convention and explicitly aims at supplementing the protection of industrial property rights. The “Paris-plus” included in TRIPS is regarded as an international standard patent protection system, 258 which in fact reflects the practices of the developed countries.259 The TRIPS follows the approach of setting norms for the protection of intellectual property rights. It sets down the protection criteria for a series of intellectual property objects, including patents, trademarks, geographical indications, industrial designs, topographies, and undisclosed information. These norms may be found in a number of provisions of the TRIPS. Concerning patents, for examples, Article 27 provides for patentable subject matters, Article 28 stipulates the rights conferred by a patent, Article 33 determines the term of patent protection, etc. The TRIPS defines clearly the normative criteria for protection of patents, which had not been addressed in the Paris Convention. The basic criteria of patentability, protection and duration of patent set forth in TRIPS are regarded as the notable achievements scored by developed countries in elevating and harmonizing minimum standards of patent protection, and this could not be done within the spectrum of the Paris Convention.260

The TRIPS provisions on the norms, in certain aspects, still leave a limited freedom to national legislation to regulate the specific issues. However, these norms bind national legislation with the more restrictive rules. For example, Article 27.1 defines generally three patentability criteria of inventions, namely, novelty, inventive step, and industrial application, and leaves national legislation the freedom to legislate the detailed requirements of such

256 This principle is also reflected in the provisions on the control of anti-competitive practices in contractual licenses, the obligation of disclosure of invention, the possibility of granting compulsory licensing to non- working patents, the obligation of technical assistance. See TRIPs Agreement, arts. 40, 29, 31.b, 67. 257 See Abdulqawi A. Yusuf, supra note 8, at 14. 258 See Carlos McCrea, supra note 221, at 189. 259 See J. H. Reichman, supra note 207, at 54. 260 Id. at 50.

© Pham Hong Quat 43 criteria.261 However, this article requires that, in any case, national legislation must obey the rule of non-discrimination in the patent protection. In this respect, the TRIPS norms restrain much the freedom of national legislation left by the Paris Convention regarding the patent protection. The following discussion will analyze this question in more details.

4.1. Patentable subject matters

Article 27.1 of TRIPS provides that patents “shall be available for any inventions, whether products or processes, in all field of technology”. A further security is also added in this provision: “patents shall be available and patent rights enjoyable without discrimination as to (…) the field of technology.” This provision is known as a major achievement of the industrialized countries and, on other hand, the greatest concession made by developing countries during the Uruguay Round.262 Under the system of the Paris Convention, national laws of the developing countries may not confer the protection of patent in some fields, especially pharmaceutical products, which are part of the exclusion from patentability. 263 Among other considerations, the public interest in health affairs, the price of medicines and the accessibility to the pharmaceutical technology were the main reasons for the opposition of developing countries to the patent protection for pharmaceutical products.264 However, under the provision of Article 27.1 of the TRIPS, national legislation can no longer justify such kind of exclusion from patentability since the requirement of non-discrimination regarding the field of technology of invention.

Patentability is also subject to the requirement of non-discrimination against the place of invention. Pursuant to Article 27.1 of TRIPS: “patents shall be available … without discrimination as to the place of invention”. Accordingly, any discrimination concerning the priority date of the patent applications made by nationals and foreigners, for example, is contradict to the requirement of non-discrimination as to the place of invention. This type of discrimination was the target of the claims during the Uruguay Round, which had existed in the national law of the United States, a signatory to the Paris Convention.265

However, the norms of patentability allow for some exceptions. The concept of order public under Article 27.2 of TRIP is regarded as one of the grounds for the permissible exclusion from patentability. It was reasoned that this concept is perceived in a narrower meaning than “public order” or “public interest”, and mainly refers to security reasons and the inventions of inhumanity.266 Article 27.2 of TRIPS adopted partly the language of Article 4quarter of the Paris Convention in its last sentence for the general conditionality of the exclusion of patentability.267 Accordingly, the exclusion cannot be made merely because the domestic law prohibits the exploitation. However, Article 4quater of the Paris Convention refers the broader terms, which are not only related to the granting of a patent, but also to its subsequent invalidation, in cases of restrictions or limitations resulting from domestic law.268

261 See Carlos M. Correa, supra 184, at 51. 262 See Carlos M. Correa, supra note 221, at 191. 263 See Compilation of WIPO of 15 September 1988, Revision 1, supra note 195, at Appendix VII. 264 See Carlos McCrea, supra note 221, at 192. 265 See J. H. Reichman, supra note 207, at note 42, p.50. 266 See Carlos McCrea, supra note 221, at 192-193. 267 See the TRIPS, art. 27.3, and the Paris Convention, art. 4quater. 268 See the Paris Convention, supra note 4, art. 4quater.

© Pham Hong Quat 44 Additionally, Article 27.3 of TRIPS refers to the exclusion of methods for the treatment of humans and animals from patentability, which is regarded as not covering the apparatus used for diagnostics or treatment or to products like “diagnostic kits”.269

It is noted that while the Paris Convention does not mention patentability and particular exclusions from patentability, the TRIPS enumerates the concrete criteria of these contents. Different from the situation under the Paris Convention, national laws under the TRIPS are required to conform to the specific criteria regarding patent protection. To this point, the TRIPS reduces much freedom left by the Paris Convention to national legislation regarding the patent protection.

4.2. Rights and obligations of patentee

The provision in the last sentence in Article 27.1 of TRIPS, which refers to the requirement of non-discrimination as to imported products or locally produced products, is currently in debate. One view is that the right to supply imports according to this provision overrides the obligation to work patents locally under Article 5A of the Paris Convention.270 The other opinion argues that, since this provision does not specify whose products it refers to, those made by the patent holder or by the patent infringers, when the patent confers only negative rights in accordance with Article 28.1 of TRIPS, the patent rights can be exercised with regard to the latter, and if it is the case, this provision would not prohibit the local production obligation of the patentee.271 The right answer to this question awaits the interpretation of the WTO panels that may be come in future. It is reasoned that the interpretation of exempting the local production obligation seems more suitable with the general context of negotiations.272 In this understanding, in favor of the patent holders, TRIPS has restricted the possibility of granting compulsory patent licensing on the ground of a non-working patent recognized by the Paris Convention, even that this point was strongly resisted by developing countries during the Uruguay Round.273

With regard to the rights conferred by a patent, Article 28.1.b of TRIPS particularly provides for the exclusive rights of the right holder of the product patent, including the right to supply the market with imports of the patented products. The protection of a patent process is extended to the product “obtained directly by that process” under Article 28.2.b of TRIPS. Together with the reversal of burden of proof, this extension of protection is the important strengthening point of patent rights derived from the process inventions.274 Admittedly, all of these contents of the patent protection are certainly outside of the regulation scope of the Paris Convention.

269 See Carlos McCrea, supra note 221, at 194. 270 See J. H. Reichman, supra note 207, at 51. 271 Following this kind of interpretation, the new patent law of Brazil includes a local working obligation. See Carlos McCrea, supra note 221, at 203. 272 See Carlos McCrea, supra note 184, at 203. 273 See Meeting of Negotiating Group of 2, 4 and 5 April 1990, GATT Doc.MTN.GNG/NG11/20(April. 24, 1990) [“hereafter Meeting of 2,4,5 April 1990”], para. 31. 274 See Carlos McCrea, supra note 184, at 205.

While the Paris Convention does not provide the criteria of exceptions but leave them to national legislation, the TRIPS provide the limited exceptions from the exclusive rights conferred on the patent holders in Article 30, which imported substantially the words of Article 9.2 of the Berne Convention.275 Different from Article 13 of TRIPS which provides for the “limitations and exceptions” to the exclusive rights conferred on the copyright and related rights holders, Article 30 of TRIPS refers only to “exceptions” to the exclusive rights derived from the patent rights. The limitations to the patent rights are admittedly implied in the provisions on compulsory licensing, which are mentioned generally in Article 8 and particularly in Article 31 of TRIPS.276 The TRIPS mentions the limitations to exclusive patent rights in the term “other use without authorization of the right holder” 277 in Article 31 rather than “compulsory licenses” as provided in Article 5(A) of the Paris Convention. Accordingly, the requirements set forth in Article 31 aimed at different types of compulsory licenses. The applicability scope of this article is broader than that of the rule provided in Article 5(A) (4) of the Paris Convention, which are only applicable to the type of compulsory licenses for non- working or insufficient working patents. Accordingly, all types of the use without authorization of the right holder other than the exceptions mentioned in Article 30 of the TRIPS is subject to the rule of Article 31 of the TRIPS. Regarding the contents of the rule, Article 31 of TRIPS elaborates the stricter requirement in comparison with that under Article 5(A) (4) of the Paris Convention.

4.4. Minimum standard of the term of protection

Unlike the Paris Convention in leaving totally the question of the term of patent protection to national legislation to decide, the TRIPS provides clearly in Article 33 that the term of patent protection available shall not end before the expiration of a period of twenty years counted from the filing date. This provision is one of the major successes of the developed countries during the Uruguay Round in internationalizing their practices of patent protection.278 There was the long controversy on how to implement the obligation under Article 33 in relation with Article 70 of TRIPS, which provides for the limitation and the extension of the TRIPS effect in the protection of the existing subject matters.279 The debate resulted in the disputes on the national patent law of a WTO Member regarding the term of protection for the patents granted before the effective date of the TRIPS. 280 The WTO panels and the Appellate Body clarified that the provision of Article 33 is also applicable to the patented inventions granted

275 See the TRIPS, supra note 10, art. 30, and the Berne Convention, art. 9.2. 276 See TRIPS, supra note 10, arts. 8, 31. See also J. H. Reichman, supra note 207, at 33-35. 277 This expression is used in the relation with the conception of exceptions provided in Article 30. See footnote 7 to Article 31 of the TRIPS. 278 See J. H. Reichman, supra note 207, at 30. 279 See Carlos McCrea, supra note 221 at 219. 280 See Panel Report, Canada-Term of Patent Protection, WT/DS170/R, 5 May 2000 [hereafter “Panel Report, Canada-Patent, Complaint by US”].

5. Limitations of the special and differential treatment

The principle of special and differential treatment for development is generally recognized in pre-existing international intellectual property conventions, including the Paris Convention.283 This principle was linked to the ideals of freedom in the scope and level of protection and the balance of rights and obligations to allow developing countries to set up a system of IPR protection depending on their level of development.284 The TRIPS follows the different approach. TRIPS obliges all Members, irrespective of their degree of economic development, to implement the “minimum” standards of IPR protection at the same level.285 What could be regarded the differential treatment is only the provision of the limited transitional periods. The determined transitional periods set out in Articles 65, 66 of TRIPS aimed at permitting the developing and the least-developed countries the delay in establishing the protection of intellectual property rights in some sensitive areas, including pharmaceutical and agricultural chemical products.286 However, the implementation of such kind of differential treatment is bound by the obligations regarding the protection of existing subject matters stipulated in Articles 70.8 and 70.9 of TRIPS.287

6. Enforcement of rights

6.1. Enforcement obligations

The pre-existing international intellectual property conventions leave the questions of enforcement to the domestic legislation of member States.288 Some of them contain a number of provisions dealing with the remedies against infringement. However, they do not impose the compulsory obligation to incorporate those remedies into the national laws of the member states, nor provide particular sanctions and remedies of enforcement. Article 9 of the Paris Convention requires three specific types of remedy against goods unlawfully bearing a trademark or a trade name: seizure on importation; seizure in the country where the unlawful affixation occurred or in the country into which the goods have been imported; and prohibition of importation,289 but does not make the incorporation of such remedies into 281 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.56; Appellate Report, Canada-Term of Patent Protection, WT/DS170/AB/R, 11 August 2000 [hereafter “Appellate Report Canada-Patent, Complaint by US”], at 79. 282 See Panel Report, Canada-Patent, Complaint by US, supra note 203, at 6.3, 6.41, 6.56; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 65, 69. 283 See Meeting of Negotiating Group of 11-13 September 1989, supra note 208, at 15-17. 284 Id. 285 See J. H. Reichman, supra note 207, at 30. See also Jim Keon, supra note 193, at 166-67. 286 See Carlos McCrea, supra note 221, at 220. 287 See Panel Report, India- Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/R, 5 September 1997 [hereafter “Panel Report, India-Patent, Complaint by US”, at 7.55, 7.57. Appellate Body Report, India- Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, 19 December 1997 [hereafter Appellate Body Report, India–Patent, Complaint by US”] at 82; See Panel Report, India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS79/R, 24 August 1998 [hereafter “Panel Report, India-Patent, Complaint by EC”] at 7.64, 7.73. 288 See Compilation on Enforcement of IPRs, supra note 155, Section I(ii). 289 See the Paris Convention, supra note 1, at art.9(1),(2).

© Pham Hong Quat 47 national law compulsory and provides that “until such time as the legislation is modified accordingly”, the actions and remedies available to nationals shall apply.290 The clause of “until such time…” is subject to explanation that these words express a simple wish that the Union countries adopt legislation according to the proposed remedies, but that they do not impose any obligation on the Union countries.291

The obligation to seize counterfeit goods on importation is not compulsory because a country’s legislation might not permit seizure on importation, which is recognized by this Article.292 This provision is further explained: “the domestic legislation of the country concerned will determine at whose request seizure will take place. The words ‘a natural of a legal entity’ do not by themselves imply an obligation to admit requests by federations or associations of interested persons.”293 Similarly, Articles 10, 10bis, 10ter of the Paris Convention do not oblige member States to introduce special legislation against unfair competition, nor give any details concerning the actions and remedies in terms of appropriate, legal and effective remedies against counterfeiting and unlawful acts, and therefore, “in most countries, it will hardly be possible to assure effective protection against unfair competition by means other than legislation.”294

TRIPS imposes the compulsory obligations of enforcement on the members and elaborated particular enforcement measures, remedies and procedures, which is quite different from the situation of the pre-existing international intellectual property conventions mentioned above. Article 41 of TRIPS provides four fundamental principles of the enforcement provisions. First, the specified procedures must “permit effective action” against present and future acts of infringement and be incorporated into the national legislation to become available in the domestic laws of the member states.295 Secondly, the relevant judicial and administrative procedures must be fair and equitable and not unnecessarily complicated, costly, burdensome, or likely to cause unwarranted delays.296 Thirdly, courts and administrative bodies dealing with the particular cases must base their decisions on evidence that must be available to all parties, and these decisions shall preferably be in writing and reasoned.297 Fourthly, member states must provide some form of appellate review for decisions made by administrative or judicial bodies of first instance.298 In fact, these provisions are the favor or bias given to the rules currently prevailing in the commercial laws of some English-speaking countries.299

290 Id. art.9(6). See also Compilation on Enforcement of IPRs, supra note 155, at para.16. 291 This explanation was supported by the Drafting Commission of the General Commission of the 1925 Revision Conference of The Hague on the Paris Convention. See Compilation on Enforcement of IPRs, supra note 155, at para.17. 292 See the Paris Convention, supra note 1, at art.9(5); Compilation on Enforcement of IPRs, supra note 155, at para.16; Memorandum of the International Bureau of WIPO on Protection Against Counterfeiting, PAC/CE/II/2, para.18. 293 See the Paris Convention, supra note 1, at art.9(3); Compilation on Enforcement of IPRs, supra note 155, at para.18. 294 See Compilation on Enforcement of IPRs, supra note 155, at paras. 19-22 . 295 See TRIPS Agreement, supra note 10, at art.41(1). 296 Id. art. 41(2). 297 Id. art.41(3). 298 Id. art.41(4). 299 See J. H. Reichman, supra note 207, at 72.

© Pham Hong Quat 48 Under these general principles, articles 42-49 of TRIPS particularize the civil and administrative procedures and remedies in consistent with the general obligations of Article 41. It is admitted that these detailed provisions elaborate on the concept of fair and equitable procedures, including procedures for the discovery of evidence that are a characteristic feature of US law, 300 and they allow for default judgments in proper circumstances.301 The WTO Members are also obliged to make injunctions formally available to aggrieved right holders, except in cases that specifically concern the infringement of patented inventions or innocent infringers of other IPRs.302 The WTO Members must empower local judicial authorities to order compensatory damages, expenses and attorneys’ fees and the lost profits or liquidated damages in appropriate case.303 Courts must have authority to dispose of infringing goods outside the channels of commerce, or destroy infringing goods or equipment likely to contribute to the production of infringing goods, and must not normally release counterfeit trademark goods into the channels of commerce even after removal of the offending marks.304 The judicial authorities must have authority to require claimants to indemnify parties who are wrongly or subjected abusively to any of the provided procedures.305 The preliminary injunctions to prevent future infringements and to preserve relevant evidence must also be available within the authority of the judicial authorities.306

Counterfeiting and piracy are concretely defined and distinguished from the general infringements to be applied in the “Special Requirements Related to Border Measures”307 elaborated in articles 51-60 of the TRIPS. The right holders must have the right to take legal action to compel the domestic customs authorities to suspend the release of imported goods into free circulation whenever the complainants have valid grounds for suspecting that the items in question are counterfeit trademarks or pirated copyright goods.308 The proceedings for filing application, providing security or equivalent assurance, obtaining the notice of suspension, and the duration of suspension are provided in details.309 The indemnification of the importer and of the owner of the goods for any injury caused to them by the wrongful detention of goods, the right of inspection and information given to the right holders, must be available in national legislation.310 The competent national authorities may act ex officio to suspend the release of goods in respect of which the prima facie evidence of infringement is available.311 The imposition of the strict border control measures on imports of counterfeit goods is perceived as “a safety valve” in case the enforcement at the source has been ineffective.312 Furthermore, the TRIPS imposes a requirement in response of internal procedures against the counterfeiting upon the WTO Members. Accordingly, the criminal procedures and penalties must also be available for at least cases of willful trademark

300 Id. at 73. 301 See TRIPS Agreement, supra note 10, at art.43(2) 302 Id. art.44. 303 Id. art.45.a 304 Id. art.46. 305 Id. art.48. 306 See TRIPS Agreement, supra note 10, at art.50. 307 Id. art.51 308 Id. art.51. 309 Id. arts.52, 53, 54. 310 Id. arts.56, 57. 311 Id. art.58. 312 See J. H. Reichman, supra note 207, at 75.

© Pham Hong Quat 49 counterfeiting or copyright piracy on a commercial scale.313 Finally, different from the pre- existing conventions, TRIPS gives rise to the significance of the obligations concerning enforcement, at least equivalent to that given to the obligations concerning legislation.314

6.2. Enforcement supervision

While it had not been addressed in the pre-existing international intellectual property conventions, the transparency principle transformed from GATT into TRIPS is conceived as an ancillary provision for supervising the enforcement obligations.315

The transparency provisions facilitate the implementation of the enforcement provisions by requiring transparency with regard to the relevant laws and judicial decisions, which must be published or made publicly available, and by empowering the Council for TRIPS to obtain the laws, regulations and judicial decisions and administrative rulings concerning the subject matter of the agreement, including enforcement.316

The effect of the transparency principle on the enforcement obligations is reinforced by the requirement of establishment of contact points in the administrations of the member states with a view to exchanging information on trade in infringing goods.317 Furthermore, the requirement of local authorities to perform in the proper way the procedures and formalities concerning the acquisition and maintenance of intellectual property rights is deemed to provide support to the implementation of the enforcement standards set out by the TRIPS.318

It is a fact that under the Paris Convention no organization with the authority of monitoring the enforcement of intellectual property rights had been established. The situation is different in TRIPS by the establishment of the Council for TRIPS which is empowered to monitor the operation of the Agreement and “in particular, Member’s compliance with their obligations” through providing the opportunity of consultations, including efforts to mediate disputes.319 Moreover, the power of the Council for TRIPS is also expressed in the provision of authority to examine the scope and modalities for complaints of the types of nullification or impairment and “situation” as provided in Articles XXIII:1(b) and (c) of GATT.320 The authority for reviewing the implementation of the Agreement after the expiration of the transitional period is also provided with the Council for TRIPS. The power vested in the Council for TRIPS is

313 See TRIPS Agreement, supra note 10, at 61. 314 This point was somehow verified by the panel in the case of US-Copyright: “In our view, such argumentation could be abused as a justification of any exception or limitation since right holders could never reasonably expect remuneration for uses which are not covered by exclusive rights provided in national legislation. Logically, no conflict with normal exploitation could be construed. The same would apply where a low level of exercise of an exclusive right would be due to lack of effective or affordable means of enforcement of that right.” See Panel Report, United Sates-Section 110(5) of the US Copyright Act, WTO Doc. WT/DS160/R (15 June 2000) [hereafter “Panel Report, US-Copyright”] at 6.198. 315 See TRIPS Agreement, supra note 10, art.63. See also J. H. Reichman, supra note 207, at 76. 316 See TRIPS Agreement, supra note 10, art.63. 317 Id. art.69. 318 Id. art.62. 319 See TRIPS Agreement, supra note 10, art. 68. 320 Id. art.64.3.

7. Application of WTO dispute settlement mechanism

7.1. WTO jurisdiction over intellectual property rights

Article 64 of the TRIPS provides that the WTO dispute settlement regime shall be applied to deal with the disputes under this Agreement.322 Accordingly, the Dispute Settlement Body (“DSB”) which is established to administer the execution of dispute settlement provisions of the WTO agreements, including the TRIPS, shall have the authority to establish panels, adopt reports of panels and appellate bodies, maintain surveillance of implementation of rulings and recommendations and authorize suspension of concessions and other obligations covered by the agreement concerned.323A non-consultable dispute concerning the TRIPS provisions would be subject to the findings of a panel and an appellate body established by the DSB.324 The panels are provided the authority to make an assessment of the matter in the dispute in both the facts of the case, and the applicability of, and conformity with, the relevant covered agreements, and make the other findings for assisting the DSB in making the recommendations or giving the rulings provided for in the covered agreements.325 An appellate body has the authority to hear appeals from panel case. However, the review jurisdiction of the appellate body is limited in the issues of law covered in the panel reports and legal interpretations developed by the panel, not extended to assessing the facts of the case.326 In fact, the panels and appellate bodies have dealt with a number of cases concerning TRIPS as mentioned in the previous sections.

No provision on the possibility of making a reservation to the dispute settlement provisions in the type of that provided in the Paris Convention.327 Although Article 72 of TRIPS permits the possibility of reservations, this provision is almost nullified by the accompanied condition that these reservations may not enter in respect of any of the provisions of this agreement without the consent of the other WTO Members.328 The recourse to the DSB for settling the non-consultable disputes under this agreement is an obligatory provision, which is bound to all WTO Members.

7.2. Specified dispute settlement procedures

The dispute settlement proceedings under the Dispute Settlement Understanding (“DSU”) are formulated in such a manner to make the process of dispute settlement more effective. The most important improvement could be seen in the application of the so-called “negative

321 See J. H. Reichman, supra note 207, at 76-79. 322 See TRIPS Agreement, supra note 10, art. 64. 323 See WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (1994), available at http://www.wto.org. [hereafter “DSU”], art 2. 324 Id. art.4 (7). 325 Id. art.11. 326 Id. arts17(1), (7). 327 See the TRIPS, supra note 10, art. 64. 328 Id. art. 72.

© Pham Hong Quat 51 consensus”329 principle in adopting panel reports and appellate body reports.330 Additionally, the time limits for the consultations, panel procedures, and procedures for appellate review and DSB decisions are provided in detail.331

The procedures for the surveillance of implementation of recommendations and rulings of the DSB are elaborated in a particular time-schedule.332 The arbitration procedures are also available for facilitating the compliance with the recommendations and rulings of the DSB.333 Finally, the compensation and the suspension of concessions are particularly provided as the supplementary measures to ensure the effective implementation of rulings.334 All such restrictive procedures are contemplated for overcoming the delays in the establishment of panels, the blockage in adopting panel reports and the non-compliance with the dispute settlement rulings, which is where the problems existed in the GATT 1947 dispute settlement system.335

Assumedly, the well-defined and rigid WTO dispute settlement procedures binding TRIPS, in addition to the particularly described “minimum standards” of IPR protection and enforcement, seem to constrain further the freedom at level of intellectual property protection, which was enjoyable in the pre-existing Paris Convention. Such restrictions are applicable to the intellectual property protection under the surveillance of GATT rules.

Conclusion

The examination of the regulations under the Paris Convention and the TRIPS shows that the fundamental difference between these two covenants. For the connection of the TRIPS to GATT, the great change in the concept of sovereignty and freedom of legislation regarding the protection of intellectual property rights needs to be changed. While the Paris Convention provides the common rules of the substantive law regarding the industrial property protection, the TRIPS elaborates specific standards for the protection of particular subject matters. Particularly, the national legislation of the WTO Members must comply with the minimum standards and criteria of patent protection that are specified in the text of the TRIPS.

The movement of the intellectual property attention from the WIPO framework to the WTO framework resulted in the transformation of the GATT principles into the TRIPS. Strict rules against the non-discrimination of the trade in goods were adapted to the intellectual property protection. Under WTO jurisprudence national legislation would certainly be subject to the pressure different from that exists under WIPO framework in performance of national polices regarding intellectual property protection.

329 See Ernst-Ulrich Petersmann, ‘International Trade Law and the GATT/WTO Dispute Settlement System 1948-1996: An Introduction’, International Trade Law and the GATT/WTO Dispute Settlement System (Kluwer Law International, 1997), p.21. 330 See DSU, supra note 323, arts.16(4), 17(14). 331 Id. arts.4, 12, 17(9), 20. 332 Id. art.21. 333 Id. arts.21, 25. 334 Id. art. 22. See also Asif H. Qureshi, The World Trade Organization: implementing international trade norms (Manchester University Press, 1996), p.105. 335 See Ernst-Ulrich Petersmann, supra note 329, at 53-54.

© Pham Hong Quat 52 As stated in the text of the TRIPS, the TRIPS incorporated the substantive provisions of the Paris Convention. How such provisions are incorporated into the WTO system and how they could work in the WTO framework? These questions will be discussed in the next chapter. The discussion is expected to explore the practical challenges of WTO jurisprudence to national legislation in compliance with the TRIPS obligations, including those under the incorporated Paris Convention.

New Challenges from WTO jurisprudence to the “Incorporated” Paris Convention

As stated in the language of Article 2.1 of TRIPS, “in respect of Parts II, III and IV” of the TRIPS, WTO Members must “comply with” the substantive provisions of the Paris Convention.336 Accordingly, the TRIPS incorporates the substantive provisions of the Paris Convention. The question is how the substantive provisions of the Paris Convention are incorporated in the TRIPS. Should all obligations under the referred articles of the Paris Convention and those under the context attached to them automatically become the TRIPS obligations? Should the obligations under the incorporated provisions “comply with” the principles and the norms of TRIPS? Which will prevail where there is a difference between the former and the latter? These questions are not clear in the language of the TRIPS. In fact, some disputes occurred among the WTO Members in understanding the term “incorporation” and in implementing the obligations under “incorporated” provisions. The panels and the Appellate Body have some chances to clarify the above questions in certain TRIPS related disputes. The discussion in Part I bellow will analyze the panel findings in the relevant aspects to see the appropriate answer for the question of how the incorporation should be, pursuant to the panel rulings. Subsequently, Part II will deal with the question of how to implement the obligations under the incorporated provisions in the WTO framework. The discussion is expected to identify the practical challenges from the incorporated Paris Convention that national legislation needs to take into account in compliance with the TRIPS.

I. Incorporation of the Paris Convention into the TRIPS

1. Incorporation of the contents and context (United States-Section 110(5) of the US Copyright Act) 337

The fact is that Section 110(5) of the US copyright Act of 1976, amended by the Fairness in Music Licensing Act of 1988, contains provisions on the limitations of the exclusive rights of the owner of copyright in respect of certain performances and displays (the right of performance).338 Section 110(5)(A) provides for the “home style exemption” in response to a communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes.339 This provision is to exempt from copyright liability anyone who merely turns on in a public place an ordinary radio or television receiving apparatus, which is of a kind being commonly sold for private use.340 Section 110(5)(B) provides for the “business exemption” in respect of a communication by an establishment of a transmission or

336 See the TRIPS, supra note 10, art. 2.1 of TRIPS provides: “In respect of Parts II, III and IV of this Agreement, Members shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967).” 337 See Panel Report, United Sates-Section 110(5) of the US Copyright Act, WTO Doc. WT/DS160/R (15 June 2000) [hereafter “Panel Report, US - Section 110(5) Copyright Act”]. 338 Id. at 2.1. 339 Id. at 2.3, 2.4. 340 Id. at 2.5.

© Pham Hong Quat 54 retransmission embodying a performance or display of a non-dramatic musical work.341 Its purpose is to provide an exemption for a small commercial establishment from copyright liability to the extent of the kind of right of performance mentioned above.342

The European Communities (“EC”) argued that Article 13 of the TRIPS was only applicable to exclusive rights newly introduced under the TRIPS, but not to rights conferred under articles 1 to 21 of the Berne Convention343 which are incorporated in the TRIPS (except for Article 6bis on moral right).344 The argument of the EC was supported by the provisions of Article 2.2 of the TRIPS and Article 20 of the Berne Convention, which could be interpreted as a prohibition on any derogation from existing standards of protection under the Berne Convention.345 In this way, the doctrine of “minor exceptions” was applicable under the Berne Convention,346 but not applicable within the context of Article 13 of TRIPS.347 Moreover, the minor exceptions were the pre-existing exemptions limited to the public performance of works for some non-commercial purpose such as religious ceremonies, military bands and the needs of child and adult education.348 For such arguments, the EC claimed that the exemptions provided in Section 110(5) of the US Copyright Act were a violation of the US obligations under TRIPS, and these measures caused a prejudice to the legitimate rights of copyright owners, thus nullifying and impairing the rights of the EC.349 European Community alleged that Subparagraphs (A) and (B) of Section 110(5) of the US Copyright Act violated the US obligations under Article 9.1 of the TRIPS together with Articles 11bis(1)(iii) and 11bis(1)(ii) of the Berne Convention.350

In a rebuttal, the United Sates argued that the exemptions provided in Article 13 of the TRIPS applied to all provisions relating to copyright in the TRIPS, including the provisions on rights conferred under articles 1 through 21 of the Berne Convention.351 Therefore, the doctrine of minor exceptions was applicable in the context of Article 13, including those provisions of the Berne Convention incorporated therein.352 Additionally, the minor exceptions were not exhausted and not limited to non-commercial purposes.353 Accordingly, the United States contended that the exemptions provided in Section 110(5) of the US Copyright Act fell within the limitations and exceptions of copyright covered by Article 13 of the TRIPS, which allows members of the TRIPS to place minor exceptions permitted by the Berne Convention on the

341 Id. at 2.3, 2.8. 342 Id. at 2.9. 343 The Berne Convention for the Protection of Literary and Artistic Works incorporated by Article 9.1 of TRIPS refers to the Paris Act of this Convention of 24 July 1971. See Article 9.1 and footnote 2 of Article 3.1, TRIPS. The text of the incorporated provisions of this Convention is reproduced in Agreement on Trade-Related Aspects of Intellectual Property Rights, WIPO Publication No. 223(E) (WIPO 1986). 344 See Panel Report US – Section 110(5) Copyright Act, supra note 337, at 6.34. 345 Id. 346 See Existence, Scope and Form of Generally Internationally Accepted and Applied Standards/Norms For the Protection of Intellectual Property, GATT Doc.MTN.GNG/NG11/W/24/Rev.1(Sept. 15, 1988), Part II.4(i), p.18. 347 See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.34, 6.36. 348 Id. at 6.36. 349 Id. at 3.1. 350 Id. at 6.1. 351 Id. at 6.35. 352 Id. at 6.35, 637. 353 Id. at 6.37.

© Pham Hong Quat 55 exclusive rights of copyright owners.354 The United States contended that Section 110(5) of the US Copyright Act was consistent with its obligations under the TRIPS, and both Subparagraphs (A) and (B) of Section 110(5) of the US Copyright Act met the standards of Article 13 of the TRIPS and the substantive provisions of the Berne Convention incorporated into the TRIPS.355

The question in the dispute was to what extent does the TRIPS incorporates the substantive provisions of the Berne Convention, or whether the TRIPS incorporates all the context of the incorporated provisions of the Berne Convention. This question is significant because it would identify the rationale for determining the scope of exceptions under the TRIPS, and whether such rationale justifies the exemptions provided in Section 110(5) of the US Copyright Act.356

Generally, the United Sates argued for the application of the minor exceptions doctrine under the TRIPS, because this doctrine is part of the context of the Berne Convention that is incorporated into TRIPS.357 The argument of the United States referred to the following particular points: (i) the minor exceptions doctrine is a basis for the interpretation of Article 13 of the TRIPS. Article 13 of the TRIPS clarifies and provides the standard for the application of the minor exceptions doctrine under the Berne Convention;358 (ii) the minor exceptions doctrine is non-exhaustive, not required to be non-commercial, and not limited to the specific examples mentioned in the reports of the conferences on the Berne Convention. The minor exceptions doctrine constitutes the state practice of the Berne Union members359 and the subsequent developments of the Berne Convention, including the WIPO Copyright Treaty 1996;360

On the contrary, the EC argued for the non-application of the minor exceptions doctrine under TRIPS because TRIPS does not incorporate the context of the substantive provisions of the Berne Convention.361 The argument of the EC relied on the following reasons: (i) the minor exceptions doctrine is not applicable in the interpretation of Article 13 of the TRIPS because of the unclear scope and legal status of this doctrine. It goes beyond the scope of incorporation of the TRIPS in regard to the substantive provisions of the Berne Convention,362 or alternatively, if Article 13 of the TRIPS is applied to the incorporated substantive provisions of the Berne Convention and the minor exceptions doctrine is applicable in the interpretation of Article 13 of the TRIPS, Article 13 should be confined within the scope of

354 Id. at 3.3. 355 Id. at 6.2. 356 The Panel determined that: “Consequently, the core question before this Panel is which of the exceptions under the TRIPS Agreement invoked are relevant to this dispute and whether the conditions for their invocation are met so as to justify the exemptions under subparagraphs (A) and (B) of Section 110(5) of the US Copyright Act.” See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.29. 357 Id at 6.30; 6.33; 6.35. 358 Id. at 6.30; 6.33; 6.35. 359 Id. at 6.37, 6.56. 360 Id. at 6.67. 361 Id. at 6.36, 6.56. 362 Id. at 6.36.

© Pham Hong Quat 56 the pre-existing limitations under the minor exceptions doctrine;363 (ii) the minor exceptions doctrine is exhaustive, applicable to the non-commercial and limited to those pre-existing exceptions that existed in national legislation prior to the Stockholm Diplomatic Conference of 1967.364

The findings of the Panel were first of all based on an examination of the negotiating history of the Berne Convention concerning the minor exceptions doctrine. The doctrine refers to the permissible exceptions to the exclusive rights conferred by Articles 11, 11bis, 13 and 14 of the Berne Convention.365 The concept of minor exceptions came from the so-called minor reservations recognized and stated in the reports of the Berne Convention revision conferences: the Brussels Diplomatic Conference of 1948 and the Stockholm Conference of 1967.366 The exceptions regarded “minor” and stated in the reports of the Berne Convention revision conferences include the exceptions allowed for religious ceremonies, military bands and the needs of education and popularization.367 In state practice, the exceptions for non- commercial, religious, charitable and educational purposes are often allowed.368

Next, the Panel examined the legal status of the minor exceptions doctrine under the Berne Convention based on Article 31(2) of the Vienna Convention.369 The Panel found that the minor exceptions doctrine is part of the “context” of Article 11bis (1) of the Berne Convention,370 because it was introduced simultaneously with the adoption of Article 11bis (1) and closely related to the substance of the amendment of the Berne Convention, which was formally adopted by the Berne Union members.371 Based on Article 31(3) of the Vienna Convention,372 the Panel found that the practice of national copyright laws of the Berne Union

363 Id. at 6.36, 6.56. 364 Id. at 6.36. 365 Id. at footnote 58. 366 Id. at 6.49, 6.52, 6.54. 367 Id. at footnotes 61, 64, para.6.57. 368 Id. at footnote 67. 369 Id. at paras. 6.44, 6.45. Article 31(2)(a) of Vienna Convention on the Law of Treaties provides: “2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all parties in connexion with the conclusion of the treaty” The text of this Convention is available at http://www.un.org/law/ilc/texts/treaties.htm. 370 On this point, the Panel stated that: “When ascertaining the legal status of the minor exceptions doctrine (…) We therefore conclude that an agreement within the meaning of Article 31(2)(a) of the Vienna Convention between all the parties on the possibility to provide minor exceptions was made in connection with the conclusion of a revision of the Convention introducing additional exclusive rights, including those contained in Articles 11bis(1)(iii) and 11(1)(ii), to which these limitations were to apply, and that this agreement is relevant as context for interpreting these Articles.” (Footnotes omitted and emphasis added). See Panel Report, US – Section 110(5) Copyright Act, supra note 337 at 6.53. 371 Id. at 6.53, 6.54. 372 Articles 31(3) of Vienna Convention on the Law of Treaties provides that together with the context, any subsequent agreement, subsequent practice, or any relevant rules of international law applicable between the parties, shall be taken into account for the purposes of interpretation. See Vienna Convention on the Law of Treaties, supra note 369, art. 31(3).

© Pham Hong Quat 57 members as well as of the WTO Members concerning the application of minor exceptions doctrine should be a basis for interpretation of Article 11bis(1) of the Berne Convention.373 Accordingly, the application of the minor exceptions doctrine should not necessarily be limited to the pre-existing exemptions, but extended to the subsequent practice.374

In conclusion, the argument of the Panel was in favor of the US argument, which allowed for the adoption of the minor exceptions doctrine in interpretation of Article 13 of the TRIPS. The particular points supporting this argument included: (i) both substantive provisions, including Article 11bis(1), of the Berne Convention and the context related thereto, including the minor exceptions doctrine,375 are incorporated in the TRIPS by provision of Article 9.1 of the TRIPS,376 because Article 9.1 of the TRIPS does not specify any exclusion to the incorporation of this doctrine,377 and (ii) the preparatory documents of the TRIPS during the GATT Uruguay Round supported the application of the minor doctrine to the TRIPS;378 and (iii) the WIPO Copyright Treaty that was adopted at a Diplomatic Conference in 1996 is regarded as a subsequent development of the minor exceptions doctrine to be a basis for interpretation of Article 13 of the TRIPS.379 Based on the adoption of the minor exception

373 See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.55 374 Id. at 6.55, 6.88, 6.70. 375 The Panel stated: “Having concluded that the minor exceptions doctrine forms part of the "context" of, at least, Articles 11bis and 11 of the Berne Convention (1971) by virtue of an agreement within the meaning of Article 31(2)(a) of the Vienna Convention, which was made between the Berne Union members in connection with the conclusion of the respective amendments to that Convention, we next address the second step of our analysis outlined above. This second step deals with the question whether or not the minor exceptions doctrine has been incorporated into the TRIPS Agreement, by virtue of its Article 9.1, together with Articles 1-21 of the Berne Convention (1971) as part of the Berne acquis.” (Footnote omitted and emphasis added) See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.60. 376 The Panel made this finding in the absence of an explicit provision on this issue in Article 9.1 of TRIPS: “We note that the express wording of Article 9.1 of the TRIPS Agreement neither establishes nor excludes such incorporation into the Agreement of the minor exceptions doctrine as it applies to Articles 11, 11bis, 11ter, 13 and 14 of the Berne Convention (1971).” (Emphasis added) See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.61. 377 The Panel stated the reasoning on this point as follows: “There is no indication in the wording of the TRIPS Agreement that Articles 11 and 11bis have been incorporated into the TRIPS Agreement by its Article 9.1 without bringing with them the possibility of providing minor exceptions to the respective exclusive rights. If that incorporation should have covered only the text of Articles 1–21 of the Berne Convention (1971), but not the entire Berne acquis relating to these articles, Article 9.1 of the TRIPS Agreement would have explicitly so provided.” (Emphasis added) “Thus we conclude that, in the absence of any express exclusion in Article 9.1 of the TRIPS Agreement, the incorporation of Articles 11 and 11bis of the Berne Convention (1971) into the Agreement includes the entire acquis of these provisions, including the possibility of providing minor exceptions to the respective exclusive rights.” (Emphasis added) See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.62, 6.63. 378 Id., at 6.64, 6.65. 379 Id. at 6.67.

© Pham Hong Quat 58 doctrine in interpretation of Article 13 of the TRIPS, the Panel found that the minor exceptions doctrine is incorporated into the TRIPS as the context of Article 11bis (1) of the Berne Convention.380

It is clear that the finding of the Panel in this case certifies the incorporation of the TRIPS in respect of the substantive provisions of the Berne Convention381 together with the context and subsequent practices attached to it. Regardless of the justification of the findings in regard to the TRIPS members who are not members of the Berne Convention,382 it could be affirmed that the Panel gives effect to the incorporation of TRIPS in the broad sense, including the contents and context of the incorporated provisions. By the same token, by the language of Articles 2.1 and 2.2 of the TRIPS,383 it is plausible for the assumption that the TRIPS incorporates entirely the substantive provisions of the Paris Convention together with their context and subsequent practices. Consequently, WTO Members should comply with not only the obligations under the plain language of the incorporated provisions, but also those coming from the context adherent to such provisions, regardless of whether they are at the same time the members of the related pre-exiting treaty or not.

380 The Panel found that: “In the light of the foregoing analysis, we conclude that the context of Articles 11 and 11bis of the Berne Convention (1971) comprises, within the meaning of Article 31(2)(a) of the Vienna Convention, the possibility of providing minor exceptions to the exclusive rights in question. This minor exceptions doctrine has been incorporated into the TRIPS Agreement, by virtue of its Article 9.1, together with these provisions of the Berne Convention (1971). Therefore, the doctrine is relevant as forming part of the context of Articles 11(1)(ii) and 11bis(1)(iii) of the Berne Convention (1971) as incorporated into the TRIPS Agreement.” See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at 6.92. 381 Except for the provision on moral rights as provided by Article 9.1 of TRIPS. See Panel Report, US – Section 110(5) Copyright Act, supra note 337, at para.6.62 and footnote 79. 382 It seems to be unreasonable for the TRIPS members who are not members of any of the incorporated pre- existing treaties to bear the obligations coming from the context and practice of the related pre-existing treaty besides the obligations directly coming from the contents of the incorporated substantive provisions. However, the findings of the Panel in this case obliges all of the TRIPS members to conform to the context and subsequent practices of the incorporated pre-existing treaties. 383 Provisions of Article 2.1 of TRIPS are similar to the language of Article 9.1 of TRIPS, which provide for the incorporation of the substantive provisions of the Berne Convention and those of the Paris Convention, respectively, without any derogation of obligations under the incorporated treaties. See the TRIPS, supra note 10. arts. 2.1, 9.1.

This dispute happened over the provisions of Section 211 of the Omnibus Appropriation Act (“OAA”) of 1998 of the United States regulating the trademarks, trade names, commercial names that are the same as or substantially similar to those used in connection with business or assets that were confiscated by the Cuban Government on or after 1 January 1959.385 Particularly, Section 211(a)(1) of OAA prohibits the transaction or payment with respect to those objects, unless it has been expressly consented by their original owner or bona fide successor-in-interest, and accordingly, the registration or renewal of the trademarks in the type mentioned above would not be permissible.386 Section 211(a) (2) prohibits the exercise of enforcement rights of a “designated national” with respect to those objects before the US courts;387 and Section 211(b) prohibits the exercise of the treaty rights of a “designated national” or its successor-in-interest with respect to those objects derived from any international intellectual property conventions before the US courts.388 The term “designated national” is defined as Cuba and any national thereof including any person who is a specially designated national.389

The EC claimed, among other things, that Section 211(a)(1) of OAA was inconsistent with Article 2.1 of TRIPS in conjunction with Article 8 the Paris Convention providing for the obligation of protection of trade names.390 The United States countered that Section 211 of the OAA was not inconsistent with the provisions of TRIPS in conjunction with the relevant provisions of the Paris Convention with two main arguments: firstly, the matter of refusal of registration and the enforcement of trademarks as based on the grounds of ownership of trademarks was not regulated by the Paris Convention to be applicable under TRIPS, and TRIPS supported the provisions of Section 211 of OAA.391 Secondly, there was no discrimination existing in the law and practice in respect to the refusal of registration and enforcement with regard to the confiscated trademarks and trade names.392

As a ground for determining whether the scope of the TRIPS encompasses trade names, the Panel interpreted the definition of the term “intellectual property” used in TRIPS. The interpretation of the Panel relied on a number of reasons: (i) since the word “all” in the provision of Article 1.2 of the TRIPS indicates an exhaustive list of categories of intellectual property rights, Sections 1 through 7 of Part II of the TRIPS do not provide for the protection of trade names, and trade names do not come within the terms of intellectual property set

384 See Panel Report, US - Section 211 Omnibus Appropriations Act 1998, WTO Doc. WT/DS176/R (6 August 2001) [hereafter “Panel Report, US - Section 211 Omnibus”]. 385 Id. at para.2.1. 386 Id. at 2.1, 2.9. 387 Id. at 2.1, 2.10. 388Id. at 2.1, 2.6. 389 See Panel Report, US - Section 211 Omnibus, supra note 384, at 2.2. 390 Id. at 3.1. 391 Id. at 3.4, 8.44, 8.45, 8.72, 8.73, 8.93, 8.104, 8.114 392 Id. at 8.124, 8.134, 8.142.

© Pham Hong Quat 60 forth in Article 1.2 of the TRIPS;393 (ii) the second sub-clause of Article 2.1 of TRIPS obliges TRIPS Members to comply with the provisions of the Paris Convention, but it is conditioned by the first sub-clause “in respect of Parts II, II and IV of this Agreement” meaning that the TRIPS members shall comply with Articles 1 through 19 of the Paris Convention “in respect of” what are covered by Parts II, III, and IV of the TRIPS, which do not include trade names;394 (iii) the negotiating history reveals that trade names had not been addressed in the TRIPS discussions.395 Based on those reasons, the Panel came to the conclusion that trade names are not a category of intellectual property covered by the TRIPS.396 Therefore, Section 211 of OAA is not inconsistent with Article 2.1 of the TRIPS in conjunction with Article 8 of the Paris Convention.397

393 Id. at 8.26. 394 See Panel Report, US - Section 211 Omnibus, supra note 384, at 8.30. 395 Id. at 8.32-8.40. Particularly, the Panel found that: “As regards the provision now contained in Article 2.1 of the Agreement, a difference between the Chairman's text of July 1990 and the Brussels draft was the addition of the words "in respect of Parts II, III and IV of this Agreement" (…) The records do not contain information on the purpose of the addition but the language of this provision, contained in Part I of the Agreement, suggests that Members are to comply with the Paris Convention (1967) provisions to the extent that they relate to Part II—i.e., the relevant categories of intellectual property rights regulated in the agreement—Part III (enforcement) and Part IV (acquisition). “The negotiating history confirms the view that trade names are not covered by the TRIPS Agreement.” (Emphasis added) See Panel Report, US - Section 211 Omnibus, supra note 384, at 8.39, 8.40. 396 Particularly, the Panel found that: “[W]e conclude that the categories of intellectual property covered by the TRIPS Agreement are those referred to in Article 1.2. Article 8 of the Paris Convention (1967) is relevant as part of the TRIPS Agreement to the extent that it may affect the protection of the categories of intellectual property covered by the Agreement. As trade names are not a category of intellectual property covered by the TRIPS Agreement, Members do not have obligations under the TRIPS Agreement to provide protection to trade names.” (Footnotes omitted and emphasis added) See Panel Report, US - Section 211 Omnibus, supra note 384, at 8.41. 397 Id. at 8.122, 8.165, 9.1.

© Pham Hong Quat 61 The Appellate Body reversed the findings of the Panel on the exclusion of Article 8 of the Paris Convention providing for trade names from the scope of the TRIPS398 for a number of reasons: (i) the Panel erred in interpreting the phrase of “in respect of” in Article 2.1 of the TRIPS as limiting the scope of the TRIPS incorporation into the categories of intellectual property listed in Part II of the TRIPS;399 (ii) the categories of intellectual property referred to in Part II of the TRIPS is not an exhaustive list of intellectual property objects subject to the regulations of the TRIPS;400 (iii) the negotiating history of the TRIPS did not exclude the matter of trade names from the scope of the TRIPS. The Appellate Body argued for the incorporation of Article 8 of the Paris Convention into the TRIPS by the explicit words of the provision stipulated in Article 2.1 of the TRIPS:

“Moreover, we do not believe that the Panel's interpretation of Article 1.2 can be reconciled with the plain words of Article 2.1. Article 2.1 explicitly incorporates Article 8 of the Paris Convention (1967) into the TRIPS Agreement".401 (Emphasis added)

As stated in the plain language of the TRIPS, the incorporation of Article 8 of the Paris Convention cannot be excluded in the event that there is a lack of relevant evidence in the

398 The Appellate Body reversed the Panel’s finding that trade names are not covered by TRIPS: “For all these reasons, we reverse the Panel's finding in paragraph 8.41 of the Panel Report that trade names are not covered under the TRIPS Agreement and find that WTO Members do have an obligation under the TRIPS Agreement to provide protection to trade names.” See Appellate Body Report, US - Section 211 Omnibus, WT/DS176/AB/R 2 January 2002, para. 341. 399 The Appellate Body disagreed with the Panel’s interpretation of the “conditional” effect of Article 2.1 of TRIPS: “The Panel was of the view that the words "in respect of " in Article 2.1 have the effect of "conditioning" Members' obligations under the Articles of the Paris Convention (1967) incorporated into the TRIPS Agreement, with the result that trade names are not covered. We disagree.” See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 337. 400 The Appellate Body interpreted the incorporation provisions in terms of the subjects instead of the titles of the categories of intellectual property provided in Sections II of TRIPS: “The Panel interpreted the phrase "'intellectual property' refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II"(emphasis added) as if that phrase read "intellectual property means those categories of intellectual property appearing in the titles of Sections 1 through 7 of Part II." To our mind, the Panel's interpretation ignores the plain words of Article 1.2, for it fails to take into account that the phrase "the subject of Sections 1 through 7 of Part II" deals not only with the categories of intellectual property indicated in each section title, but with other subjects as well. For example, in Section 5 of Part II, entitled "Patents", Article 27(3)(b) provides that Members have the option of protecting inventions of plant varieties by sui generis rights (such as breeder's rights) instead of through patents. Under the Panel's theory, such sui generis rights would not be covered by the TRIPS Agreement. The option provided by Article 27(3)(b) would be read out of the TRIPS Agreement.” See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 335. 401 Id. at 336.

“As for the import of the negotiating history, we do not see it as in any way decisive to the issue before us. The documents on which the Panel relied are not conclusive of whether the TRIPS Agreement covers trade names. The passages quoted by the Panel from the negotiating history of Article 1.2 do not even refer to trade names. There is nothing at all in those passages to suggest that Members were either for or against their inclusion (…). Therefore, we do not consider that any conclusions may be drawn from these records about the interpretation of the words "in respect of " in Article 2.1 as regards trade names.”402 (Emphasis added)

Evidently, the above findings of the Appellate Body clarify that the incorporation of the provision on trade names under Article 8 of the Paris Convention is effective under Article 2.1 of the TRIPS even without “for or against” evidence in the negotiating history of the TRIPS. In other words, the Appellate Body confirms the full incorporation of the substantive provisions of the Paris Convention into the TRIPS, as stated in the plain language of Article 2.1 of the TRIPS. In this respect, it is appropriate to say that the TRIPS incorporates the provision on the independence of patents under Article 4bis of the Paris Convention since this provision comes within the range of incorporated provisions pursuant to the wording of Article 2.1 of the TRIPS.403

In is clear that the findings of the WTO panels and the Appellate Body confirmed the incorporation in full of the substantive provisions of the Berne Convention and the Paris Convention into the TRIPS. The incorporation is understood in the broad meaning, which covers both the contents and the context of the incorporated provisions. Moreover, the incorporation is effective under the plain language of Article 2 of the TRIPS, irrespective of the unavailability of relevant evidence existing in the TRIPS negotiating history.

The above section discussed how the panels and the Appellate Body give effect to the provision of Article 2.1 of TRIPS on the incorporation of the substantive provisions of the Paris Convention. The following section will examine how the “incorporated” provisions to be effective under the substantive provisions of TRIPS. As stated in the language of Article 2.1 of TRIPS, WTO Members “must comply with” the substantive provisions of the Paris Convention. However, this provision does not address the question of whether the incorporated provisions must comply with the principles and the norms of TRIPS. And which will prevail when there is difference among them? In other words, how the incorporated provisions will work under the WTO jurisprudence. The panels and the Appellate Body have provided the answers to these questions in handling some TRIPS related disputes.

402 Id. at 339. 403 Article 2.1 of the TRIPS provides that: “In respect of Parts II, III and IV of this Agreement, Members shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967).” See the TRIPS, supra note 10, art.2.1.

© Pham Hong Quat 63 Accordingly, the prevailing effect of the principles and norms of TRIPS is confirmed. The implementation of the incorporated provisions should be under the surveillance of the norms of TRIPS. In this respect, the panels and the Appellate Body have clarified another aspect of the incorporation. It may be regarded as an additional implication to the provision of Article 2.1 of TRIPS. That is, WTO Members must otherwise “comply with” the substantive provisions of TRIPS while they implement the incorporated provisions. The following discussion will analyze the findings of the panels and the Appellate Body in some cases to elucidate this point.

© Pham Hong Quat 64 II. Compliance with the TRIPS norms and WTO dispute settlement rules 1. Incorporated provisions and the TRIPS principles 1.1. Prevailing effect of TRIPS national treatment and MFN principles (United States - Section 211 Omnibus Appropriations Act 1998)

The implementation of the incorporated provisions of the Paris Convention is required to conform not only to the national treatment principle and the other related provisions of the Paris Convention, but also to the national treatment and MFN principles of the TRIPS. Even though a domestic law does not violate its obligation under a particular provision of the “incorporated” Paris Convention, it may violate its obligations under the national treatment and MFN provisions of TRIPS. The Appellate Body has confirmed this requirement in the case of US - Section 211 Omnibus Appropriations Act 1998. The Appellate Body found that the relevant domestic law of the United States violated Articles 3.1 and 4 of TRIPS in despite of the fact that it did not violate Article 8 of the Paris Convention.

As mentioned in the above section, the Appellate Body first reversed the finding of the Panel and found that the TRIPS did not exclude trade names from its regulation. Under the plain language of Article 2.1, TRIPS incorporates Article 8 of the Paris Convention providing the obligation of WTO Members to protect trade names. In the next step, the Appellate Body examined the consistency of the relevant domestic law with Article 8 of the Paris Convention, with the national treatment provision of the Paris Convention and the national treatment and MFN provisions of TRIPS in relation to trade names:

“Having reversed the Panel's finding, we consider next whether we should complete the legal analysis with respect to the application of Section 211 to trade names and to the consistency of Section 211 with Article 2.1 of the TRIPS Agreement in conjunction with Article 8 of the Paris Convention (1967), with Article 2.1 of the TRIPS Agreement in conjunction with Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS Agreement, with Article 4 of the TRIPS Agreement (…).” 404

On this point, the Appellate Body assumed that the implementation of obligations under Article 8 of the Paris Convention should be in conformity with the national treatment and MFN treatment obligations under Articles 3.1 and 4 of TRIPS. The Appellate Body asserted that that Sections 211(a) (2) and (b) of OAA did not distinguish on their face between trademarks and trade names.405 In consideration of the alleged inconsistency of Sections 211(a)(2) and (b) with Article 2.1 of the TRIPS Agreement in conjunction with Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS Agreement, and with

404 See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 342. 405 Id. at 346.

© Pham Hong Quat 65 Article 4 of the TRIPS Agreement, the Appellate Body relied on the finding that these Sections imposed on designated nationals and their successors-in-interest the requirement to obtain the express consent of the original owners or their bona fide successors-in-interest. On the one hand, it noted that the requirement to obtain express consent applied not only to the defined category of trademarks, but also to the defined category of trade names referred to in those Sections. On the other hand, Section 211(a) (2), reading in conjunction with Section 211(d), applied only to successors-in-interest of non-United States origin, whereas Section 211(b) applied to successors-in-interest of any origin. Consequently, the Appellate Body found that Section 211(a)(2) was inconsistent with the national treatment provisions under Article 2.1 of TRIPS in conjunction with Article 2(1) of the Paris Convention and Article 3.1 of TRIPS in relation to trade names, with respect to successors-in-interest in trade names referred to in that Section:

“[W]e find that our conclusion (…) that the "extra hurdle" imposed by Section 211(a)(2) only to non-United States successors-in-interest to trademark rights referred to in that Section, the United States violates the national treatment obligation in Article 2.1 of the TRIPS Agreement in conjunction with Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS Agreement, applies also to successors-in-interest in trade names referred to in that Section.”406 (Emphasis added)

For the similar reasoning, the Appellate Body also found that the United Sates violated its MFN treatment obligation under Article 4 of TRIPS in relation to trade names, with respect to original owners of trade names referred to in Sections 211(a)(2) and (b):

“We find as well [in] our conclusion (…) that Sections 211(a)(2) and (b) are inconsistent with Article 4 of the TRIPS Agreement, to the extent that they concern the treatment of original owners of trademarks referred to in those Sections, applies also to original owners of trade names referred to in Sections 211(a)(2) and (b).”407 (Emphasis added)

406 Id. at 354. The Appellate Body further found violations by the United States under Article 2(1) of the Paris Convention and Articles 3 and 4 of TRIPS in relation to trade names as follows: “We find further that our conclusion (…) that Section 211(b) is not inconsistent with Article 2.1 of the TRIPS Agreement in conjunction with Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS Agreement, applies also to successors-in-interest to trade names referred to in that Section.” “We find also (…) [in] our conclusion (…) that (…) Sections 211(a)(2) and (b) are inconsistent with Article 2.1 of the TRIPS Agreement in conjunction with Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS Agreement, to the extent that they concern the treatment of original owners of trademarks referred to in those Sections, applies also to original owners of trade names referred to in Sections 211(a)(2) and (b).” (Emphasis added) See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 355, 356. 407 Id. at 357.

© Pham Hong Quat 66 It is evident that in the implementation of the incorporated provisions of the Paris Convention, domestic law is required to conform to the obligations under the principles of TRIPS. The strictness of the obligations under the principles of TRIPS implies that even if the relevant domestic law may not violate its obligation under an incorporated provision of the Paris Convention, it may violate the obligations under the principles of TRIPS. This situation may be seen in the findings of the Appellate Body concerning the obligation under Article 8 of the Paris Convention and that under Articles 3.1 and 4 of TRIPS. As mentioned above, the “extra hurdle” is the reason for the Appellate Body finding that the relevant domestic law of the United States violated its obligations under the national treatment and MFN treatment principles of TRIPS. However, because Article 8 of the Paris Convention does not regulate the matter relating to ownership, which is of the concern of the relevant domestic law under examination, the Appellate Body found that the United States did not violate its obligation under Article 8 of the Paris Convention:

“We recall further our conclusion (…) addressing Article 16.1 of the TRIPS Agreement that neither the Paris Convention (1967) nor the TRIPS Agreement determines who owns or who does not own a trademark. We believe that the Paris Convention (1967) and the TRIPS Agreement also do not determine who owns or does not own a trade name. Given our view that Sections 211(a) (2) and (b) relate to ownership, we conclude that these Sections are not inconsistent with Article 2.1 of the TRIPS Agreement in conjunction with Article 8 of the Paris Convention (1967).”408 (Footnote omitted and emphasis added)

The similar finding was applied to the obligation under Article 6quinquies of the Paris Convention. Namely, even though the relevant domestic law does not violate its obligation under an incorporated provision (Article 6quinquies) of the Paris Convention in relation to trademarks, it may violate its national treatment and MFN treatment obligations under Articles 3.1 and 4 of TRIPS.409

408 Id. at 359. 409 The Appellate Body interpreted Article 6quinquies of the Paris Convention as not covering the question under the claim of Section 211 of US Omnibus Appropriations Act (in relation to ownership of trademarks). Therefore, the United States did not violate its obligation under this article: “We have already stated that we agree with the Panel that Section 211(a)(1) is a measure dealing, in the particular circumstances in which it applies, with the ownership of a defined category of trademarks. We also agree that the obligation of countries of the Paris Union under Article 6quinquies A(1) to accept for filing and protect a trademark duly registered in the country of origin "as is" does not encompass matters related to ownership.” (Footnote omitted and emphasis added) “For these reasons, we uphold the finding of the Panel in paragraph 8.89 of the Panel Report that Section 211(a)(1) is not inconsistent with Article 2.1 of the TRIPS Agreement in conjunction with Article 6quinquies A(1) of the Paris Convention (1967).” (Emphasis added) See Appellate Body Report, US - Section 211 Omnibus, supra note 398, at 147, 148.

© Pham Hong Quat 67 1.2. Impracticability of the objectives and principles under Articles 7 and 8 of TRIPS (Canada - Patent protection of pharmaceutical products; European Communities - Geographical indications)

With regards to the objectives and principles stipulated in Articles 7 and 8, the TRIPS is designed in response to the expectation of balancing rights and obligations and promoting the public interest and technological developments from the less developed countries.410 In the practice of the settlement of disputes concerning TRIPS, the WTO panels have some opportunities to consider the TRIPS obligations under these provisions.411 However, the

410 See Daniel Gervais, supra note 227, at 116-118. See also Abudulqawi A. Yusuf, supra note 8, at13-14. 411 E.g., the panels in the case of Canada - Patent protection of pharmaceutical products, Complaint by EC, WTO Doc. WT/DS114/R (17 March 2000) [hereafter “Panel Report, Canada- Patent, Complaint by EC”] and in the double cases of EC-Protection of trademarks and geographical indications for agricultural products and foodstuffs, Complaint by the United States, WTO Doc. WT/DS174/R (15 March 2005) [hereafter “Panel Report, EC-Geographical indications, Complaint by US”] and Complaint by Australia, WTO Doc. WT/DS290/R (15 March 2005) [hereafter “Panel Report, EC-Geographical indications, Complaint by Australia”] considered the arguments for necessary exceptions in executing the obligations of TRIPS concerning the objectives and principles enunciated in Articles 7 and 8 of TRIPS. The respondent in Canada-Patent, Complaint by EC, argued for the application of such objectives and principles in interpreting the exceptions of patent rights under Article 30 of TRIPS. In contrast, the complainant asserted the inapplicability of these objective and principles to modify the scope of such exceptions. The Panel was in favor of the argument of the complainant and found that the objectives and principles could not be regarded as an additional element to the three-conditions in testing the exceptions of patent rights, which were already specified in Article 30 of TRIPS. Particularly, Canada argued for the applicability of provisions of Articles 7 and 8 of TRIPS in interpreting the three conditions stated in Article 30 of TRIPS. For that reason, these provisions provide the WTO Member governments with the necessary flexibility to adjust patent rights to maintain the desired balance with other important national policies. Canada expressed its argument as follows: “[T]he italicized text of Article 7 above declares that one of the key goals of the TRIPS Agreement was a balance between the intellectual property rights created by the Agreement and other important socio-economic policies of WTO Member governments. Article 8 elaborates the socio-economic policies in question, with particular attention to health and nutritional policies. With respect to patent rights, Canada argued, these purposes call for a liberal interpretation of the three conditions stated in Article 30 of the Agreement, so that governments would have the necessary flexibility to adjust patent rights to maintain the desired balance with other important national policies.” See Panel Report, Canada-Patent, Complaint by EC, para. 7.24. Otherwise, the EC argued that the TRIPS itself contains the overall balance in its provisions. Therefore, the application of Articles 7 and 8 in interpreting the exceptions provided in Article 30 would involve a double counting of the socio-economic polices. In particular, the lock of consistency provided in Article 8.1 supports the EC’s argument: “[I]n the view of the EC, Articles 7 and 8 are statements that describe the balancing of goals that had already taken place in negotiating the final texts of the TRIPS Agreement. According to the EC, to view Article 30 as an authorization for governments to "renegotiate" the overall balance of the Agreement would involve a double counting of such socio-economic policies. In particular, the EC pointed to the last phrase of Article 8.1 requiring that government measures to protect important socio-economic policies be consistent with the obligations of the TRIPS Agreement ” (Emphasis added) See Panel Report, Canada-Patent, Complaint by EC, para. 7.25. The Panel found that very the existence of the exceptions provided in Article 30 amounts to the necessary adjustment of patent rights contained in Article 28, relying on the consideration of the basic balance of the TRIPS. The interpretation of Article 30 needs not to adjust these rights any more under the goals and the limitations stated in Articles 7 and 8.1 of TRIPS:

© Pham Hong Quat 68 principles and objectives provided in Articles 7 and 8 of TRIPS have not ever been applied to modify a particular TRIPS obligation.412 In this respect, the TRIPS practice affirms the proposition that the applicability of the objectives and principles under Articles 7 and 8 of the TRIPS is very limited in comparison with that of the GATT standard principles.413

2. TRIPS substantive provisions prevailing the incorporated provisions (United States - Section 110(5) of the US Copyright Act; United States – Section 211 Omnibus Appropriations Act of 1998)

“In the Panel's view, Article 30's very existence amounts to a recognition that the definition of patent rights contained in Article 28 would need certain adjustments. On the other hand, the three limiting conditions attached to Article 30 testify strongly that the negotiators of the Agreement did not intend Article 30 to bring about what would be equivalent to a renegotiation of the basic balance of the Agreement (…) Both the goals and the limitations stated in Articles 7 and 8.1 must obviously be borne in mind when doing so as well as those of other provisions of the TRIPS Agreement which indicate its object and purposes.” (Emphasis added) See Panel Report, Canada-Patent, Complaint by EC, supra note 411, at 7.26. 412 The Panel in EC- Geographical indications, Complaint by Australia found that the principles provided in Article 8 of TRIPS does not allow any exception in securing the obligations under TRIPS. The Panel stated: “These principles reflect the fact that the agreement does not generally provide for the grant of positive rights to exploit or use certain subject matter, but rather provides for the grant of negative rights to prevent certain acts. This fundamental feature of intellectual property protection inherently grants Members freedom to pursue legitimate public policy objectives since many measures to attain those public policy objectives lie outside the scope of intellectual property rights and do not require an exception under the TRIPS Agreement.” (Emphasis added) See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.246. 413 The Appellate Body affirms the importance of the GATT standard national treatment enshrined in TRIPS and the applicability of the GATT jurisprudence in interpreting TRIPS as follows: “Thus, in drafting the TRIPS Agreement, the framers of the WTO Agreement saw fit to include an additional provision on national treatment. Clearly, this emphasizes the fundamental significance of the obligation of national treatment to their purposes in the TRIPS Agreement.” “Indeed, the significance of the national treatment obligation can hardly be overstated. Not only has the national treatment obligation long been a cornerstone of the Paris Convention and other international intellectual property conventions. So, too, has the national treatment obligation long been a cornerstone of the world trading system that is served by the WTO.” “As we see it, the national treatment obligation is a fundamental principle underlying the TRIPS Agreement, just as it has been in what is now the GATT 1994. The Panel was correct in concluding that, as the language of Article 3.1 of the TRIPS Agreement, in particular, is similar to that of Article III:4 of the GATT 1994, the jurisprudence on Article III:4 of the GATT 1994 may be useful in interpreting the national treatment obligation in the TRIPS Agreement.” (Footnote omitted and emphasis added) See Appellate Body Report, US-Section 211Omnibus, supra note 398, at 240, 241, 242. Similarly, the Appellate Body emphasized the significance of the MFN treatment principle of TRIPS in the light of the corresponding GATT principle:

© Pham Hong Quat 69 After incorporation into the TRIPS, the implementation of the obligations coming from the incorporated provisions of the pre-existing treaties is subject not only to the principles, but also to the relevant norms of TRIPS. The Panel in the case of United States-Section 110(5) of the US Copyright Act confirmed this assumption in finding that the obligations under Article 11bis(1) of the Berne Convention, as incorporated by Article 9.1 of TRIPS414, should conform to the requirement provided in Article 13 of TRIPS.

By the finding that minor exceptions form part of the context of Articles 11bis (1) and 11(1) (ii) of the Berne Convention, the Panel then examined the scope of applicability of this doctrine under the conditions of Article 13 of TRIPS. Subsequently, the Panel found that Article 13 of TRIPS is applicable not only to the relevant provisions of TRIPS, but also to the incorporated provisions of the Berne Convention:

“In our view, neither the express wording nor the context of Article 13 or any other provision of the TRIPS Agreement supports the interpretation that the scope of application of Article 13 is limited to the exclusive rights newly introduced under the TRIPS Agreement.”415

The Panel argued for the application of Article 13 to the relevant incorporated provisions of the Berne Convention. Particularly, the three criteria test provided in Article 13 of TRIPS is applied to measure the obligations under the Article 11bis (1) of the Berne Convention. The Panel reasoned that the application of Article 13 of the TRIPS Agreement to the rights provided under Articles 11(1) and 11bis(1) of the Berne Convention (1971) as incorporated into the TRIPS Agreement need not lead to different standards from those applicable under the Berne Convention (1971):

“We conclude that Article 13 of the TRIPS Agreement applies to Articles 11bis (1) (iii) and 11(1) (ii) of the Berne Convention

“Like the national treatment obligation, the obligation to provide most- favoured-nation treatment has long been one of the cornerstones of the world trading system. For more than fifty years, the obligation to provide most- favoured-nation treatment in Article I of the GATT 1994 has been both central and essential to assuring the success of a global rules-based system for trade in goods. Unlike the national treatment principle, there is no provision in the Paris Convention (1967) that establishes a most-favoured-nation obligation with respect to rights in trademarks or other industrial property. However, the framers of the TRIPS Agreement decided to extend the most-favoured-nation obligation to the protection of intellectual property rights covered by that Agreement. As a cornerstone of the world trading system, the most-favoured- nation obligation must be accorded the same significance with respect to intellectual property rights under the TRIPS Agreement that it has long been accorded with respect to trade in goods under the GATT. It is, in a word, fundamental.” (Emphasis added) See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 297. 414 Article 9.1 of TRIPS incorporates the substantive provisions of the Berne Convention while Article 2 incorporates the substantive provisions of the Paris Convention. See the TRIPS, supra note 10, arts. 2.1, 9.1. 415 Id. at 6.80.

Relying on the finding that the possibility of providing minor exceptions forms part of the context of these articles, the Panel examined the scope for permissible minor exceptions to the exclusive rights in question by applying the conditions of Article 13 of the TRIPS Agreement.”417 On this point, the Panel stated that the three conditions provided in Article 13 of TRIPS are also applied to examine the fulfillment of US obligations under Article 11bis(1) (iii) and 11(1)(ii) of the Berne Convention as incorporated into TRIPS:

“We now proceed to applying the three conditions contained in Article 13 of the TRIPS Agreement to the exemptions contained in Section 110(5) of the US Copyright Act in relation to Articles 11bis(1)(iii) and 11(1)(ii) of the Berne Convention (1971) as incorporated into the TRIPS Agreement.”418 (Emphasis added)

Accordingly, Section 110(5) of the US Copyright should be examined under the provisions of the relevant provisions of the Berne Convention “plus” the conditions provided in Article 13 of TRIPS. In other words, the fulfillment of the obligations under the incorporated provisions of the Berne Convention must be, at the same time, in conformity with the requirements under the related substantive provisions of TRIPS.

By the same token, the implementation of the obligations under the incorporated provisions of the Paris Convention should also be subject to the requirements under the related substantive provisions of TRIPS. Regarding the prevailing effect of the relevant substantive provisions of TRIPS in the relationship with the incorporated provisions, the finding of the Appellate Body in the case of the United States – Section 211 Omnibus Appropriations Act of 1998 on the relationship between Article 6(1) of the Paris Convention and Article 15.1 of TRIPS is of significance. The Appellate Body endorsed that the implementation of Article 6(1) of the Paris Convention should conform to Article 15.1 of TRIPS. Furthermore, the Appellate Body found that by the distinctiveness requirement, Article 15.1 of TRIPS limits the right of Members given by Article 6(1) of the Paris Convention, as incorporated into TRIPS. This point could be read in the following finding:

“As with our interpretation of Article 6quinquies, here, too, we recall that Article 6(1) of the Paris Convention (1967), which has become a WTO provision by incorporation through Article 2.1 of

416 See Panel Report, US- Section 110(5) Copyright Act, supra note 337, at 6.94. 417 Id. at 6.81. The Panel further stated: “We conclude that Article 13 of the TRIPS Agreement applies to Articles 11bis(1)(iii) and 11(1)(ii) of the Berne Convention (1971) as incorporated into the TRIPS Agreement, given that neither the express wording nor the context of Article 13 or any other provision of the TRIPS Agreement supports the interpretation that the scope of application of Article 13 is limited to the exclusive rights newly introduced under the TRIPS Agreement.” See Panel Report, US- Section 110(5) Copyright Act, supra note 337, at 6.94. 418 Id. at 6.96.

© Pham Hong Quat 71 the TRIPS Agreement, reserves to each country of the Paris Union the right to determine the "conditions" for filing and registration of trademarks in its domestic legislation. (…) In our view, Article 15.1 of the TRIPS Agreement limits the right of Members to determine the "conditions" for filing and registration of trademarks under their domestic legislation pursuant to Article 6(1) only as it relates to the distinctiveness requirements enunciated in Article 15.1.”419 (Footnote omitted and emphasis added)

Two implications may be drawn from the above-mentioned findings of the Appellate Body on the incorporation of the substantive provisions of the Paris Convention into TRIPS. First, the incorporated provision of the Paris Convention (Article 6.1) must be subject to the relevant substantive provision of TRIPS (Article 15.1). Second, the right of each member of the Paris Union granted by the related provision of the Paris Convention may be diminished by the relevant provision of TRIPS.420 Particularly, Article 15.1 of TRIPS limits the right to determine the “conditions” for filing and registration of trademarks given to domestic legislation pursuant to Article 6(1) of the Paris Convention, to the extent that the latter requires the distinctiveness of trademarks.

3. Subject to the WTO dispute settlement procedures (United States – Section 211 Omnibus Appropriations Act of 1998)

The Paris Convention is incorporated into TRIPS, and therefore, into the WTO system. As a result, the implementation of the incorporated provisions must be subject to the dispute settlement procedures of the WTO. On this point, in the case of the United States – Section 211 Omnibus Appropriations Act of 1998, the Appellate Body stated:

“Article 2.1 of the TRIPS Agreement provides that: "[i]n respect of Parts II, III and IV of this Agreement, Members shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967)." Thus, Article 6quinquies of the Paris Convention (1967), as well as certain other specified provisions of the Paris Convention (1967), has been incorporated by reference into the TRIPS Agreement and, thus, the WTO Agreement.”421

In the above-mentioned findings, the Appellate Body affirmed that, by incorporation into TRIPS, the incorporated provisions of the Paris Convention are covered and regulated by the

419 See Appellate Body Report, US- Section 211 Omnibus, supra note 398, at 165. 420 The prevailing effect of the TRIPS provisions (in respect of rights and obligations) in the relationship with the incorporated provisions of the Paris Convention invited different views of TRIPS as being “Paris-plus” or “Paris-minus” concerning different provisions of TRIPS and the Paris Convention. For the “Paris-plus” view, see Daniel Gervairs, supra note 227, at 95; Carlos McCrea, supra note 221, at 189. For the “Paris-minus” view, see Nuno Pires de Carvalho, supra note 103, at 72. The findings of the Appellate Body in this case to a certain extent confirm the prevailing effect of the relevant TRIPS provisions or the “Paris-plus” approach. 421 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 124.

© Pham Hong Quat 72 WTO Agreement. The WTO Members should implement these provisions in the framework of the WTO in the same way as they do with respect to the other obligations under TRIPS and the WTO Agreement. The Appellate Body clarified this point as follows:

“Consequently, WTO Members, whether they are countries of the Paris Union or not, are obliged, under the WTO Agreement, to implement those provisions of the Paris Convention (1967) that are incorporated into the TRIPS Agreement. As we have already stated, Article 6quinquies of the Paris Convention (1967) is one such provision.”422

The TRIPS is one of the covered agreements under the Dispute Settlement Understanding (“DSU”) of the WTO. Therefore, the compliance with the TRIPS obligations is under the surveillance of the Dispute Settlement Body (“DSB”) and subject to the dispute settlement rules and procedures provided in the DSU. The Appellate Body confirmed the legal status of the TRIPS under the WTO dispute settlement rules and procedures in the case of India- Patent protection for pharmaceutical and agricultural chemical products:

“As one of the covered agreements under the DSU, the TRIPS Agreement is subject to the dispute settlement rules and procedures of that Understanding. The dispute that gives rise to this case represents the first time the TRIPS Agreement has been submitted to the security of the WTO dispute settlement system.”423

As a part of the WTO Agreement, the implementation of the obligations under the TRIPS, including those under the incorporated provisions, must be subject to the dispute settlement rules and procedures of the WTO. In the case of US-Section 211 of Omnibus Appropriations Act of 1988, the Appellate Body endorsed that the obligations under Article 2(1) of the Paris Convention and other incorporated provisions of this convention are enforceable under the DSU as if the obligations under the WTO Agreement:

“As we have explained, what is new is that, as a consequence of the Uruguay Round, Article 2(1) of the Paris Convention (1967) was made part of the WTO Agreement. And, as we have previously explained, by virtue of Article 2.1 of the TRIPS Agreement, Article 2(1) of the Paris Convention (1967), as well as certain other specified provisions of the Paris Convention (1967), have been incorporated into the TRIPS Agreement and, thus, the WTO Agreement. Consequently, these obligations of countries of the Paris Union under the Paris Convention (1967) are also now obligations of all WTO Members, whether they are countries of the Paris Union or not, under the WTO Agreement, and, thus,

422 Id. at 125. 423 See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 29.

As mentioned earlier, the fact is that the WTO panels and the Appellate Body were requested to interpret the obligations under the particular incorporated provisions of the Paris Convention, where there existed a dispute in the interpretation and implementation of such provisions. In conjunction with the relevant provisions of TRIPS, the WTO panels and the Appellate Body examined the fulfillment of the incorporated provisions pursuant to the WTO dispute settlement rules and procedures. A possible conclusion from the above analysis is that the Paris Convention, by incorporation into the TRIPS, is subject to the regulation of the principles, norms and other procedural provisions of the TRIPS. In other words, after incorporation, the implementation of the substantive provisions of the Paris Convention must be not only consistent with the national treatment principle of the Paris Convention, but also in compliance with the principles of national treatment and MFN as well as other related provisions of the TRIPS and the WTO. The implementation of the incorporated provisions therefore must not only to be in the light of the principle of national treatment of the Paris Convention, but also conform to the principles and norms of the TRIPS. In consideration of GATT surveillance, the following discussion will examine the practical challenges of WTO jurisprudence to the “incorporated” Paris Convention, as developed by the WTO panels and the Appellate Body in finding the TRIPS related disputes.

III. The extension of the GATT practice to the “incorporated” Paris Convention

After incorporation into the TRIPS, the implementation of the “incorporated” Paris Convention should be subject to not only the TRIPS regulation but also the WTO rules. As a consequence of the integration of the WTO system, the panels and the Appellate Body interpreted the principle of national treatment of the Paris Convention in terms of being “in conjunction with” the related provisions of the TRIPS. The benchmarks they used in measuring the compliance with the incorporated provision of the Paris Convention should certainly be in conformity with the WTO disciplines and practices. The recently developed rulings of the panels and Appellate Body revealed the practical requirements as to the application of the national treatment principle of the Paris Convention after the incorporation.

1. “Effective equality of opportunities” and “no less favorable” standards (United States - Section 211 Omnibus Appropriations Act of 1998)

In discussing the question of whether TRIPS incorporates the provision of the Paris Convention on trade names, the fact of the case of US-Section 211 Omnibus Appropriations Act of 1998 was mentioned previously. This section refers to only the factual aspects concerning the discussing question. The dispute concerned Section 211 of the Omnibus Appropriation Act (OAA) of 1998 of the United States in dealing with trademarks, trade names, commercial names that are the same as or substantially similar to those used in

424 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 238.

© Pham Hong Quat 74 connection with business or assets that were confiscated by the Cuban Government on or after 1 January 1959.425 Particularly, Section 211(a)(1) of OAA prohibited the transaction or payment with respect to those objects, unless it has been expressly consented by their original owner or bona fide successor-in-interest, accordingly, the registration or renewal of the trademarks in the type mentioned above would be prevented.426 Section 211(a) (2) prohibited the exercise of enforcement rights of a “designated national” with respect to those objects before the US courts;427 and Section 211(b) prohibited the exercise of the treaty rights of a “designated national” or its successor-in-interest with respect to those objects derived from any international intellectual property conventions before the US courts.428 The term “designated national” is defined as Cuba and any national thereof including any person who is a specially designated national.429

The EC claimed that Section 211(a) (2) was inconsistent with Article 2.1 of TRIPS in conjunction with Article 2(1) (the national treatment obligation) of the Paris Convention, Article 3.1 (the national treatment obligation) and Article 4 (the MFN obligation) of the TRIPS.430 The EC argued that the above provision was inconsistent with the national treatment principle at two levels: in respect of “designated nationals” and “successors-in- interest”.

By curtaining the protection of trademarks held by “designated nationals” while granting US nationals the full enjoyment of their rights, Section 211(a)(2) discriminated against the “designated nationals” in breach of the national treatment principle. In respect of successors- in-interest, this provision denied protection to foreign successors-in-interest while US successors-in-interest can enjoy their rights to trademarks used in connection with confiscated assets.431

The United States rebutted that Section 211 of OAA was not inconsistent with the provisions of TRIPS in conjunction with the relevant provisions of the Paris Convention claimed by the EC with two main arguments: First, the matter of refusal of registration and enforcement of the trademark was based on the grounds of ownership of trademarks was not regulated by the Paris Convention whilst being applicable under TRIPS, and TRIPS supported the provisions of Section 211 of OAA.432 Second, there were no discrimination existing in the law and practice in respect of the refusal of registration and enforcement with regard to confiscated trademarks and trade names.433

Concerning the national treatment principle, the United States argued that under Section 211(a) (2) US courts were not to recognize, enforce or validate any assertion of rights in a confiscated trademark by a designated national or national of any foreign country who is a successor-in-interest to the designated national. The statutory language did not include US

425 See Panel Report, US-Section 211 Omnibus, supra note 384, at 2.1. 426 Id. at 2.1, 2.9. 427 Id. at 2.1, 2.10. 428Id. at 2.1, 2.6. 429 Id. at 2.2. 430 See Panel Report, US-Section 211 Omnibus, supra note 384, at 3.1. 431 Id. at 8.123, 8.132. 432 Id. at 3.4, 8.44, 8.45, 8.72, 8.73, 8.93, 8.104, 8.114 433 Id. at 8.124, 8.134, 8.142.

© Pham Hong Quat 75 nationals and US nationals could not become a successor-in-interest to a designated national because they were impossible to get the required license from the competent administrative authority.434

The Panel did not distinguish the national treatment obligation of the TRIPS and that of the Paris Convention in finding whether the Section 211(a) (2) was inconsistent with these obligations. The Panel did not find how these obligations are different from each other in terms of “no less favorable” under Article 3.1 of the TRIPS and “the advantages…now grant, or may hereafter grant” under Article 2(1) of the Paris Convention.435 Otherwise, the Panel mentioned the similarity in the language of these two provisions and argued for the “common objective of according the non-discrimination treatment”:

“The national treatment provision as embodied in Article 2(1) of the Paris Convention (1967) contains a statement similar to Article 3.1 of the TRIPS Agreement: (…)”436 (Emphasis added)

The Panel interpreted the similarity in the nature of the two principles by the reference to “the same protection (…) and the same legal remedy” under Article 2(1) of the Paris Convention in comparison with “treatment no less favourable” under Article 3.1 of the TRIPS. Significantly, the Panel reasoned that the inconsistency under Article 3.1 of the TRIPS could at the same time be an inconsistency under Article 2(1) of the Paris Convention. This was the reasoning for the conjunctional conclusion concerning the violation of the national treatment obligation under Article 2(1) of the Paris Convention following the conclusion of a violation of the national treatment obligation under Article 3.1 of the TRIPS. The reasoning of the Panel is expressed in the below statement:

“Both Article 3.1 of the TRIPS Agreement and 2(1) of the Paris Convention (1967) deal with "protection" of intellectual property. Article 3.1 refers to "treatment no less favourable" while Article 2(1) refers to "the same protection…and same legal remedy". We do not purport to determine whether the expression "treatment no less favourable" means "the same

434 Id. at 8.124. 435 Article 3.1 of the TRIPS provides: “Each Member shall accord to the nationals of other Members treatment no less favourable than it accords to its own nationals with regard to the protection (footnote 3) of intellectual property….” (Emphasis added) See the TRIPS, supra note 10, art. 3.1. 436Article 2(1) of the Paris Convention stipulates: “Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon nationals are complied with.” (Emphasis added) See the Paris Convention, supra note 1, art. 2(1). See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.126.

© Pham Hong Quat 76 protection…and same legal remedy". However, given the common objective of according non-discriminatory treatment to foreign nationals in respect of protection of intellectual property, a finding of inconsistency under Article 3.1 could also lead to the same finding under Article 2.1 of the TRIPS Agreement in conjunction with Article 2(1) of the Paris Convention (1967).”437 (Emphasis added)

With the above reasoning, the Panel just examined the consistency of the US domestic legislation with the requirements of Article 3.1 of the TRIPS to be able to come to the conclusion on the consistency with Article 2(1) of the Paris Convention. In this respect, the assessment of the obligation under the national treatment provision of the Paris Convention is subject to the same discipline as that applied to the national treatment provision of the TRIPS. In other words, domestic legislation should obey the same requirements to fulfill the obligations under both of these provisions.

In the next step, for interpreting the obligation under Article 3.1 of the TRIPS, the Panel adopted the provision and the practical application of Article III: 4 of the GATT 1994438 as the relevant context and guideline. The reasoning for the adoption is the similar language used in the both provisions:

“The language of Article 3.1 of the TRIPS Agreement is similar to that contained in III: 4 of the GATT 1994… In construing Article 3.1 of the TRIPS Agreement, Article III: 4 can serve as a useful context.”439

The term “treatment no less favourable” was thereupon interpreted in the light of the GATT Article III:4 practice. The Panel referred to the findings of the panels in a number of GATT and WTO cases as the basis to define this term in the concept of “effective quality of opportunities” which was applied to imported products in comparison with domestic products:

“The term "treatment no less favourable" was expressly interpreted by the Panel in United States—Section 337of the Tariff Act of 1930 as requiring Members to provide equality of competitive conditions for imported products in relation to domestic products.”440 (Emphasis added)

437 Id. at footnote 140 to para. 8.126. 438 Article III:4 of the GATT 1994 states: “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.” See GATT 1994, supra note 14, art. III:4. 439 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.129. 440 Id. at 8.130. The Panel in United States—Section 337 stated the effective equality of opportunities for imported products as a minimum permissible standard for the “treatment no less favorable” under Article II:4 of

© Pham Hong Quat 77 The Panel also applied the interpretation of the GATT panel for the practical application of Article III: 4 of the GATT 1947 in interpreting Article 3.1 of the TRIPS.441 There is no substantive reasoning for the transfer of the GATT national treatment benchmarks applied to “like products” into the TRIPS national treatment application:

“The relevant standard of examination to determine whether the nationals of other Members are treated "less favourably" than the nationals of the concerned Member under Article 3.1 of the TRIPS Agreement is whether the measure provides effective equality of opportunities as between these two groups in respect of protection of intellectual property rights.”442 (Emphasis added)

Based on the “effective equality of opportunities” criteria imported from the GATT practice, the Panel examined the implementation of the TRIPS national treatment obligation in the US domestic legislation and found that, in the face of the statutory language, the differential treatment in respect of intellectual property rights protection could be considered to provide a less favorable treatment to nationals of other Members as it denied effective equality of opportunities to non-US nationals.443 However, the Panel applied the concept of “mandatory and discretionary legislation” developed by various GATT panels in determining whether the United States violated its TRIPS obligation of national treatment.444 The findings of the panel in the case of United States—Measures Affecting the Importation, Internal Sale and Use of Tobacco and of the Appellate Body in the case of United Sates-Antidumping Act of 1916 were the basis for the findings of the Panel in this case:

“[L]egislation which mandated action inconsistent with the General Agreement could be challenged as such, whereas

GATT: “[T]he "no less favourable" treatment requirement set out in Article III:4, is unqualified. These words are to be found throughout the General Agreement and later agreements negotiated in the GATT framework as an expression of the underlying principle of equality of treatment of imported products as compared to the treatment given either to other foreign products, under the most favoured nation standard, or to domestic products, under the national treatment standard of Article III. The words "treatment no less favourable" in paragraph 4 call for effective equality of opportunities for imported products in respect of the application of laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products. This clearly sets a minimum permissible standard as a basis.” (Emphasis added) See Panel Report, United States—Section 337 of the Tariff Act of 1930 [hereafter "US—Section 337"), BISD 36S/345, adopted 7 November 1989, para. 5.11. 441 The Panel in Canada—Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies examined a Canadian measure in relation to Article III:4 of the GATT 1947 and stated that "by allowing the access of domestic beer to points of sale not available to imported beer, Canada accorded domestic beer competitive opportunities denied to imported beer". See Panel Report, Canada—Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies, BISD 39S, adopted 18 February 1992, para. 5.6. 442 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.131. 443 Id. at 8.133. 444 Id. at 8.136. 8.137.

© Pham Hong Quat 78 legislation which merely gave the discretion to the executive authority of a contracting party to act inconsistent with the General Agreement could not be challenged as such; only actual application of such legislation inconsistent with the General Agreement could be subject to challenge.”445 (Emphasis added)

“[T]he relevant discretion, for purposes of distinguishing between mandatory and discretionary legislation, is a discretion vested in the executive branch of government.”446 (Emphasis added)

As a result, the Panel found that the US domestic legislation did not violate the TRIPS national treatment obligation because (i) Section 211(a)(2) did not accord a treatment less favorable to foreign original owners than it accords to US original owners, and (ii) US nationals were unable to obtain licenses so as to become a successor-in-interest and the fact of no license having been granted by US competent authority.447 The Panel reasoned that although the term “designated national” does not include US nationals and therefore seems literarily to provide less favorable treatment to nationals of foreign countries,448 this provision has no effect in reality, due to the non-operation of the administrative branch in charge of its execution.449 Thereupon, Section 211(a) (1) of OAA was concluded to be not inconsistent with Article 3.1 of the TRIPS and Article 2.1 of the TRIPS in conjunction with Article 2(1) of the Paris Convention concerning the obligation of national treatment.450

For similar reasons, Section 211(b) was not found inconsistent with Article 3.1 of the TRIPS and Art.2.1 of the TRIPS in conjunction with Article 2(1) of the Paris Convention. 451 As for the MFN obligation, the Panel found that the term “designated national” used in Section 211(a) (2) means not only Cuba, a Cuban national, but also a specially designated national or national of any foreign country who was a successor-in-interest to a designated national, and therefore, it did not discriminate between Cuban nationals and other foreign nationals in respect of trademarks used in connection with the confiscated assets.452 Section 211(a) (2) of OAA was found not inconsistent with Article 4 of TRIPS concerning the obligation of MFN.453

The Appellate Body reversed the findings of the Panel and found that the US domestic legislation violated the obligations under principles of national treatment and MFN of the

445 See Panel Report, United Sates – Measures Affecting the Importation, Internal Sale and Use of Tobacco, BISD 41S, Volume 1, adopted 4 October 1994 [hereafter Panel Report, “US-Tobacco”], para.118. 446 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.137; Appellate Body Report, United Sates- Antidumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, para. 88. 447 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.139, 8.140. 448 Id. at 8.133. 449 Id. at 2.2, 2.7, 8.134, 8.137, 8.138. Section 515.201 of 31 Code of Federal Regulations prohibits US nationals from becoming successors-in-interest without obtaining a specific license from the Office of Foreign Assets Control of the US Treasury Department (OFAC). In fact, OFAC, the agency of the executive branch which has discretion to grant specific licenses, has never granted a specific license. 450 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.140. 451 Id. at 8.171. 452 Id. at 8.146. 453 Id. at 8.148.

© Pham Hong Quat 79 TRIPS and, at the same time, violated the obligations under the principle of national treatment of the Paris Convention. The Appellate Body agreed with the Panel on the application of the concept of “mandatory and discretionary legislation” in examining the US domestic legislation in the implementation of the TRIPS obligations. However, the Appellate Body went further into examining the US domestic legislation based on the argument of the EC on the “extra hurdle” concerning the procedural difficulties faced by foreign successors-in- interest in registration and renewal of trademarks according to Section 211(a) (2).454 The Appellate Body found that:

“It is not disputed that Section 515.201 of the CACR imposes a limitation – a "hurdle" – on both successors-in-interest who are United States nationals and successors-in-interest who are not. It is also not disputed that Section 211(a) (2) applies only to successors-in-interest who are not United States nationals.”455 (Emphasis added)

By applying the approach of the Panel in the case of United States – Section 337 of the Tariff Act of 1930456 for considering the possibility of offsetting against each other the elements of less and more favorable treatment, the Appellate Body assessed whether the existence of “extra hurdle” is the “possibility” of an “inherently less favourable treatment”. Consequently, Section 211(a) (2) could not pass the “extra hurdle” test of the Appellate Body:

“The United States may be right that the likelihood of having to overcome the hurdles of both Section 515.201 of Title 31 CFR and Section 211(a) (2) may, echoing the panel in US – Section 337, be small. But, again echoing that panel, even the possibility that non-United States successors-in-interest face two hurdles is inherently less favourable than the undisputed fact that United States successors-in-interest face only one”457

454 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 259, 260, 284. 455 Id. at 264. 456 The following findings of the Panel in US-Section 337 case are significance for the Appellate Body to deal with this case: "[T]he mere fact that imported products are subject under Section 337 to legal provisions that are different from those applying to products of national origin is in itself not conclusive in establishing inconsistency with Article III:4." “[I]t would follow (…) that any unfavourable elements of treatment of imported products could be offset by more favourable elements of treatment, provided that the results, as shown in past cases, have not been less favourable. [E]lements of less and more favourable treatment could thus only be offset against each other to the extent that they always would arise in the same cases and necessarily would have an offsetting influence on the other.” (Emphasis added) “[W]hile the likelihood of having to defend imported products in two fora is small, the existence of the possibility is inherently less favourable than being faced with having to conduct a defense in only one of those fora.” (Emphasis added) See Panel Report, United States – Section 337 supra note 440, at 5.11, 5.12, 5.19. 457 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 265.

© Pham Hong Quat 80 Considering the fact, as the United Stated submitted, that there was no actual applicability of the “hurdle” in the practice of courts, the Appellate Body found that the “likelihood” of no application of the hurdle could not escape the claimed provision from the finding of a less favorable treatment:

“[A]s the United States argues, a likelihood that United States courts would not enforce rights asserted by a United States successor-in-interest, the fact remains, nevertheless, that non- United States successors-in-interest are placed by the measure, on its face, in an inherently less favourable situation than that faced by United States successors-in-interest. And, even if we were to accept the United States argument about the doctrine of non-recognition of foreign confiscation, presumably that doctrine would apply to those who are not nationals of the United States as well as to those who are. Any application of this doctrine would therefore not offset the discrimination in Section 211(a) (2), because it would constitute yet another, separate obstacle faced by nationals and non-nationals alike. Hence, it would not offset the effect of Section 211(a) (2), which applies only to successors-in-interest who are not United States nationals.”458(Emphasis added)

Without mentioning the difference between the national treatment obligation under the TRIPS and that of the Paris Convention, the Appellate Body concluded that Section 211(a) (2) violated both related provisions of these two treaties. Logically, it results in the conception that the national treatment principle of the Paris Convention also requires the treatment of “no less favourable” as the TRIPS does. In addition, the existence of an “extra hurdle” in domestic legislation is the likelihood of violation of the national treatment obligation of the Paris Convention as well:

“Accordingly, we conclude that Section 211(a) (2) imposes an additional obstacle on successors-in-interest who are not nationals of the United States that is not faced by United States successors-in-interest. And, therefore, we conclude that, by applying the "extra hurdle" imposed by Section 211(a) (2) only to non-United States successors-in-interest, the United States violates the national treatment obligation in Article 2(1) of the Paris Convention (1967) and Article 3.1 of the TRIPS Agreement.”459 (Emphasis added)

By the same token, the Appellate Body found that the discrimination treatment imposed by the “extra hurdle” concerning the foreign original owners of the confiscated trademarks, which is available under Section 211(a) (2) and (b), could not be offset in every case by a prohibiting provision of another law. And, therefore, since the inherently less favorable treatment present in this Section could not be eliminated in each and every case, the Appellate 458 Id. at 267. 459 Id. at 268.

“We do not believe that Section 515.201 of the CACR would in every case offset the discriminatory treatment imposed by Sections 211(a)(2) and (b) (…)We are, therefore, not satisfied that Section 515.201 would offset the inherently less favourable treatment present in Sections 211(a)(2) and (b) in each and every case. And, because it has not been shown by the United States that it would do so in each and every case, the less favourable treatment that exists under the measure cannot be said to have been offset and, thus, eliminated.”460 (Emphasis added)

“Thus, we conclude that Sections 211(a) (2) and (b) are inconsistent with the national treatment obligation of the United States under the Paris Convention (1967) and the TRIPS Agreement at the level of original owners. And, therefore, we reverse the Panel's findings in paragraphs 8.140 and 8.173 of the Panel Report that Section 211(a) (2) and Section 211(b) are "not inconsistent with Article 3.1 of the TRIPS Agreement and Article 2.1 of the TRIPS Agreement in conjunction with Article 2(1) of the Paris Convention (1967)" to the extent that they concern the treatment of original owners.”461 (Emphasis added)

It is evident that the Appellate Body follows the same approach as the Panel did in interpreting and examining the national treatment obligations under Article 2.1 of the Paris Convention and Article 3.1 of the TRIPS, which relied on the reasoning of compatibility between “the same protection” and “no less favorable” under these two provisions, respectively, for “the common objective of according the non-discrimination treatment”.462 By examining the standards of “no less favorable” treatment in the light of the GATT practice, the Appellate Body came to conclude the inconsistency with the national treatment obligations under both provisions after finding the existence of the “extra hurdle” in the US domestic legislation.

Clearly, by the incorporation of the TRIPS, the standards and disciplines of national treatment under Article III: 4 of GATT were adopted in examining the complaints about the national treatment obligation under the Paris Convention. The concepts of mandatory and discretionary legislation, “effective equality of opportunities”, “treatment no less favorable”, etc. developed from the GATT practice were transferred into the practice of implementation of the national treatment obligation under the Paris Convention. In this respect, it is reasonable for the perception that the nature of the national treatment obligation under the Paris Convention after incorporation into the TRIPS has been changed substantially. Accordingly, domestic legislation would certainly be subject to the more burdensome requirements of both legislation and practical application.

460 Id. at 294. 461 Id. at 296. 462 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.126 and footnote 140.

© Pham Hong Quat 82 The above mentioned concern could also be regarded as a limitation that domestic legislation should take into account in implementing the substantive provisions of the Paris Convention after the incorporation into the TRIPS, and then into the WTO system. Otherwise, it is also meaningful for domestic legislation to take into consideration the concepts developed from the practice of Article II: 4 of GATT to secure compliance with the TRIPS for the extensive effect of GATT on the implementation of obligations under the TRIPS and the incorporated Paris Convention.

2. Extension of the rule of assimilation (European Communities – Geographical indications)

This concerns the claim of violation of national treatment obligation under the Paris Convention concerning the Regulation of the Council of the European Communities No 2081/92 of 14 July 1992463 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, as amended by Regulation of the Council of the European Communities No 692/2003 of 8 April 2003 (the “Regulation”).464 The United States argued that Article 12(1) of the Regulation requires equivalent and reciprocal conditions for the registration of geographical indications located in the territory of a WTO member outside the European Union, which are applicable to the WTO members and not applicable to the EC members.465 Therefore, the United States claimed that the Regulation violated the national treatment obligations under Article 3.1 of the TRIPS, Articles 2(1) and 2(2) of the Paris Convention because it imposes conditions of reciprocity and equivalence on the availability of protection.466 Australia raised almost the same claim in a subsequent dispute brought separately before the Panel.467

In the interpretation of the national treatment obligation under the TRIPS and that of the Paris Convention as incorporated into the TRIPS, the Panel found that the scope of national treatment obligation under the Paris Convention had also changed, namely, all Members of the WTO are regarded as if the members of the Paris Convention.468 Accordingly, the rule of

463 Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, available at http://www.wipo.int/clea/docs_new/en/fi/fi010en.html. 464 Council Regulation (EEC) No 692/2003 of 8 April 2003 Official Journal of the European Union, No.L99 of 17 April 2003 [hereafter the “Regulation”]. 465 See Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.38. 466 Id. at 7.104, 7.109. 467 Id. at 7.89, 7.154, 7.159 468 However, as to the nature of the national treatment obligation under the Paris Convention, the Panel in this case emphasized the unlikeness of the national treatment obligations under the Paris Convention and the TRIPS. Different from the view of the Panel in the case of US-Section 211 Omnibus (see Panel Report, US-Section 211 Omnibus, supra note 384, at 8.126 and footnote 140), the Panel in this case did not mention the “common objective” of these two national treatment obligations by reference to the provisions on “the same protection” and “no less favourable” treatment under Article 2(1) of the Paris Convention and Article 3.1 of the TRIPS, respectively. Otherwise, the Panel weighted the difference in the words “the advantages” and “no less favourable than” in these two provisions. At least according to this reasoning it means that there are no totally common standards for measuring the consistency with these two national treatment obligations. Applying this reasoning in examining the implementation of the national treatment obligations under Article 2(1) of the Paris Convention and Article 3.1 of the TRIPS will lead to the different results. While the concept “extra hurdle” is

© Pham Hong Quat 83 assimilation applied to the nationals of non-members of the Paris Union469 would also apply to the persons who are the nationals of non-members of the WTO, as long as they domicile or have real and effective industrial or commercial establishments in the territory of any WTO Member. The Panel referred to this point when focusing on the concept of nationals under the Paris Convention and the TRIPS:

“The rule in Article 3 of the Paris Convention (1967) only applies to nationals of countries outside the Paris Union. According to Article 1.3 of the TRIPS Agreement, these criteria shall be understood as if "all Members of the WTO" were members of that Convention. Therefore, for the purposes of the TRIPS Agreement, that rule of assimilation only applies to persons that are nationals of a country that is not a WTO Member.”470 (Emphasis added)

According to the findings mentioned above, the rule of assimilation under the Paris Convention extended its scope to persons who are not nationals of WTO members, provided found coming within the term “no less favourable” under Article 3.1 of the TRIPS, this concept may be regarded going beyond the scope of the “advantages” under Article 2.1 of the Paris Convention. In other words, the “extra hurdle” can be used in examining the former, but it may not be suitable to measure the latter. As a result, the inconsistency with Article 3.1 of the TRIPS is not necessarily an inconsistency with Article 2.1 of the Paris Convention. In this view, the examination of the national treatment obligation under each of these provisions should be made separately and not based on the same standards. The Panel in this case clearly adopted this methodology in making its findings. The Panel did not conclude automatically the violation of both provisions after finding the existence of the “extra hurdle” and less favorable treatment (see EC-Geographical indications, Complaint by US, supra note 411, at 7.139, 7.140, 7.213), as was done by the Panel and the Appellate Body in the case of US-Section 211 Omnibus (see Panel Report, US-Section 211 Omnibus, supra note 384, at 8.126 and footnote 140; Appellate Report, US-Section 211 Omnibus, supra note 398, at 268, 294, 296). Either way, the Panel chose to exercise judicial economy with respect to the claim of the national treatment obligation under Article 2.1 of the Paris Convention after having found inconsistency with the national treatment obligation under Article 3.1 of the TRIPS. The viewpoint of the Panel in dealing with this issue expressed in the following findings: “With respect to the claim under paragraph 1 of Article 2 of the Paris Convention (1967), as incorporated by Article 2.1 of the TRIPS Agreement, the Panel observes that, unlike Article 3.1 of the TRIPS Agreement, Article 2(1) of the Paris Convention (1967) refers to "the advantages that ... laws now grant, or may hereafter grant" and not to "no less favourable" treatment. Therefore, the Panel has not actually reached a conclusion on this claim. However, further findings on this claim would not provide any additional contribution to a positive solution to this dispute and are therefore unnecessary.” (Emphasis added) See Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.216. 469 The rule of assimilation requires the provision of national treatment with the persons who are not nationals of members of the Paris Convention but have a domicile or a real and effective industrial and commercial establishment in the territory of a member. Article 3 of the Paris Convention (1967) provides for the rule of assimilation as follows: "Nationals of countries outside the Union who are domiciled or who have real and effective industrial or commercial establishments in the territory of one of the countries of the Union shall be treated in the same manner as nationals of the countries of the Union." (Emphasis added) See the Paris Convention, supra note 1, art. 3. 470 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 794.

© Pham Hong Quat 84 that they have a domicile or a real and effective industrial and commercial establishment in a WTO member. Otherwise, the Panel noted that Article 1.3 of the TRIPS defines "nationals of other members" in order to determine the persons to whom members shall accord treatment, which includes national treatment.471 Thereby, Article 1.3 of the TRIPS qualifies the assimilation to nationals under the Paris Convention as nationals of the WTO Members. It states as follows:

"3. Members shall accord the treatment provided for in this Agreement to the nationals of other Members. In respect of the relevant intellectual property right, the nationals of other Members shall be understood as those natural or legal persons that would meet the criteria for eligibility for protection provided for in the Paris Convention (1967), the Berne Convention (1971), the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits, were all Members of the WTO members of those conventions. (...)"472 (footnote omitted and Emphasis added)

Accordingly, after the incorporation into the TRIPS, the rule of assimilation applied to nationals of non-members of the Paris Convention became the rule of assimilation applied to nationals of non-WTO members. In other words, the national treatment obligation under the Paris Convention is required to apply not only to the assimilation of nationals of non- members of the Paris Convention, but also to the assimilation of nationals of non-members of the WTO. And also, the TRIPS national treatment obligation with regards to the substantive provisions of the Paris Convention is required to provide the assimilation of nationals of non- members of the WTO when reading the wording “in respect of the relevant intellectual property right” provided in Article 1.3 in the context of Article 2.1 of the TRIPS for the incorporation of the Paris Convention into the TRIPS.

471 See Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.142. 472 See the TRIPS, supra note 10, art.1.3.

The panel rulings on the TRIPS related cases clarified the question of how the substantive provisions of the Paris Convention are incorporated into the WTO system. It was found that the relevant provisions of TRIPS will prevail the “incorporated” Paris Convention provisions where exists the difference between them. The appearance of the “new” extensive rules of WTO jurisprudence and the application of the GATT standards in examining the obligations under the “incorporated” Paris Convention constitute the practical challenges for national legislation in compliance with the TRIPS.

The practice of national treatment under Article III: 4 of GATT is extended to the interpretation of the national treatment of the incorporated Paris Convention. By the extension of the GATT disciplines to the incorporated Paris Convention, it is arguable that the nature of the national treatment obligation under the Paris Convention has been changed substantially. National legislation should take into account this challenge in compliance with the TRIPS.

The analysis of the rulings of the Panel over the recent TRIPS disputes affirmed the change in the scope of the national treatment obligation of the Paris Convention under WTO framework. Under WTO jurisprudence, national legislation should provide for the protection of inventions in all fields of technology, without discrimination in respect of duration of patent and patents for imported and domestic products, to nationals of all WTO Members. Second, the same treatment is required to provide to nationals of WTO non-Members when they have a domicile or a real and effective industrial and commercial establishment in the territory of a WTO Member. Those effects arising from the incorporation of the Paris Convention into the TRIPS may be regarded as the practical challenges to the implementation of the substantive provisions of the Paris Convention as incorporated into the WTO system.

Increasing Risky in Compliance with the TRIPS under WTO Jurisprudence

The surveillance of the GATT disciplines in interpreting the national treatment and MFN principles and norms of the TRIPS created the burdensome of the TRIPS obligations. The objectives and the principles inscribed in the TRIPS seem to be ineffective in practice. The examination standards recently developed by the WTO panels regarding the intellectual property protection constitute the new challenges to national legislation in compliance with the TRIPS and WTO law. The rulings of the WTO panels regarding the disputes concerning intellectual property protection reflected the more and more restrictive approach in examining the inconsistency of the relevant domestic law to WTO law. The unavailability of an effective implementing mechanism in a domestic legislation may be regarded a WTO violation because WTO law requires domestic law to secure positively its WTO obligations. The inconsistency of a discretionary legislation can no longer be exempted from the charge of WTO violation as it could be under the regime of GATT 1947. The intrusive examination and explanation of the WTO panels and the Appellate Body on the particular domestic regulations in the recent TRIPS related cases are also understood as the practical challenges to national laws in compliance with the TRIPS under WTO jurisprudence. The discussion in this Chapter will explore such challenges in examination of the relevant panel findings over the TRIPS related disputes. Part I is going to deal with the question of how to secure the obligations under the norms of the TRIPS as interpreted by the panel rulings. Part II will examine an important aspect of the TRIPS regulation, that is, how the national treatment and MFN principles of the TRIPS were interpreted in practice. To which extent the GATT practice was applied in interpreting the TRIPS principles and provisions. Part III will discuss the development of WTO jurisprudence regarding the intellectual property, particularly the challenges in compliance of domestic law to WTO law.

I. Securing the obligations under the TRIPS norms

1. Rule of anti-discrimination

(Canada-Patent protection of pharmaceutical products).

Article 27.1 of the TRIPS requires that patents shall be available for any inventions, including products and processes, in all fields of technology. Article 27.1 also prohibits the discrimination as to inventions and patent rights. Particularly, the inventions should be given the treatment without discrimination regarding the place of invention and the field of technology. The patent rights should be given the treatment without discrimination between the imported products and the locally produced products.473 In the sense that this article refers

473 Id. art. 27.1

© Pham Hong Quat 87 to the non-discrimination rule applied to inventions and patent rights, not only the contents but also the scope of application of this rule is of great importance. Should the exceptions and limitations of patent rights under Article 30 and 31 of the TRIPS be subject to the non- discrimination rule? The relation between these provisions would be very important. The former would limit where the non-discrimination rule prevailed the exceptions and limitations, the scope of the latter. By contrast, it would be more flexible to decide a measure in the meaning of an exception without the fear of a discrimination challenge. In fact, there were different views on the scope of this rule in understanding and implementation of the norms of the TRIPS. The debate reflected in the case of Canada – Patent protection of pharmaceutical products. The relevant arguments and the answer of the Panel to this question will be discussed below.

The fact was that the Canadian patent law allowed the kind of regulatory review exception for the purpose of permitting potential competitors of the patent owner to obtain government marketing approval during the term of the patent, so it is possible for them to procure permission to sell pharmaceuticals in competition with the patent owner by the date of expiration of the patent.474 The kind of stockpiling exception also existed in the Canadian patent law, it allowed competitors of the patent owner to manufacture and stockpile patented goods during a period of six months before the patent expires, but the goods could not be sold until the patent expired.475 The EC claimed that the regulatory review exception and the stockpiling exception provided in the Canadian patent law violated Article 28.1 and Article 33 of TRIPS by virtue of allowing manufacturing and stockpiling of pharmaceutical products without the consent of the patent holder during the six months immediately prior to the expiration of the 20-year patent term; and violated Article 27.1 of TRIPS by treating patent holders in the field of pharmaceutical inventions less favorably than inventions in all other fields of technology. 476 To this point, the EC argued for the broad application of the non-discrimination rule under Article 27.1 of the TRIPS relied on the general purpose of the TRIPS. Accordingly, it should be applied to the exceptions under Article 30 of the TRIPS. Canada argued that the provisions on the regulatory review exception and stockpiling exception existing in the Canadian patent law were falling into “limited exceptions” to exclusive rights conferred by a patent within the meaning of Article 30 of TRIPS.477 To this point, Canada argued for not extending the scope of the non-discrimination rule to the exceptions of patent rights. The argument based on the rationale provided in objectives and principles, which stand for the limitations of patent rights for the purpose of the public

474 Without this exception, the patent owner might be able to prevent potential competitors from using the patented products during the term of the patent to comply with the testing requirements, therefore, the competitors would have to wait until the patent expires before they could begin the process of obtain market approval. See Panel Report, EC v. Canada-Patent, supra note 177, at para. 7.2. 475 See Panel Report, EC v. Canada-Patent, supra note 177, at paras. 77.-7.9. The stockpiling exception complemented the competitive effects of the regulatory review exception: without the additional permission to stockpile during the term of the patent, competitors who obtain regulatory permission to sell on the day of expiration of the patent would still not be able to enter the market on that day, because they would first have to manufacture a sufficient stock of goods. 476 See Panel Report, Canada-Patent Protection of Pharmaceutical Products, WT/DS114/R, 17 March 2000, [hereafter “Panel Report, Canada-Patent, Complaint by EC”], para.3.1. 477 Id. at 3.2.

The Panel did not accept the argument of Canada. The Panel found that according to Article 27.1 of the TRIPS, the non-discrimination rule applied to both patents and patents rights. In that way, domestic legislation cannot invoke an exception endorsed by Article 30 of the TRIPS to justify a limitation applied to a patent for the reason that it belongs to a specific field of technology. In this respect, the Panel in the case found that:

“[I]t is not true that being able to discriminate against particular patents will make it possible to meet Article 30's requirement that the exception be "limited". An Article 30 exception cannot be made "limited" by limiting it to one field of technology, because the effects of each exception must be found to be "limited" when measured against each affected patent.”478 (Emphasis added)

According to the above findings, there exists no ground for any discrimination with regards to inventions in different fields of technology under the TRIPS. The same rule is also applied to the place of invention and the products of importation and domestic production as required by the language of Article 27.1 itself. The Panel certified the broad view of understanding on the applicability of the non-discrimination rule. The argument for that view is based on the grounds of the overall purpose of the TRIPS in ensuring non-discriminatory treatment of inventions of foreigners:

“It is quite plausible, as the EC argued that the TRIPS Agreement would want to require governments to apply exceptions in a non-discriminatory manner, in order to ensure that governments do not succumb to domestic pressures to limit exceptions to areas where right holders tend to be foreign producers.”479

The Panel was in favor of the broad view of understanding on the anti-discrimination rule results in the extension of the applicability of Article 27.1 to other provisions of the TRIPS, including the provisions on the exceptions. Consequently, a limitation that is permissible under Article 30 or Article 31 of the TRIPS should still satisfy the non-discrimination requirement of Article 27.1 to be applicable in domestic legislation. The Panel certified the applicability of the anti-discrimination rule under Article 27.1 in examining a measure of domestic legislation that had been regarded as coming within the scope of the exceptions authorized by Article 30 of the TRIPS:

“Having reviewed the conformity of Section 55.2(1) with each of the three conditions for an exception under Article 30 of the TRIPS Agreement, the Panel concluded that Section 55.2(1) does satisfy all three conditions of Article 30, and thus is not

478 Id at 7.92 479 Id.

“The Panel concluded, therefore, that the anti-discrimination rule of Article 27.1 does apply to exceptions of the kind authorized by Article 30. We turn, accordingly, to the question of whether Section 55.2(1) of the Canadian Patent Act discriminates as to fields of technology.”481 (Emphasis added)

It is meant that even a limitation is permissible under Article 30, the application of that limitation in domestic legislation is still impossible if it would result in discrimination prohibited by Article 27.1 of the TRIPS. To this end, the broad view in understanding and application of non-discriminatory rule clearly leads to the stricter requirements regarding domestic legislation where it expects to apply some limitation to certain kind of inventions.

The reasoning of the Panel depended much on the words and the grammar used in wording the provision of Article 30 of the TRIPS to suppress the exceptions under the scope of the non-discrimination under Article 27.1 of the TRIPS. The argument of the Panel for the extension of non-discrimination rule of Article 27.1 to the relevant other provisions of the TRIPS is that Article 27.1 prohibits discrimination as to enjoyment of "patent rights" without any limitation. Article 30 exceptions are described as "exceptions to the exclusive rights conferred by a patent" and contain no exemption applicable to non-discrimination rules. The Panel argued that a discriminatory exception “that takes away enjoyment of a patent right is discrimination” as if it is “discrimination in the basic rights themselves”. The Panel also acknowledged that the Article 31 exception for compulsory licenses and government use is subject to the non-discrimination rule of Article 27.1, “without the need for any textual provision so providing”. This perception further strengthens the argument for treating the extension of non-discrimination rules to Article 30. As to the relation between Articles 30 and 31, the Panel also found that Articles 30 and 31 are linked together by the opening words used in the title of Article 31. These opening words define the scope of Article 31 in terms of exceptions not covered by Article 30. For that link, the Panel argued that the non- discrimination rules under Article 27.1 should be applicable to all provisions of the TRIPS concerning the patent rights. 482

The interpretation of the concept of discrimination provided in Article 27.1 of the TRIPS in the broad sense is another difficulty for domestic legislation in justifying a limitation applied to patents. At least, there are two aspects needed to be taken into account, that is, de jure discrimination and de facto discrimination. Thereby, an identical treatment is not enough to be qualified as non-discriminatory treatment. The following finding of the Panel refers to this point:

“The ordinary meaning of the word "discriminate" is potentially broader than these more specific definitions. It certainly extends beyond the concept of differential treatment. It is a normative 480 Id. at 7.84 481 Id. at 7.93. 482 Id. at 7.91.

© Pham Hong Quat 90 term, pejorative in connotation, referring to results of the unjustified imposition of differentially disadvantageous treatment. Discrimination may arise from explicitly different treatment, sometimes called "de jure discrimination", but it may also arise from ostensibly identical treatment which, due to differences in circumstances, produces differentially disadvantageous effects, sometimes called "de facto discrimination"”483 (Emphasis added)

While the anti-discrimination rule is applied in the broad sense, the objectives and principles set forth in Articles 7 and 8 of the TRIPS is applied in a limited sense. Domestic legislation cannot justify a limitation to the protection of patents by reason of the importance of national policies if it is regarded as constituting a “frustration” to the overall purpose of the TRIPS. The Panel discussed this point as follows:

“Moreover, to the extent the prohibition of discrimination does limit the ability to target certain products in dealing with certain of the important national policies referred to in Articles 7 and 8.1, that fact may well constitute a deliberate limitation rather than a frustration of purpose.”484 (Emphasis added)

Clearly, in its broad and prevailing applicability, the anti-discrimination rule under Article 27.1 of the TRIPS restricts much, if it does not intend to eliminate entirely, the areas that the provision on independence of patents of the Paris Convention leaves to domestic legislation. The scope of application of the anti-discrimination rule is also extended to the exceptions and limitations provided in the TRIPS.

The extensional scope of this rule would narrow down the flexibility of the exceptions and limitations of the TRIPS. Consequently, national legislation may not invoke such provisions to justify the regulations on the exceptions and limitations of patent rights that might fall into the conception of discrimination. As for the developing countries, the findings of the Panel seem to nullify their arguments for more extensive exploitation of the exceptions and limitations of the TRIPS with respect to pharmaceuticals and some other products indispensable for the public interest.485

483 Id. at 7.94. In this respect, the Panel chose the interpretation of this concept in the light of GATT practices: “In considering how to address these conflicting claims of discrimination, the Panel recalled that various claims of discrimination, de jure and de facto, have been the subject of legal rulings under GATT or the WTO (...) Given the very broad range of issues that might be involved in defining the word "discrimination" in Article 27.1 of the TRIPS Agreement, the Panel decided that it would be better to defer attempting to define that term at the outset, but instead to determine which issues were raised by the record before the Panel, and to define the concept of discrimination to the extent necessary to resolve those issues” (Footnote omitted and emphasis added) See Panel Report, Canada-Patent, Complaint by EC, supra note 474, at 7.98. 484 See Panel Report, Canada-Patent, Complaint by EC, supra note 474, at 7.92.

Though Article 33 of the TRIPS specifies particularly the term of patent protection, there some questions were unclear. For examples, how this provision would be interpreted in relation with the other provisions, particularly the provisions on the protection of existing subject matters. Whether the standards provided in Article 33 of the TRIPS would be applied to the patents having granted before the effective date of the TRIPS in the relevant WTO Members. Should the WTO Members implement the obligations under this provision “retroactively” against the past act of granting patent. How to qualify the terms “available” in Article 33 and “existing” in Article 70.2 of the TRIPS. Such questions were responded by the findings of the Panel and the Appellate Body in the case of Canada – Term of patent protection, 486 as discussed below.

In this case, the Panel and the Appellate Body interpreted strictly the meaning of the “available” term as literally stipulated in Article 33 of the TRIPS. It is impossible for any variant transformation of this provision in domestic legislation. For example, the arguments for the equivalence of and an effective term of protection were not accepted in the case of the domestic legislation of Canada. For understanding more particularly what domestic legislation should and should not do in the implementation of this obligation in relation to the other provisions of the TRIPS, it is worth studying further the findings of the Panel in the case mentioned above.

The fact was that the Patent Act of Canada contained a transitional provision on the term of patents granted on the basis of the Old Act, which counted twenty years from the “filing date” for the patents based on applications filed on and after October 1, 1989, and seventeen years counted from the “granting date” for patents based on those filed before October 1, 1989.487 Consequently, a number of patents based on applications filed before October 1, 1989 were granted a period three years less than that those patents granted twenty years duration as provided in Article 33 of TRIPS.488

The United States claimed that Canada violated its obligations under Articles 33 and 70.2 of TRIPS since a large number of existing Old Act patents expired before twenty years had passed since the filing date.489

485 See Assafa Endeshaw, ‘Asian Perspectives on Post-TRIPS Issues in Intellectual Property’, The Journal of World Intellectual Property (Vol. 8, 2005), p. 218. There was a criticism that the interpretation of the Panel in this case is stricter than that of the Panel in the case of US-Copyright concerning the limitations of copyrights, which would have given more attention to the social purposes of the exceptions. See Dara Williams, supra note 61, at 205. Another comment criticized that the interpretation of the Panel in this case is “extraordinary constructionist” decision that went against the Doha Declaration on the TRIPS Agreement. See 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, 2002), p. 767. 486 See Panel Report, Canada-Patent, Complaint by US, supra 280; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281. 487 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 2.1 488 Id. at 2.7, 2.9. 489 Id. at 3.1.

© Pham Hong Quat 92 Canada argued that the transitional provision in its patent law was consistent with Articles 33 and 70.1 of TRIPS. Particularly, the term of seventeen years granted after the filing date was effectively “equivalent or superior” to the term of twenty years granted from the filing date according to Article 33 of TRIPS when read together with Article 62.2 of TRIPS, which recognized that the term of a patent would be reduced in a reasonable period necessary for the procedures for the granting of a patent (assumedly, it took a period of 2-4 years to complete the examination process for the Old Act patents and the “average” pending period of five years for the New Act patents).

Furthermore, Article 1.1 of TRIPS recognized the freedom afforded the members in determining the appropriate method of implementing the provision of TRIPS.490 Moreover, the minimum term of protection described by Article 33 of TRIPS was and had been “available” under its patent law and administrative practices relating to Old Act patents because the applicants could choose to take advantage of the delays available to ensure a term of protection ending on or after twenty years from the filing date.491

Additionally, the obligation in respect of the term of protection under Article 33 of TRIPS is related to the act of filing a patent application and the act of granting a patent, while both of these “acts” are within the scope of Article 70.1 of TRIPS, it does not have retroactive application to the Old Act patents granted in Canada before the date of entry into force of the TRIPS Agreement.492

The Panel interpreted Article 33 of TRIPS, and then the Appellate Body, upheld that the provision on the term of patent under this article should be implemented precisely as it is expressed in the plain text of TRIPS, and that any transformation to it, like the effectively “equivalent” system of the term protection, cannot be recognized.493 The findings over this case adopted the ruling developed from the case of Japan- Taxes on Alcoholic Beverages that “interpretation must be based on above all upon the text of treaty”.494

The Panel and the Appellate Body did not accept the conception of an “average” pendency period (namely, the period between the filing date of a patent application and the granting date of a patent495) used to support the argument that the “effective” period of protection is equivalent or superior to the term of protection under Article 33 of TRIPS.496 The concept of “average” pendency period was justified by the adoption of the ruling developed in the case of United States - Section 337 of the Tariff Act of 1930, which rejected the notion of “balancing more favorable treatment… against less favorable treatment” applicable to the imported products within the scope of Article III of GATT.497 490 Id. at 3.2, 6.62-6.67, 6.75, 6.99. 491 Id. 3.2, 6.71, 6.72. 492 Id. 3.2, 6.27, 6.28. 493 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.92; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 92. 494 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.92, referring to Appellate Body Report, Japan - Taxes on Alcoholic Beverages, WTO Doc. WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R (1 November 1996), footnote 14, p. 11. 495 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 2.11. 496 Id. at 6.92; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 95, 97. 497 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.98, referring to Panel Report, United States-Section 337, supra note 440, at 5.14, 5.16.

© Pham Hong Quat 93 Canada could not advocate the conception of effectively “equivalent” term by the combination of interpretation of Article 33 and Article 62.2 of TRIPS, because in the separate obligations implied in these two articles, one referred to the expiry date of the available period of protection and the other referred to the commencement of such period.498 The Panel did not allow the modification in implementing Article 33 of TRIPS by invoking the freedom in determining the method of implementation permitted by the provision of Article 1.1 of TRIPS, since the Panel found that this provision was not applicable to the putative obligation concerning the length of effective protection.499

The Panel regarded the “available” term of protection under Article 33 of TRIPS as a matter of legal right and certainty,500 which denotes the term of protection in which the patent right holders must pay the fees from time to time to maintain it, and is the same as that applicable to industrial designs as provided in Article 26 of TRIPS and different from those applicable to copyright, related rights and, trademarks.501 In that notion, the Panel defined the availability of the term of patent protection as the opportunity to obtain a 20-year term of protection readily available in both the filing and granting procedures.502

Accordingly, the delays in the examination procedures permissible in the law and administrative practices could not provide the availability of the term of protection.503 Moreover, the delays were not only unjustifiable under Article 62.2 in advocating the availability of the term of protection, but also inconsistent with articles 62.1, 62.4, 42.2 of TRIPS.504 Additionally, the members cannot satisfy their obligations on making available the term of patent protection under Article 33 of TRIPS by resorting to the availability of the term of protection under the national law whose validity ceased prior to the date of entry into force of the TRIPS.505

With regard to the existing patents granted on the basis of the national law, which ceased to exist on the date of entry into force of TRIPS, Article 33 of TRIPS requires the members to implement the obligation on patent term protection in accordance with Article 70.2 of TRIPS. This obligation could not be evaded by resorting to the exemption permitted by the transitional provision of Article 70.1 of TRIPS.

The Appellate Body upheld the interpretation of the Panel that a patent is regarded as a “patented invention” and then is an “existing subject mater” in the meaning of the provision described by Article 70.2.506 Such patented invention, although subjected to a granting act in the past, was a “situation” existing until the effective date of TRIPS, therefore it was justified

498 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.94, 6.95. 499 Id. at 6.94. 500 Id. at 6.102, Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 90. 501 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.110. 502 See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 92. 503 Id. 504 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.115-6.119. 505 Id. at 6.120; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281,at 82. 506 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.3, 6.41, 6.56; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 65, 69.

The obligation on the term of protection is of equivalent significance to all other obligations concerning patent described in Section 5 of TRIPS, and subject to the regulation of Article 70.2 of TRIPS,509 according to which the members should implement the obligation under Article 33 of TRIPS in respect of those patents granted before the date of entry into force of TRIPS.510 The interpretation of the Panel and Appellate Body on the provisions of the term of patent and the protection of the existing subject mater ended the long debate concerning the implementation of obligations under Article 33 in relation with Article 70.2 of TRIPS.511

The Appellate Body approved the interpretation of the Panel on the “available” term of protection provided in Article 33. National patent law should make available in domestic legislation the regulation allowing the patent applicant to enjoy fully the duration of 20 years counting from the filing date. The Appellate Body found:

“In simple terms, Article 33 defines the earliest date on which the term of protection of a patent may end. This earliest date is determined by a straightforward calculation: it results from taking the date of filing of the patent application and adding twenty years”512

“We agree with the Panel that, in Article 33 of the TRIPS Agreement, the word "available" means "available, as a matter of right", that is to say, available as a matter of legal right and certainty.” 513 (Emphasis added)

Clarifying the term of patent protection as a matter of right, the Appellate Body emphasized that Article 33 of the TRIPS obliges domestic legislation to declare clearly in the language of law the opportunity to obtain a twenty year patent term to such an extent that a patent applicant can see that opportunity at the time of filing a patent application. Domestic legislation shall be regarded as failing to meet that obligation when the opportunity is available only to the persons who have to complete certain requirements of administrative procedures. The Appellate Body stated:

“The opportunity to obtain a twenty-year patent term must not be "available" only to those who are somehow able to meander successfully through a maze of administrative procedures. The 507 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.52-6.56; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 58, 60, 69. 508 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.41, 6.44, 6.56; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 65, 69, 72, 77. 509 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.52-6.54; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 77, 78. 510 See Panel Report, Canada-Patent, Complaint by US, supra note 280, at 6.56; Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 79. 511 See Carlos McCrea, supra note 211, at 219. 512 See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 85. 513 Id. at 90.

© Pham Hong Quat 95 opportunity to obtain a twenty-year term must be a readily discernible and specific right, and it must be clearly seen as such by the patent applicant when a patent application is filed. The grant of the patent must be sufficient in itself to obtain the minimum term mandated by Article 33. The use of the word "available" in Article 33 does not undermine but, rather, underscores this obligation.”514

The Appellate Body clarified further that the requirements of the obligation on making the term of patent available in domestic legislation be implemented without any modification or transformation. The conception of effective and nominal term of protection in understanding the language of Article 33 was unacceptable. In any case, domestic legislation should conform strictly to the mandatory language of this provision:

“The text of Article 33 gives no support to the notion of an "effective" term of protection as distinguished from a "nominal" term of protection. On the contrary, the obligation in Article 33 is straightforward and mandatory: to provide, as a specific right, a term of protection that does not end before the expiry of a period of twenty years counted from the filing date”515 (Emphasis added)

In relation to the provision of Article 62.2 of the TRIPS on procedures relating the acquisition of intellectual property rights, the Appellate Body rejected the argument for the linkage between this provision and the provision of the term of patent protection, which aimed at giving effect to the equivalent term of protection adopted in domestic legislation. At this point, national patent law should implement the obligations on the term of patent protection and the obligation on procedural matters distinctly and separately under the findings of the Appellate Body:

“Article 62.2 deals with procedures relating to the acquisition of intellectual property rights... This purely procedural Article cannot be used to modify the clear and substantive standard set out in Article 33 so as to conjecture a new standard of "effective" protection (…) A harmonious interpretation of Article 33 and Article 62.2 must regard these two treaty provisions as distinct and separate Articles containing obligations that must be fulfilled distinctly and separately.”516 (Footnote omitted)

Consequently, the Appellate Body upheld the findings of the Panel that the domestic legislation of Canada violated the Canada’s obligation on the term of patent protection under Article 33 of the TRIPS.517 In this case, the Panel and Appellate Body not only clarified the criteria of patent term protection provided by the TRIPS in the light of GATT practice, but

514 Id. at 92. 515 Id. at 95. 516 Id. at 97. 517 Id. at 102.

© Pham Hong Quat 96 also specified the standards for implementing strictly such criteria in the domestic legislation of the TRIPS members. Noticeably, the Appellate Body did not apply at any rate the provisions on objectives and principles set out in Articles 7 and 8 of the TRIPS in interpreting the obligation on the term of patent protection under Article 33 of the TRIPS. This means that domestic legislation may not invoke the policy objectives allowed by those Articles to argue for any modification of the obligation on the term of patent protection.518

In this respect, it is worth looking into the provision of the TRIPS on the term of patent protection from the view of enforcing patent rights. The Panel in the case of Canada-Patent protection of pharmaceutical products interpreted the concept of the normal exploitation of patent rights as a significant basis for understanding fully the actual scope of the term of patent protection. The Panel regarded patent rights as the right to exclude all possibilities of competitive products entering the exclusive market of the patented products:

“The normal practice of exploitation by patent owners, as with owners of any other intellectual property right, is to exclude all forms of competition that could detract significantly from the economic returns anticipated from a patent's grant of market exclusivity (…)”519 (Emphasis added)

As a result, the Panel recognized the existence of an ad hoc “extra term of protection” in addition to the term of 20 years provided in Article 33 of the TRIPS for the consequence of enforcing patent rights:

“Some of the basic rights granted to all patent owners, and routinely exercised by all patent owners, will typically produce a certain period of market exclusivity after the expiration of a patent (…) There is nothing abnormal about that more or less brief period of market exclusivity after the patent has expired.”520 (Emphasis added)

As found by the Panels and Appellate Body in the interpretation of Article 33 and the related provisions of the TRIPS, domestic legislation should provide unconditionally to the patent applicants an opportunity to enjoy a full term of protection as defined precisely in the TRIPS. The Appellate Body affirmed the way to understand the term “available” as “a matter of legal right and certainty”.521 As such, the TRIPS demands national law to secure strictly conformity

518 Furthermore, the Appellate Body laid down an open possibility for the applicability of those provisions in future: “[W]e note that our findings in this appeal do not in any way prejudge the applicability of Article 7 or Article 8 of the TRIPS Agreement in possible future cases with respect to measures to promote the policy objectives of the WTO Members that are set out in those Articles. Those Articles still await appropriate interpretation.” See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 101. 519 See Panel Report, Canada-Patent, Complaint by EC, supra note 411, at 7.55. 520 Id. at 7.56. 521 See Appellate Body Report, Canada-Patent, Complaint by US, supra note 281, at 90.

As to the patents for inventions having granted prior to the effect date of the TRIPS with respect to the relevant national law, those patents should still be given the full term of patent protection as provided in Article 33 of the TRIPS. Regardless of the granting of those patents relates to a “past act”, the patents themselves are regarded being “existing” under the meaning of Article 70. 2 of the TRIPS. The Appellate Body confirmed that the extension of the applicability of Article 33 of the TRIPS to the “past act” of granting of patents did not mean the retroactive application of the TRIPS.522

3. Availability and security of legal basis (India - Patent Protection for Pharmaceutical and Agricultural Chemical Products)

How national legislation would be regarded being “compliance with” the requirements of WTO law in the implementation of the TRIPS obligations? Would there any advantage or differential treatment given to the legal situation of the developing countries in securing the obligations in the transitional period? These questions were the topics of the disputes concerning the Patent Act of India. The examination of the case of India-Patent Protection for Pharmaceutical and Agricultural Chemical Products523 below will discuss the development of WTO jurisprudence in regulating the issue of intellectual property protection.

This was the first TRIPS dispute brought before the Dispute Settlement Body of the WTO after the TRIPS went into effect.524 The findings of the Panel in this case, confirmed by the Appellate Body, charged the domestic legislation of India with violating the TRIPS obligations due to the lack of availability and the security of a legal basis in domestic legislation for the protection of patents for pharmaceutical products during the transitional period. It would be meaningful to this case discuss in more detail to draw some implications relevant to national patent legislation in the TRIPS era.

Since the dominant pressure and lobbying of the pharmaceutical industries of the United States in the GATT negotiation Uruguay Round,525 the TRIPS virtually requires that the obligation of patent protection in the field of pharmaceutical and agrochemical products be fulfilled earlier than that of the other fields. Accordingly, although the developing countries are given a transitional period to make available fully legal grounds for the protection of patents in domestic legislation under Article 65.4 of TRIPS, they are obligated to execute the so-called “mail box” system under Article 70.8 and a mechanism for granting exclusive marketing rights under Article 70.9 of TRIPS to the foreign patent applicants for the pharmaceutical, agricultural and chemical products.

The dispute occurred over differing views on the fulfillment of domestic legislation regarding the above mentioned TRIPS obligations. The findings of the panels and the Appellate Body put weight on the requirements for availability and security rather than the substantive criteria

522 Id. para. 77. 523 See Panel Report, India-Patent, Complaint by US, supra note 287. 524 See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 29. 525 See Terence P. Stewart, supra note 165, at 2256-57.

© Pham Hong Quat 98 of required mechanisms in domestic legislation. The details of these requirements could be found the in the findings over the case of India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, with complaint by the United Sates in 1997526 (“India - Patent, Complaint by the United States”) and the case of India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, with complaint by the European Communities and their member States for the same concern in 1998 (“India - Patent, Complaint by the EC).527

The Patent Act of 1970 of India excluded the pharmaceutical and agricultural chemical products from patentability.528 This exclusion was temporarily eliminated by the Patent Ordinance of 1994 issued by the President of India, in which the system for filing and processing patent applications for products and the system of granting exclusive marketing rights for products being the subject of patent applications were established.529 The Patent Bill of 1995 was intended to give these systems a permanent effect. However, it was never adopted because of the dissolution of the Parliament in 1996.530 Despite the Patent Ordinance, which lapsed at the expiration of six weeks from the reassembly of Parliament, the Indian executive authorities instructed the Patent Offices in India to continue to receive patent applications for pharmaceutical and agricultural chemical products to store them separately for examination in future.531 However, after the expiration of the Patent Ordinance, there were not any legal basis, procedurally and substantively, for the granting of exclusive marketing rights in regards to products being the subject of patent applications in the “mailbox” system, and there was not any request for the granting of exclusive marketing rights before the Government of India.532

The main claim of the United States in India - Patent, Complaint by the United States was that, by the insufficiency in the patent law, India had failed to implement its obligations under articles 70.8 and 70.9 of TRIPS to establish a mechanism known as the “mailbox” for preserving the novelty of patent applications for pharmaceutical and agricultural chemical products and a system for granting exclusive marketing rights during the transitional period.533 The EC raised almost the same claim in India - Patent, Complaint by the EC.534

India argued that it had been providing a “means” for filing patent applications for pharmaceutical and agricultural chemical products consistent with Article 70.8 of TRIPS and that it had not failed to accord exclusive marketing rights under Article 70.9 of TRIPS since there had not been any request for exclusive marketing rights in India.535 In addition, it was not obligated to establish a system for the granting of exclusive marketing rights before all the conditions for the granting of rights had been met in respect of a specific product.536 526 See Panel Report, India-Patent, Complaint by US, supra note 287; Appellate Body Report, India-Patent, Complaint by US, supra note 287. 527 See Panel Report, India-Patent, Complaint by EC, supra note 287. 528 See Panel Report, India-Patent, Complaint by US, supra note 287, at 2.3, 7.1. 529 Id. at 2.3, 7.2. 530 Id. at 2.5, 7.3. 531 Id. at 2.6, 7.4. 532 Id. at 2.12, 7.5. 533 Id. at 7.6. 534 See Panel Report, India-Patent, Complaint by EC, supra note 534, at 7.7. 535 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.7. 536 See Panel Report, India-Patent, Complaint by EC, supra note 287, at 7.8.

© Pham Hong Quat 99 The Panel in India - Patent, Complaint by the United States interpreted the nature of the obligation under Article 70.8 as being to provide “a means” by which applications for patents for inventions in respect of pharmaceutical and agricultural chemical products “can be filed”.537 In the language of Article 70.8 itself there is no definition of what type of means is required. The Panel found the answer to this question on the basis of analysis of this provision in the context of other provisions of TRIPS, particularly in relation with Article 27.1 concerning the criteria of patentability:

“[I]n order to prevent the loss of the novelty of an invention in this sense, filing and priority dates need to have a sound legal basis if the provisions of Article 70.8 are to fulfill their purpose. Moreover, if available, a filing must entitle the applicant to claim priority on the basis of an earlier filing in respect of the claimed invention over applications with subsequent filing or priority date.”538 (Emphasis added)

The Appellate Body upheld the findings of the Panel in India - Patent, Complaint by the United States with the emphasis on two qualities relating to the functions and the legal status of the mailbox system. That is, a system shall provide “a sound legal basis” to preserve novelty and priority and allow the entitlement to file mailbox applications and the allocation of filing and priority dates to them:

“Furthermore, the Panel was correct in finding that the “means” established under Article 70.8(a) must also provide “a sound legal basis to preserve novelty and priority as of those dates”. The findings flow inescapably from the necessary operation of paragraphs (b) and (c) of Article 70.8” 539 (Emphasis added)

The Panel interpreted the obligation on the substantive standards of the mailbox system under Article 70.8 in so far as to “eliminate any reasonable doubts” about the unpatentability of the inventions subject to the mailbox system:

“Article 70.8 requires the Members in question to establish a means (…) so as to eliminate any reasonable doubts regarding whether mailbox applications and eventual patents based on them could be rejected and invalidated because, at the filing or priority date, the matter for which protection was sought was unpatentable in the country in question.”540 (Emphasis added)

However, the Appellate Body reversed the interpretation of the Panel on the obligation of the substantive standards of the mailbox system. Instead, the Appellate Body emphasized the significance of the security of the mechanism for implementing the obligations.

537 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.25. 538 Id. at 7.28. 539 Id. at 31; Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 57. 540 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.29.

© Pham Hong Quat 100 “[B]y Article 70.8, to provide a legal mechanism for the filing of mailbox applications that provides a sound legal basis to preserve both the novelty of the inventions and the priority of the applications as of the relevant filing and priority dates. No more.”541 (Emphasis added)

From the interpretation of the obligation under Article 70.8 in terms of “a sound legal basis” for a mailbox system, the Panel found that the domestic legislation of India violated its obligation under Article 70.8 of TRIPS due to the “administrative instructions” for receiving mailbox applications of India had not provided a “sound legal basis” for preserving the novelty and priority:

“In light of these provisions, the current administrative practice creates a certainty of legal insecurity in that it requires Indian officials to ignore certain mandatory provisions of the Patents Act… The existence of the legislation per se is not a problem under the TRIPS Agreement. However, in the absence of clear assurance that applications for pharmaceutical and agricultural chemical product patents will not be rejected and that the novelty and priority will be preserved despite the wording of the Patent Act, the legal insecurity remains”.542 (Emphasis added)

The findings on the soundlessness of the legal basis for the mailbox system were based on the legal insecurity of the system after the lapse of the Patent Ordinance of 1994,543 the uncertain validity of the administrative actions which apparently contradicted mandatory legislation,544 and the lack of a sufficient legal basis for preserving novelty and priority leading an insecure and unpredictable legal status of the patent applications for a possibly long period.545 India contended the availability of a “sound legal basis” in domestic legislation with the fact that administrative instructions had been established to provide a mailbox system as required by Article 70.8 of the TRIPS:

“India contends that it has established, through “administrative instructions”, a “means” consistent with Article 70.8(a) of the TRIPS Agreement. According to India, these “administrative instructions” establish a mechanism that provides a sound legal basis to preserve the novelty of the inventions and the priority of the applications as of the relevant filing and priority dates consistent with Article 70.8(a) of the TRIPS Agreement”546 (Footnote omitted and Emphasis added)

541 See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 58. 542 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.35; Appellate Body Report, India- Patent, Complaint by US, at 69, 70; Panel Report, India-Patent, Complaint by EC, supra note 287, at 7.55. 543 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.36. 544 Id. at 7.37; Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 69, 70. 545 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.38. 546 See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 60.

© Pham Hong Quat 101 The Appellate Body endorsed the finding of the Panel that it is not necessary to assess the substantive functions of the mailbox system. Only the “lack of legal security” of such a system is sufficient to be regarded as not being in conformity with the obligations under Article 70.8547, even in a case where that system may practically ensure the necessary substantive functions.548 The Appellate Body also found that the “administrative instructions” of India did not provide a sound legal basis to preserve novelty of inventions under the mailbox system:

“We are not persuaded of India’s explanation of these seeming contradictions. Accordingly, we are not persuaded that India’s “administrative instructions” would survive a legal challenge under the Patents Act. And, consequently, we are not persuaded that India’s “administrative instructions” provide a sound legal basis to preserve novelty of inventions and priority of applications as of the relevant filing and priority dates”549 (Emphasis added)

It is noted that the administrative practice to receive the mailbox applications without legislative changes “does not itself constitute a violation” of obligations under Article 70.8 in the light of Article 1.1 of TRIPS, which allows the freedom in determining the appropriate method of implementation.550 Only when administrative practice “creates a certain degree of legal insecurity”, for example, it overrides certain mandatory provisions of the related patent law, shall it be regarded insufficient to fulfill the required obligations.551

Article 70.9 of TRIPS refers to exclusive marketing rights, a tough issue in the dispute that lasted until the end of the Uruguay Round.552 Together with Article 70.8, the interpretation of Article 70.9 is of significance because it gives effect to the temporary protection regime in the transitional period for the pharmaceutical and agricultural chemical patented products.

Article 70.9 is in direct relation with Article 70.8(a) of TRIPS in terms of the latter being the requisite condition for the former “where a product is subject of a patent application … in accordance with paragraph 8(a)”,553 and both contain the phrase “not withstanding the provision of Part VI”, which implies that the transitional period under Article 65 is not 547 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.43; Appellate Body Report, India- Patent, Complaint by US, supra note 287, at 69-71. 548 The reasoning of the Panel on this point is as follows: “We note the point made by India that the present system ensures the retention of necessary facts to determine novelty and priority for the purposes of decisions on the future grant of patent rights pursuant to Article 70.8(b) and (c). Even if we persuaded that this was the case despite the unpublished nature of the system, we do not believe that this would alter our concerns regarding the soundness of the legal basis for the system under the law as it presently stands.” (Emphasis added) See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.58. 549 See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 70. 550 See Panel Report, India-Patent, Complaint by US, supra note 287, at. 7.33. 551 Id. at 7.35. 552 See Terence P. Stewart, supra 165, at 2286. 553 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.54; Appellate Body Report, India- Patent, Complaint by US, supra note 287, at 82.

© Pham Hong Quat 102 applicable to them,554 and the term of “shall be granted” used in Article 70.9 is the same in meaning with in “shall be available” in Article 27 of TRIPS.555 Therefore, both Article 70.8(a) and Article 70.9 are intended to apply from the date of entry into force of the WTO Agreement.556

Article 70.9 is understood to “share… the object and purpose” of Article 70.8, namely, to “provide a degree of protection of the interests of inventors of pharmaceutical and agricultural chemical products during the transitional period”. Therefore, they operate “in tandem” to provide a package of rights and obligations that apply during the transitional periods contemplated in Article 65 of TRIPS.557

The fact is that there was no request for the grant of exclusive marketing rights having been filed before the Indian authorities.558 India argued for the unavailability of a regime granting exclusive marketing rights on the grounds that a mechanism for grant of exclusive marketing rights was not practically needed before 1 January 2000 in the commercial sense.559 The Panel rejected the argument of India and required India to “take positive action” to implement the TRIPS obligations. The situation of non-action should be considered a violation because the specific feature of the TRIPS obligations. The Panel expressed its view as follows:

“the TRIPS Agreement is different from other covered agreements in that most of its provisions require Members to take positive action; in this particular case to grant exclusive marketing rights pursuant to Article 70.9 (…) a failure to provide the executive with the required authority constitutes a breach of the Agreement, because the lack of authority mandates the executive not to comply with the Member’s WTO obligations.”560 (Emphasis added)

By such interpretations, the Panel found that India violated its obligation by reason that India had not enacted the legislation needed to implement its obligations under Article 70.9 of the TRIPS which went into effective as from the date of entry into force of the WTO Agreement,

554 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.55; Appellate Body Report, India- Patent, Complaint by US, supra note 287, at 82; Panel Report, India-Patent, Complaint by EC, supra note 287, at 7.64. 555 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.56; Panel Report, India-Patent, Complaint by EC, supra note 287, at 7.65. 556 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.55; Appellate Body Report, India- Patent, Complaint by US, supra note 287, at 82. 557 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.57; Appellate Body Report, India- Patent, Complaint by US, supra note 287, at 82; Panel Report, India-Patent, Complaint by EC, supra note 287, at 7.73. 558 See Panel Report, India-Patent, Complaint by US, supra note 287, at 2.12 559 Because, in the view of India, that mechanism is only possible to put in operation after a number of conditional actions, e.g., a mailbox application has been filed in India, a patent application has been filed and a patent has been granted in another WTO Member for the related product, the other Member has approved the marketing of the product, India has approved the marketing of the product. It seems to be impractical for the requirement of establishing a mechanism for grant of exclusive marketing rights when the above actions have not happened yet. See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.58. 7.60 560 Id. at. 7.53.

© Pham Hong Quat 103 that is, 1 January 1995.561 The Panel recalled the fact that there was neither legislation nor administrative practice in place in India regarding the grant of exclusive marketing rights.562 India could not argue for the postponement of the effective date of issuance by the fact that there had been no request for the grant of exclusive rights.563 The reasoning of the Panel was that the lack of legal security was likely to discourage potential applicants to file applications:

“Postponement of the effective date cannot follow merely the fact that there has been no request for the grant of exclusive marketing rights so far. Where, as we discussed with respect to Article 70.8, lack of legal security is likely to discourage potential applicants to file an application, this is certainly the case if a system is non- existent.”564 (Emphasis added)

Interpreting the obligations under Article 70.9 of TRIPS in the light of Article XVI: 4 of the WTO Agreement,565 the Appellate Body did not examine the mentioned-above reasoning of the Panel. The Appellate Body concluded that India violated its obligation simply because India did not make “available” in the domestic legislation a regime for granting exclusive marketing rights as it should have been under Article 70.9 of the TRIPS Agreement. The following findings of the Appellate Body are of significance on this point:

“Given India’s admission that legislation is necessary in order to grant excusive marketing rights in compliance with Article 70.9 and that it does not currently have such legislation, the issue for us to consider in this appeal is whether a failure to have in place a mechanism ready for the grant of exclusive marketing rights, effective as from the date of entry into force of the WTO Agreement, constitutes a violation of India’s obligations under Article 70.9 of the TRIPS Agreement”566 (Emphasis added)

561 Id. at 7.63. 562 Id. at 7.51. 563 India argued that Article 70.9 of TRIPS only obliges Members to establish a mechanism for the grant of exclusive marketing rights after all the other conditions specified in this article have been fulfilled. India asserted that Article 70.9 is unlike the other provisions elaborated in the TRIPS Agreement, which explicitly oblige Members to change their domestic laws to authorize their domestic authorities to take certain action before the need to take such action actually arises (e.g., according to articles 42-48, the judicial authorities of Members “shall have the authority” to grant certain rights. Article 51 obliges Members to “adopt procedures” to enable right holders to prevent the release of counterfeited or pirated products from customs. Pursuant to Article 25.1 “Members shall provide for the protection” of certain industrial designs. Article 22.2 obliges Members to “provide the legal means for interested parties to prevent” certain misuses of geographical indications). India alleged that, by the requirement of a mechanism for the grant of exclusive marketing rights to be established as from the date of entry into force of the WTO Agreement, the Panel turned an obligation to take action in future into an obligation to take action immediately, and therefore, made the transitional arrangements in Article 65 of TRIPS nonsense in regard to pharmaceutical chemical products. See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 78 and footnote 62. 564 See Panel Report, India-Patent, Complaint by US, supra note 287, at 7.62. 565 The Appellate Body reasoned that the argument of India on the obligations under Article 70.9 of TRIPS “must be examined in the light of Article XVI:4 of the WTO Agreement”. See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at. 79. 566 See India-Patent, Complaint by US, supra note 287, at 81.

© Pham Hong Quat 104 In the light of the “positive action” reasoning, the Appellate Body interpreted that Article 70.9 obliges WTO Members to make a mechanism for the grant of exclusive marketing rights available and effective as from the date of entry into force of the WTO Agreement. 567 For the reason that India had not enacted the legislation to give effect to that mechanism, the Appellate Body upheld the conclusion of the Panel that India violated Article 70.9 of TRIPS:

“[W]e agree with the Panel that India should have had a mechanism in place to provide for the grant of exclusive marketing rights as from the date of entry into force of the WTO Agreement, and, therefore, we agree with the Panel that India is in violation of Article 70.9 of the TRIPS Agreement.” 568 (Emphasis added)

In sum, in the light of the GATT/WTO, the panels and the Appellate Body give effect to the strict TRIPS obligations with respect to the developing country members regarding the availability and soundness of legal basis for patent protection. Furthermore, domestic legislation is also bound with the strict requirements on the mechanism of implementing its obligations. These requirements cannot be modified with resort to the special treatment given to them during the transitional period.

For the specific interests of a group of patent holders in the field of pharmaceutical and agricultural chemical products, the TRIPS obliges the developing country members to protect the substantial patent rights, namely, the right to enjoy the priority through the mailbox system and exclusive marketing rights, in respect of a patented product in this field. Despite the lack of legal grounds for granting a patent for such a product in domestic legislation, a developing country member should recognize a patent that has been granted for that product in another country member and provide a patent applicant with the opportunities to enforce his patent rights.

The Panels and Appellate found that the TRIPS required domestic legislation to secure the availability and the soundness of the legal basis for the patent protection even for objects currently excluded by national patent law. The availability of the legal basis was still mandatory where there appeared no practical request of protection on the side of patent applicants in national patent practice

The requirements of the legal security and the certainty of the legal grounds for patent protection are also applied to the receiving patent application mechanism during the transitional period. Moreover, the requirement of legal security obliges domestic legislation to assure the protection of the substantial patent rights in regards to a product being protected by

567 The Appellate Body found that India had an obligation to implement the provisions of Article 70.9 of TRIPS effective as from the date of entry into force of the WTO Agreement, that is, 1 January 1995. India had not enacted the legislation that was needed to implement that obligation. “To give meaning and effect to the rights and obligations” under Article 70.9 of TRIPS, such legislation should have been in effect since 1 January 1995. See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 83. 568 See Appellate Body Report, India-Patent, Complaint by US, supra note 287, at 84.

II. GATT standards for securing the TRIPS obligations

The national treatment and MFN principles of the TRIPS requires domestic legislation to make available a treatment no less favorable and an opportunity of enjoying unconditionally and immediately any advantage, favor, privilege or immunity for nationals of all other members.570 How these requirements would be interpreted in ensuring the TRIPS substantive norms? Should the GATT disciplines be fully appropriate to interpret the obligations under the national treatment and MFN of the TRIPS? Besides, whether the traditional principles of the pre-existing international treaties on intellectual property would have influence on the interpretation of the TRIPS obligations. The discussion in this section will examine the above questions in analysis of the relevant panel rulings over the WTO disputes concerning the implementation of Article 3.1 and Article 4 of the TRIPS.

569 For this case invited comments in different views. E.g., for the ‘wiggle room’ remaining after the findings of the Panel and the Appellate Body in this case, see Jerome H. Reichman, ‘Securing Compliance with the TRIPS Agreement After US v India’, Journal of International Economic Law (1998), pp. 585-601; for the criticism about no deference given to the domestic law of India in this case, in comparison with the partial deference in other TRIPS cases concerning the domestic law of U.S. and that of Canada, see Daya Shanker, supra note 76; for the criticism about the impact of the TRIPS obligation on the developing countries in dealing with the problems of the public interest, see Tshimanga Kongolo, supra note 49, at 268-269. 570 See the Paris Convention, supra note 1, art.2(1); the TRIPS, supra note 10, arts. 3.1 and 4.

The fact of the case of Section 211 of Omnibus Appropriation Act of 1998 was mentioned previously. This section recalls some relevant factual elements concerning the current topic of discussion. Section 211 of OAA prohibited every transaction and payment necessary for the registration or renewal of a trademark or a trade name confiscated by the Cuban Government with respect to a “designated national”, unless an authorized administrative body approved that transaction or payment. Section 211 of OAA also prohibited the enforcement procedures concerning a confiscated trademark or trade name before US courts with respect to a “designated national”. The term “designated national was defined to include Cuba, a Cuban national, and a national of any foreign country who is a successor-in-interest thereto. 571 Especially, the great concern was with Sections 211(a)(2) and (b) of that Act,572 based on the statutory language of these provisions, the EC claimed that the United States violated the national treatment and MFN treatment obligations under Articles 3.1 and 4 of the TRIPS.573

1.1. National treatment obligation

The EC argued that Section 211(a) (2) was inconsistent with Article 3.1 of the TRIPS because the provision applied in respect of “designated nationals” which are basically comprised of Cuba and Cuban nationals. Moreover, the statutory language referred only to nationals of a foreign country without referring to US nationals in defining “successors-in-interest”.574 Section 211(b) created the de jure discrimination between Cuban right holders and US right holders and violated Article 3.1 of the TRIPS because this provision indicated “designated national” referring essentially to Cuba and its nationals. Moreover, the language of this provision singled out foreign successors-in-interest for the curtailment of their rights while US successors-in-interest were not subject to such curtailment.575

571 See Panel Report, US-Section 211 Omnibus, supra note 384, at 2.1, 2.2, 2.7-2.12. 572 Sections 211(a)(2) and (b) of U.S. Omnibus Appropriations Act of 1998 provided that: “(2) No U.S. court shall recognize, enforce or otherwise validate any assertion of rights by a designated national based on common law rights or registration obtained under such section 515.527 of such a confiscated mark, trade name, or commercial name. (b) No U.S. court shall recognize, enforce or otherwise validate any assertion of treaty rights by a designated national or its successor-in-interest under section 44(b) or (e) of the Trade Act of 1946 (15 U.S.C 1126 (b) or (e)) for a mark, trade name, or commercial name that is the same as or substantially similar to a mark, trade name, or commercial name that was used in connection with a business or assets that were confiscated unless the original owner of such mark, trade name, or commercial name, or the bona fide successor-in-interest has expressly consented.” 573See Panel Report, US-Section 211 Omnibus, supra note 384, at 2.1. See Panel Report, US-Section 211 Omnibus, supra note 384, at 3.1. 574 Id. at 8.123. 575 Id. at 8.166, 8.167.

© Pham Hong Quat 107 The United States argued that under this provision US courts were not to recognized, enforce or validate any assertion of rights in a confiscated trademark by a designated national or a national of any foreign country who is a successor-in-interest thereto. Although the statutory language did not include US nationals when describing successor-in-interest, US nationals could never become a successor-in-interest, because it was impossible for them to get a specific license from the Office of Foreign Assets Control (“OFAC”) due to the prohibiting provision under Section 515.201 of title 31 of the Code of Federal Regulation (“CFR”). The OFAC had never issued a specific license to a US national for the purpose of becoming a successor-in-interest to a confiscated trademark. The United States contended that a measure is inconsistent on its face only if it mandates WTO-inconsistent actions.576 The United States also argued that Section 211(b) applied to designated nationals and any successor-in-interest whether Cuban or not.577

To examine the consistency of the challenged legislation, the panel applied the concept of mandatory and discretionary legislation by referring to the findings of the panel in the case of United Sates – Measures Affecting the Importation, Internal Sale and Use of Tobacco.578 In the findings of that panel, only the legislation which “mandated” action inconsistent with GATT could be challenged “as such”, whereas legislation which merely “gave the discretion to the executive authority” to act inconsistently with the General Agreement could not be challenged as such, and only the actual application of such legislation inconsistent with GATT could be subject to the challenge.579 The Panel also referred to the finding of the Appellate Body in the case of United States-Antidumping Act of 1916, which stated that “the relevant discretion, for purpose of distinguishing between mandatory and discretionary legislation, is a discretion vested in the executive branch of government.”580

The Panel admitted that the OFAC was part of the executive branch that was vested the discretion to grant specific licenses to US nationals to become a successor-in-interest to a “designated national”.581 Based on the fact that the OFAC had never granted a specific license to US nationals to allow them to become a successor-in-interest to a “designated national”, the Panel found that the EC had not demonstrated that the OFAC acted in a manner inconsistent with the national treatment principle encapsulated in Article 3 of the TRIPS.582 Together with the finding that Section 211(a)(2) did not accord a treatment less favorable to foreign original owners than it accorded to original owners who are US nationals, the Panel concluded that this provision is not inconsistent with the national treatment obligation under Article 3.1 of the TRIPS.583 Similarly, the Panel found that that Section 211(b) did not violated Article 3.1 of the TRIPS because US courts would not recognize, enforce or validate any assertion of treaty rights by a “designated national or its successor-in-interest”, of which the term its successor-in-interest was not limited to foreign nationals.584 576 Id. at 8.124, 2.7, 2.11. 577 Id. at 8.169. 578 Id. at 8.136. 579 See Panel Report, US-Tobacco, supra note 445, at 8.118 580 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.137. See also Appellate Body Report, United Sates-1916 Act, supra note 398, at 89. 581 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.137. 582 Id. at. 8.138. 583 Id. at 8.139, 8.140. 584 Id. at 8.171.

© Pham Hong Quat 108 The Appellate Body did not agree with the conclusion of the Panel on the consistency of Sections 211(a) (2) and (b) with the TRIPS national treatment obligation. The Appellate Body considered the facts submitted by the United Sates that the OFAC had not grant any specific license due to the prohibition of Section 515.201, there was small likelihood for both United States and non-United States to bring a case of enforcement of assertion rights before US courts.585 In other words, although Section 211(a) (2) prohibited the enforcement of assertion of rights in respect of the confiscated trademarks before US courts, its actual applicability is unreal by the prohibition of Section 515.201.

However, the Appellate Body did not agree with the United States argument for the elimination of the less favorable elements in the statutory language of Section 211(a) (2) on the basis of those facts.586 The Appellate Body emphasized the situation that exists under the statute on its face.587 It noted that while the prohibition under Section 515.201 of the Cuban Assets Control Regulations ("CACR") applied to both United States and non-United States successors-in-interest in getting the specific licenses, the prohibition under Section 211(a) (2) on enforcement of assertion rights applied only to non-United States successors-in-interest.588

The Appellate Body reasoned that because the prohibition of Section 211(a) (2), there existed a possibility that non-United States successors-in-interest would face two hurdles and the United States successors-in-interest would face only one hurdle. And, therefore, the inherently less favorable element was available under Section 211(a) (2).589 In this point, the view of the Appellate Body is expressed in the following finding:

The Appellate Body found that Section 211(a) (2) imposed the “extra hurdle” on successors- in-interest who are not nationals of the United States, and therefore, the United States violated the national treatment obligation in Article 3.1 of the TRIPS.591 Based on the similar reasoning, the Appellate Body found that Section 211(b) was discriminatory on its face between Cuban nationals and United States nationals in terms of original owners of trademarks that are the same or substantially similar to a Cuban trademark used in connection with a business or assets that were confiscated in Cuba.592 The discriminatory language of Section 211(b) could not be offset in every case by the “unblocked” and prohibitive 585 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 265, 266. 586 Id. at 265-267. 587 Id. at 264. 588 Id. 589 Id. at 265. 590 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 265. 591 Id. at 267. 592 Id. at 279-281.

“A Cuban original owner residing in a country other than the United States or Cuban, for example, in the European Communities, could apply to OFAC to be “specifically licensed as [an] unblocked national.” (…) This could eliminate less favourable treatment in practice. Yet, the very existence of the additional “hurdle” that is imposed by requiring application to OFAC is, in itself, inherently less favourable.”594 (Emphasis added)

Clearly, by the application of the concept “additional hurdle” of the Appellate Body, the argument of the United States on the practical elimination of less favorable treatment by an action of the executive branch was of no weight. In other words, in examining the inconsistency of discretionary legislation, the Appellate Body did not only appraise the actual application, but also the possible application of that legislation.

Submitting the facts and arguments substantiating the impractical conditions and the available offsetting provisions for working Section 211(a) (2) and (b), the United States insisted on the non-actual application of these provisions in the practice of US courts.595 Despite that, the Appellate Body relied on the reasoning mentioned above to find that Sections 211(a) (2) and (b) were inconsistent with the national treatment obligation of the United States under Article 3.1 of the TRIPS.596

1.2. MFN treatment obligation

As for the claim of the violation of the United States with regards to the MFN treatment obligation under Article 4 of the TRIPS, the EC argued that Sections 211(a)(2) and (b) created a discrimination de jure between Cuba/Cuban nationals and other non-US nationals by denying protection of intellectual property rights held by Cuban nationals while granting such protection to nationals of other countries.597 Similarly to the argument on the national treatment obligation, the United States contended that Section 211(a)(2) did not limit its scope to Cuba and Cuban nationals because US courts would not enforce or recognize any assertion of rights to the confiscated trademarks and trade names by any successors-in-interest - whether Cuban or not. The United States argued that Section 211(b) did not grant an "advantage, favour, privilege or immunity" to nationals of any other country that it does not grant to the nationals of Cuba in respect of protection of intellectual property rights.598

The Panel was in favor of the argument of the United States and found that Section 211(a) (2) did not discriminate between Cuban nationals and other foreign nationals in respect of the

593 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 289, 290, 294. 594 Id. at 289. 595 Id. at 291-295. 596 Id. at 296. 597 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.141. 598 Id. at 8.141.

© Pham Hong Quat 110 confiscated trademarks. The Panel admitted that pursuant to this provision “US courts will not recognize, enforce or validate any assertion of rights” by a Cuban national or any other foreign national in respect of trademarks in connection with confiscated trademarks and assets.599 In respect of original owners, the Panel found that the language of the provision did not limit the class of original owners based on nationality.600 The Panel concluded that Section 211(a) (2) did not deny Cuban nationals any advantage,601 favor, privilege or immunity that it accorded to other foreign nationals and therefore, was not inconsistent with Article 4 of the TRIPS.602 Similarly, the Panel found that Section 211(b) was not inconsistent with Article 4 of the TRIPS.603

The Appellate Body found that the discriminatory language in the statute itself was inconsistent with the MFN treatment obligation under Article 4 of the TRIPS. The Appellate Body emphasized the discriminatory nature of the statutory provisions on their face and did not weigh the practical application of those provisions. To this point, the following findings stated clearly:

“[O]n the face of the statute, the original owner who is a Cuban national is subject to Sections 211(a) (2) and (b), and the original owner who is a non-Cuban foreign national is not. This alone(…) is sufficient for us to find that Sections 211(a)(2) and (b) violate the most-favoured-nation obligation of the United States. (Emphasis added)

“We agree with the European Communities that the situation it describes on appeal is within the scope of the statute on its face(…)” (Emphasis added)

Therefore, here too, as with national treatment, the European Communities has established a prima facie case that Sections 211(a)(2) and (b) are discriminatory on their face, as between a

599 Id. at 8.146. 600 Id. at 8.147. 601 As for the term of “advantage”, in this case when interpreting the MFN treatment obligation under Art. 4 of TRIPS the wording is in the positive sense of the term “advantage”, regardless of the difference in the wording of this provision and the term “no less favourable” in the wording of Article 3.1 of the TRIPS on the national obligation. The Appellate Body did not mention any difference between the two obligations in this aspect. Consequently, the benchmark of “no less favorable” in terms of an “extra hurdle” was applied in examining the discrimination under Article 4 of the TRIPS (see Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 314, 317). Differently, in the case of EC-Protection of trademarks and geographical indications for agricultural products and foodstuffs, although the Panel did not clarify the particular requirements of the national treatment obligation under Article 2(1) of the Paris Convention, it remarked that the positive language of Article 2(1) of the Paris Convention was not compatible with the negative language of Article 3.1 of the TRIPS. It means that the term “advantages” under Article 2(1) of the Paris Convention does not cover all contents of the term “no less favorable than” under Art. 3.1 of the TRIPS (see Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.216). 602 See Panel Report, US-Section 211 Omnibus, supra note 384, at 8.148. 603 Id. at 8.176.

The Appellate Body relied on the same reasoning as it did with respect to the national treatment obligation and found that Sections 211(a) (2) and (b) were inconsistent with Article 4 of the TRIPS:

“The United States arguments on this claim are the same as their arguments on national treatment. We have already addressed these arguments. And, as these United States arguments have not changed, our conclusions have not changed either.”605 (Emphasis added)

It is noted that in examining the consistency of Sections 211(a)(2) and (b) with the MFN treatment obligation under Article 4 of the TRIPS, the Appellate Body applied the same standards as used in examining the consistency of this provision with the national treatment obligation under Article 3.1 of the TRIPS. Significantly, the examining standard of inherently less favorable in terms of “extra hurdle” and are also bound with the MFN treatment obligation.

“The United States further asserts that the Cuban original owner could be "unblocked" by OFAC under Section 515.505… This implies that Cuban nationals that reside in the "authorized trade territory" face an additional administrative procedure that does not apply to non-Cuban foreign nationals who are original owners, because the latter are not "designated nationals". Therefore, as we stated earlier, treatment that is inherently less favourable persists...”606 (footnote omitted and emphasis added)

With regards to the argument for the offset possibility, which stated that the prohibitive provisions in Sections 211(a)(2) and (b) were offset by Section 515.201 of Title 31 CFR, another prohibitive provision which could also apply to a non-Cuban foreign national, the Appellate Body found that these two regulations had no completely overlapping scope. Therefore, it was not satisfied that Section 515.201 of Title 31 CFR would offset the inherently less favorable treatment present in Sections 211(a)(2) and (b) in each and every case.607

As analyzed, the findings of the Appellate Body in this case indicate a different approach of the Appellate Body in dealing with the claim challenging domestic legislation “as such”. The Appellate Body did not put weight on the actual application of discretionary legislation as the Panel did in the adoption of GATT practice in interpreting the TRIPS national treatment obligation. Otherwise, the Appellate Body emphasized the possibility of application of the challenged legislation. In this point, the Appellate Body adopted a new concept in the terms

604 See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 307-309. 605 Id. at 310. 606 Id. at 314. 607 Id. at 316, 317.

This development in the panel findings is of practical significance. Accordingly, not only the actual application, but also the possible application of legislation is subject to the examination of the panels and likely to be found in violation of the TRIPS national treatment and MFN treatment obligations. Particularly, with the existence of a discriminatory provision in the statutory language alone, it is enough for the related domestic legislation to be subject to the challenge under the national treatment and MFN obligations of the TRIPS. By application of the “extra hurdle” standard, even without evidence of the actual application in the case of discretionary legislation, the likelihood of being found to be discriminating remains for the panel examination with respect to possible applications in the future.

With the concept “extra hurdle”, the argument for the elimination of the less favorable or discriminatory elements by the ‘lock’ or the ‘offset’ available in other national regulations is also hard to maintain. Likewise, the evidence of no actual application of the allegedly discriminatory provision would have no weight in findings of inherently less favorable or discriminatory elements. The adopted reasoning is that the existence of such a situation in the statutory language assumes an additional obstacle to foreigners that assumedly they would face in exercising their intellectual property rights.608 In effect, before a challenge to the possible application of discretionary legislation, domestic legislation is facing higher risk in the implementation of the TRIPS national treatment and MFN treatment obligations. National legislation should take into consideration all such “new” principle constraints in compliance with the TRIPS.

2. Adaptation of the GATT “fundamental thrust and effect” (European Communities - Geographical indications)

2.1. The TRIPS national treatment obligation

As mentioned in the section above, the United States and Australia raised basically the same claims about the Regulation of the European Communities and, among others, its inconsistency with the national treatment and MFN treatment obligations of the TRIPS.609 One point to be noted is that, different from the case of United States - Section 211 Omnibus Appropriations Act of 1998, where the language of the statute included clauses that particularly discriminated against “designated nationals”, the Regulation does not contain any language of such a nature. Article 12(1) of the Regulation provides that the equivalence and reciprocity conditions in the registration of geographical indications (“GIs”) apply to “the third country”, which is subject to the general exception stated in the conditional clause “without prejudice to international agreements”.610

608 Id. at 268. 609 A double cases complaint by Australia and the United States, the findings of the Panel on the claims relating to the TRIPS national treatment in these two cases are almost the same. 610 Article 12(1) of the Regulation provided as follows: "1. Without prejudice to international agreements, this Regulation may apply to an agricultural product or foodstuff from a third country provided that:

© Pham Hong Quat 113 The European Communities explained that the conditions in Article 12(1) of the Regulation do not apply to geographical areas located in WTO Members. The introductory phrase of Article 12(1) provides that it applies "without prejudice to international agreements" – which include the WTO agreements. This was made clear by the eighth recital of the April 2003 amending Regulation611 in taking specific account of the provision of the TRIPS. And therefore, Article 12(1) and 12(3) of the Regulation612 do not apply to WTO Members. Accordingly, the registration of GIs from other WTO Members is subject to exactly the same conditions as the registration of GIs from the European Communities. The European Communities also argued that the term "third country" in Articles 12 through 12d613 did not refer to WTO Members depending on the wording, context and objectives of each specific provision.614

Australia challenged the Regulation "as such" with the claim that the equivalence and reciprocity conditions applied to the registration of GIs located in the territory of a WTO Member under Article 12(1) of the Regulation.615 In particular, Australia argued that the European Communities “had consistently led other WTO Members to believe that” the Article 12(1) of the Regulation applied to them.616 Without the evidence of the actual application of this provision, the argument of Australia based mainly on the text of the Regulation.617

- the third country is able to give guarantees identical or equivalent to those referred to in Article 4, - the third country concerned has inspection arrangements and a right to objection equivalent to those laid down in this Regulation, - the third country concerned is prepared to provide protection equivalent to that available in the Community to corresponding agricultural products or foodstuffs coming from the Community." See the Regulation, supra note 464, art.12. 611 The preamble to the April 2003 amending Regulation, which modified Article 12 and inserted a detailed procedure for applications and objections from third countries in Articles 12a through 12d, sets out the justification for the amendments as follows: "(8) The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) 1994, contained in Annex 1C to the Agreement establishing the World Trade Organisation contains detailed provisions on the existence, acquisition, scope, maintenance and enforcement of intellectual property rights(…)” See the Regulation, supra note 464, preamble. 612 Article 12(3) of the Regulation provides as follows: "3. The Commission shall examine, at the request of the country concerned, and in accordance with the procedure laid down in Article 15 whether a third country satisfies the equivalence conditions and offers guarantees within the meaning of paragraph 1 as a result of its national legislation. Where the Commission decision is in the affirmative, the procedure set out in Article 12a shall apply." 613 Art.12 through 12d of the Regulation provided the procedures for registration of geographical indications (“GIs) in the European Communities from the third country. See the Regulation, supra note 464, art. 12. 614 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.92. 7.93. 615 Id. at 7.89. 616 Id. at 7.90. 617 Australia presented two types of evidence. The first was the text of the Regulation and the second consisted of the European Communities' own statements concerning the Regulation prior to and during the panel proceeding. See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, 7.12.

© Pham Hong Quat 114 The Panel did not accept the EC’s explanations of the phrase "without prejudice to international agreements" as used in Article 12(1) of the Regulation.618 And based on the analysis of the textual provision of the Regulation, the Panel found that such conditional clauses of the Regulation do not exclude a WTO Member from the equivalence and reciprocity conditions applied to “the third party”.619 Otherwise, the term “the third party” of the Regulation includes also a WTO Member.620 Therefore, the Panel concluded in favor of Australia’s argument that the equivalence and reciprocity conditions in Article 12(1) of the Regulation were applicable to the availability of protection for GIs located in WTO Members.621

Australia claimed that the Regulation was inconsistent with Article 3.1 of the TRIPS Agreement because non-EC nationals are not able to access the rights available to EC nationals, including the advantages of registration by the conditions of reciprocity and equivalence on the availability of protection of GIs.622 Particularly, Australia argued that under the Regulation, the right to obtain registration of a non-EC national seeking to register a GI for an area located outside the European Union (“EU”) was treated less favorably than an EC national seeking to register a GI for an area located within the EU.623

The EC argued that the conditions in Article 12(1) of the Regulation do not depend on nationality, but on the location of GIs: one for geographical areas located within the EC and one for those located outside the EU. The regulation on the location of GIs is in no way linked to the question of the nationality of the producers concerned.624 The European Communities also argued that the rule of de facto application of the GATT national treatment was incompatible with TRIPS national treatment. The EC argument was based on the following main reasons: (i) there was no general concept of discrimination common to all WTO agreements. There had never been a de facto application of Article 3.1 and the concept of conditions of competition was not easily transposable to the TRIPS Agreement; and (ii) de facto discrimination was a notion closely related to preventing circumvention of national treatment obligations, which does not exist when the specific issue was dealt with in other national treatment provisions, such as those of GATT; and (iii) the national treatment provisions of GATT and the TRIPS Agreement should not systematically overlap.625

The Panel did not accept the arguments of the EC and argued for the adoption of a de facto application of GATT national treatment in interpreting the “no less favourable” treatment standard under TRIPS national treatment obligation. First, the Panel applied the standard “effective equality of opportunities” having been approved by the Appellate Body in the case of US – Section 211 Appropriations Act with the reference to the finding of the GATT panel in US – Section 337.626 Then, the Panel adopted the concept “fundamental thrust and effect” from the finding of the Appellate Body in the case of United States – Tax Treatment for 618 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.146 619 Id. at 7.116. 620 Id. at 7.117-7.118. 621 Id. at 7.152. 622 Id. at 7.156. 623 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.155. 624 Id. at 7.162. 625 Id. at 7.164. 626 Id. at 7.183.

As explained by the Appellate Body, the “fundamental thrust and effect” refers to the implications rather than the actual effects of the contested measure in the market place that are appropriate to examine the practice of de facto application of Article II:4 of GATT. However, the Appellate Body also noted that the application of this concept must be grounded “in close scrutiny” and “on a careful analysis” of the contested measure and its implications in the “marketplace”:

"The examination of whether a measure involves 'less favourable treatment' of imported products within the meaning of Article III:4 of the GATT 1994 must be grounded in close scrutiny of the 'fundamental thrust and effect of the measure itself'. This examination cannot rest on simple assertion, but must be founded on a careful analysis of the contested measure and of its implications in the marketplace. At the same time, however, the examination need not be based on the actual effects of the contested measure in the marketplace."628 (Emphasis added)

Without mentioning the particular justifications for the transfer of the “fundamental thrust and effect” from the practice of de facto application of Article II:4 of GATT to deal with the challenge of legislation “as such” in the protection of intellectual property, the Panel considered that concept as an appropriate basis for interpreting the national treatment obligation under Article 3.1 of the TRIPS. Particularly, the Panel examined the practical implications of the Regulation on opportunities with regards to the protection of intellectual property:

“Similarly, in the present dispute, the Panel considers it appropriate to base its examination under Article 3.1 of the TRIPS Agreement on the fundamental thrust and effect of the Regulation, including an analysis of its terms and its practical implications. However, as far as the TRIPS Agreement is concerned, the relevant practical implications are those on opportunities with regard to the protection of intellectual property.” 629 (Emphasis added)

627 Id. at 7.186. See also Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW (14 January 2002), para. 215. 628 See Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW (14 January 2002), para. 215, quoting Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R (11 December 2000), para. 142, and Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R (4 October 1996) para. 110. 629 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.187.

© Pham Hong Quat 116 In reference to the “extra hurdle” standard that had been approved by the Appellate Body in the case of US – Section 211 Appropriations Act, the Panel found that the Regulation posed a significant “extra hurdle” in obtaining GI protection in respect to geographical areas located outside the European Communities. The reasons for the finding were that (i) the Regulation did not make available GI protection for a geographical area located in a third country that has not been qualified to enjoy GI protection under Article 12(3) of the Regulation, and that (ii) the Regulation required the third country to enter into an international agreement or satisfy the conditions in Article 12(1) of the Regulation to enjoy GI protection.

The Panel reasoned the practical implications constituting the “extra hurdle” by the fact that no third country had been recognized under Article 12(3) or entered into an international agreement or satisfied the conditions under Article 12(1) of the Regulation.630 Based on that reasoning the Panel found that the equivalence and reciprocity conditions of the Regulation affected adversely the effective equality of opportunities with respect to the availability of GI protection for the persons who wished to obtain protection in respect of geographical areas located in third countries, including WTO Members, and therefore, constituted less favorable treatment. 631

Because the Regulation on its face contained formally identical provisions applicable to the nationals of different members with respect to the availability of GI protection,632 the Panel referred to the GATT panel in US – Section 337, which interpreted the "no less favourable" standard under Article III:4 of GATT in the case where application of formally identical legal provisions would in practice accord less favourable treatment to imported products in terms of de facto discrimination.633 It noted that the Panel in Canada – Pharmaceutical Patents supported the approach of de facto discrimination in examining the minimum standards of intellectual property protection.634

The panel considered that this reasoning is also appropriate for examining the no less favorable treatment standard in Article 3.1 of the TRIPS. It means that, despite the provisions of the Regulation being formally identical in the treatment accorded to the nationals of other WTO Members and to the European Communities' own nationals, the Regulation is possibly

630 Id at 7.189. 631 Id. at 7.190. 632 The Panel recognized the formally identical provision provided in the Regulation. See Panel Report, EC- Geographical indications, Complaint by Australia, supra note 411, at 7.206. 633 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.207. The Panel in US-Section 337 stated that the formally identical legal provisions may in fact accord less favorable treatment to imported products: "On the one hand, contracting parties may apply to imported products different formal legal requirements if doing so would accord imported products more favourable treatment. On the other hand, it also has to be recognized that there may be cases where application of formally identical legal provisions would in practice accord less favourable treatment to imported products and a contracting party might thus have to apply different legal provisions to imported products to ensure that the treatment accorded them is in fact no less favourable." (Emphasis added) See GATT Panel report, US – Section 337, supra note 440, at 5.11. 634 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.209; Panel Report, Canada-Patent, Complaint by EC, supra note 411, at 7.100-7.105.

© Pham Hong Quat 117 regarded a violation of Article 3.1 of the TRIPS. 635 For such a reasoning, the Panel would have to review the "fundamental thrust and effect" of the Regulation on the effective equality of opportunities with regard to the protection of intellectual property rights to identify whether it provided the no less favorable treatment:

“Whether or not the Regulation accords less favourable treatment to the nationals of other Members than it accords to the European Communities' own nationals should be examined instead according to the standard (...) namely, the "effective equality of opportunities" with regard to the protection of intellectual property rights. In this examination, we will follow the approach (…) which focuses on the "fundamental thrust and effect" of the Regulation.”636 (Emphasis added)

For the lack of formal criterion of nationality, the Panel compared the effective equality of opportunities for the group of nationals of other WTO Members who may wish to see GI protection and the group of the European Communities’ own nationals who may wish to seek GI protection under the Regulation.637 This approach is based on the respective comparison between the treatment accorded to group of “like” imported products and that accorded to the group of “like” domestic products which has been contemplated by the Appellate Body in the case of European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, in the context of the national treatment obligation in Article III:4 of GATT 1994.638

Based on the analysis of the particular provisions of the Regulation on the definition of a “designation of origin”, the definition of a “geographical indication”, and the right of objection, the Panel argued that the Regulation created a link between persons, the territory of a particular WTO Members, and the availability of protection.639 Although the European

635 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.210. 636 Id. 637 Id. at 7.218 638 The Appellate Body in European Communities – Measures Affecting Asbestos and Asbestos-Containing Products adopted the approach of making a comparison between the group of like imported products and the group of the like domestic products, for the purpose of examining the less favorable treatment under the national treatment principle of GATT. The Appellate Body reasoned that: "(…) A complaining Member must still establish that the measure accords to the group of 'like' imported products 'less favourable treatment' than it accords to the group of 'like' domestic products. The term 'less favourable treatment' expresses the general principle, in Article III:1, that internal regulations 'should not be applied (…) so as to afford protection to domestic production'. If there is 'less favourable treatment' of the group of 'like' imported products, there is, conversely, 'protection' of the group of 'like' domestic products. However, a Member may draw distinctions between products which have been found to be 'like', without, for this reason alone, according to the group of 'like' imported products 'less favourable treatment' than that accorded to the group of 'like' domestic products. (...)" See Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R (12 March 2001), para. 100. 639 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.225, 7.226, 7.237.

© Pham Hong Quat 118 Communities opposed this argument of the Panel,640 the Panel considered that link as a “fundamental thrust and effect” of the Regulation, which constituted the less favorable treatment provided to other WTO Members with respect to the availability of protection. 641

Because Australia claimed at the same time that the Regulation violated the national treatment obligation under Article III: 4 of GATT, the European Communities argued that the interpretation of the national treatment obligations in the TRIPS Agreement and GATT 1994 should not lead to "systematic overlap" between them. 642 Accordingly, when the Regulation was examined under Article III: 4 of GATT, it could not be examined under Article 3.1 of the TRIPS to avoid the system overlap between GATT and TRIPS. As for the relationship between national treatment under 3.1 of the TRIPS and national treatment under Article III:4 of GATT, the Panel referred to the finding of the Appellate Body on the relationship between GATS and GATT to find that there has no hierarchy between the TRIPS Agreement and GATT 1994, which exist in separate annexes to the WTO Agreement. According to this finding, the provisions of Article 3.1 of TRIPS and Article II: 4 of GATT shall apply “cumulatively” and distinctly:

“The Panel notes that there is no hierarchy between the TRIPS Agreement and GATT 1994, which appear in separate annexes to the WTO Agreement. The ordinary meaning of the texts of the TRIPS Agreement and GATT 1994, as well as Article II: 2 of the WTO Agreement, taken together, indicates that obligations under the TRIPS Agreement and GATT 1994 can co-exist and that one does not override the other. This is analogous to the finding of the Panel in Canada – Periodicals, with which the Appellate Body agreed, concerning the respective scopes of GATS and GATT 1994. Further, a "harmonious interpretation" does not require an interpretation of one that shadows the contours of the other. It is well established that the covered agreements apply cumulatively and that consistency with one does not necessarily imply consistency with them all.” 643 (Footnote omitted and emphasis added)

The Panel also found that the provisions supporting public policy objectives under Article 8 of TRIPS and the lack of a general exceptions provision like Article XX of GATT 1994 have no impact on the analysis of Article 3.1 of TRIPS.644 This means that, these factors would not

640 Id. at 7.238. 641 Id. at 7.239, 7.240 642 Id. at 7.241. 643 Id. at 7.244. For the cumulative application of GATT and GATS, see Panel Report, Canada – Periodicals, at para. 5.17; Appellate Body Report, Canada – Certain Measures Concerning Periodicals, WT/DS31/AB/R (30 June 1997), para. 465. For the cumulative application of GATT and other agreements covered by the WTO Agreement, see e.g. Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R (14 December 1999), para. 81; and Appellate Body Report, Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R (14 December 1999), para. 74; Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Complaint by the United States, WT/DS27/R/USA (22 May 1997), para. 7.160. 644 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.246, 7.247.

© Pham Hong Quat 119 affect the assessment of the Panel on the fundamental thrust and effect of the Regulation on the effective equality of opportunities for the purpose of examining the no less favorable treatment standard under Article 3.1 of TRIPS.645 For that reasoning, the Panel concluded that the Regulation was inconsistent with Article 3.1 of TRIPS because it accorded treatment to nationals of other WTO Members less favorable than that it accorded to the European Communities own nationals.646

2.2. TRIPS MFN treatment obligation

Although Australia had withdrawn the claim on the violation of Article 4 of TRIPS before the Panel rendered its findings,647 the United States challenged the Regulation "as such" and claimed that the Regulation violated TRIPS MFN treatment obligation.648 The United States argued that the Regulation imposed conditions of reciprocity and equivalence on the availability of protection. The Regulation did not immediately and unconditionally accords the same advantages with respect to availability of protection that it accords to EC nationals. Moreover, nationals of some WTO Members that satisfied those conditions would be accorded more favorable treatment than nationals of the other WTO Members that did not.649

The European Communities argued that in fact it did not apply the conditions in Article 12(1) of the Regulation to geographical areas located in WTO Members. Otherwise, the conditions on availability of protection did not apply to nationality but according to the location of geographical areas. The conditions in Article 12(1) of the Regulation were the same for all third countries.650

The Panel was in favor of the argument of the United States in the assumption that there was no possibility that the European Commission would refuse to recognize all third countries

645 It is clear that not only the language of the provisions, but also the practice of GATT standards national treatment were adopted into the practice of TRIPS. The Panel developed the interpretation of Article 3.1 of TRIPS by applying the practical requirements of Article III:4 of GATT. The disciplines of national treatment for trade in goods were brought fully into the protection of intellectual property. The requirement of equally effective opportunities for competitive imported products became the requirement of equally effective opportunities for foreigners in protection of intellectual property. However, there are some points still questionable here. First, how “the opportunities” in protection of intellectual property could be regarded “equally effective” given the fact that most patent storage and patent applications are held by foreigners in the practice of developing countries. This fact should also be taken into account in measuring the thresholds and fundamental effects of national law and regulations in question. Second, in the GATT practice, domestic and imported products should be in competitive relation to be enjoyed with equally effective opportunities. Where there does not exist a competitive relation between domestic and foreign holders of intellectual property rights, the justification for the adoption of the GATT practice into the TRIPS practice is questionable. Third, the rationale of the equally effective opportunities under the GATT national treatment is a level “playing field” for competitive products by eliminating the discriminatory tariff and non-tariff measures that restrict importation. When the “equality effective opportunities” is transferred into the TRIPS practice, the rationale of the GATT national treatment has been changed because it stands for the strengthening rather than elimination of the restrictions on importation. 646 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.249. 647 Id. at 7.54, 7.55. 648 Id. at 7.689. 649 Id. at 7.689, 7.690. 650 Id. at 7.691, 7.692.

© Pham Hong Quat 120 under the procedures in Article 12(3).651 However, the Panel considered that even in such a case, the Regulation would be inconsistent with the national treatment obligation. Because the Panel had found the Regulation violated Article 3.1 of TRIPS, it exercised judicial economy with respect to that claim.652

The analysis of the findings of the Panel in this case reveals that although the Panel reminded itself that there exists different rationale for the national treatment obligations under Article 3.1 of TRIPS and Article III:4 of GATT,653 the Panel adopted fully the examination standards of less favorable treatment from the practice of de facto application of GATT national treatment in interpreting the standards of TRIPS national treatment, without any further reasoning. Accordingly, the concept of “fundamental thrust and effect” was applied in examining the consistency of domestic legislation with TRIPS national treatment obligation.

In the findings of the Panel in the case of US-Section 211 Omnibus Appropriations Act, the different language in treatment existing in the statutory language led to a finding of the Appellate Body of violation of Articles 3.1 and 4 of TRIPS for applying not only the actual application, but also the possible application of legislation in terms of the “extra hurdle”. Differently, in this case, even where the statutory language contained a formally identical language in treatment, the Panel found that the challenged legislation violated Article 3.1 of TRIPS as the result of applying both the “extra hurdle” and the “fundamental thrust and effect”.

Accordingly, when domestic legislation is subject to the challenge of legislation “as such”, not only the actual and possible application of legislation, but also the practical implications of legislation are possibly subject to the review of the panel under the TRIPS national treatment obligation. Legislation as a neutral trade measure concerning Article III: 4 of GATT on the marketplace becomes the protection of intellectual property under Article 3.1 of TRIPS on grounds of different policy considerations. The assessment of its practical implication, therefore, seems to be more difficult and political oriented.

In this respect, the adoption of the concept of “fundamental thrust and effect” would certainly give rise to the strictness of TRIPS national treatment requirements with regard to domestic legislation in the protection of intellectual property. Such specific accounts need to be carefully taken in bringing national legislation into conformity with the TRIPS.

The panel finding on the cumulative application requirement with respect to national treatment and MFN obligations under TRIPS and GATT poses another challenge to domestic

651 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.708. 652 Id. at 7.709. 653 The Panel considered that Article 3.1 applies to nationals, not products as GATT does: “The Panel now examines the second element of this claim which is whether the nationals of other Members are accorded less favourable treatment than the European Communities' own nationals. It is useful to recall that Article 3.1 of the TRIPS Agreement combines elements of national treatment both from pre-existing intellectual property agreements and GATT 1994. Like the pre-existing intellectual property conventions, Article 3.1 applies to "nationals", not products (…)” (Footnote omitted) See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.181.

© Pham Hong Quat 121 legislation in the protection of intellectual property in general in formulating legislation for the protection of patents in particular.654 This finding of the panel provides an answer to the question under discussion of the scholars on the relationships among triangles: GATT, GATS and TRIPS.655

Irrespective of the different comments on the specific features of TRIPS,656 specific areas as applied to national treatment and MFN obligations under GATT have been transferred into the practice of TRIPS national treatment and MFN obligations. Although TRIPS has no general exception clause as GATT does, the application of GATT standards to the examination of national treatment and MFN obligations under TRIPS has no modification at any rate. The situation does not change with the existence of the objectives and principles clauses in TRIPS. Consequently, domestic legislation can face tougher challenges from the importation of GATT standards in the interpretation and examination of TRIPS principle obligations.

III. Domestic law under WTO Jurisprudence

In implementing the principle of the independence of patents, domestic legislation should not only be subject to the principles and norms of TRIPS, but also be in compliance with the WTO dispute settlement rules. The fact is that most TRIPS disputes brought before the WTO panels related to claims about domestic legislation.657 Therefore, the panels are often requested by the claimants to find the inconsistency of the specific national law or regulation with certain TRIPS provisions. Generally, the rulings developed from the WTO and GATT practice are adopted in dealing with the claims about domestic legislation on the protection of intellectual property.658 The WTO dispute settlement mechanism for handling the disputes

654 See generally, Joost Pauwelyn, Conflict of Norms in Public International Law How WTO Law Relates to other Rules of International Law (Cambridge University Press, 2003), pp. 158-164 (discussing the accumulation and conflict norms of GATT, GATS and TRIPS). See also Thomas Cottier and Krista Nadakavukaren Schefer, ‘The Relationship Between World Trade Organization Law, National Law and Regional Law’, Journal of International Economic Law, (1998), pp. 86, 104 (discussing the effects of the WTO rulings on national jurisdiction) 655 See William J. Davey and Werner Zdouc, ‘The Triangle of TRIPs, GATT and GATTS’, in Intellectual Property: Trade, Competition, and Sustainable Development, World Trade Forum, Vol. 3. , Thomas Cottier and Petros C. Mavroidis eds. (The University of Michigan Press, 2003), p. 66. Thomas Cottier and Krista Nadakavukaren Schefer, supra note 654, at 86, 104. 656 See William J. Davey and Werner Zdouc, supra note 655, at 67-68. See also Thomas Cottier and Krista Nadakavukaren Schefer, supra note 655; pp. 67-68; Wilfred F. Ethier,’ Intellectual Property Rights and Dispute Settlement in the World Trade Organization’, Journal of International Economic Law (Vol. 2004), pp. 449-458. 657 See Matthijs Geuze and Hannu Wager, ‘WTO Dispute Settlement Practice Relating to the TRIPs Agreement’, Journal of International Economic Law, (1999), pp. 347-384 (discussing the WTO challenges to the domestic legislation of WTO Members in securing TRIPS obligations); Mathias Oesch, supra note 42, at 188-200 (discussing the jurisdiction of the WTO panels and the Appellate Body in reviewing domestic law under the DSU). 658 See Michael Lennard, ‘Navigating by the Stars: Interpreting the WTO Agreements’, Journal of International Economic Law (2002), pp. 52-53 (discussing the specific features in interpreting TRIPS by the WTO panels).

Perception of the recently developed WTO rules on the compliance of domestic legislation will identify the present challenge for national legislation in compliance with the TRIPS. The general account in this regard will be withdrawn from the analysis of certain WTO disputes relating to the claims about domestic legislation, with the focus being on those relating to TRIPS obligations.

1. Possible WTO law violation of discretionary legislation

Apart from the “extra hurdle” and the “fundamental thrust and effect” as discussed above, discretionary legislation may also be subject to the finding of a violation on the basis of its language per se being inconsistent with WTO law. In the practice of GATT/WTO, the distinction between mandatory and discretionary legislation has been well recognized for the purpose of identifying whether national legislation per se violated GATT obligations.660

The term mandatory legislation is used to refer to legislation, which on a mandatory basis requires the executive authority to act in a manner inconsistent with its GATT/WTO obligations.661 The term of discretionary legislation is used to refer to legislation, which provides the executive authority with the discretion to decide whether to act inconsistently with its GATT/WTO obligations.662 In the practice of GATT, when domestic legislation was subject to the challenge of legislation “as such”, it could only be found in the violation of its GATT obligations when it was defined as mandatory legislation.663 Otherwise, the challenged legislation per se was not regarded inconsistent with its GATT obligations, even if it was discretionary legislation.664 The finding of GATT inconsistency in that case should await the examination of the actual action of the executive authority that was vested with the discretion from discretionary legislation.665

659 See Adrian Otten, ‘The First Five Years (1995-1999): Implementing and Enforcing TRIPs Obligations’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum, Vol. 3 eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), pp. 108-109. See also Matthijs Geuze and Hannu Wager, supra note 657, at 347-384. 660 See generally, Mandatory and Discretionary Legislation, in WTO Appellate Body Repertory of Reports and Awards 1995-2004, available at http://www.wto.org/english/tratop_e/dispu_e/repertory_e/m1_e.htm. For the history and backgrounds of mandatory and discretionary legislation distinction under GATT/WTO, see Sharif Bhuiyan, Mandatory and Discretionary Legislation: ‘The Continued Relevance of The Distinction under the WTO’, Journal of International Economic Law 2002), pp. 671-604 (arguing for the continuance of the distinction under the WTO); For the criticisms of the continuing distinction under the WTO, see Kwan Kiat Sim, ‘Rethinking the mandatory/discretionary legislation distinction in WTO jurisprudence’, World Trade Review (Vol. 2, 2003), pp. 33-64 661 See generally, Mandatory and Discretionary Legislation, supra note 660. See also Sharif Bhuiyan, supra note 660. 662 Id. 663 Id. 664 Id. 665 Id.

© Pham Hong Quat 123 The situation has been changing recently. The WTO panels found that WTO law did not preclude the possibility of WTO inconsistency with respect to discretionary legislation either.666 The notable reasoning of that finding is that the “chilling effect” on economic activities of individuals may be caused from the “mere existence of legislation” in general. The supportive context for the adoption of that finding is the provision of Article XVI: 4 of the WTO Agreement. In this respect, a brief discussion on the findings of the Panel in the case of United States-Sections 301-304 of the Trade Act of 1974667 will provide some useful implications to national legislation in realizing the principle of independence of patents under the WTO rules.

This case concerned Sections 301-304 of the US Trade Act of 1974.668 The EC raised a number of claims about the WTO’s inconsistency in these sections. Particularly, the EC claimed that Section 304 violated Article 23.2(a) of the Dispute Settlement Understanding (“DSU”). The argument was that this section mandated the United States Trade Representative (“USTR”) to make a unilateral determination as to whether another WTO Member had violated US rights under the WTO Agreements within 18 months, namely, before the adoption of a panel or Appellate Body findings on the matter, which takes longer than 18 months from the date of request for consultations under the DSU. Therefore, this section was inconsistent with the United States obligation under Article 23(2) of DSU under which such determination should be made in accordance with the relevant DSU procedure.669

The United States argued that even though Section 304 mandated the USTR to make a determination at the end of 18-month period, it did not mandate the USTR to make a determination of inconsistency within such period. Otherwise, the USTR was vested full discretion to decide the contents of the determination. Accordingly, the USTR had the discretion to make the determinations in the manner consistent with the requirements of the DSU. On the basis of the GATT/WTO jurisprudence on the distinction between mandatory and discretionary legislation, Section 304 could not by itself be regarded as WTO inconsistent because it did not preclude the United States from acting consistently with Article 23.2(a).670

Concerning the issue of mandatory and discretionary legislation, the EC argued that the distinction in the light of the GATT practice would be no longer appropriate to the context of WTO law. It was necessary to distinguish between two types of discretionary legislation. The first type is the “genuinely discretionary”, which refers to domestic law that is merely meant to transfer decision-making authority from legislative body to executive authorities. The second type is the “not genuinely discretionary” type, which refers to domestic law that does not preclude the executive authorities from acting consistently with WTO law. However, it is intended to encourage violations of WTO laws by its design, structure and architecture.671

666 See generally, ‘The possibility of challenging laws “as such”’, in Possible Object of a Complaint – Jurisdiction of Panels and the Appellate Body (the WTO’s homepage), available at http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c5s5p1_e.htm (discussing the change in the rulings of the panels and the Appellate Body on the distinction of mandatory and discretionary legislation). 667 See Panel Report, United States-Sections 301-304 of the Trade Act of 1974, WT/DS152/R (22 December 1999) [hereafter “US-Sections 301-310”]. 668 Id. at 1. 2. 669 Id. at 4.11-4.18, 7.2-7.7. 670 Id. at 4.19-4.26, 7.9. 671 Id. at 4.249-4.255.

© Pham Hong Quat 124 The Panel was in favor of the United States in the finding that the statutory language of Section 304 neither mandates the USTR to make a determination of inconsistency nor precludes the USTR from making such a determination for the aggregate effect of the Statement of Administrative Action ("SAA") and US Statements before the Panel.672 However, the Panel rejected the argument of the United States on the distinction between mandatory and discretionary legislation for the purpose of determining the WTO inconsistency. 673 Particularly, the Panel reasoned that:

“The question is then whether, on the correct interpretation of the specific WTO obligation at issue, only mandatory or also discretionary national laws are prohibited. We do not accept the legal logic that there has to be one fast and hard rule covering all domestic legislation. After all, is it so implausible that the framers of the WTO Agreement, in their wisdom, would have crafted some obligations which would render illegal even discretionary legislation and crafted other obligations prohibiting only mandatory legislation.” (Emphasis added)

“[S]ince Article 23 may prohibit legislation with certain discretionary elements and therefore the very fact of having in the legislation such discretion could, in effect, preclude WTO consistency.” (Emphasis added)674

Abandoning the classic argument for precluding discretionary legislation from the WTO inconsistency, the Panel reasoned the possibility of violating WTO law with regard to discretionary legislation per se, though it limited its reasoning within the interpretation of the specific WTO obligations under Article 23 of DSU.

672 Id. at 7.126, 7.131-7.134. 673 See Panel Report, US-Section 301-310, supra note 667, at 7.54 – 757. 674 Id. at 7.53-7.54.

The Panel opined that the general objects and purposes of GATT/WTO are to create market conditions conductive to individual economic activity in national and global markets and provide a secure and predictable multilateral trading system.675 Therefore, the indirect impact on individuals is one of the principal reasons constituting the violation of GATT/WTO. In other words, for a treaty that benefits from the activity of individual operators the legislation itself may be regarded a breach due to its significant “chilling effect” on the economic activities of individuals. This reasoning was found as follows:

“Why is it, then, that legislation as such was found to be inconsistent with GATT rules? If no specific application is at issue – if, for example, no specific discrimination has yet been made – what is it that constitutes the violation?

Indirect impact on individuals is, surely, one of the principal reasons. In treaties, which concern only the relations between States, State responsibility is incurred only when an actual violation takes place. By contrast, in a treaty the benefits of which depend in part on the activity of individual operators the legislation itself may be construed as a breach, since the mere existence of legislation could have an appreciable "chilling effect" on the economic activities of individuals.”676 (Emphasis added)

As the Panel argued, the general rationale for the findings of the GATT panels and the WTO panels on the violation of domestic laws in imposing discriminatory taxation on imported products was the negative effect of such domestic laws on individual economic operators. The risk or threat of discriminatory taxation in the legislation affected adversely the relative competitive opportunities between imported and domestic products. The “chilling effect” of legislation would be a shift in consumption from imported to domestic products, caused by the increased cost or a negative impact on economic planning and investment with respect to imported products.677 Such rationale could also be found in this case.

Because Section 304 preserved the right for unilateral measures to be taken inconsistent with DSU rules and procedures, it produced a “chilling effect” causing serious damage both to other WTO Members and the marketplace. The damage caused directly to other WTO Members when they are faced with a threat of unilateral action and may be forced to serve the demands of the Member excerpting the threat even before the DSU procedures have been activated. The damage also affects the marketplace because the statutory language permitting conduct prohibited by the WTO may make economic operators change their commercial behavior in a way that distorts trade.678

675 Id. at 7.71. 676 Id. at 7.80-7.81. 677 Id. at 7.84. 678 See Panel Report, US-Section 301-310, supra note 667, at 7.89-7.90.

© Pham Hong Quat 126 For these reasons, the Panel argued that Section 304 itself had an equally “chilling effect” on both other WTO Members and the marketplace and therefore, constituted for the WTO an inconsistency. The Panel, however, made its finding be limited within the obligations in Article 23.2(a) of the DSU:

“In conclusion, the risk of discrimination was found in GATT jurisprudence to constitute a violation of Article III of GATT – because of the "chilling effect" it has on economic operators. The risk of a unilateral determination of inconsistency as found in the statutory language of Section 304 itself has an equally apparent "chilling effect" on both Members and the marketplace even if it is not quite certain that such a determination would be made (…)”

Consequently, the statutory language of Section 304 (…) must be considered presumptively to be inconsistent with the obligations in Article 23.2(a). The discretion given to the USTR to make a determination of inconsistency creates a real risk or threat for both Members and individual economic operators that determinations prohibited under Article 23.2(a) will be imposed (…) it is the core element of the prima facie inconsistency of the statutory language of Section 304.”679 (Emphasis added)

The Panel seemed to emphasize the special adverse damage caused by Section 304 of the US Trade Act to the other WTO Members and the marketplace. This may be the particular response to the fact that the section was one of those that was much criticized for a long time during and after the Uruguay Round of GATT negotiations.680 However, after finding the prima facie inconsistency of the statutory language of Section 304, the Panel examined the non-statutory elements of Section 304, including SAA and US Statements before the Panel. Virtually, the Panel found that the prima facie violation had in fact been removed and no longer existed and therefore, this section was not inconsistent with Article 23 of DSU.681 This conclusion was commented on as a compromise solution of the Panel in this special case.682 Either way, it posed a condemnation of the United States regarding the future application of this section. It is reflected in the warning that the finding of inconsistency with the WTO would not be warranted whenever the non-statutory elements that removed the prima facie inconsistency of its statutory language no longer existed. The warning massage of the Panel stated as follows:

679 Id. at 7.91, 7.96. 680 See Duncan Matthews, Globalising Intellectual Property Rights The TRIPs Agreement (Routledge, 2002), p. 25. See also Terence P. Stewart, supra note 165, at 2256. Many criticisms on the imposition of Section 301 and Special 301 of the United States were raised in the meetings of the Negotiating Group on TRIPS, especially on the fact of United States took a unilateral action against Brazil for the claim concerning inadequate protection of IPRs during the Uruguay Round. See Meeting of Negotiating Group of 17-21 October 1988, supra note 174, at 27; Meeting of Negotiating Group of 3-4 July 1989, supra note 174, at 4; Meeting of Negotiating Group of 12-14 July 1989 supra note 174, at 5. 681 See Panel Report, US-Section 301-310, supra note 667, at 7.104, 7.131. 682 See Yoshiko Naiki, ‘The Mandatory/Discretionary Doctrine in WTO Law: The US – Section 301 Case and its Aftermath’, Journal of International Economic Law (Vol. 7, 2004), p. 54.

Should the undertakings articulated in the SAA and confirmed and amplified by the US to this Panel be repudiated or in any other way removed by the US Administration or another branch of the US Government, this finding of conformity would no longer be warranted.”683 (Emphasis added)

Despite this,684 the Panel paved the way for a new approach to the possibility WTO inconsistency in discretionary legislation. To this end, there are two implications drawn from the findings of the Panel that may be useful to domestic law in TRIPS implementation.

First, TRIPS contains in particular the norms for the protection of the interests of individuals. TRIPS stipulates clearly the obligations of WTO Members to protect the intellectual property rights of nationals of all other WTO Members in compliance with the non-discrimination principles provided. In this sense, the reasoning behind the “chilling effect” on the economic activities of individuals is evidently compatible with TRIPS norms.

Second, TRIPS provides for the substantive obligations of intellectual property protection, which require WTO Members to take positive action in making available in domestic legislation a sound legal basis for the protection of intellectual property rights. In this regards, the rationale for the WTO inconsistency of domestic law caused by its negative effect on individual economic operators may be subject to a broader view with respect to domestic law under TRIPS obligations. Taking these accounts, domestic legislation under TRIPS obligations seems to be at higher risk under the reasoning of the “chilling effect” than for inconsistency with the WTO of discretionary legislation.

1.2. Article XVI: 4 of the WTO Agreement

Although the Panel did not give its findings directly on the inconsistency of Section 304 with Article XVI: 4 of the WTO Agreement, it interpreted the WTO law violation with respect to domestic law in the context of this provision. In other words, the general provision in this article served as an important context for identifying the possibility of WTO inconsistency in discretionary legislation. It reasoned that as a general proposition, Article XVI: 4 of the WTO Agreement confirmed that legislation as such, independently from its application in specific cases, might breach WTO obligations. The Panel based its reasoning on the following grounds:

“Article XVI: 4 of the WTO Agreement explicitly confirms that legislation as such falls within the scope of possible WTO violations. It provides as follows:

683 See Panel Report, US-Section 301-310, supra note 667, at 7.135-7.136. 684 Some criticized the deference of the Panel to the U. S. statements in this case, which was quite different from the approach of the Panel in the case of India-Patent, Complaint by US, supra note 287. See Daya Shanker, supra note 76, at174-175

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 or dispute. Article XVI: 4, though not expanding the material obligations under WTO agreements, expands the type of measures made subject to these obligations.”685 (Footnote omitted)

The Panel also clarified the positive nature of the provision in Article XVI: 4 of the WTO Agreement, which is different from the negative nature as stated in Article 27 of the Vienna Convention. For the positive nature in the wording, Article XVI:4 not only abandons the invocation of the provisions of domestic legislation as a justification for WTO inconsistencies, but also demands the WTO Members bring their domestic law into conformity with WTO obligations. The Panel made this point as follows:

“Article XVI: 4 goes a step further than Article 27 of the Vienna Convention. Article 27 of the Vienna Convention provides that "[a] party may not invoke the provisions of its internal law as justification for its failure to perform a treaty". Article XVI: 4, in contrast, not only precludes pleading conflicting internal law as a justification for WTO inconsistencies, but requires WTO Members actually to ensure the conformity of internal law with its WTO obligations.”686 (Emphasis added)

In this approach, it is appropriate to read into the context of Article XVI: 4 the provision in Article 1.1 of TRIPS. For giving effect to the substantive provisions in TRIPS, this article imposes a general obligation on WTO Members to respond positively in their domestic legislation conform to the principles and norms of TRIPS. Article 1.1 provides as follows:

“1. Members shall give effect to the provisions of this Agreement. Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement. Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.” 687 (Emphasis added)

685 Id. at 7.41. 686 Id. at footnote 652 to para. 7.41. 687 See the TRIPS, supra note 10, art.1.1.

© Pham Hong Quat 129 To a certain extent, the finding of the Panel in the case of EC-Protection of trademarks and geographical indications for the agricultural products and foodstuffs was a change in the clarification of the obligations under Article 1.1 of TRIPS. Accordingly, the first sentence creates an obligation to give effect to the provisions of TRIPS after the relevant transitional period with respect to each category of intellectual property rights. The second sentence recognizes the freedom of domestic legislation to implement the standards of protection to an extent more extensive than that required by the minimum standards in TRIPS. However, such freedom is subject to the consistency condition.688 The relevant finding of the Panel in that case was that:

“The Panel notes that the first sentence creates an obligation for Members to give effect to the provisions of the TRIPS Agreement and the second sentence recognizes Members' freedom to implement more extensive protection, subject to a condition. After the expiry of the transitional arrangements in Articles 65 and 66 (and 70.8 and 70.9), as applicable, a Member is obliged to give effect to the provisions of the Agreement with respect to each category of intellectual property right, irrespective of whether it implements more extensive protection in the same or another category of intellectual property right.”689

In addition, the Panel in the case of India-Patent protection for Pharmaceutical and Agricultural Chemical Products clarified that TRIPS, different from the other covered agreements of the WTO Agreement, substantially requires the “positive action” of the WTO Members in the implementation of the obligations concerning domestic legislation. This point could be seen in the following finding of the Panel:

“In our view (…) Most of the provisions in the WTO Agreement aim to prevent governments from taking measures that might be harmful to trade and, therefore, concern the existence of legislation requiring governments to act in a way that is inconsistent with the obligations under the WTO Agreement (…) The TRIPS Agreement is different from other covered agreements in that most of its provisions require Members to take positive action, in this particular case to grant exclusive marketing rights pursuant to Article 70.9. in situations where it is necessary for a

688 The condition “not contravene the provisions of this Agreement” was applied in the finding concerning the inconsistency of Article 12a(2)(b) with Article 3.1 of TRIPS (see, Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.431) and therefore, violated Article 1.1 of TRIPS in the second sentence provision: “This conclusion refers only to the United States' claim under Article 1.1 of the TRIPS Agreement and is without prejudice to the Panel's conclusion…that certain aspects of the inspection structures requirements are inconsistent with Article 3.1 of the TRIPS Agreement. Those aspects contravene the provisions of the Agreement within the meaning of the proviso in the second sentence of Article 1.1.” See, Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.767. 689 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.755.

© Pham Hong Quat 130 Member to give effect to such positive action, a failure to provide the executive with the required authority constitutes a breach of the Agreement, because the lack of authority mandates the executive not to comply with the Member’s WTO obligations.”690 (Emphasis added)

The Appellate Body confirmed the need to interpret the obligations under Article 70.9 of TRIPS under the light of Article XVI: 4 of the WTO Agreement in dealing this case.691 The reasoning in this line resulted in the finding of the Appellate Body upholding the conclusion of the Panel that India was in violation of Article 70.9 of TRIPS.692

For the compatible feature of the positive obligations under Article XVI: 4 of the WTO Agreement and those under the principles and substantive provisions of TRIPS, the requirements applied in examining the WTO consistency under Article XVI: 4 with respect to domestic legislation will arguably be applied in measuring the TRIPS consistency. In this respect, the rationale lying behind the obligations of WTO law is certainly different from that which existed under the Paris Convention. It is necessary, therefore, to take into account the substantially different contexts of the two systems in the adoption of the independence of patents under the WTO framework.

2. Detailed examination and independent assessment of the WTO panels on domestic law

Different from the situation under the Paris Convention, domestic legislation under WTO law is subject to the detailed examination of the WTO panels when there appear claims about the WTO inconsistency with domestic legislation. The tendency of examining more and more strictly domestic legislation is reflected in the recent WTO cases. The extrusive examination of domestic legislation will be the significant limitations to the discretion given to domestic legislation in the fulfillment of WTO obligations.

These limitations are getting more burdensome with the views of the panels regarding domestic law as a matter of evidence of the compliance of domestic legislation with WTO law. Consequently, domestic legislation is subject to the examination of both panels and the 690 See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.53. 691 In India-Patent, Complaint by US, the Appellate Body found that: “India’s argument must be examined in the light of Article XVI:4 of the WTO Agreement, which requires that: Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.” See Appellate Body Report, India-Patent, Complaint by US, supra note 423, at 79. 692 The Appellate Body upheld the finding of the Panel that India violated its obligations under Article 70.9 of TRIPS: “For these reasons, we agree with the Panel that India should have had a mechanism in place to provide for the grant of exclusive marketing rights effective as from the date of entry into force of the WTO Agreement, and, therefore, we agree with the Panel that India is in violation of Article 70.9 of the TRIPS Agreement.” See Appellate Body, India-Patent, Complaint by US, supra note 423, at 84.

© Pham Hong Quat 131 Appellate Body in the relevant cases. For the perception of the WTO rules on the legal status of domestic legislation, it is worth analyzing the development in the views of the panels and the Appellate Body in reviewing domestic legislation in the recent WTO cases, with the focus on TRIPS related disputes.

2.1. Detailed examination of the panels regarding the relevant domestic law

In the case of India-Patent protection for Pharmaceutical and Agricultural Chemical Products, the first TRIPS related dispute brought before the WTO Dispute Settlement Body, the Panel had a chance to examine Indian domestic law for assessing the fulfillment of India regarding the obligations under Articles 70(8) and 70(9) of TRIPS. In this case, the Panel admitted that under Article 1.1 of TRIPS, India had jurisdiction to “decide how to implement its obligations under Article 70.8”. And therefore, the Panel recognized that the “mere fact” of India relying administrative practice to receive mailbox applications without change in its legislation did not itself constitute a violation of India’s obligations under Article 70.8.693

However, the Panel reasoned that in order to make an objective assessment regarding the consistency of the current Indian mechanism with TRIPS, the Panel needed to analyze the current Indian system from the viewpoint of whether it ensured a degree of legal security and predictability for patent applicants of other WTO Members.694 The Panel interpreted the standards of legal security and predictability under Article 70.8 by application of the concept “legitimate expectation” in the light of GATT practice,695 and then assessed Indian domestic law relying on such standards.696 Although the Appellate Body consequently reversed the application of the concept “legitimate expectation” in interpreting TRIPS obligations under Article 70.8,697 the Appellate Body approved “the detailed examination” of the Panel regarding Indian domestic law.698

693 See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.33. 694 Id. at 7.34. 695 Id. at 7.31. 696 Id. at 7.34. 697 See Appellate Body Report, India-Patent, Complaint by the United States, supra note 423, at 48. There are several different opinions on this point. The Appellate Body found that this concept was only appropriate to deal with “non-violation” complaints, while the matter of whether or not “non-violation” remained to be determined by the Council for Trade-Related Aspects of Intellectual Property pursuant to Article 64.3 of TRIPS (Appellate Body Report, para. 42). Some scholars did not agree with the view of the Appellate Body and argued for the applicability of this concept. They suggested that the Appellate Body confused the approach of the Panel on the doctrine of non-violation complaints. See Thomas Cottier and Nadakavukaren, Schefer Krista, supra note 654, at 87; Thomas Cottier and Nadakavukaren, ‘Good Faith and the Protection of Legitimate Expectations in the WTO’, in Marco Bronkers and Reinhard Quick (eds.), New Directions in International Law, Essays in Honour of John H. Jackson (Kluwer Law International, 2000), pp. 60-61. Others opined that, this concept should also be applicable to the case of direct violation of TRIPS obligations as well. See William J. Davey and Werner Zdouc, supra note 655, at 57-58. 698 See Appellate Body Report, India-Patent, Complaint by US, supra note 423, at 68. In reference to the GATT practice, particularly the findings of the Panel in the case of United States-Section 337 where the Panel conducted the “detailed examination” of the relevant US legislation and practice, the Appellate Body found that the current case was comparable for carrying out such a kind of examination with respect to Indian domestic law. Actually, the GATT practice was inconsistent in dealing with this matter. Generally, the GATT panels adopted a careful approach in the assessment of domestic law. This remark was reflected in a finding of the Panel in US-Tobacco:

© Pham Hong Quat 132 Without deference to the interpretation of India of its own legislation, the Panel conducted the independent assessment of the relevant Indian law and administrative practices. From the analysis of the particular provisions of Indian law, the Panel rendered its own assessment on the legal status of Indian administrative practice on the mailbox system under its national legal order. The Panel stated:

“First, under Section 12(1) of the Patents Act 1970, when the complete specification has been filed in respect of a patent application, the Controller must refer the matter to an examiner. Section 12(2) clearly obliges the examiner ordinarily to complete examination within 18 months from the date of reference from the Controller. Under Section 15(2) of the Patents Act, any application for the grant of a patent on a pharmaceutical or agricultural chemical product must be refused by the Controller for lack of patentability. In light of these provisions, the current administrative practice creates a certain degree of legal insecurity in that it requires Indian officials to ignore certain mandatory provisions of the Patents Act.”699 (Emphasis added)

For the proposition on the “legal insecurity” of the mailbox administrative practice having been in place, the Panel supposed that “even if” Patent Office officials did not examine and reject mailbox applications, a competitor might seek a judicial order to force them to do so in order to obtain a rejection of a patent claim. 700 Moreover, the evidence701 submitted by India to substantiate its interpretation on its own legal system was rejected. Instead, the Panel made independently its own assessment on the essence of the two submitted Indian Supreme Court judgments and found that they did not support the position of India on the valid status of the current “mailbox” administrative practice. The Panel indicated its independent assessment of the evidence and the relevant proposition submitted by India concerning the judgments of its Supreme Court in the following statement:

“[The Panel] noted in this regard that previous panels, consistent with the practice of international tribunals, had refrained from engaging in an independent interpretation of domestic laws, and had treated the interpretation of such laws as questions of fact.” (Emphasis added) See Panel Report, US-Tobacco, supra note 445, at para. 75. 699 See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.35. 700 Id. at 7.37. 701 India referred to two judgments of its Supreme Court, of which the Supreme Court held that if there were no statutory rules in force or even if there are statutory rules but they are silent on any particular subject, it was competent to the Government to make appropriate rules “to fill in the lacuna in the statutory rules”. The other judgment stated that where a statute was to be implemented by a designated authority, Parliament must have assumed that the designated authority would act properly and responsibly, with a view to doing what was best in the public interest and most consistent with the policy of the statute. By these judgments, India explained that even if there were any statutes, but were silent on any particular subject, the Government was competent to fill in the lacunae in the statute rules. Moreover, if there were certain deviations from the guidelines set for in-house management of the government departments, the courts did not need to interfere. It was to maintain that mailbox applications had a proper legal status under Indian law and the current mechanism of administrative instructions on the filing system was valid under the Patents Act and the Constitution. See Panel Report, India-Patent, Complaint by US, supra note 41, at 4.10, 4.12.

© Pham Hong Quat 133 “ The evidence submitted by India - two Supreme Court rulings on administrative practices - does not sufficiently demonstrate that a court will uphold the validity of administrative actions which apparently contradict mandatory legislation. One case cited by India involved a situation where the administrative practice was not contrary to the statutory provisions. In the other case, the Supreme Court reached a conclusion that administrative guidelines had no statutory force and conferred no right on any citizen to complain that they were not being met. These cases may confirm the Indian position that its reliance on an administrative practice regarding the handling of pharmaceutical and agricultural chemical product patent applications is not unconstitutional, but they do not specially answer the question we are facing, i.e., whether a court will uphold the validity of administrative actions which apparently contradict mandatory legislation.” 702 (Emphasis added)

2.2. Detailed examination of the Appellate Body regarding the relevant domestic law

In its appeal, India contended that the Panel erred in its treatment of India’s municipal law because municipal law should be a fact that must be established before an international tribunal by the party relying on it. India viewed that the Panel did assess the Indian domestic law as a law to be interpreted by the Panel. It argued that the Panel should have followed the GATT practice703 and given India the “benefit of the doubt” as to the status of its mailbox system under its own domestic law.704

The Appellate Body reasoned that in public international law, municipal law may serve as evidence of facts, otherwise, it may also constitute “evidence of compliance or non- compliance” with international obligations.705 Therefore, it was needed for the Panel to have a

702 See Panel Report, India-Patent, Complaint by US, supra note 411, at 7.37. 703 India referred to Panel Report. Canada-Measures Affecting the Sale of Gold Coins, L/5863, 17 September 1985, not adopted, paras. 58-59, and Panel Report, United States- Tobacco, supra note 445, at 75 (stating that the general approach adopted by the previous GATT panels was that the panels refrained in their findings from the independent assessment of the related domestic law). 704 See Appellate Body Report, India-Patent, Complaint by US, supra note 423, at 9. 64. 705 Id. at 65. The Appellate Body reconfirmed and clarified this reasoning in US-Section 211 Omnibus, which put domestic law and the panel’s examination of domestic law into the scope of appellate review under the DSU provisions. This point could be read in the following findings of the Appellate Body: “Our rulings in these previous appeals are clear: the municipal law of WTO Members may serve not only as evidence of facts, but also as evidence of compliance or non-compliance with international obligations. Under the DSU, a panel may examine the municipal law of a WTO Member for the purpose of determining whether that Member has complied with its obligations under the WTO Agreement. Such an assessment is a legal characterization by a panel. And, therefore, a panel's assessment of municipal law as to its consistency with WTO obligations is subject to appellate review under Article 17.6 of the DSU.” “To address the legal issues raised in this appeal, we must, therefore, necessarily examine the Panel's interpretation of the meaning of Section 211

© Pham Hong Quat 134 detailed examination of the relevant Indian domestic law to assess the compliance of India with its obligations under TRIPS. Particularly, it was necessary for the Panel to seek a detailed understanding of the operation of the Indian Patents Act in relation to administrative practice in order to assess whether India had complied with Article 70.8. The Appellate Body explained that the Panel did not interpreted Indian law “as such”, but only for the purpose of determining whether India had met its obligations under TRIPS. This reasoning was inscribed in the following findings:

“It is clear that an examination of the relevant aspects of Indian municipal law and, in particular, the relevant provisions of the Patents Act as they relate to the “administrative instructions”, is essential to determining whether India has complied with its obligations under Article 70.8(a). There was simply no way for the Panel to make this determination without engaging in an examination of Indian law.”706 (Emphasis added)

For the same reasoning, the Appellate Body considered that it needed to engage in the detailed examination of the relevant Indian domestic law to review the Panel’s examination with respect to the same domestic law. As a result, the Appellate Body came to the same conclusion as the Panel did, that is, the domestic law of India lacked a sound legal basis for the maintenance of the mailbox system. The following findings of the Appellate Body reflected this point:

“[S]o, too, [it] is necessary for us in this appeal to review the Panel’s examination of the same Indian domestic law.

To do so, we must look at the specific provisions of the Patents Act (…)

We are not persuaded by India’s explanation of these seeming contradictions. Accordingly, we are not persuaded that India’s “administrative instructions” would survive a legal challenge under the Patents Acts (…)

(…)And, consequently, we are not persuaded that India’s “administrative instructions” provide a sound legal basis to under United States law. An assessment of the consistency of Section 211 with the Articles of the TRIPS Agreement and of the Paris Convention (1967) that have been invoked by the European Communities necessarily requires a review of the Panel's examination of the meaning of Section 211. Likewise, that assessment necessarily requires a review also of the Panel's examination of the meaning of both the CACR and the Lanham Act, to the extent that they are relevant for assessing the meaning of Section 211. This is an interpretation of the meaning of Section 211 solely for the purpose of determining whether the United States has fulfilled its obligations under the TRIPS Agreement. The meaning given by the Panel to Section 211 is, thus, clearly within the scope of our review as set out in Article 17.6 of the DSU.” See Appellate Body Report, US-Section 211 Omnibus, supra note 398, at 105, 106. 706 See Appellate Body Report, India-Patent, Complaint by US, supra note 411, at 66.

Evidently, both the Panel and the Appellate Body adopted the approach of engaging in a detailed examination of the relevant Indian domestic law in the assessment of its TRIPS obligations. Accordingly, not only the related national legislation, but also the administrative and judicial practices were subject to the examination of the Panel and the Appellate Body. Significantly, against the request of India, the Panel and the Appellate Body did not deem that it was necessary to give deference to some extent to the positions of India in its interpretation of its own domestic law and practice. Instead, they considered and took the independent views in understanding and assessment of the particular provisions of Indian law and the related administrative and judicial practices, for the purpose of identifying the legal status of Indian mailbox mechanism within the context of its domestic law.

3. Independent explanations of the panels on the domestic law in question

The approach of detailed examination of domestic law approved by the Appellate Body in this case was then referred to in many subsequent WTO cases, however, with some modification or clarification. For example, the Panel in the case of US Section 301-310 of the Trade Act of 1974 confirmed that it followed that approach, and additionally, regarded the relevant US domestic law as “factual elements” to check whether these factual elements constitute conduct by the US contrary to its WTO obligations. The Panel stated:

“In respect of the examination of domestic law by WTO panels, both parties referred to the India – Patents (US) case. There the Appellate Body stated that "[i]t is clear that an examination of the relevant aspects of Indian municipal law (…) is essential to determining whether India has complied with its obligations under Article 70.8(a) [of the TRIPS Agreement]. There was 707 Id. at para. 68-70. The Appellate Body conducted an independently detailed assessment of the relevant provisions of the Patents Act and the administrative instructions of India before coming to the conclusion in the agreement with the finding of the Panel, as follows: “Section 5(a) of the Patent Act provides that substances “intended for use, or capable of being used, as foods or as medicine or drug” are not patentable. “When the complete specification has been led in respect of an application for a patent”, section 12(1) requires the Controller to refer that application and that specification to an examiner. Moreover, section 15(2) of the Patents Act states that the Controller “shall refuse” an application in respect of a substance that is not patentable. We agree with the Panel that these provisions of the Patent Acts are mandatory. And like the Panel, we are not persuaded that India’s “administrative instructions” would prevail over the contradictory mandatory provisions of the Patents Act. We note also that, in issuing these “administrative instructions”, the Government of India did not avail itself of the provisions of section 159 of the Patents Act, which allows the Central Government “to make rules for carrying out the provisions of [the] Act” or section 160 of the Patents Act, which requires that such rules be laid before each House of the Indian Parliament. We are told by India that such rulemaking was not required for the “administrative instructions” of issue here. But this, too, seems to be inconsistent with the mandatory provisions of the Patents Act.” (Emphasis added)

In this case, too, we have to examine aspects of municipal law, namely Sections 301-310 of the US Trade Act of 1974. Our mandate is to examine Sections 301-310 solely for the purpose of determining whether the US meets its WTO obligations. In doing so, we do not, as noted by the Appellate Body in India – Patents (US), interpret US law "as such", the way we would, say, interpret provisions of the covered agreements. We are, instead, called upon to establish the meaning of Sections 301-310 as factual elements and to check whether these factual elements constitute conduct by the US contrary to its WTO obligations. The rules on burden of proof for the establishment of facts referred to above also apply in this respect.”708 (Footnote omitted and emphasis added)

Regarding the relevant US domestic law as a question of facts and applying the rules on burden of proof for the establishment of facts, the Panel weighted the evidence and arguments of the parties and rendered its own assessment of the meaning of the concerning domestic law provisions in comparison with the corresponding provisions of the WTO provisions. For instance, the Panel considered that:

“As regards the statutory language of Section 304, we consider it sufficient to make the following findings based upon examination of the text itself, the evidence and arguments submitted to us in this respect as well as interpretation, where applicable, of the relevant provisions of the WTO.

(…)

(d) Fourth, as a matter of fact, we find that even though the USTR is not obligated, under any circumstance, to make a Section 304 determination of inconsistency prior to exhaustion of DSU proceedings, it is not precluded by the statutory language of Section 304 itself from making such a determination. We find that the broad discretion given to the USTR allows him or her to do exactly what the statutory language suggests: to determine whether US rights have been denied, i.e. to determine that they have not been denied but also to determine that they have been denied.709 (Emphasis added)

708 See Panel Report, US-Section 301-310, supra note 667, at 7.17, 7.18. 709 Id. at 7.31.

© Pham Hong Quat 137 For this approach, the Panel did not agree with the interpretation of the United States and made its own understanding on the meaning of Section 304 based upon its textual provision.710 As a result, after assessing the statutory language of Section 304 under the obligations provided in Article 23 of the DSU, the Panel came to conclusion that the statutory language of Section 304 constituted a prima facie violation of Article 23.2(a).711 However, with the recognition of the legal status of the non-statutory elements existing in the US multi- layered law system,712 especially the aggregate effect of the SAA and the US statements, the Panel found that these elements had removed the inconsistency of Section 304 with Article 23.2(a).713

The Panel in the parallel cases of EC-Geographical Indications also adopted and developed the approach of the Appellate Body in the case of India-Patents (US). The Panel affirmed that its mandated obligation was to “make an objective assessment of the meaning of the relevant provisions of the Regulation”, which was not bound by the European Communities’ interpretation of its relevant domestic law. It also clarified the rule of burden of proof applied to the parties with respect to each party’s interpretation concerning the related provision of the Regulation. The Panel stated:

“The fact that this is an "as such" challenge, and that the parties disagree sharply on whether the European Communities' interpretation of its own measure is correct, requires the Panel to conduct a detailed examination of the Regulation. In doing so, the Panel examines the Regulation solely for the purpose of determining its conformity with relevant obligations under the WTO covered agreements. Although the Regulation is part of the European Communities' domestic law, the parties agree that the Panel is not bound by the European Communities' interpretation of its provisions. Rather, the Panel is obliged, in accordance with its mandate, to make an objective assessment of the meaning of the relevant provisions of the Regulation. In this context, the Panel is mindful that, objectively, a Member is normally well placed to explain the meaning of its own law. To the extent that either party advances a particular interpretation of a provision of the Regulation at issue, it bears the burden of proof that its interpretation is correct.”714

Consequently, after analyzing the particular related provisions of the EC domestic law, the Panel rejected the European Communities’ explanations of the disputed clause "[w]ithout

710 Id. at 7.32, 7.33. 711 Id. at 7.97. 712 Id. at 7.132-7.134. 713 See Panel Report, US-Section 301-310, supra note 667, at 7.126, 7.135. 714 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.106; The panels generally referred to the approach of the Appellate Body in India – Patents (US) as the basis reasoning for its examination of the relevant EU law. Id. at footnote 133 to para. 7.106. See also Panel Report, EC-Geographical indications, Complaint by US, supra note 411, footnote 89 to para. 7.55.

© Pham Hong Quat 138 prejudice to international agreements" inscribed in the provision 12(1) of the Regulation.715 That was the main reason for Panel reached the conclusion that Australia and the United States had made a prima facie case that the equivalence and reciprocity conditions in Article 12(1) of the Regulation applied to the availability of protection for GIs located in third countries, including WTO Members. And the European Community had not succeeded in rebutting that case.716 This finding resulted in the final conclusion that the Regulation was inconsistent with the EC obligations under Article 3.1 of TRIPS.717

In sum, the analysis of the findings of the panels and the Appellate Body on WTO cases, especially TRIPS related disputes reveals that the practice of WTO dispute settlement poses tough requirements on the compliance of domestic law with WTO law. The WTO panels, different from the general approach adopted by the GATT panels in the past, have not refrained themselves from making their own independent assessment of the relevant domestic law at issue.

By regarding domestic law as evidence of facts and evidence of compliance or non- compliance with international obligations, domestic law may be subject to the detailed examination by panels and reviews by the Appellate Body. By application of the rule of burden of proof, the WTO panels and the Appellate Body often assess the evidence and arguments submitted by the parties to the dispute for establishing the meaning of the related domestic law provisions in the comparison with the related WTO provisions.

Significantly, the panels and the Appellate Body, in the appropriate case, may reject the explanations of the meaning of the relevant domestic law provisions or law practices made by either the respondent or the complainant in the related dispute. Instead, they can render their own understanding or interpretation of the relevant domestic law provisions or related national administrative and judicial practices, for the purpose of assessment of WTO consistency with respect to the relevant domestic law.

Conclusion

The WTO panels and the Appellate Body not only adopted adequately the GATT standards, but also created some more specific rulings in measuring the national treatment obligations under TRIPS. The rulings of the “extra hurdle” place domestic legislation on intellectual property protection in a more risky situation in terms of a challenge to legislation on the grounds of de jure or de facto discrimination. The surveillance of the GATT practice in interpreting the TRIPS principles and norms gives rise to the burdensome of the obligations under the TRIPS.

715 See Panel Report, EC-Geographical indications, Complaint by Australia, para. 7.146; Panel Report, EC- Geographical indications, Complaint by US, supra note 411, at 7.96. 716 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.152; Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.102. 717 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.249; Panel Report, EC-Geographical indications, Complaint by US, supra note 411, at 7.213.

© Pham Hong Quat 139 The newly developed concepts in finding the TRIPS-related cases would place domestic law in the vulnerable situation before challenge of legislation “as such”. The actual application, the possible application and even the practical implication of legislation might be fallen within the terms of “extra hurdles” and the “fundamental thrust and effect”, which might lead to the panel finding of a de facto discrimination.

The strict requirements of securing the obligations under the substantive provisions of TRIPS concerning the patentability and duration of patents are the practical challenges to national legislation in the intellectual property protection. The rule of anti-discrimination and the rulings on the availability and soundness of the legal basis in patent protection limit to much extent the scope of the exceptions and the limitations for the public interest.

Due to the cumulative application of the principles of GATT and the TRIPS, national legislation would face a heavy task from the surveillance of the standards of national treatment and MFN treatment developed from GATT practice in implementation of the TRIPS obligations. While the GATT standard principles applied fully to the obligations under TRIPS, the provisions on the objectives and principles stated in Article 7 and 8.1 of the could not be invoked to justify any reduction of such obligations. The “consistency test” blocked the effect of these principles in the practice of TRIPS.

In addition, the development of the panel rulings on the positive compliance requirement of WTO law, the possible violation of discretionary legislation, the detailed examination and independent explanation of the panels as to the relevant domestic law is also the practical challenge for domestic legislation in compliance with the TRIPS under WTO jurisprudence.

After the great effort of bringing the national patent legislation into compliance with TRIPS/WTO for the last decade, the current patent regulations of Vietnam are generally assumed to be “fully” qualified or in compliance with the TRIPS standards.718 Most of the commentators and authorities admitted that there would be no problem with the current national legislation on the patent protection under the TRIPS/WTO.719 Is this assumption truly correct in the view of the recently developed rulings of the WTO panels? In this connection, the next chapter will examine the current domestic patent legislation of Vietnam in the light of the development of WTO jurisprudence regarding the intellectual property protection. Relying on the recently developed rulings of the WTO panels, the examination of the relevant domestic patent law of Vietnam will explore some hidden problems in the current regulations, which might be the vulnerable points of the national legislation before the likely challenges. This work is expected to be a small contribution to the effort of bringing the national legislation in compliance with the TRIPS and WTO jurisprudence.

718 See Submissions of the Draft of Intellectual Property Law. 719 See e.g., Tran Viet Hung, Intellectual Property System of Vietnam, WIPO National Roving Workshop on the Enforcement of Intellectual Property Rights, Hanoi July 5-6, 2004, p. 4.

Hidden problems of the patent legislation of Vietnam in compliance with the TRIPS and WTO rulings

In the light of the development of WTO jurisprudence regarding the intellectual property protection as discussed in the previous chapters, this chapter examines the implementation of this principle in the patent law and practice of Vietnam. The purpose of the discussion in this chapter is to identify the problems of the domestic legislation regarding the patent protection. These problems might be at risk before the challenge of the “incorporated” Paris Convention together with the TRIPS and WTO rules. The specific implication from such a discussion serves the national objectives of accession to the WTO in the near future.

In the context that Vietnam is a party to the Paris Convention and expecting to be a party to the TRIPS and the WTO, the clarification of the undiscovered problems in the current legislation would be helpful for Vietnam to complete its domestic law in the light of the currently developed rulings of the WTO panels on the implementation of the obligations under the TRIPS and the WTO. That is also a good response to the requirement for active action in bringing domestic law and regulations into compliance with the TRIPS and WTO law, as secured by both the TRIPS and WTO law.

In the perception that the legislation might be challenged for the discriminatory language existing in the statutes or for the “extra hurdle in the terms of practical application, possible application, or even practical implications, the discussion in this chapter will examine the current regulations in the light of the relevant panel rulings. As regards each identified problem, which might be regarded as inconsistent with the “incorporated” Paris Convention, the TRIPS and WTO rules, the relevant suggestion for the elimination of such inconsistency will be provided.

Before exploring the problems of the current regulations and the necessity for their elimination under the TRIPS, it worth providing an overview of the national law system regarding the patent protection. The process of improvement of the national legislation towards the Paris Convention and the TRIPS is mentioned by reference to the historical existence of the problems in the national patent legislation. The problems inherent to the national patent legislation may be attributed to certain reasons, which might be justified under the Paris Convention. However, they would be no longer justifiable under the TRIPS and WTO jurisprudence.

Furthermore, some problems seem to be unidentifiable when looking only to the textual language of the TRIPS and the “incorporated” provisions of the Paris Convention. It would be necessary to examine the national legislation according to both textual language of these treaties and the “benchmarks” developed by the panel rulings. The panel rulings themselves

© Pham Hong Quat 141 are also moving on, particularly in dealing with the issue of the intellectual property protection. In that sense, reviewing the national legislation under the development of WTO jurisprudence for identification of the “new” problems is a meaningful work. As examined in the previous chapters, in the practice of the TRIPS, a dispute might be arisen from a vague point or an unclear problem existed in domestic law.

I. Vietnam Patent Legislation under the Paris Convention

1. Unavailability and insufficiency in the protection of patents

Although becoming a member of the Paris Convention since 1949,720 there had been no patent act that gave effect to patent protection in the whole territory of Vietnam until 1981, when the first ordinance on innovations and inventions was issued by a governmental degree.721 In the period from 1981 to 1989, appropriate to the features of a centrally planned economy, Vietnam adopted a system granting certificates of inventors and patents, which was aimed towards the moral rights of inventors rather than the material rights of patent holders.722 The ownership of inventions subject to certificates of inventions belonged to the State. The inventors had the rights to place their name in the certificates and to receive the prescribed remuneration for the exploitation of inventions.723

In the period from 1989 to 1995, the legal patent protection system of Vietnam underwent a significant change following the renovation policy for the transition from a centrally planned economy into a market-oriented economy.724 The Act on the protection of industrial property of 1989 eliminated the mechanism for granting certificates of inventions. Instead, the exclusive patent rights with respect to inventions were recognized as the private property rights of individuals and legal entities.725 The amended ordinance on innovations and inventions stated that the single form of protection regarding an invention was the patent.726

720 The Paris Convention entered into effect in Vietnam on 8th March 1949. See Paris Convention, supra note 1. 721 After Independent Day, 2nd September 1945, Vietnam experienced a long period of war until 30th April 1975, during which the territory was divided into two separate areas: North Vietnam (Democratic Republic of Vietnam) and South Vietnam (Republic of Vietnam). Correspondingly, there existed two legal systems in Vietnam during that period. South Vietnam seemed to have a legal system of intellectual property stronger than that of North Vietnam due to the former adopting a market economy while the latter following a centrally planned economy, the model of the socialist countries. See Pham van Thuyet, The Emerging Legal Framework for Private Sector Development in Viet Nam's Transitional Economy, World Bank, Washington, DC, 1995, pp. 12-13. After unification, the first legal document on the protection of inventions that had effect throughout the territory of Vietnam was Governmental Decree No. 31 issued on 23 January 1981, which recognized certificates of inventors rather than the exclusive patents of inventions, as did most former socialist countries. See Pham Dinh Chuong, The Role of IPR System for Economic Development in Vietnam, National Office of Intellectual Property of Vietnam, Hanoi, 1988, p. 13. 722 See Pham Dinh Chuong, supra note 721, at 13. 723 See Dieu le ve sang kien cai tien ky thuat va hop ly hoa san xuat va sang che (Ordinance on innovations of improvement and rationalization of production and inventions), issued by Decree 31/CP on 23 Jan. 1981, art. 20, Vietnam Laws (the National Politics Publishers, 2000). 724 See Pham Dinh Chuong, supra note 721, at 13. 725 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, art. 9.

© Pham Hong Quat 142 At the beginning of 1995, Vietnam applied for accession to the WTO, and since then, it has been attempting at make its domestic legislation on intellectual property consistent with TRIPS/WTO requirements.727 For the period of the last ten years, the government has expended great efforts to revise and enact a series of regulations on the protection of intellectual property in general and on patents in particular, to fill up the gaps existing in the current legislation in comparison with the TRIPS standards.728 Significantly, for the time being, the draft of a new act on protection of intellectual property is been prepared also for that purpose. This act intends to codify all current regulations concerning intellectual property located in various legal documents. The act will become the first statute on intellectual property rights in Vietnam, which provides in full and in detail the principles and norms for the all categories of intellectual property rights being protected in the country, including those covered by the TRIPS.729

2. Legal grounds for refusal of patents

As for the legal grounds for the refusal of patents, the first ordinance on inventions excluded a wide range of categories of inventions from patentable subject-matters, including chemical products, pharmaceuticals and foodstuffs used for human beings and animals.730 The inventions of such products were subject to the ownership of the State. The inventors who created those inventions could receive certificates of inventors but had no right to prevent others from using the inventions. Even with the lack of legal grounds for granting patents for the chemical, pharmaceutical and foodstuff products in the domestic legislation, it was not regarded as inconsistent with the Paris Convention under the mandate of the principle of national treatment of the Convention.

726 See Phap lenh ve bao ho quyen so huu cong nghiep (Ordinance on protection of industrial property rights), promulgated on 28 Jan. 1989, art. 14, Vietnam Laws (the National Politics Publishers, 2000). 727 Vietnam applied for the accession to the WTO in 1 Jan. 1995 and is aiming for satisfying the requirements of TRIPS/WTO in the area of intellectual property rights. See Pham Dinh Chuong, The Extension of the Scope Protection for New IPR Categories-A Pressing Demand to Industrial Property System of Vietnam, National Symposium on the Extension of the Scope Protection for New IPR Categories, Hanoi 10 January 2000. 728 See e.g., Nghi dinh 63/CP ngay 24 thang 10 nam 1996 quy dinh chi tiet ve so huu cong nghiep (Decree on 63/CP issued on 24 Oct. 1996 detailed provisions on intellectual property) [hereafter “Decree 63”], amended on 1 Feb. 2001 by Nghi dinh 06/2000/ND-CP ve sua doi bo sung mot so dieu cua Nghi dinh 63/CP quy dinh chi tiet ve so huu cong nghiep (Decree 06/2000/ND-CP on amendment and supplement of Decree 63/CP detailed provisions on industrial property [hereafter “Decree 06”], Nghi dinh 12/199/ND-CP ngay 6 thang 3 nam 1999 ve xu phat hanh chinh trong linh vuc so huu cong nhiep (Decree 12/1999/ND-CP issued on 6 March 1999 on issued on administrative sanctions on violations of industrial property regulations) [hereafter “Decree 12”], Nghi dinh 54/2000/ND-CP ngay 3 thang 10 nam 2000 ve bao ho bi mat kinh doanh, ten thuong mai, chi dan dia ly va chong canh tranh khong lanh manh lien quan den so huu cong nghiep (Decree 54/2000/ND-CP on protection of business secrets, trade names, geographical indications and protection against unfair competition relating industrial property), Nghi dinh 13/2001/ND-CP ngay 20 thang 4 nam 2002 ve bao ho giong cay trong (Decree 13/2001/ND-CP issued on 20th April 2002 on protection of new varieties of plants), Nghi dinh so 42/2003/ND- CP ngay 2 thang 5 nam 2003 ve bao ho quyen so huu cong nghiep doi voi bo tri thiet ke mach tich hop (Decree 42/2003/ND-CP issued on 2 May 2003 on protection of industrial property rights with respect to layout designs of integrated circuits), Vietnam Laws (the National Politics Publishers, 2004). 729 The Publication of the Draft of Law of Intellectual Property (the fourth draft), the National Office of Intellectual Property of Vietnam, Hanoi, 2005, available in Appendix. 730 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, art. 15.

© Pham Hong Quat 143 The amended ordinance on inventions did not exclude the chemical, pharmaceutical and foodstuff products from being patentable subject-matters.731 However, the amended ordinance did not stipulate how to handle the applications for patents with respect to such inventions either. Given the lack of the relevant examining procedures for granting patents with respect to those products, the effect of the amended ordinance in this aspect was still limited in reality.732

3. Legal grounds and procedures for revocation and invalidation of patents

With regards to the legal grounds for the revocation and invalidation of patents, the first ordinance on inventions provided a large discretion to the governmental authorities to decide the forfeiture of a patent for public exploitation in the case of necessity. 733 A patent might be subject to a decision of revocation when there appeared a justified claim concerning the patent holder or the patentability of the invention in question. However, there was no procedure for the judicial review of an administrative decision of revocation or forfeiture of a patent.734 A decision of invalidation was applicable to a patent when the patent holder did not make the due payment of validity maintenance fees.735

The amended ordinance on inventions removed the reason for the forfeiture of a patent but maintained the existing legal grounds for revocation and invalidation of a patent. The administrative agencies had exclusively competent authority to deal with the complaints of revocation and invalidation concerning the patentability of a patent under the administrative procedures.736 The courts only settled the complaints concerning the right to register an invention or the right to be the inventor of the registered invention under the judicial procedures.737

4. Term of patent protection

Regarding the term protection of patents, the first ordinance on inventions stipulated the term of patent starting from the filing date.738 The amended ordinance changed the starting date of

731 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, amended by Nghi dinh 84/HDBT ngay 20 thang 3 nam 1990 (Decree 84/HDBT on 20 th March 1990), Vietnam Laws (the National Politics Publishers, 2000), art. 13. 732 See statistics of applications for patents of inventions, the National Office of Intellectual Property of Vietnam, Hanoi, 2005. 733 Namely, the Prime Minister may decide, upon the proposal of the State Committee of Science and Technical Affairs, to forfeit a patent of invention with the payment of certain compensation to the patent holders in the case of necessity for the public or national demands. See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, Vietnam Laws (the National Politics Publishers, 2000), art. 23. 734 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, arts. 50, 51, 23. 735 Id. art. 21. 736 Id. art. 50. 737 Id. art 51. 738 Id. art. 16.

© Pham Hong Quat 144 patent validity from the filing date into the priority date.739 In this point, the amended ordinance was inconsistent with Article 4bis of the Paris Convention. However, because there is not a clear requirement on the starting date of patent validity in the provisions of this article, Vietnam did not deem that inconsistent provision necessary to be changed.

The amended ordinance also provided that a patent might be terminated before the expiry of this term if the patent holder did not pay the fee for maintenance of patent validity or declared abandonment of the patent.740 As for the priority date of the patent applications, both ordinances contained the provision consistent with the provision of the Paris Convention on the priority right. However, the primary ordinance did not give real effect to this provision by the absence of particular procedures for claiming the priority right.741 The amended ordinance overcame the shortcoming by the addition of provisions on procedures for claiming the priority right under the Paris Convention.742

5. Different treatment for inventions of foreigners

In relation to the treatment given to the inventions of foreigners, the first ordinance required that a patent application for an invention of a foreigner from another country had to be lodged with the representatives of the Vietnam Commercial Chamber located in the respective country before filing with the national patent office of Vietnam.743 This requirement was certainly a discriminatory treatment regarding procedural aspects applied to the inventions of foreigners.

The amended ordinance did not impose this burdensome requirement any more. However, it maintained that a patent application with respect to an invention of a foreigner had to be filed through a patent attorney of Vietnam when the applicant had no permanent residence or business establishment in Vietnam.744 Though this requirement of additional procedures was also a discrimination against foreigners in protection of inventions, it was not regarded inconsistent with the Paris Convention.745

739 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, art. 15.1. Ordinance on innovations of improvement and rationalization of production and inventions, supra 723, amended by Decree 84/HDBT, supra note 731. In this respect, the provision on the duration of patent counting from the priority date was inconsistent with the provision of independence of patents under Art.4bis of the Paris Convention. 740 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, amended by Decree 84/HDBT, supra note 731, art. 15.2. 741 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, art. 28. 742 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, amended by Decree 84/HDBT, supra note 731, art. 29. 743 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, art. 25.2. 744 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, amended by Decree 84/HDBT, supra note 731, art. 26.2. 745 See the Paris Convention, supra note 1, art. 2(3). This provision reserves “expressly” the independence of national laws of the members in maintaining certain discriminations against nationals of other countries, e.g., in judicial proceedings or administrative procedures or in appointment of an agent, concerning the procedural matters in protection of industrial property.

© Pham Hong Quat 145 In other aspects, the first ordinance applied the reciprocal principle as a pre-condition for the protection of inventions with respect to nationals of the other countries. This was deemed inconsistent with the national treatment of the Paris Convention, and therefore, the amended ordinance changed the wording of the related provision to place the consistency with the Paris Convention in the priority position.746

In summary, under the mandate of the Paris Convention, Vietnam was able to exploit effectively the principle of independence of patents in national legislation and the administrative practices concerning the protection of inventions. For the particular social and economic circumstances of the country, the regime of patent protection experienced flexible changes to serve the specific national policies in each period of development.

The regulations on the protection of inventions might contain certain permissible discriminations against foreigners and foreign inventions. The lack of a legal basis for the protection of patents for a long period after being a member of the Paris Convention did not lead to domestic law being found in violation of the Paris Convention. In the same vein, the absence of legal grounds for patent protection with respect to the inventions in a given field of technology did not itself constitute inconsistency of domestic law with the Paris Convention obligations.

Similarly, the legal grounds for identifying the validity, duration and scope of patent protection were up to decisions of the domestic legislature. As a matter of fact, there was no ruling of the International Court of Justice on the inconsistency with the Paris Convention imposed upon the allegedly violating domestic law of its members.747 Assumedly, even with both de jure and de facto discriminations against foreign inventions existing in the national patent regulations and practice of Vietnam, there would be no problem under the shield of the principle of national treatment of the Paris Convention.

746 See Ordinance on innovations of improvement and rationalization of production and inventions, supra note 723, amended by Decree 84/HDBT, supra note 731, art. 25.1. Article 25.1 of the Ordinance provided: “Foreigners (or foreign legal entities) may enjoy the rights and the interests provided by this ordinance on the basis of the reciprocal principle, in accordance with the legislation of the Socialist Republic of Vietnam and the international treaties to which Vietnam is a party”. (emphasis added) Art. 26.1 of the amended Ordinance stipulated: “Foreign organizations and individuals may request the protection of inventions in Vietnam and may enjoy the rights and interests provided by this ordinance in consistent with the international treaties to which Vietnam is a party or following the reciprocal principle.” (emphasis added) 747 There was no case brought before the International Court of Justice for the alleged violation of the Paris Convention. See Provisions on Enforcement in International Agreements on Intellectual Property Rights, GATT Doc. MTN.GNG/NG11/W/18, Feb. 10, 1988 Compilation on Enforcement of IPRs, supra note 155, at 42 (the factual report from the World Intellectual Property Organization). In the case of Vietnam, both the first ordinance and the amended ordinance on the protection of inventions contained certain provisions which could be regarded as a violation of its obligations under the Paris Convention. However, there was no complaint of such inconsistent provisions referred to the International Court of Justice. This seems to be part of general situation regarding the implementation of the Paris Convention in the other countries, e.g. the principle of first- to-use in the patent protection adopted by the United States still existed for a long time although it was clearly contrary to the principle of first-to-file mandated by the Paris Convention.

© Pham Hong Quat 146 With the perception that the above-mentioned situation could no longer be maintained under the TRIPS and WTO framework, Vietnam has invested great effort in changing its own legislation on patents to move towards the TRIPS standards. How this work has been done, and whether the current legislation satisfies with the TRIPS/WTO rules, are the questions for discussion in the next section.

II. Establishment of legal framework in conformity with the TRIPS

Since 1995, after the application for accession to the WTO, Vietnam has enacted a big volume of new laws and regulations on intellectual property protection in the light of TRIPS/WTO requirements. Concerning the patents of inventions, the new legal instruments have replaced the old ordinances on protection of inventions. Significantly, the Civil Code of 1995 provided the principles and substantial norms of the paten protection. For the implementation of the provisions on patents inscribed in the Civil Code, the government issued detailed regulations on particular matters such as patentable subject matters, granting procedures, duration and scope of patent protection etc.

Currently, the most important document is Decree 63 on detailed provisions of industrial property that was issued in 1996 and amended in 2001. This document is the main legal basis for the protection of patents in Vietnam at the present. Generally, it is admitted that the current domestic legislation has met the “adequate” protection standards required by TRIPS, except for the problems in the enforcement of intellectual property rights.748 The current national legal framework regarding the patent protection may be briefly introduced as follows.

1. The Civil Code of 1995

For the first time the protection of intellectual property rights was introduced in the Civil Code, a highest legal document passed by the National Assembly of the Vietnam on 28 October 1995 and which entered into force on 1 July 1996.749 This is a landmark in the history of the protection of IPR in Vietnam. The Civil Code that includes 26 Articles (Section 2, Chapter, Part 6) on the industrial property rights, stipulating the basic principles for establishment and protection of industrial property rights in Vietnam.750 In general, most articles maintain the spirit of the earlier ordinance on the protection of industrial property and covers additional articles to clarify the contents and scope of the industrial property protection. Concerning patents for inventions, the Civil Code provides generally for the patentability criteria, the basic and scope of patent rights, the exceptions and limitations of patent rights, the principles for determining the right of priority, the term of patent protection, the revocation and invalidation of patents.

748 See Tran Viet Hung, supra note 719, at 4. 749 See Bo luat dan su cua nuoc Cong Hoa Xa Hoi Chu Nghia Viet Nam do Quoc Hoi thong qua ngay 28 thang 10 nam 1995 (The Civil Code of the Socialist Republic of Vietnam, passed by the National Assembly on 28 Oct. 1995), Vietnam Laws (the National Politics Publishers, 2000). 750 Id.

© Pham Hong Quat 147 Although there was still a lack of separate laws for the protection of each industrial property subject matter was yet to put forth like other countries in the world, the Civil Code constituted the highest legal status to implement comprehensive industrial property activities and it marked an epoch-making turning point in the history of protection of industrial property in Vietnam.

2. The Governmental Regulations

Along with the process of negotiation for the WTO's accession, participation in the international and regional organizations and economic fora as well as preparation for the signing of bilateral trade agreement with the United States, foreign investment and economic relations between Vietnam and other countries are expanded and developed rapidly. Under these circumstances, the effective protection and enforcement of industrial property rights in Vietnam become a compulsory requirement for its integration into the world economy. One of the obligations that Vietnam has to fulfill before WTO is to ensure an intellectual property system, which satisfies the requirements provided for in the TRIPS.

2.1. Decree 63 on industrial property regulation

The Government promulgated the Decree 63/CP dated 24 October 1996 on detailed provision concerning industrial property (“Decree 63”), for implementing the Chapter 2, Part 6 on Industrial Property of the Civil Code.751 The Decree contains almost all necessary contents for implementing the provisions in the Civil Code and more over added many other necessary provisions on the procedures for the establishment and protection of industrial property rights through administrative measures in order to set up a complete legal framework for the increasingly efficient implementation of industrial property activities. It goes beyond doubt that the whole contents of the 5 Decrees issued earlier by the Government on industrial property were reviewed and adequately reflected in the Decree 63.752

By the issuance of Decree 63, the legal framework of Vietnam was basically appropriate to the standards required by the TRIPS. The main contents that were introduced in Decree 63 for the purpose of compliance with the TRIPS includes:753

- The term of protection of an invention has been increased to 20 years from the official filing date (instead of 15 years in the past);

- The registration of a trademark or an appellation of origin shall be cancelled if the owner has not used the trademark or appellation of origin without legitimate reasons for five consecutive years prior to the request for termination of validity;

- The procedure for registration of copyright has been stipulated for the compliance with the international standards.

751 See Decree 63, supra note 728. 752 See History and Development of the National Office of Industrial Property, The National Office of Intellectual Property of Vietnam (2004). 753 See Pham Dinh Chuong, supra note 721. See also Decree 63, supra note 728.

© Pham Hong Quat 148 However, a number of problems in legislation system of intellectual property in Vietnam had been not yet in conformity with the TRIPS Agreement at the time of issuance of Decree, such as:

- There was still a lack of regulations on protection of layout designs of integrated circuits, undisclosed information including trade secrets and repress of unfair competition.

- Geographical indications were not fully protected. Under existing legislation only geographical indication of a special kind, namely appellations of origin are protected; geographical indications other than appellations of origin, even signs symbolizing the origin country or locality of goods are not protected. Vietnamese law on protection of appellation of origin had no provision on additional protection for wines and spirits.

- The scope of trademark protection was narrower than the requirement of the TRIPS Agreement.

- The protection of plant variety was inefficient. The creators of plant varieties were protected by Certificate of Plant Variety Creator with validity term of 15 years counted from the date of filing applications. Apart from moral rights, the creator of a protected plant variety has the right to remuneration paid by the users whereas the exclusive right over the plant varieties belongs to the State.

- Micro-organisms and micro-biological processes were included in patent coverage of the Vietnamese existing law. However, at the time being special regulations on filing an application, examination and deposition had not been promulgated yet.

- There was still a lack of a special legislation on administrative procedures and remedies against the infringement of intellectual property rights.

2.2. Revision of Decree 63 and supplemental regulations

In order to establish and complete the legal documents on the industrial property protection, the Government made certain amendments of and supplements to Decree 63 with a view to meeting the standard under TRIPS. Along with the amendment of Decree 63, the Government issued some other legal documents on the protection of new industrial property subject matters, the issuance of legal documents on handling of violation of administrative regulations on industrial property as well as legal documents on the civil procedures for disputes and violations of industrial property rights. These regulations set up the legal regime for the protection of plant varieties, undisclosed information, geographical indications, repress of unfair competition, and layout designs of integrated circuits. Such regulations are provided in the following legal documents:

- Decree 12/1999/ND-CP on the handling of violations of administrative regulations on industrial property.

© Pham Hong Quat 149 - Decree 54/2000/ND-CP on the protection of industrial property rights to business secrets, geographical indications and trade names, and the protection against industrial property- related unfair competitions.

- Decree 06/2001/ND-CP on amendment of and supplement to the provisions in the Decree 63/CP on the detailed regulations concerning industrial property.

- Decree 42/2003/ND-CP on the protection of industrial property rights over semiconductor integrated circuit layout designs.

3. Substantive provisions on patent protection

3.1. Patentability

Under the existing laws on industrial property, the technical solutions may be protected as inventions include devices (machineries, equipment, tools, accessories, consumers goods etc.), substances (materials, chemical products, pharmaceutical products etc.) and methods (technological process, method of treatment, method of forecast etc.). Thus, patentable objects are required to be the types of technology.754

Technology to be protected in Vietnam has to satisfy certain criteria. To be patented as an invention, respective technology must comply with three requirements: it must be novel compared with the state of the art of the world technology on the date of priority; involve an inventive step and at the same time must be industrially applicable. Failing to meet one of these criteria, a technology can not be protected.755 The Vietnamese patent law is not different at all in comparison with common patent laws prevailing in the world.

Before the Civil Code of 1995 came into force, criteria for protection of utility solution were much lower compared with that of invention. It was sufficient that a technology was novel compared with the state of the art of the Vietnamese technologies and industrially applicable under the existing conditions of Vietnam, the technology may be patented and protected as utility solution. At that time, the criteria for utility solution in Vietnam were much lower compared with that for utility models in other countries as the Vietnamese technology was at a much lower level compared with the world’s one.

Such low criteria for utility solution were appropriate only to the practical conditions prevailed in the past years. Today, together with the broadening of the relations in the field of science, technology with the world, such criteria are no more compatible. If such criteria are maintained, technologies created in Vietnam would remain at a low level compared with that of the world and would lead to a trend of importation into Vietnam of second class technology widely available abroad, but not yet appears in Vietnam, and would make the technology exclusive for the importer, hence hampering the importation of other similar technology or more advanced technology.

754 See Decree 63, supra note 728, art. 4. 755 See the Civil Code, supra note749, art. 782 and Decree 63, supra note 728, art. 4.

© Pham Hong Quat 150 As a result of the said reasons, as stated in the Civil Code and Decree 63, the criteria for protection of utility solution have been changed to novelty compared with the world state of the art and applicability. These criteria are consistent with those for utility models applicable in developed countries. An invention is a technical solution that is new in terms of the world's existing technical development, involves an inventive step and is applicable to different social and economic fields.756

3.2. Patent rights

Under the current legislation,757 a patentee has the following rights:

- To have exclusive right to use the patented objects;

- To transfer the right to use the patented objects to other persons (through licensing contracts);

- To request the State competent authority to force the infringers of their industrial property rights to stop the infringing acts and pay damages

3.3. Exceptions of patent rights

However, the patent rights of the patentee are subject to certain limitations stipulated by the law and regulations.758 Accordingly, the patentee may not prevent others from using the patented objects in the following cases:

- The use of these objects is not for business purposes;

- Circulation and usage of the objects that the patentee or the persons having right of use in advance, the licensees had traded in markets;

- The usage of these objects by foreign transportation means that temporarily are or travel by transit through the territory of Vietnam provide that this usage is for maintaining the activities on such transportation means.

The patentee has the obligation of working the granted patent to serve the demands of the public interest. In certain cases, the exclusive rights of the patentee may be subject to the granting of compulsory licenses.759 By the application of persons having the need in the patented invention, the competent state authority may order the patentee to license the patented invention under the following conditions:

- The patentee, without reasonable motivation does not use, or uses the patented invention not in accordance with the needs of economic, social development of the country;

756 See the Civil Code supra note 749, article 782 and Decree 63, supra note 728, art. 4. 757 See the Civil Code, supra note 749, art. 796 758 Id. arts. 801, 802, 803 759 Id. art. 802.

© Pham Hong Quat 151 - The persons who have the needs in using the patented invention, have negotiated with the patentee in different ways and have offered reasonable price but the latter still refuse to conclude a contract on transfer of the right to use the patented invention;

- The use of the patented invention is necessary for satisfying the interest of national defense, national security, health, or other urgent needs of the society.

3.4. Enforcement of patent rights

Being civil rights provided for by the Civil Code, patent rights are protected through civil procedures. The patentee owners can bring before the civil court the person who did or does commit any acts infringing his patent rights.

In practice, civil court cases relating to industrial property are centered in Ha Noi city and Ho Chi Minh city. Majority of such cases are solved by mediation. This has possibly been resulted from the fact that Vietnamese people find judicial procedures unfamiliar, and they are afraid of possible procedural complexity, high cost and lack of judges experienced in the field of industrial property, etc.760

Administrative handling is the way to take administrative measures against those industrial property infringements, which are not serious enough to be subject to criminal procedures, and the industrial property owner would not like to have his case dealt with by the civil court. Administrative measures can be taken against industrial property infringements discovered by administrative authorities while carrying out their task of inspection and control.761

In practice of Vietnam, cases of industrial property infringements and disputes are settled more often through administrative procedures than judicial one. The reason is that the former is simple, quick and not too costly. According to statistics, annually there are thousands cases of infringement of industrial property rights, which are handled by the market management organizations and the police.762

The existing legal instrument applied for handling cases of industrial property rights infringement is Decree No 12/1999/ND-CP of 6 March 1999 the Government on the sanctions against administrative violations in the field of industrial property. The Decree provides for fully in detail all kinds of infringing acts, level of penalties, procedures and authorities responsible for the settlement. Accordingly, the competent authorities involving in the investigation and handling of administrative violations in the field of industrial property include the People Committees at various levels, the specialized industrial property inspectorate, the police, the customs, the market control forces, and the National Office of Intellectual Property.763 However, in the general view of compliance with WTO law, there are some vulnerable points existing in the domestic legislation, which are no longer safe as they were under the mandate of the Paris Convention. The discussion below will specify the

760 Tran Viet Hung, ‘Legal Provisions and Industrial Property Rights Enforcement in Vietnam’, Workshop for Judges, Hanoi, March 6-7, 2000. 761 Id. 762 Id. 763 See Decree 12, supra note 728, arts. 12-14.

© Pham Hong Quat 152 hidden problems existing in the current national legislation on patents in the light of the WTO panel rulings in interpreting the internal relations among the provisions of the TRIPS, their relevance to the rules of GATT 1994 and the consistency requirement of WTO law.

III. The hidden problems of the current patent legislation

1. Patentable subject matters: absence of detailed examining procedures

Under Decree 63 on detailed provisions of industrial property, the patentable subject matters cover both pharmaceuticals and microorganisms.764 However, there is no detailed provision on the examining procedures with respect to the inventions of these objects. For this reason, even though the language of the regulation is not inconsistent with the TRIPS requirements, the absence of the implementing instructions may preclude the real effect of the regulation in this respect.

The practice of the TRIPS was not justified by the fact of there being no actual demand from the side of applicants.765 Even though there were no request for patents of such products in practice, TRIPS requires the domestic law to make “available” the effective regime for the patent protection of inventions in all fields of technology.766 WTO law also requires the Members to respond with the “positive” action of bringing domestic laws and regulations into compliance with WTO obligations.767

764 Article 4.4 of Decree 63, supra note 728, as amended by Decree 06, supra note 728, in 2001, does not exclude pharmaceuticals and microorganisms from patentability. This provision states: “The following objects shall not be protected by the State as inventions or utility solutions: - scientific concepts, principles and discoveries; - methods and systems for economic organization and management; - methods and systems for education, teaching and training; - methods for the training of animals; - systems in regard of linguistics, information, classification and compiling of documentation; - designs and planning schemes for construction works, projects for regional development and planning; - solutions concerning only the shape of articles and being of an aesthetic nature only; - conventional signs, timetables, rules and regulations and symbols; - computer software, layout designs of integrated circuits, mathematical models, graphs and the like; - plant or animal varieties; - methods for the prevention, diagnosis or treatment of diseases for human being, animals; - processes bearing biological nature (except for micro-organic processes) for producing plants and animals.” 765 See Chapter 4, the findings of the Panel and the Appellate Body in the case of India-Patent, Complaint by US. 766 See the TRIPS, supra note 10, art.27.1. See also discussions in Chapter 4. 767 See the WTO Agreement, available at http://www.wto.org, Art.XVI:4. See also discussions in Chapter 4.

© Pham Hong Quat 153 The domestic law could not argue for the non-existence of the relevant implementing mechanism through internal technical or legal problems. Because the transitional period applicable to the WTO Members of developing countries has been terminated,768 a late comer like Vietnam should conform immediately to all TRIPS obligations.

For that reason, the absence of an effective implementing mechanism in the domestic legislation in patent protection for those products is likely to invite a complaint on the violation of the anti-discrimination rule of TRIPS, the unavailability and insecurity of the domestic legal basis, and the incompliance with WTO rules. In dealing with this situation, there would be no other option but creating the availability of the particular and executable examining procedures with respect to the inventions in the mentioned-above fields.

2. Revocation of patents: uncertainty of legal basis and problem of MFN obligation

2.1. Incompatibility with Article 32 of TRIPS

Article 32 of TRIPS requires that an opportunity for judicial review as to any decision of revocation or forfeiture of a patent shall be available.769 Though it does not set forth the particular legal grounds for revocation of patents, this provision may be regarded as a general limitation on the implementation of the principle of independence of patents regarding revocation of patents. In this aspect, the current legislation of Vietnam is deemed to be incompatible with that general limitation. For instance, Article 27 of Decree 63 on the detailed provisions of industrial property provides that:

“(1). (…) (a) First appeal:

An applicant for Protection Titles shall have the right to file an appeal to the Director General of the National Office of Industrial Property with respect to the rejection of an application for a Protection Title or refusal to grant; (…)

Any third party, whose rights and interests are directly linked to the grant of Protection Titles, … shall have the right to file an appeal to the Director General of the National Office of Industrial Property with respect to his relevant decisions.

(b) Second appeal, litigation:

In the event of disagreement with the decision by the Director General of the National Office of Industrial Property, the 768 See the TRIPS, supra note 10, arts. 65 and 70. The findings of the Panel and the Appellate Body in the case of India – Patent, Complaint by US clarified the expiry date of transitional period and the starting day for the full patent protection with respect to chemical agricultural and pharmaceutical products shall be 1 st Jan. 2005. See also discussion in Chapter 4. 769 See the TRIPS, supra note 10, art. 32. This article provides: “An opportunity for judicial review of any decision to revoke or forfeit a patent shall be available.”

© Pham Hong Quat 154 appellant shall have the right to file further appeal to the Minister for Science, Technology and Environment (second appeal) or proceed litigation according to the administrative procedures.

(4). (…) Appeals are dealt with in the order, procedures set forth in the Law on complaints and denouncements (...)”770

According to the above provisions, any third party may take a complaint against the decision of granting a patent. Consequently, the General Director of the National Office of Intellectual Property may render a decision of revocation of the patent where the complaint is evidenced and justified by reasonable arguments. That is so-called the first appeal.

Then, in the case where the complainant disagrees with the decision of the General Director of the National Office of Intellectual Property, he has an option: either taking an appeal to the administrative authority at a higher level, or taking a suit before the administrative court of competence. That is the so-called the second appeal or taking a suit.

Normally, the procedure for the second appeal or taking a suit is only applicable to the complainant in the case that the first appeal is subject to the decision of non-revocation of patent. This two-step optional procedure is also applicable in handling the complaints of termination and invalidation of patents under Article 28 and Article 29 of Decree 63, respectively.771

It is clear that the provision of Article 27 of Decree 63 provides an opportunity for the complainant to take a suit against the decision of non-revocation of a patent before the competent court. However, there exist two questionable points:

770 See Decree 63, supra note 728, and amended in 2001, art. 27. The English translation of the provisions of Decree 63 used in this paper is quoted from that made by the National Office of Intellectual Property of Vietnam, available in the Appendix. 771 Arts. 28 and 29 of Decree 63 issued in 1996 and amended in 2001 provide: “Section 28: Termination of validity of Protection Titles (1) Any third party shall have the right to file an application requesting the National Office of Industrial Property to terminate the validity of a Protection Title for reasons referred to in (2) of this Section. The application requesting termination of validity of a Protection Title shall be handled in accordance with the procedures for appeals under Section 27(2), (3) or (4) of this Decree. (…) Section 29: Cancellation of validity of Protection Titles (1) Any third party shall have the right to file an application requesting the National Office of Industrial Property to cancel the validity of a Protection Title for the reason that such Protection Title has been granted contrary to the provisions of law, as stated in (2) of this Section. The application requesting cancellation of validity of a Protection Title shall be handled in accordance with the procedures for appeals under Section 27(2), (3) or (4) of this Decree.(…)” In the above provisions, the term “Titles of Protection” refers generally to patents and certificates of registration with respect to the objects of industrial property rights granted by the National Office of Intellectual Property. See Art. 9, Decree 63 issued on 24 Oct. 1996 and amended on 1 Jan. 2001, Vietnam Laws (the National Politics Publishers, 2002).

© Pham Hong Quat 155 First, the provision does not mention the possibility of taking an appeal against the decision of revocation of patents from the side of the patent holder. Logically, he shall have no opportunity to bring a case before the competent court against the decision of non-revocation of his patent.

Second, the complainant may not take a suit before the competent court against the decision of non-revocation of a patent after he has opted to take an appeal to the administrative authority at a higher level. In both cases, the competent court does not have any chance to review the administrative decision with respect to the revocation of a patent.

Some may argue that an opportunity for the complainant to subject a revocation decision to a judicial review procedure is already available in the above mentioned provision, and therefore, may be regarded as being compatible with Article 32 of TRIPS.772 It should be noted that the language of Article 32 of TRIPS requires the availability of an opportunity for judicial review for every decision of revocation. Under this provision, at least the competent court should have an opportunity to review the final administrative decision of revocation of a patent. Otherwise, the patent holder who possesses the patent that was subject to the decision of revocation should be provided with an opportunity to bring a case against that decision before the competent court.

The legal basis for the existence of both these opportunities, one for the judicial bodies and the other for the patent holder, is indispensable for proceeding with a judicial review with respect to a decision of revocation. Because this legal basis is currently absent in the provision of Article 27 of Decree 63, it cannot be regarded as being compatible with the requirements of Article 32 of TRIPS.

One more point is that, Article 27 of Decree 63 refers to the Law on Complaints and Denouncements as a general legal ground for dealing with a complaint of revocation of a patent.773 Articles 39 and 46 of this law provide for an optional opportunity for a complainant to bring a complaint before administrative authorities or courts under administrative or judicial procedures.774Accordingly, an opportunity for bringing a lawsuit against an

772 See the Explanations of Amendments to Decree 63/CP made by Decree 06/2001/ND-CP, the National Office of Intellectual Property of Vietnam, Hanoi, 2001. 773 See Luat ve khieu nai va to cao (Law on Complaints and Denouncements) No. 09/1998-QH10 dated 2 Dec. 1998, Vietnam Laws (the National Politics Publishers, 2000). The Law of Complaints and Denouncements is referred as a general legal ground for dealing with the complaints of termination and invalidation of a patent. See Arts.27.4, 28.1 and 29.1 Decree 63 issued on 24 Oct. 1996 and amended on 1 Jan. 2001, Vietnam Laws (the National Politics Publishers, 2002). 774 Arts. 39 and 46 of the Law on Complaints and Denouncements provide: “Article 39. Within the period of 30 days, counting from the date of expiry of the time-limit for handling complaints as prescribed in Article 36 of this Law where the complaint has not been handled, or counting from the date of receiving the first decision of complaint where the complainant disagrees with this decision, the complaint may take an appeal to the competent authority at higher level or take a suit before courts in compliance with the procedures provided by law... Article 46. Within the period of 30 days, counting from the date of expiry of the time-limit for handling complaints as prescribed in Article 36 of this Law where the complaint has not been handled, or counting from the date of

© Pham Hong Quat 156 administrative decision is only available for the complainant when he opts for a judicial procedure instead of administrative procedures in taking his appeal against the first decision of the complaint. Where the complainant opts for an administrative procedure for his appeal, the decision of the administrative authority at a higher level shall be final without any further review.

In this respect, the Law on Complaints and Denouncements precludes the right of a complainant to sue the final administrative decision on a complaint before a competent court. And therefore, the courts will have no chance to review under judicial procedures with respect to that decision. For this structure of dispute settlement, an opportunity for the judicial review of a decision to revoke a patent is not always available under the Law on Complaints and Denouncements.

It is noted that the Law on Complaints and Denouncements contains two “precautionary” provisions, which may be explained in a way to argue for the compatibility with Article 32 of TRIPS. These provisions are arranged in the last section of the law, that is, the provisions for the implementation of the law. Firstly, Article 101 of the law provides that the complaints of foreigners be handled in accordance with the law and the related international treaties to which Vietnam is a member.775 Secondly, Article 102 of the law empowers the government to stipulate in details instructions for the implementation of the law.776 In this point, the argument based on the provision conforming to the implementation of the law to the TRIPS and WTO Agreement may be questionable in some aspects:

Firstly, when the international treaty itself requires the “availability” of the procedure that is unavailable under the law, the non-existence of any other detailed provisions on that procedure would make the general provision of Article 101 ineffective. The rulings on the availability of the patent protection regime strengthen the “availability” requirement of the judicial review mechanism required by Article 32 of TRIPS. 777 By the same token, the WTO Agreement mandates the positive response in bringing domestic laws and regulations into the compliance with the WTO law.778

Secondly, because there is no mandatory clause which clearly prohibits the opportunity of the courts to interfere with the process of handling complaints in the law, while it does allow the government to issue detailed implementing regulations, it could be argued that it has the nature of discretionary legislation of the law. However, this argument cannot always be justifiable under the rulings on the possible violation of discretionary legislation. In other

receiving the decision of complaint where the complainant disagrees with this decision, the complaint may take an appeal to the competent authority at higher level, unless the decision of complain is the final decision…” (Emphasis added) (English translation made by VietLaw & Legal Forum) See Law on Complaints and Denouncements, supra note 773. 775 See Law on Complaints and Denouncements, supra note 773, art.101. 776 Id. art.102, 777 See findings of the Panel and the Appellate Body in the case of India-Patent, Complaint by US, discussed in Chapter 4 778 See discussions in Chapter 4.

Thirdly, it may be explained that the combination of the provisions in both articles provides the discretion for the executive branch to implement the law in a manner consistent with TRIPS and WTO requirements. In this respect, the practical implementation of the law does not support that explanation. The fact is that the related regulations of the government for implementing the law contain no specific provision providing for an additional opportunity for taking a suit against the final decision of patent revocation under administrative procedure before the courts.780

Fourthly, it may be argued that the complaint settlement structure inscribed in the law is to deal with complaints in all areas generally. Article 102 allows the government to issue a particular regulation to provide a supplemental mechanism to deal with specific complaints concerning patent revocation. Even if this argument is practical, it is hard to be secure under the rulings on the uncertainty of legal basis formed by administrative instructions when they are counter to the statutory language of law.781

For the above-mentioned reasons, it seems that the provisions of Articles 101 and 102 of the Law on Complaints and Denouncements cannot help in demonstrating the compatibility of the law with TRIPS requirements and WTO rules. For the purpose of making domestic legislation conform to WTO law, the appropriate solution for this particular issue is to make both provisions of the Law on Complaints and Denouncements and of Decree 63 consistent with the language of Article 32 of TRIPS. Accordingly, an opportunity for the competent court and the patent holder involving judicial review procedures for every patent revocation decision should be available in the statutory language and the related implementing regulation.

2.2. Problems with MFN treatment requirements

The legislation of Vietnam is likely to face certain problems caused by the requirement of MFN treatment regarding the revocation of patents. The fact is that Vietnam has concluded a bilateral trade agreement with the United States that contains a specific provision limiting legal grounds for a decision of patent revocation. Article 7.6, Chapter II of the bilateral trade agreement with the United States provides that each party may revoke a patent “only when grounds exist that would have justified a refusal to grant the patent.”782 This limitation is not found in the text of TRIPS. However, where the limitation of legal grounds for the revocation of patents is regarded as an advantage in the protection of intellectual property that Vietnam provides the nationals of the United States, such an advantage should be accorded

779 Id. 780 See Nghi dinh huong dan thi hanh Luat khieu nai to cao (Decree on detailed provisions and instructions for implementing the Law on Complaints and Denouncements), Vietnam Laws (the National Politics Publishers, 2000). 781 See discussions in Chapter 4. 782 See Hiep dinh Thuong mai giua Hoa Ky va Cong Hoa Xa hoi Chu nghia Vietnam (Agreement between the United States of America and the Socialist Republic of Vietnam on Trade Relations), available at www.usvtc.org/trade/bta/, Chapter II, art.7.6.

Under Decree 63 on detailed provisions of industrial property, the reason that may result in a refusal to grant a patent refers only to the insufficient patentability criteria of the related invention.783 In addition, although there is no clear provision, it may be justifiable for a refusal to grant a patent if there appears an unresolved dispute about the right to be the patentee or proof of untruthful information on the part of the applicant or the inventor.784

According to the bilateral trade agreement with the United States, Vietnam may refer to these legal grounds to revoke a patent. It is noted that, besides such legal grounds, in the current legislation of Vietnam there exist some other reasons leading to the revocation of a patent. Particularly, Decree 12 on handling violations of administrative regulations on industrial property stipulates the revocation of a patent as a sanction applied to the violations during the carrying out of patent registration procedures.785 The acts of registering a patent for the purpose of unfair competition, unlawful market monopoly or market power appropriation, or falsifying the contents of a patent are subject to the imposition of a fine and the sanction of revocation of the patent.786 Where the patent was determined as the object of an act violation as mentioned, the National Office of Intellectual Property is required to revoke a patent

783 See Decree 63, supra note 728, arts. 23.1 and 25. 784 Id. arts.15.4, 16.2. 785 See Decree 12, supra note 728, art.5.2. 786 Article 5 of Decree 12 provides that: “Article 5. The acts of violation of regulations on the procedures of establishment and exercise industrial property rights (…) 1. (…) (a) Carrying out the procedures of establishment or exercise of industrial property rights to avoid or to execute the acts that are prohibited or restricted by the laws and regulations in other areas; (b) Carrying out the procedures of establishment or exercise of industrial property rights for the purpose of unfair competition, unlawful market monopoly or market power appropriation, nullification of industrial property objects, restraint or restriction of the protection scope of industrial property rights of others, abuse or derogation of commercial reputation of others; (…) 2. (…) (a) Falsifying, erasing, forging a Title of Protection or a Certificate of Registration on protection of industrial property rights, to the extent that the criminal liability for such acts is not applied. (b) Forging documents, having a deceit in carrying out the procedures of request of grant or renewal or amendment of a Title of Protection (…). 3. The supplemental sanctions: (…) (b) Forfeiture of the document, or the Title of Protection, or the Certificate of Registration that was falsified or forged with respect to the acts of violation prescribed in paragraph 2 of this Article; (c) Forfeiture of the Title of Protection or the Certificate of Registration having been granted to the individual or organization committed an act of violation prescribed in subparagraphs (a) and (b) of paragraph 1 of this Article.”

It is clear that the provisions of Decree 12, on its face, refer to some legal grounds and procedures applicable to the revocation of a patent that go beyond the limitation provided by Article 7.6, Chapter II of the bilateral trade agreement with the United States. It may be argued that these provisions are elaborated for the purpose of warning rather than actual application in practice of implementing this regulation. In fact, there has been no case of revoking a patent under procedures provided in Decree 12.788

Such an argument and fact would be unjustifiable under the rulings on discrimination treatment that violates Article 4 of TRIPS. On the one hand, the possibility of applying these procedures can be regarded as an “extra hurdle” imposed on the nationals of the other countries other than those of the United States, and therefore the previously mentioned provisions on the face of it may constitute less favorable treatment being given to the former.789 On the other hand, even if there is no actual opportunity for the competent authority to apply these provisions in reality, the practical implications or “fundamental thrust and effect” of these provisions may be the vulnerable points in a challenge to legislation “as such” as it stands.790

It needs to be recalled that the WTO panels and the Appellate Body may express their own understanding and explanations on the relevant domestic law and regulations subject to their examination, which could be independent from that of the related dispute party. 791 At any rate, the additional legal grounds and procedures applicable to the revocation of patents stated in the language of Decree 12 would be at a high risk before a challenge on the basis of the MFN treatment obligations of TRIPS. The wise advice would be to abolish the current provisions on the revocation of patents in terms of a supplemental sanction, applicable to an act of violation of administrative regulations on industrial property. Moreover, all legal grounds for the revocation of patents should be defined and stipulated clearly in the provisions of Decree 63. The wording of these provisions needs to avoid using vague language that may lead to different understandings and explanations.792 Because the limitations of the legal grounds to revoke a patent has been determined clearly in the bilateral

787 See Decree 12, supra note 728, art.14.4. 788 See Report on Enforcement Situation of Intellectual Property Rights in Vietnam, the Ministry of Science and Technology and the Ministry of Culture and Information, July, 2004. See also Le Van Kieu, the Role of Inspectors of the Ministry of Science and Technology in Handling the Disputes and Complaints on Intellectual Property, the Ministry of Science and Technology, 2004. 789 See the findings of the Appellate Body in the case of US-Section 211 Omnibus, discussed in Chapter 4. 790 See the findings of the Panel in the case of EC-Geographical indications, Complaint by Australia, discussed in Chapter 4. 791 See discussions in Chapter 4. 792 The wording of the relevant provisions of Decree 63 presently uses some unclear terms that may lead to confusion in understanding. E.g., termination of validity and cancellation of validity refer to some legal grounds that should have been defined in terms of revocation. Therefore, which legal grounds are applied to the revocation of a patent and which are applied to the invalidation of a patent seem to be undistinguishable. While the procedure for filing a request of revocation is available, there is no clear provision on legal grounds and procedure for the issuance of a decision of revocation. The vague and confusing provisions on this matter are likely to cause disputable questions in their explanation and application. See Decree 63, supra note 728, arts. 27, 28, 29.

© Pham Hong Quat 160 trade agreement with the United States, the relevant domestic regulation on this matter should be revised appropriately. The revised regulation needs to ensure that it will not create any discriminatory treatment inconsistent with the requirements of Article 4 of TRIPS.

3. Term of protection of patents: “extra hurdle” in renewal procedure

Since Vietnam has recently changed its legislation on the protection of patents towards the TRIPS standards, there exist different regimes applied to calculating the term of protection of patents. On the one hand, the term of a patent granted on the basis of the old regulations is counted from the priority date.793 On the other hand, the term of a patent is granted on the basis of the new regulation is counted from the filing date.794 In the perception that the patents granted pursuant to the old regulation have an insufficient term of 20 years counting from the filling date as required by Article 33 of TRIPS, the government has amended the new regulation to allow the prolongation of the protection term with respect to those patents granted on the old regulation.795

The renewal of the term of protection is applicable to such patents in so far as they get a sufficient term of 20 years counting from the filing date. By this amendment, it was deemed that the new regulation was satisfactory with the TRIPS standards.796 However, in the view of rulings regarding “extra hurdles” recently developed by the WTO panels and the Appellate Body, there appears a hidden problem in the revised provision of the new regulation on patents mentioned above. The question is that, under the amended provision allowing the prolongation, the patent holder of a patent granted on the basis of the old regulation should express his wish to renew the patent by filing a request with the National Office of Intellectual Property. Article 69.2 of Decree 63 as amended by Decree 06 in 2001 states that:

“Section 69: Transitional provisions

(2) Protection Titles granted on the basis of the Ordinance on Innovations and Inventions of 1981, the Ordinance on Utility Solution of 1988, the Ordinance on Trademarks of 1982, the Ordinance on Industrial Designs of 1988 or on the basis of the Decree on the Protection of Industrial Property Rights of 28 January 1989 shall continue to be valid under such legal instruments until the date of expiry. After the above respective term of validity, according to the procedures for renewal provided in paragraph 2, Section 30 of this Decree, upon the owners’ request, the Trademark Registration Certificates and Industrial Design Certificates shall be renewed, patents for inventions shall be renewed until expiration of 20 years of the

793 See Ordinance on protection of industrial property of 1989, supra note 726, art. 23 and Ordinance on innovations and inventions, supra note 723, art. 15. 794 See Decree 63, supra note 728, art. 9, 795 See Decree 63, supra note 728, art. 69, as amended by Decree 06, supra note 728. 796 See Hoang Van Tan, The New Regulations on Industrial Property of Vietnam, the National Office of Intellectual Property of Vietnam, August, 1997, p.5.

According to the above provision, the National Office of Intellectual Property only provides for the renewal of a validity term to a patent granted on the basis of the old regulation after consideration of the request filed by the patent holder. It is noted that there is not any procedure applied to the renewal of term of validity of a patent granted on the basis of the new regulation, except for the obligation of payment of a validity maintenance fee.798 Even if the National Office of Intellectual Property cannot refuse any request of renewal with respect to a patent granted on the basis of the old regulation, the requirement of an additional procedure for the renewal of the patents granted on the basis of the old regulation is evident.

It is necessary to recall that the patents that need to be renewed under Article 69.2 are those that start the term of protection from the priority date, and for that reason their duration is shorter than those starting the term of protection from the filing date. In other words, in terms of duration, there exist two different categories of patents granted under the old regulation. The first category includes those patents having been granted with claims of the priority right, and therefore, they were determined the starting date as the priority date. The second category includes those patents that have been granted without the claim of the priority right, and therefore, the starting was date was determined as the filing date. Under the new regulation, only one category of patents exits so every patent’s starting date for the term of protection is the filing date.

This amended provision can be attack on two aspects. First, the provision imposes an additional procedure only on the patents with claim of the priority right granted on the basis of the old regulation. Therefore, it creates discrimination between the first category of patents and the second category of patents, which are granted under the old regulation. Presently, Vietnam has no mechanism for the protection of dependent patents and both old and new regulations do not refer to the concept of internal or domestic priority right. 799 Namely, a patent applicant cannot claim the priority right based on the first application that is a domestic one, while he may claim the priority right based on the first application having been filed in other countries under Article 4 of the Paris Convention.800

For that legal structure, the additional procedure in essence is applicable only to a patent for a foreign invention that has been subject to a foreign patent application. It does not apply to a patent for a domestic invention that comes first to the National Office of Intellectual Property. In other words, the requirement of the additional procedure creates an “extra hurdle” that basically imposed on the patent holders who obtained the patents for the inventions having been protected under the patents of foreign countries. This point is

797 See Decree 63, supra note 728, art. 69, as amended by Decree 06, supra note 728. 798 See Decree 63, supra note 728, art. 45. 799 The additional inventions are not protected under the legislation of Vietnam at present. See Decree 63, supra note 728. The protection of dependent patents is proposed in the draft of the new law on intellectual property. See Du Thao 5 Luat So Huu Tri Tue (the fifth Draft of Law on Intellectual Property), art. 138, the Legislation Committee of the National Assembly, September 2005. 800 See Ordinance on Innovations and Inventions, supra note 723, art. 29; Decree 63, supra note 728, art. 17,

In addition, if the fact that the patent applications with claim of the priority right only came from the foreign applicants is proved, the additional procedure could be regarded as an “extra hurdle” imposed purposely on the foreign patent holders. The extra hurdle, consequently, is regarded as the less favorable treatment given to the foreign patent holders. This treatment certainly contradicts the national treatment principle under Article 3.1 of TRIPS. Moreover, when the GATT standards of less favorable treatment are also applied in examining the national treatment obligation of the “incorporated” Paris Convention, the “extra hurdle” may violate at the same time the national treatment obligation under Article 2(1) of the Paris Convention, as incorporated by Article 2.1 of TRIPS.801

In other aspect, based on that fact, the revised provision would be subject to not only a challenge of legislation “as such”, but also a challenge of de facto discrimination regarding the actual application of that provision. It is noted that the rulings of the WTO panels have confirmed the possibility of raising a challenge of de facto discrimination in regard to the relevant domestic legislation under TRIPS obligations.802

Second, it is also plausible for the claim of the discrimination between treatment given to the first category of patents under the old regulation and that provided for the patents under the new regulation. For similar reasons, the patents for the foreign inventions with claims of the priority right under the old regulation shall be subject to the requirement of additional procedure for the renewal of term of protection. While such a requirement does not apply to the patents granted under the new regulation, it does not distinguish the patents with the priority right and those without the priority right in terms of duration account.

In other words, under the new regulation, the patents for domestic inventions are not subject to the requirement of the additional procedure. In this respect, the “extra hurdle” created by the revised provision is likely to create discrimination against the patents for foreign inventions under the old regulation in comparison with the patents for domestic inventions under the new regulation. The revised provision is, therefore, incompatible with the rule of anti-discrimination under Article 27.1 of TRIPS.

Otherwise, if the fact that the patent holders of the patents with the priority right are actually the foreign patent applicants is evidential in the practice of the National Office of Intellectual Property, the additional procedure may be regarded as an extra hurdle imposed only on the foreign patent holders. By the same reasoning with respect to the foreign patent holders in relation to the domestic patent holders under the old regulation, the requirement for the renewal procedure may constitute the less favorable treatment with respect to the foreign patent holders in the comparison with the domestic ones under the new regulation. As a result, it would be risky before a challenge on the basis of legislation “as such” as it stands or a challenge of de facto discrimination. The rulings on the standards of domestic law

801 The change of the standards for measuring the consistency of the national treatment obligations under the Paris Convention after incorporation into the TRIPS is discussed in Chapter 3. See the findings of the Panel and the Appellate Body in the case of US-Section 211 Omnibus as discussed in Chapter 4. 802 See the findings of the Panel in the case of Canada- Patent, Complaint by US, discussed in Chapter 4.

In short, since the application of the relevant “incorporated” provisions of the Paris Convention should be in compliance of with the rule of anti-discrimination and the national treatment principle of TRIPS, the requirement of an additional procedure for filing requests of renewal and considering such requests is deemed to be inconsistent to the rules of TRIPS and the WTO. Although the amendment that the government made to the transitional provisions of the new regulation is admittedly an active step towards conformity with the TRIPS standards, the amended provision needs to be reviewed in regards to its procedural aspects. Accordingly, it should eliminate any elements that may cause a discriminatory treatment due to the specific features of the legislation and the practice of Vietnam on the protection of patents.

4. Requirement of source indication with respect to foreign licensing

Under the rationale of protection of social interests, Section 65(5) of Decree 63, on the face of it, provides that a product manufactured in Vietnam under a “foreign licensing” or with a “foreign trademark” be required to display an indication “made in Vietnam” on its label. This is regarded as a national policy for the protection of consumers’ interest. It protects the domestic consumers from confusion over the sources of products. Despite this, there is no governmental regulation to clarify what a “foreign licensing” or a “foreign trademark” is.

An instruction from the National Office of Intellectual Property refers to “foreign licensing” and “foreign trademark” with the implication of the use of an industrial property subject matter that originates from a foreign country, or is transferred by a foreign owner. 804 The foreign element in the use of the industrial property subject matter may cause confusion for the consumers as to the source of the goods when it is advertised on products. For example, it may create an image that the related product is produced in, or originates from a foreign country whose reputation for such products is widely known. For that reason, it is necessary the true source indication “made in Vietnam” is added on the label of all products that are produced in Vietnam under a “foreign licensing”. In the language of a governmental decree, this requirement is read as follows:

“Section 65: Protection of national interests and social interests in industrial property activities

(…)

(5)(…)In case a product is manufactured in Vietnam under a foreign license or bears a trademark which may create the

803 See the discussions on the change of the national treatment principle of the Paris Convention as incorporated into the TRIPS and the challenge of legislation “as such” and de facto discrimination under the TRIPS in Chapters 3 and 4, respectively. 804 See Cong van so 1080/PC-QQL cua Cuc So huu cong nghiep tra loi Tong cuc Hai quan ngay 4 thang 11 nam 1999 (Official Response Letter No. 1080/PC-QL of the National Office of Industrial Property on the date of 04 November 1999 provided to the General Customs), Official Notice Records of 1999, the Legislation and Management Division, the National Office of Intellectual Property.

The requirement of source indication is applicable to any industrial property subject matter belonging to the categories provided in Decree 63, when it is under a “foreign licensing”.806 It means that this requirement is also applicable to a foreign licensing of a patent. Accordingly, licensing a patent that covers a foreign originated invention or a patent that is held by a foreign patentee should be subject to the requirement. A product that is manufactured in Vietnam under the license of a foreign originated patent, or a license granted by a foreign patentee, is required to add the source indication “made in Vietnam” on its label.

The provision is problematic when there is no provision in Decree 63 on the same requirement applied to a product manufactured under a domestic licensing. A product manufactured under a domestic patent licensing, accordingly, is not subject to the requirement of source indication. It means that the use of a patent that covers a domestically created invention and is licensed by a domestic patentee is not subject to the requirement of source indication.

On this point, Decree 63, on the face of it, contains a discriminatory treatment applied to a patent for a foreign originated invention and a foreign patent holder. It may be argued that the requirement of source indication is an “extra hurdle” in the patent protection given to a foreign originated invention and a foreign patent holder. The effective equality of opportunities in patent protection is not available to a foreign invention and a foreign patent holder. This may be regarded as a less favorable treatment to the foreign inventions and foreign patent holders.

In addition to the provision of Decree 63 on the requirement of source indication, Decree 12 on the administrative remedies in the field of industrial property applies a fine and certain supplemental sanctions to an act of failing to comply with the requirement of source indication.807 The supplemental sanctions, in an appropriate case, may be the revocation of the business license, the confiscation of the products subject to the violation, the compulsory attachment of the indication to the products, or the correction of the improper indication displayed on the products.808 Particularly, Section 6.2(b) provides that the failure to display the source indication on the products manufactured in Vietnam under a “foreign licensing” is an act of violation of the regulations on industrial property protection indications:

“Section 6: The acts violating the regulation on industrial property protection indications

(…)

805 See Decree 63, supra note 728, art. 65, as amended by Decree 06, supra note 728. 806 This decree provides the regime protection to patents, trademarks, industrial designs, appellation of origin of goods. See Decree 63, supra note 728, arts. 4-7, as amended by Decree 06, supra note 728. 807 See Decree 12, supra note 728, art. 6 (title ). 808 See Decree 12, supra note 728, art. 6.3.

© Pham Hong Quat 165 2(b) Failing to display the indication or displaying in an insufficient or unclear manner the indication in the phrase “made in Vietnam” on the products manufactured in Vietnam under a foreign licensing (…)”809

This provision applies generally to a product manufactured by a “foreign licensing”, including a foreign licensing of a patent. It means that an act of failing to display, or displaying improperly the source indication “made in Vietnam” on a product manufactured under a foreign licensing of patent shall be regarded as an act of violation. Pursuant to Section 6.2(b) of Decree 12 such an act shall have applied the prescribed relevant fine and sanctions.

It is noted that there is no provision in Decree 12 providing for similar sanctions applicable to an act of failing to display, or displaying improperly, the source indication on a product manufactured under a domestic licensing. Accordingly, where a product manufactured under a domestic licensing of patent does not display, or displays improperly the source indication, there will be no fine and sanction applied to it.

It is clear that, on the face of it, Decree 12 applies administrative sanctions on the failure to display the source indication with respect to the use of a patent for a foreign originated invention or a patent licensed by a foreign patent holder, while it does not do so with respect to the use of a patent for a domestically originated invention or licensed by a domestic patent holder. In this respect, similar to Section 60(5) of Decree 63, Section 6.2(b) of Decree 12, on the face of it, it is likely to constitute discriminatory treatment against a foreign originated invention and a foreign patent holder. A claim of a less favorable treatment in terms of application of an “extra hurdle” to a foreign originated invention and a foreign patent holder may be relevant in this case.

In the practice of implementation, there are many cases to which the administrative authorities applied the provisions of Decree 63 and Decree 12 on the source indication requirement. After the issuance of Decree 12 in March 1999, the competent authorities, including the Economic Polices, the Market Inspections, and the Customs, executed a series of examinations with respect to the products manufactured by a “foreign licensing” or bearing a foreign trademark. In such cases, the mentioned-above provisions have been uniformly applied, without any distinction between a product under a trademark licensing and one under a patent licensing.

The practical effects of the provisions under Section 65(5) of Decree 63 and Section 5.2(b) of Decree 12 are reflected in the series of decisions made by the enforcement authorities on the detention of the products, which are manufactured domestically under a “foreign licensing” and lacked the source indication as required.810 The instructions of the National Office of

809 See Decree 12, supra note 728, art. 6.2(b). 810 For example, under Cong van cua Chi cuc Quan ly thi truong Thanh pho Ha Noi so 30 ngay 1 thang 7 nam 1999 (Official Notice of the Market Inspection of Hanoi City No. 30 on the date of 1 June 1999) provided to the National Office of Industrial Property, the Market Inspection of TanBinh District, HochiMinh City, detained a lot of “Lee Part Korea” gas cookers, of which the main parts were manufactured by a domestic enterprise, without displaying the indication “Made in Vietnam” as required. Under Cong van so 137-QLTT cua Cuc Quan ly thi truong ngay 5 thang 7 nam 1999 (Official Notice of the Market Inspection Bureau No. 137-QLTT on the date of 5 July 1999) provided to the National Office of Industrial Property, the Market Inspection of HoChiMinh City detained a lot of “TOSHIBA” refrigerators, which were assembled from imported accessories by a domestic

© Pham Hong Quat 166 Intellectual Property in response to the requests of the enforcement authorities also give effect to the provisions in the implementing practice. The implementing instructions of the National Office of Intellectual Property provided to the enforcement authorities clarification that the source indication requirement under Decree 63 and Decree 12 is applicable to any forms of manufacture of a product. A product that is manufactured in Vietnam, wholly or partly, under a foreign licensing should be subject to the source indication requirement:

“If the product (or its main part) is manufactured in Vietnam, it is required to display the indication “made in Vietnam” on the product; with regards to the failure to display clearly and sufficiently this indication as required, it shall be regarded as an act of violation and be handled under Section 6 of Decree 12 dated 6 March 1999 in terms of a violation on the industrial property indication.”811

“Where a product is assembled in Vietnam, it should display the indication that the product is assembled in Vietnam, if not, it shall be an act of violation under Section 6 of Decree 12.”812

The requirement is also applied generally to any industrial property category that is the object of a license granted by a foreign industrial property right holder. There is no limitation or exception regarding a patent in the application of the requirement. The purpose of the requirement is to protect the consumers’ interests from confusion over the source of products. The particular instructions may be read in the following explanation of the National Office of Intellectual Property:

“The regulation on industrial property protection requires a compulsory expression of the indication “made in Vietnam” with respect to a product manufactured under a foreign licensing, or produced in Vietnam and bearing a foreign trademark, which contains an element that may cause a misleading perception that the product is of a foreign country enterprise. These products did not bear the source indication as required. Under Cong van cua Tong cuc Hai quan so 5799/TCHQ-GSQL ngay 12 thang 10 nam 1999 (Official Notice of the General Customs No. 5799/TCHQ-GSQL on the date of 12 October 1999) provided to the National Office of Industrial Property, the local customs detained some lots of products which did not attach properly the source indication as required. Under Cong van cua Cong an Thanh pho Ha Noi so 312 ngay 7 thang 12 nam 2000 (Official Notice of the Police of Hanoi City No. 312 on the date of 07 December 2000) provided to the National Office of Industrial Property, the Police of DongDa District detained a lot of BBM motorbike exhaust pipes, which were produced by a domestic enterprise, and so on. See Official Letter Records of 1999 and 2000, the Legislation and Management Division, the National Office of Intellectual Property. 811 See Cong van cua Cuc So huu cong nghiep so 589/PC-QL ngay 22 thang 7 nam 1999 tra loi cong van cua Cuc Quan ly thi truong Thanh pho Ha Noi (Official Response Letter No. 589/PC-QL of the National Office of Industrial Property on the date of 22 June 1999 provided to the Market Inspection of Hanoi City), Official Notice Records of 1999, the Legislation and Management Division, the National Office of Intellectual Property. 812 See Cong van cua Cuc So huu cong nghiep so 668/PC-QL ngay 17 thang 7 nam 1999 tra loi cong van cua Cuc Quan ly thi truong (Official Response Letter No. 668/PC-QL of the National Office of Intellectual Property on the date of 17 July 1999) provided to the Market Inspection Bureau, Official Notice Records of 1999, the Legislation and Management Division, the National Office of Intellectual Property.

© Pham Hong Quat 167 or originated from a foreign country (pursuant to Section 66 of Decree 63/CP dated 24 October 1996 and Section 6 of Decree 12/1999/ND-CP dated 6 March 1999), in order to protect the interest of the consumers”813

In addition, the instructions also specified that the indication should be in Vietnamese. The expression of the indication on the product should be presented in such a manner that informs clearly the source of the product to the consumers that the product is manufactured in Vietnam under a foreign licensing.814 The following instructions referred to these points:

“Under the provisions of Section 66 of Decree 63/CP dated 24 October 1996 of the Government on detailed regulation on industrial property, if a product is manufactured in Vietnam under a foreign licensing or bears a trademark that may create an image that such a product is of a foreign country or originates from a foreign country, it is mandated to display in full (not in abbreviation) the indication “made in Vietnam” on the product. This provision is explained that the related manufacturer does not necessarily inscribe precisely the phrase “made in Vietnam” on the product. Instead, it is possible to replace this phrase by other words (in Vietnamese), which give a clear indication that the product is manufactured by an enterprise having a particular address in Vietnam.”815

Under Section 14 of Decree 12, the investigation and consideration of the violation, the competent authorities should follow a three-step proceeding for complicated cases, or a one- step proceeding for simple cases.816 In practice, in almost all cases the three-step proceedings are applied.817 Three steps include detection, consultation, and decision. For example, in

813 See Cong van cua Cuc So huu cong nghiep so 1080/PCQL ngay 4 thang 11 nam 1999 tra loi Tong cuc Hai quan (Official Response Letter No. 1080/PC-QL of the National Office of Intellectual Property on the date of 04 November 1999 provided to the General Customs), Official Notice Records of 1999, the Legislation and Management Division, the National Office of Intellectual Property. 814 It is noted that a licensing with respect to a patent or trademark itself, for example, should be subject to the requirement of licensing indication, which applies to the products manufactured under the licensing. However, this requirement applies to a license in general. It does not discriminate between a foreign licensing and domestic licensing as in the case of source indication requirement. This may be read in another clause of Section 65(5) of Decree 63, as follows: “In case a product is manufactured under a license, such indication on products, in advertisements and transactions for commercial purposes shall be compulsory.” See Decree 63, supra note 728, art. 65(5), as amended by Decree 06, supra note 728. 815 See Cong van cua Cuc So huu cong nghiep so 1832/PC-QL ngay 21 thang 12 nam 2000 tra loi Cong an Quan Dong da (Official Response Letter No. 1832/PC-QL of the National Office of Intellectual Property on the date of 21 December 2000 provided to the Police of DongDa District), Official Notice Record of 2000, the Legislation and Management Division, the National Office of Intellectual Property. In this letter, the instructions referred to Article 66 of Decree 63 because at this time this decree was not amended. Section 66 became Section 65 after amendment. See Decree 06, supra note 728, art. 2.31. 816 See Decree 12, supra note 728, art. 14.

First, the enforcement authority in charge of implementing the regulations on the source indication requirement needs to identify the different kinds of patented products during the course of market inspection and handling of the violation. The patented products in every case should be classified into two kinds: the patented products, which are subject to a foreign licensing, and the products, which are not subject to a foreign licensing, for the purpose of application of the source indication requirement. When they suspect the patented products are of the kind that should have applied the source indication requirement, normally based on the trademark of the products, they will detain the lot of products which have no “made in Vietnam” indication presented in Vietnamese and in full letters.

Second, the enforcement authority shall consult with the National Office of Intellectual Property, or the Department of Science and Technology belonging to the Municipal People’s Committee, to confirm whether the related patent involving the pending case belongs to a foreign patent holder, and whether it is subject to an effective licensing agreement. The consulted agency shall respond to the request of the enforcement authorities in a certain period. In the response letter, the consulted agency should clarify the legal situation of the related patent, information about the patent holder, the related effective licensing, if any, as requested. The consulted agency may also render the tentative conclusion about the violation based on the information provided by the enforcement authority, and specify particularly legal provisions applicable to the case.

Third, the enforcement authority after receiving the response letter from the consulted agency, will decide the appropriate measures in the case. Where it is confirmed that an act of violation exists in the pending case, they will apply certain fine and supplemental sanctions as provided in the related provisions. The decision of the case, in the case of violation, will be delivered to the consulted agency for co-operation and supervision and the revocation of the related license when necessary.

For the purpose of applying the source indication requirement, the enforcement authorities during the operation of the above procedures should always keep in mind the distinction between a foreign originated trademark and a domestic trademark; between a foreign originated patent and a domestic patent; between a foreign trademark owner and a domestic trademark owner; between a foreign patent owner and a domestic patent owner, etc., in relation to a product produced in Vietnam. That distinction is nothing but a discriminatory treatment with respect to foreign originated trademarks and foreign originated patents, and to foreign trademark owners and foreign patent owners, in comparison with the domestic ones.

The above discriminatory treatment is clearly inconsistent with the requirements of the anti- discrimination rule under Article 27.1 and the national treatment principle under Article 3.1 of TRIPS. A claim may be made under the current regulation with a challenge to the legislation “as such” or a using the “extra hurdle” argument. The challenge may be made not only regarding the discriminatory language, but also the actual application of the regulation. Even 817 See Official Notices Records, the Legislation and Management Division, the National Office of Intellectual Property.

The government may explain that the source indication requirement is necessary for the purpose of protecting the legitimate interests of the domestic consumers. The argument for the interest of consumers seems to be valid under the rationale of the principles provided in Article 8.1 of TRIPS. However, this explanation may not be justifiable for the reason that the requirement of source indication itself is inconsistent with Articles 27.1 and 3.1 of TRIPS, because it is applied in a manner that discriminates against foreign originated patents and foreign patent holders. The demand of the public interest does not justify the inconsistency of the relevant domestic law to the TRIPS obligations. Otherwise, any measure executed under the rationale of Article 8.1 shall be subject to the “consistency test” existing as a lock to the realization of this provision.818 As discussed earlier, the WTO panels may examine domestic legislation for the purpose of the assessment of WTO obligations compliance. They may make their own understanding and independent explanation on the relevant domestic law.819

In such a situation, the “fundamental thrust and effect”, in terms of the practical implications or the actual effects of the regulation, may be the appropriate reasoning for the conclusion of inconsistency with the national treatment obligation under Articles 3.1 of TRIPS. Moreover, where the GATT standards of less favorable treatment is practically applied to measure the national treatment obligation of the Paris Convention, the “extra hurdle” caused by the imposition of the discriminatory requirement of source indication may also be a violation of the national treatment obligation under Article 2(1) of the Paris Convention, as incorporated by Article 2.1 of TRIPS.

The examination of the provisions on the source indication requirement and their actual application discloses that the current regulations are incompatible with the requirements of Articles 27.1 and 3.1 of TRIPS, in response to the source indication requirement. The incompatibility in this point cannot be justified under Article 8.1 of TRIPS because of the TRIPS inconsistent nature. The solution for that may be one of the two suggested options. Either the source indication requirement is totally eliminated from the current regulations or the discriminatory elements existing in the language of such regulations be excluded.

If the requirement of source indication is necessary for the purpose of the public interest, it should be set forth and applied in a manner consistent with the requirement of the national treatment principle and the anti-discrimination rule. Particularly, it should be applicable to both foreign and domestic patents and patent owners. Any discrimination existing in the textual language of the legal documents and in the implementing mechanism should be entirely precluded.

The government may also choose another way to implement the second option. It seems to be safe under TRIPS if it leaves this matter to the regulation of the other fields other than industrial property protection. Under the regulation of the other fields, for example, the law on the protection of consumers’ interest or on protection against unfair competition practices, the kind of the source indication requirement may find some justification. 818 See discussions in Chapter 3. 819 Id.

At present, Decree 63 is the only national legal document containing provisions on the matter of the priority right. Article 17 of this Decree provides for the right to claim the priority right of nationals and the assimilation of nationals of the Members of the Paris Convention. The contents of this provision were prepared in the light of the relevant provisions of the Paris Convention on the priority right.820

Apart from that, Article 17 requires reciprocity in the provision of the priority right. Basically, this article enables a patent applicant to claim the priority right on the basis of an application having been filed earlier in another country when such a country is a member of the Paris Convention or also provides with the nationals of Vietnam the same treatment. The claim of the priority right referring to a basic patent application having been filed in the country that has entered a bilateral agreement with Vietnam on the matter of the priority right is also recognized.

Similarly, the rule on the assimilation of nationals under the Paris Convention is also applied in the provisions of this article. Accordingly, not only the nationals or residents but also the persons who have real and effective industrial or commercial establishment in the territory of a member of the Paris Convention are entitled to claim the priority right under this article. A similar rule applies to nationals and the assimilation of nationals of a country that has concluded a bilateral agreement with Vietnam or recognized the principle of reciprocity on the matter of the priority right. This structure can be read in the following provisions:

“Section 17: Priority rights

1) Applicants for a Protection Title for an invention, utility solution, industrial design or trademark may claim priority on the basis of an application which has been filed earlier in another country for the same subject matter or on the basis of an exhibition of the object described in the application at an official, or officially recognized international exhibition, organized in Vietnam or a third country, if:

a) Such third country where the earlier application has been filed or where the exhibition has been organized is a member of the Paris Convention or has signed a bilateral agreement on priority rights with Vietnam, or applies the principle of reciprocity in this respect;

b) The applicant is a national or resident or has a real and effective industrial or commercial establishment in a country which satisfies the conditions under (a) of this subsection;(…)” (emphasis added)

820 See Decree 63, supra note 728, art. 17.

© Pham Hong Quat 171 It is clear that the above-mentioned provisions do not provide for or, at least, make available an open opportunity for the extension of the application of the priority right, for instance, where Vietnam accesses the WTO, and therefore are bound with TRIPS and the “incorporated” Paris Convention. As discussed, the scope of the national treatment principle and the assimilation rule has been changed due to the incorporation of the Paris Convention into the TRIPS. The nationals of all WTO Members are regarded “as if” they are the nationals of the countries in the Union of the Paris Convention, and the nationals of non- WTO Members shall be regarded “as if” they are nationals of the countries outside the Union of the Paris Convention.821 As a result, the national treatment regarding the priority right under Article 2.1 of the Paris Convention, when it is subject to the treatment of nationals under Article 3.1 of TRIPS, will be provided unconditionally to the nationals of all WTO Members. Similarly, the same treatment regarding the assimilation of nationals under Article 3 of the Paris Convention, when it is subject to the treatment of nationals under Article 3.1 of TRIPS, shall be accorded unconditionally to the nationals of non-WTO Members who meet the criteria of the extended rule.

Both of paragraphs (a) and (b) of Section 17 of Decree 63 are incompatible with these implications. On the one hand, paragraph (a) of Section 17 of Decree 63 does not provide any possibility for according the treatment of nationals regarding the priority right to the nationals of all WTO Members. The requirement of reciprocal conditions in the application of this provision is inconsistent with the national treatment and MFN treatment requirements of Articles 3.1 and 4 of TRIPS. On the other hand, paragraph (b) of this section does not allow the extensibility of the rule of assimilation regarding the priority right to provide the same treatment to the nationals of non-WTO Members who meet the criteria of the extended rule. In addition, the reciprocal conditions set forth in both paragraphs of this article are clearly incompatible with the national treatment and MFN treatment requirements of Articles 3.1 and 4 of TRIPS.

In other words, the application of the paragraphs (a) and (b) of this section is likely to result in a “less favourable treatment” regarding the priority right with respect to the nationals of a given WTO Member or non-WTO Member to some extent. The language of this section itself does not, at any rate, seek the extensibility and the unconditional provision of the priority right to the nationals of all WTO Member and those of non-WTO Members qualified for the extended rule of assimilation. In this point only, the section is at highly risk before a challenge to legislation “as such” as it stands for its inconsistency with Articles 2.1 and 3 of the Paris Convention, as subjected to the requirements of Articles 3.1 and 4 of TRIPS, when Vietnam becomes a WTO Member.

The solution for this incompatibility is that Section 17 of Decree 63 should be revised in time so as to make available a possibility of adaptation to the change in the “incorporated” Paris Convention obligations in respect to the priority right. Alternatively, the appropriate amendments should be added to the contents of this section, immediately after the accession of Vietnam to the WTO.

6. Reciprocity in the protection of patent for foreigners 821 See discussions on the change in the scope of the national treatment principle and the rule of assimilation of nationals under the Paris Convention after incorporation, in Chapter 3.

© Pham Hong Quat 172 One incompatible point existing in Decree 63 is the provision on the conditional protection of industrial property rights providing for foreigners. This point stays behind the requirement of reciprocity applicable to the nationals of the countries outside the Paris Union to which Vietnam is a member. This requirement could be read in the provisions of Section 67.1 of Decree 63: “Section 67: Protection of industrial property rights of foreigners 1. Foreign natural or legal persons in the following cases shall have the right to request protection for their industrial property rights in Vietnam in accordance with the provisions of this Decree and shall enjoy all such rights and be subject to all such obligations as Vietnamese subjects: (a) Natural or legal persons that enjoy the rights in accordance with the Paris Convention; (b) Natural or legal persons of countries that have signed an agreement on the mutual protection of industrial property with Vietnam or adopted the principle of reciprocity in matters of industrial property protection with regard to Vietnam for each other’s natural or legal persons.” (Emphasis added) As stipulated in the above provision, apart from the nationals and the assimilations of nationals of the Paris Union countries, Decree 63 provides the protection of industrial property rights only to the nationals of those countries which have either concluded the bilateral agreements on the protection of industrial property rights with Vietnam or accepted the reciprocity principle in the protection of industrial property. Accordingly, the scope of application of the national treatment in the patent protection cannot be automatically extended to the nationals of the countries who are not enjoyable the national treatment under the Paris Convention. In the sense that the TRIPS does not allow the reciprocity in the application of the national treatment principle, the above provision of Decree is incompatible. The reciprocity requirement is inconsistent to the provision of Article 3.1 of the TRIPS. Some may be arguable for the application of a provision existing in the Civil Code, which allows the application of the international treaty provisions in case there exists a conflict between the national law provisions and the international treaty provisions.822 However, in the view that the National Assembly would not recognize the WTO Agreement, including the TRIPS, as the treaties having direct applicability in the jurisdiction of Vietnam, as generally admitted by other countries, the possibility of excluding the above inconsistence seems to be impractical. This point therefore would be likely to cause some dispute when Vietnam adheres to the WTO Agreement and the TRIPS regulation.

7. Incompatible requirements regarding compulsory licenses 822 See the Civil Code, supra note 749, art. 837. This article provides: “Industrial property right of foreign individuals and legal persons in regard of the objects patented by the Government of the Socialist Republic of Vietnam and the international conventions which the Socialist Republic of Vietnam has signed or joined to.” (Translation of the National Politics Publisher)

© Pham Hong Quat 173 As discussed in the previous chapters, the TRIPS requires much more intensive conditions as to the application of national regulation on compulsory licenses, compared with the Paris Convention. Not only compulsory licenses for non-working and insufficient working of patent should be subject to the rules provided in Article 5(A)(4) of the Paris Convention, all other types of compulsory licenses must observe the requirements stipulated in Article 31 of the TRIPS. The provisions of the Civil Code and Decree 63 mention only to the types of compulsory licenses for non-working and insufficient working of patent in light of Article 5(A) of the Paris Convention.823

“Section 51: Licence upon decision of the competent State authority (“Non-voluntary licence”) 1. A non-voluntary licence refers to a permission compulsorily granted by the owner of an industrial property right, or his or her licensee over the whole invention, utility solution or industrial design, to another natural or legal person or another entity to use such industrial property object upon a decision of the competent State body as provided for in this Section. (a) The owner of industrial property rights shall be forced to grant a non- voluntary license on the conditions provided for in Article 802 of the Civil Code. (b) The provisions set forth in paragraph 1 Article 802 of the Civil Code shall not apply to the four (4) year period of the filing date and three (3) year period of the date of granting Protection Titles. (c) The industrial property rights owner who was forced to grant a non-voluntary license has the right to request the termination of the non- voluntary license when the circumstances resulted in the non-voluntary license do not exist and impossible to take place any more, provided that the termination shall not cause any damage to the licensee.

It is clearly that the types of compulsory licenses, e.g., for the use of the Government in certain cases, would not be subject to the requirements provided in the Civil Code and Decree 63. This is likely to be inconsistent with the requirement of the TRIPS. Stating in the term “other use without authorization of the right holder”, Article 31 of the TRIPS places the all the types of use of patent without the authorization of the patent owner to be subject to the detailed conditions stated in this article, except for the exceptions provided in Article 30 of the TRIPS. This point is endorsed by the Panel in the case of Canada-Patent protection for pharmaceuticals, as discussed in the previous chapters. Furthermore, the national regulations on compulsory licenses should also observe the rules of non-discrimination as required by Article 27.1. The Panel in the case mentioned above affirmed the extension of this rule to the provisions of Articles 30 and 31.824

In the light of the WTO panel rulings on the scope of the rules of non-discrimination and the prevailing effect of these rules under Article 27.1 upon the limitations of patent rights under 823 See Civil Code, supra note 749, art. 802, Decree 63, supra note 728, art. 51. 824 See discussions on the case of Canada-Patent, Complaints by EC, in Chapter 4

© Pham Hong Quat 174 Article 31, the narrow scope of the national regulation on compulsory licenses under the Civil Code and Decree 63 appears incompatible to the requirement of the TRIPS. This point should be taken into account in the preparation of the new law on intellectual property.

Another point concerning the procedures of granting of compulsory licenses seems to be inconsistent with the requirements of the TRIPS. That is, the national legislation should make available the possibility for the patent right holder to take claim according to a review procedure against the decisions of the government authority on the granting of compulsory licenses and on the remuneration paid to the patent right holder.825

Under the provision of Decree 63, the Minister of Science and Technology is the only government authority having the competence to grant compulsory licenses and to handle the complaint regarding compulsory licenses. The patent right holder where he is enforced by a compulsory license cannot take an appeal against the decision of the Minister of Science and Technology when that decision is regarded being final. This point could be read in the provisions of Sections 51.8 of Decree 63:

“8.The non-voluntary licensor has the right to file an appeal to the Minister of Science, Technology and Environment for the decision of rejecting his request. The person requesting the non-voluntary license has the right to file an appeal to Minister of Science, Technology and Environment for the decision of rejecting his request. The procedures for filing and handling an appeal provided for in Section 27 of this Decree shall also apply to the appeal to the Minister of Science, Technology and Environment under this paragraph, where the latter is handling the first appeal. In the case of disagreement with the decision of the Minister of Science, Technology and Environment, the appellant has the right either to file a further appeal to the Prime Minister according to the Law on complaint, denouncement or to proceed litigation according to administrative procedures.” 826

Again, as the case of the decision on the revocation of patent discussed above, the reference to the dispute settlement procedures provided in Article 27 of Decree 33 and the Law on Denouncements and Complaints would not be convinced in certain aspects in the light of the relevant WTO panel rulings for the uncertainty of the national legal grounds. The unavailability of the legal grounds for foreign patent holders to take a complaint against the government decisions under the a review procedure is, therefore, likely to be challenged under Article 31 of the TRIPS.

8. Absence of procedures for enforcement of patent rights

825 See the TRIPS, supra note 10, arts. 31(g), (i), (j). 826 See Decree 63, supra note 728, art. 51. 8.

© Pham Hong Quat 175 As stated in Articles 28.1, 34, 42 of the TRIPS, in conjunction with Article 3 of the TRIPS, foreign patent right holder should be provided the opportunity in taking advantages from the so-called reversal of the burden of proof in enforcing the patent rights in the infringement cases, especially in the case of the process patents.827 Accordingly, the WTO Members are required shall make available this opportunity in the civil procedural jurisdiction. In Vietnam Domestic courts appear to be unfamiliar to this type of procedures which fall in the term of the principle of fair and equitable procedures and preliminary injunctions prevailing in the western countries.828 Neither the civil procedural law of Vietnam nor the court practice endorses this type of procedures in the civil enforcement jurisdiction. Certainly, this would be a challenge for the domestic civil law in dealing with this requirement of the TRIPS in ensuring the opportunity of enforcement of patent rights for foreigners.

Even the TRIPS does not require the national civil law to create a special system for enforcement of intellectual property right separate from the common civil procedural system,829 it is noted that Article 3 of the TRIPS requires the WTO Member to give effect to the obligations coming within the “minimum standards” determined in the substantive provisions of the TRIPS. Where the language of Article 3 and the related substantive provisions of the TRIPS do not mention any exception in the execution of the obligations under these minimum standard provisions, the derogation of such obligations might be subject to a likely challenge under the TRIPS jurisprudence.

9. Procedural burden and ex officio enforcement

As discussed earlier regarding the regulation on foreign licensing and source indication, there exists a situation that sometimes might amount to an abuse of the regulation on the intellectual property protection to interfere arbitrarily with the normal course of trade in goods, including the importation. After the issuance of the regulation on administrative sanctions against the infringement of industrial property rights, the enforcement authorities in many cases invoking this regulation to take ex officio action against the distribution of the suspecting infringement goods.830 Among the good faith actions undertaken by some enforcement authorities, there appeared the abuse of this regulation in certain cases. The enforcement authorities may themselves determine their actions in investigating and controlling the goods that they suspected the infringing goods. Especially, the customs

827 See the TRIPS, supra note 10, arts. 28.1, 34, 42, 3. See also Joseph Straus, Reversal of the Burden of Proof, the Principle of “Fair and Equitable Procedures” and Preliminary Injunction under the TRIPS Agreement’, The Journal of World Intellectual Property (Vol. 3, 2000), pp. 807-823. 828 See Dinh Ngoc Hien, ‘Legal Sanctions to Ensure the Enforcement of Industrial Property Rights in Vietnam’, Workshop for Judges, Hanoi, March 6-7, 2000. 829 See the TRIPS, supra note 10, art. 41.5. 830 E.g., a series of cases conducted ex officio by the enforcement authorities were mentioned the official letters exchanging with the National Office of Intellectual Property. See Cong van cua Chi cuc Quan ly thi truong Ha noi so 30 ngay 1 thang 6 nam 1999 (Official Notice of the Market Inspection of Hanoi City No. 30 on the date of 1 June 1999 provided to the National Office of Industrial Property), Cong van cua Cuc Quan ly thi truong so 137 –QLTT ngay 5 thang 7 nam 1999 (Official Notice of the Market Inspection Bureau No. 137-QLTT on the date of 5 July 1999), Cong van cua Tong cuc Hai Quan so 5799/TCHQ-GSQL ngay 12 thang 12 nam 1999 (Official Notice of the General Customs No. 5799/TCHQ-GSQL on the date of 12 October 1999), Cong van cua Cong an Thanh pho Ha Noi so 312 ngay 7 thang 12 nam 2000 (Official Notice of the Police of Hanoi City No. 312 on the date of 07 December 2000), Official Letter Records of 1999 and 2000, the Legislation and Management Division, the National Office of Intellectual Property.

© Pham Hong Quat 176 authorities, in some cases under the instruction of the Government, created the procedural requirement as to “non-infringing situation” applicable to the importation of goods in certain fields. 831 Under the rules of the customs, the importers should provide with the customs officers the certification of non-infringing situation of the imports.832 If not, the imports would be suspended for investigation and verification of non-infringement situation.833 Coincidently, the verification of non-infringement situation concerning the industrial property rights, including trademarks, industrial designs, and patents are subject to a very complicated and time-consuming procedure.834 Consequently, if the importers do not prepare in advance the certification of non-infringement situation, the imports are likely to be subject the decision of suspension by the customs authorities. The effect of the regulation on enforcement of intellectual property might sometimes focuses in certain types of imported products, both in the domestic distribution and in the importation. As a result, the application of that regulation might amount to an effective barrier to the importation of the specific products. The question is whether this kind of measure is always justifiable under the TRIPS and, further, WTO jurisprudence.

Would the regulation and the application of the regulation be regarded the appropriate measures of enforcement that “do not themselves become barriers to legitimate trade” in the meaning of the Preamble of the TRIPS? It is noted that the TRIPS gives effect to the kind of challenges under the nullification and impairment violations in the provisions o Article 64.2 of the TRIPS.835 Another account might also be relevance for consideration is that, as found by the Panel in the case of EC-Geographical indications discussed in the previous chapter, the TRIPS and GATT 1994 may be cumulatively applied in certain cases. When the strict measures being applied in contingency against certain kinds of imported products to an intensive extent, even if they might not be directly in violation of any provisions of the TRIPS, would these measures be safe under Article III: 4 of GATT 1994? Further, if it may be justified by some way for the non-discrimination against origin of products, should such measures of intellectual property protection as far as being amounted to barriers to the importation be always justifiable under Article XX (d) of GATT 1994? Pursuant to the recent WTO panel rulings, it may be confident that the possibility of escaping entirely the challenges from these provisions is impractical.

10. Greater protection

While the enforcement under the civil procedures lacks certain legal grounds for the courts to conduct the procedures in consistent with the requirement of the TRIPS, in the recently enacted Law on Customs contains some provisions “going beyond” the minimum standard requirement of the TRIPS. This point may be read in Article 57 of the Law on Customs of 2001.836 This article allows the intellectual property right holder to request the Customs authorities to enforce against the suspecting action of infringement in both importation and

831 Id. 832 Id. 833 Id. 834 See Decree 12, supra note 728, arts. 11-21. 835 See the TRIPS, supra note 10, art. 64.2. 836 See Luat Hai Quan 2001 (the Law on Customs of 2001), art. 57, Vietnam Laws (the National Politics Publisher, 2004).

© Pham Hong Quat 177 exportation. The customs procedure of suspension of goods for enforcement of infringement is applicable equally to both imports and exports. Along with this provision, Decree 12 on administrative sanctions against the industrial property infringement acts also provides the opportunity for the right holders taking action before the enforcement authorities to suppress the infringement in the exportation of goods.837

In the sense that the TRIPS does not compulsorily require the WTO Members to have the strong action in the suppression of infringement in the exportation of goods, the above provisions of the Law on Customs and regulation on administrative sanctions constitute a greater protection regime for the right holder. Even these provisions are not inconsistent with the provisions of the TRIPS, it is noted that Article 1.1 in conjunction with Articles 3 and 4 of the TRIPS requires the greater protection treatment should be accorded to the nationals of all WTO Members in the manner of non-discrimination. This type of provisions, on the face of it, does not contradict the provisions of the TRIPS. However, it might also become an easily disputable issue when the enforcement authorities, by some reason, create a different treatment in applying such provisions. In that situation, a challenge under the relevant articles of the TRIPS would not be impossible.

837 See Decree 12, supra note 728, art. 9.1.e.

In the general assessment of the domestic legislation, the current regulations on patents in Vietnam contain a number of problems in regard to their detailed provisions from the view of the rulings of the WTO panels that have been recently developed in dealing with TRIPS related disputes. These problems are the vulnerable points for challenges by TRIPS and WTO that the domestic legislation of Vietnam is likely to face after becoming a WTO Member.

The analysis of the relevant domestic law of Vietnam shows that the incompatibility of the current regulations with the requirements of the “incorporated” Paris Convention and TRIPS either discloses on the surface of the particular provisions or lies behind the legal structure of the provisions. In this point, the specific features of the legislation system and practical situation of Vietnam on the protection of patents are the significant accounts in the examination of the domestic law for purpose of ensuring conformity with TRIPS standards and WTO rules.

Any solution to overcome the revealed problems should observe the view that, what may be done under the mandate of the Paris Convention may not always be justifiable when it is subject to the requirements of TRIPS. In that view, the revision of the relevant provisions of the current regulations concerning the treatment given an invention and a patent should take into account the change in the rules of the incorporated Paris Convention. Moreover, it also needs to comply with the limitations and requirements under the TRIPS and WTO jurisprudence.

In that connection, it is worth examining the patent related contents of the draft of the new law on intellectual property that is the subject of hot debate in the recent meetings of the legislators, namely, the periodical sections of the National Assembly of Vietnam. The draft of the new law should be examined for some specific provisions with relevance to the new challenges from the TRIPS and WTO jurisprudence, which were used in the examination of the current legislation on the patent protection. In addition, in response to the current debates of the legislators and the drafters of the draft of the new law, the discussion in the next chapter focuses on a selected issue where it is possible to find an appropriate answer in the light of the development of TRIPS and WTO jurisprudence regarding the intellectual property. In this respect, the discussion in the next section intends to serve both the drafting process at present and the implementing process after the enactment of the new law.

Along with the efforts of the government in reviewing the current regulations in relation to TRIPS standards, the National Assembly, the highest legislative body of Vietnam, is considering the enactment of a new law on intellectual property. With the perception that this new law on intellectual property is an important step to facilitate the process of accession to the WTO, which is facing obstacles from some key players the WTO,838 the discussion and consideration of the draft of the new law is following a tight schedule.839 The first duty of the new law is to codify all norms and procedures on intellectual property protection available in the different regulations into one code.840 The second duty is to clarify and supplement the legal grounds, if necessary, for the purpose of compliance with TRIPS and WTO rules.841

In dealing with the first duty, the drafters feel that the current regulations are in full compliance with TRIPS standards and requirements. It is therefore not necessary to revise any contents of the substantive provisions in the current regulations, but to rewrite them in the language of the new law. 842 Concerning the second duty, the exhaustion of rights in relation to parallel importation is one of the issues subject to different opinions.843 The drafters proposed some alternative solutions to this issue. However, the legislators are considering these concerns from different aspects.844

Along with the duties of the new law, the discussion in this section examines the provisions set out in the recent drafts of the new law to identify the problems, if any, in light of the “constrained” principle of independence of patents, as well as the solution to them. To some extent, this study supports the first duty of the new law. Subsequently, the discussion will focus on the specific issue of parallel importation by clarifying the problems concerning this issue in certain aspects. A comprehensive understanding of the existing problems in the current legislation and policy on parallel importation is necessary for seeking an appropriate solution in the new law. The discussion on this issue will be continued in the next chapter, clarifying the concerns of the legislators regarding the legality and justification for the adoption of parallel importation of patented products in the new law and its implementing

838 See To Trinh ve Du An Luat So Huu Tri Tue No. 235/TTr-BKHCN ngay 7 thang 2 nam 2005, lan thu hai (the Second Submission of the Draft of Law on Intellectual Property dated 7th Feb 2005), pp. 5-6, the Legislation Department, the Ministry of Sience and Technology, 2005. The issue of intellectual property protection in Vietnam is a particular concern of the United States in the bilateral negotiations for the accession of Vietnam to the WTO. See news available at http://www.wto.int/english/news_e/news05_e/vietnam_15sep05_e.htm, http://english.vietnamnet.vn/biz/2005/11/507975/. 839 The schedule for the discussion and consideration of the draft of the new law on intellectual property is arranged for two consecutively periodical sessions of the National Assembly in the year of 2005. See VNNExpress.net. 840 See To trinh ve Du An Luat so huu tri tue, lan thu nhat, ngay 10 thang 1 nam 2005 (the First Submission of the Draft of Law on Intellectual Property dated 10 Jan 2005) Ministry of Science and Technology, 10 th Jan. 2005, pp. 2-3. 841 Id. 842 Id. 843 See the First Submission of the Draft of Law on Intellectual Property Submissions of the Draft Intellectual Property, supra note 840; the Second Submission of the Draft of Law on Intellectual Property, supra note 838. 844 Id.

1. The problems inherited from the current regulations

The draft of the new law was prepared on the basis of codifying all current provisions concerning intellectual property rights that are presently located in different laws and regulations.845 The norms and procedures contained in the current administrative regulations issued by the government will be given a stronger legal status, that is, a statute enacted by the National Assembly. By codifying in full the provisions of the current regulations, the administrative authorities and the courts shall base their acts of protection and enforcement of intellectual property rights on the particular legal basis existing in the statutory provisions instead of governmental regulations. The law shall therefore limit the arbitrary discretion given to the government in the issuance of under-law decrees.846

With respect to patents for inventions, for the view that there is no incompatibleness between the current provisions on patents and the requirements of TRIPS,847 the draft of the new law mostly retains the principles and norms of the patent protection provided in the Civil Code and Decree 63.848 For this feature, the problems hidden in the current regulations, as discussed in the above section, remain intact in the new draft law. On this point, the first type of problems that should be clarified in the statutory language of the new law includes those existing in the current regulations. For instance, the following provisions of the draft should particularly be reviewed.

1.1. Ineffective examining regime for patents of pharmaceuticals

Article 59 of the draft does not exclude pharmaceuticals and agricultural chemical products from being unpatentable subject matters.849 However, the articles of Section 3, Chapter VIII do not contain any specific provisions as a particular legal basis for examining patent applications with respect to these products either.850 The lack of the particular provisions and the legal basis for detailed instructions on the examining procedures would in fact nullify the protection of patents with regard to such products. Consequently, in terms of the requirements for adequate and effective protection and the rule of anti-discrimination under TRIPS, at least a claim of de facto discrimination for the ineffective protection given to these objects may bring a challenge to the legislation on this point.

845 See the Second Submission of the Draft of Law on Intellectual Property, supra note 838, p. 6. 846 See the First Submission of the Draft of Law on Intellectual Property supra note 840, pp. 2-3. 847 See the Second Submission of the Draft of Law on Intellectual Property , supra note 838, p. 3. 848 See Du Thao Luat So Huu Tri Tue, the Draft of Law on Intellectual Property (the fifth draft and the fourth draft), Section III (the fifth draft which is going to be submited to the eighth section of the elevent National Assembly), the Legislation Committee of the National Essembly, 23rd September 2005. The fourth draft was published for the public opinions. Non-official English translation version of the fourth draft made by the National Office of Industrial Property is available in the Appendix of this paper. 849 See the Draft of Law on Intellectual Property, supra note 848, art. 59 of the fifth draft and art. 63 of the fourth draft. 850 Id.

There is no particular provision in the draft to provide the general legal grounds for the revocation of patents. On the one hand, there is no provision for judicial review in the draft that is applicable to every decision of revocation, as required by Article 32 of TRIPS. Article 119 of the draft allows a third party to make an opposition or claim on the grant of a patent, but does not provide in details the procedure of dealing with such opposition or claim.851 In addition, as the Decree does, this article refers to the Law on Complaints and Denouncements as the legal grounds for the procedure for handling the request of revocation.852

On the other hand, Article 117 of the draft refers only to the grounds of refusal to grant a patent to an invention for the reason that it does not meet the requirements of patentability. 853 This article does not provide generally what would justify the refusal to grant a patent to determine the legal grounds for revocation of patents, as defined in Article 7.6 of the bilateral trade agreement between Vietnam and the United States.854 Article 217 of the draft does not provide in detail the sanctions applicable to the violations of administrative regulations to replace all current provisions of Decree 12.855 The problem with the MFN treatment of TRIPS regarding the revocation of patents remains in reality, since the provision regarding the revocation of patents as a sanction would continue to be in the effect under Decree 12.856

1.3. Procedural requirement for renewal of patent duration

The draft does not provide the details of the renewal procedure, which is applicable to the patents granted on the basis of the old regulations. Article 224 of the draft refers generally to the application of the new law in transitional provisions and therefore, requires some concrete administrative instructions for the implementation.857 Where the current requirement of additional procedures for the request and consideration of term renewal applied to those patents based on the old regulations858 is not eliminated an “extra hurdle” is existent in this aspect. In that case, the likelihood of a challenge on the basis of less favorable treatment or discrimination under Articles 27.1 and 3.1 of TRIPS still exists in regard to the domestic legislation on the term of patent protection.

851 See the Draft of Law on Intellectual Property, supra note 848, art. 119 of the fifth draft, art. 123 of the fourth draft. 852 See the Draft of Law on Intellectual Property, supra 848, art. 119 of the fifth draft, there is no reference to the Law on Complaints and Denouncements in art. 123 of the fourth draft). 853 See the Draft of Law on Intellectual Property, supra note 848, Section 3 of Chapter VIII of the fifth draft, Section 3 of Chapter VIII of the fourth draft. 854 See the Bilateral Trade Agreement between VN and USA, supra note 782, art. 7.6, 855 See the Draft of Law on Intellectual Property, supra note 848, art. 217 of the fifth draft, art. 251 of the fourth draft. 856 See Decree 12 supra note 728, arts. 5, 15. 857 See the Draft of Law on Intellectual Property, supra note 848, art. 224 of the fifth draft, art. 259 of the fourth draft. 858 The requirement of additional procedure applied to those patents granted on the basis of the old regulations is provided in art. 69, Decree 63. See Decree 63, supra note 728, as amended by Decree 06, supra note 728.

Article 91 of the draft provides for the general principles of regulations on the priority right, that is, “pursuant to the international treaty containing the provisions on the priority of right that Vietnam is a party” and the principle of reciprocity.859 According to this provision, TRIPS and the WTO Agreement would not be relevant in terms of “the international treaty containing the provisions on the priority right” as mentioned in the draft. Through the incorporation of the Paris Convention, TRIPS does not directly contain provisions on the priority right. Instead, TRIPS refers to the obligation to provide the priority right under the Paris Convention to the nationals of WTO Members and nationals of non-WTO Members who qualify under the criteria of the assimilation rule under Article 3 of the Paris Convention.

The first principle inscribed in Article 91 of the draft, therefore, in fact refers only to the Paris Convention, the only international treaty containing provisions on the priority right to which Vietnam is a party. It would not cover the extendibility of the provisions on the priority right under the requirement of Article 3.1 of TRIPS and in the light of the “incorporated” Paris Convention. Otherwise, under the second principle underlined in Article 91 of the draft, the requirement of reciprocal conditions on the priority right with respect to the nationals of WTO Members under the national treatment, or with respect to the nationals of non-WTO Members under the rule of assimilation, would be inconsistent with the requirements of Article 3.1 and Article 4 of TRIPS. On this point, the current draft does not pave the way for the extension of the provision on the priority right in the light of the Paris Convention under the requirements of TRIPS in any event. The hidden problem concerning the provision on the priority right is therefore still existent in the domestic legislation.

1.5. The source indication requirement regarding “foreign licensing”

As mentioned in the third point above, because the new draft law only contains general principles and does not set forth particular provisions, the handling of violations of the administrative regulations on industrial property protection shall still continue to be based on the particular provisions of Decree 12 and the detailed instructions of the Ministry of Science and Technology860 and the National Office of Intellectual Property.861 The principle provisions on this matter in the new law, as suggested in the current draft, will not be detailed enough to be executable. Therefore, it will not replace the effects of the current regulations in

859 See Draft of Law on Intellectual Property, supra note 848, art. 91 of the fifth draft, art. 96 of the fourth draft. Art. 91 of the fifth draft added the principle of reciprocity in the application of provisions on the priority right that was not included in art. 96 of the fourth draft. 860 The detailed instructions for implementing Decree 12 on the handling of the violations of administrative regulations on industrial property are included in two circulars issued by the Ministry of Science and Technology. See Thong tu so 825/2000/TT-BKCNMT nay 3 thang 5 nam 2000 (Circular No. 825/2000/TT- BKHCNMT on the date of 3 May 2000), Thong tu so 49/2001/TT-BKHCNMT ngay 14 thang 9 nam 2001 (Circular No. 49/2001/TT-BKHCNMT on the date of 14 September 2001), the Legislation Department, the Ministry of Sience and Technology, 2004. 861 The National Office of Intellectual Property, as a specialized agency in the field of intellectual property, shall provide the necessary evaluation and instruction on a case-by-case basis, at the request of the enforcement authorities pursuant to the procedures provided in the governmental regulation. See Decree 12, supra note 728, art. 14.

© Pham Hong Quat 183 practice after the enactment of the new law. If the government sees it necessary to issue a new regulation to implement the new law on this matter, it would certainly take time for the new issuance.

In any case, the current draft of the new law would not solve totally and immediately the problems inherent in the provisions of Decree 12. The problem caused by the source indication requirement under Section 6.2(b) of Decree 12, as discussed in the previous section, has not been settled yet. The risk of a challenge to the legislation “as such” or as an “extra hurdle” with respect to the requirement applied to products manufactured under a “foreign licensing” still exists. The claims may come from the continuing effect of this provision and the actual application of this provision in the practice of the enforcement authorities. Consequently, foreign patents and foreign patent holders are subject to a less favorable treatment in comparison with that applied to domestic patents and domestic patent holders.

The comments on the incompatibilities in the particular provisions of the governmental decrees, as mentioned in the above section, would be applicable to the same extent to the relevant provisions of the draft of the new law. The solutions for those incompatibilities, as suggested earlier, should be clearly expressed in the new law draft to such an extent that the provisions are consistent with the requirements of the “incorporated” Paris Convention, TRIPS, and WTO rules.

For such reasons, it may be seen that there exist certain problems in the new draft law from the viewpoint of the workings of the principle of independence under the WTO framework. The drafters of the new law should pay more attention to what can no longer be maintain under the principle of independence of patents of the Paris Convention, since it has been incorporated into TRIPS and therefore, included in the WTO framework.

1.6. Other problems

As discussed in the previous chapter, some other problems existing in the current legislation regarding the protection of industrial property rights appear not to be satisfactorily dealt with in the text of the new law draft. For examples, the draft has not clarify the question of application of the national treatment regarding the protection of intellectual property rights to the nationals of WTO Members and those of non-WTO Members who may enjoy the benefit from the national treatment of “incorporated” Paris Conventions and the national treatment of TRIPS. The problems concerning the lack of review procedure applicable to the decision of compulsory licenses and the absence of the civil procedure for the reversal of the burden of proof are not resolved. The likely challenge from the national treatment and MFN principles of the TRIPS to the TRIPS greater protection in applying the enforcement measures in the exportation of goods and is not excluded.

It is also noted that the above-mentioned problems might not be resolved totally in the new law on intellectual property. To deal with these problems, it requires some amendments to other laws, including the Civil Code, the Civil Procedural Code, the Law on Denouncements and Complaints, the Law on Customs and the Law on Administrative Sanctions. In the sense that these laws might not be prepared for the amendment in the very near future, the

© Pham Hong Quat 184 challenges to the national legislation in compliance with the TRIPS and WTO law are still existent. To certain extent, the Law on intellectual property, as a specialized law in this field, would be able to deal with some of these problems if it might contain some principles and provisions in the light of the relevant rules of the TRIPS and WTO law. Though it may create some conflict or uncertainty of the legal grounds for the implementing mechanism, such proposal might be a temporary solution to avoid the challenges for the direct inconsistence of the national legislation under the TRIPS and WTO jurisprudence.

2. Unsettled issue in the new law draft: parallel importation of patented products

The preparation of the draft of the new law is part of the context of Vietnam receiving intense pressure for the strengthening of intellectual property protection and enforcement from some key players in the WTO.862 The enactment of the new law therefore is necessary to serve the purpose of the international trade integration of Vietnam.863 Strengthening patent protection and enforcement is a clear mandate for the new law draft.864 Also, domestic industrial development and consumers’ interests are additional important factors in the consideration of the new draft law.865

In the ongoing discussions, one of the issues being debated concerning the draft of the new law is the issue of so-called parallel importation. 866 In relation to patented products, a contradiction may emerge from the conception that a strong regime of intellectual property protection in favor of the patent holders would not serve directly the interests of the domestic consumers.867 Therefore, the legislators are facing the question of how to formulate a law on intellectual property that strengthens patent protection and facilitates international trade integration but at the same time gives effect to measures for the protection of the interests of domestic producers and consumers.868

As reported, there exist two main opinions relating to the provisions on parallel importation in the new law draft. The first suggests that there is no need to set forth in the new law the particular provisions on this issue since it is not clarified legally and there is an unclear conception of its positive and negative effect.869 The second supports the elaboration of the provisions on this issue in the new law for the argument that it is not inconsistent with the

862 The problem of the protection and enforcement of intellectual property are regarded as obstacles to the WTO integration process of Vietnam. The issue of ineffective enforcement of intellectual property in Vietnam is under particular observation by the United States, the EU, Japan, Switzerland and Australia. See the Second Submission of the Draft of Law on Intellectual Property, supra note 838, p. 5. 863 See the Second Submission of the Draft of Law on Intellectual Property, supra note 838, at 5. 864 Id. at 5-6. 865 Id. 866 Id. 867 See Pham Dinh Chuong, The Extension of the Scope Protection for New IPR Categories-A Pressing Demand to Industrial Property System of Vietnam, National Symposium on the Extension of the Scope Protection for New IPR Categories, Hanoi 10 January 2000. 868 See Second Submission of the Draft of Law on Intellectual Property, supra note 838, at 6. See also Pham Dinh Chuong, supra note 867. 869 See the First the Second Submission of the Draft of Law on Intellectual Property, supra note 840; the Second Submission of the Draft of Law on Intellectual Property, supra note 838.

© Pham Hong Quat 185 requirements of the international treaties to which Vietnam is a party or going to be a party, that is, the Paris Convention and TRIPS.870 More or less, the legislators seem to agree with the drafters in the suggestion of parallel importation in respect of patented products. However, the question of what is legal and justified from the perspective of the Paris Convention and TRIPS is still vague and confused.

In other words, the legislators and drafters have the same concern about whether the adoption of parallel importation in every case will face any obstacle or complaint from the patent holders for its inconsistency with the spirit and particular provisions of the related international treaties. It is also in the confusion over how to adopt an appropriate policy of parallel importation with respect to patented products in the view of harmonization between the public interest and the patent holders to serve the purpose of international trade integration. These questions face not only the draft of the new law but also the implementation mechanism of the new law after its enactment. In this situation, the draft of the new law is in the process of seeking a clarification on the legality and an appropriate solution in the adoption of parallel importation of patented products.

For a comprehensive understanding on the difficulty of the duty placed on the drafters of the new law, an overview of the legal situation of parallel importation in the current legislation is necessary. The general conception of the problems in the domestic legislation as a whole will give a systematic view on the legal situation of parallel importation. Besides, the examination of the practice of dealing with this issue in the circumstances of Vietnam will explore the specific problems to be settled in the new law and in its implementing mechanism.

2.1. Systematic problems in the current domestic legislation

2.1.1. Lack of statutory provisions in settlement of intellectual property disputes

Since the legislation of Vietnam is of the tradition of statutory law, the provisions existing in the language of statutes are always the most important legal grounds for the courts to judge a case.871 A precedent is not regarded as a legal basis for the court’s judgment over a case. Instead, the courts must base their judgments on the particular statutory provisions. Where there is not clearly legal ground existing in the language of the law, the judges cannot themselves create the legal grounds for their reasoning in dealing with the case. In addition, a judgment is proper only when it is based on the legal basis provided in the relevant laws and regulations.

The Suppreme People’s Court affirmed this assumption in the finding on the case of Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd in a dispute over the trademark “Phu Dong”.872 In this case, Hoai Nam Co., Ltd claimed that Phu Dong Thien Vuong Co., Ltd infringed the trademark “Phu Dong” by using the confusingly similar trademark “Phu Dong

870 See the Second Submission of the Draft of Law on Intellectual Property, supra note 838, at 14. 871 See The Civil Law System of Vietnam, the Ministry of Justice, 1987. 872 See Nhan dinh cua Hoi dong xet xu Toa Phuc tham Toa an Nhan dan Toi cao ve vu an Cong ty Hoai nam kien Cong ty Phu Dong Thien Vuong ngay 10 thang 7 nam 2001 (Findings of the Appeal Trial Council of the Supreme People’s Court on the case Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd dated 10 July 2001), Cases Record, the Supreme People’s Court, 2001.

© Pham Hong Quat 186 Thien Vuong” for the same restaurant service. The plaintiff registered trademark “Phu Dong” for the restaurant service, while the defendant did not register the trademark “Phu Dong Thien Vuong” for that kind of service. Hanoi Municipal People’s Court found that the words “Phu Dong” in their structure were different from “Phu Dong Thien Vuong” 873and therefore, the court dismissed the claim of the plaintiff.874 The plaintiff took an appeal to the Supreme People’s Court with the argument that even though the two trademarks were different in the structure of the words, both of them indicated the same meaning and therefore were likely to confuse the clients of the plaintiff with the service of the defendant.875 The Supreme People’s Court ruled in favor of the plaintiff with the reasoning that the confusion likely to be caused by the similar meaning of the words constituted the related trademarks.876

In considering the findings of the first instance court, the Supreme People’s Court set aside the legal basis that the first instance court applied in dealing with the case. The Supreme People’s Court found that the first instance judgment was wrong in the first place in the legal aspect when it invoked and applied the provisions of a regulation guiding the handling of administrative violations in the settlement of a civil dispute.877 The fact is that there is no particular provision on how to measure the confusing similarity for the purpose of identifying an act of trademark infringement existing in the substantive law.878 However, the detailed instructions may be found in the legal document guiding the application of administrative sanctions regarding the acts of trademark infringement. For this reason, the Supreme People’s Court though disagreeing with the first instance court on the transfer of a legal basis from a regulation on the application of administrative sanctions into the settlement of a civil dispute, it, itself, did not refuse the “valuable reference” of the regulation in supporting the determination of an act of infringement.879 In turn, the Supreme People’s Court referred to that regulation, the legal basis that the first instance court had based its judgment on, to find the merits of the case. Furthermore, due to the lack of particular instructions on how to determine the “confusingly similar situation” of a mark, the Supreme People’s Court had to refer to the internal rule of trademark examination, which was never made public and only applied within the practice of the National Office of Intellectual Property Office, to assess the confusing similarity of the disputed trademarks.880

The situation would be the same when the court is faced with a dispute concerning a patent for an invention. There is no particular provision on how to determine an act of patent 873 The words of “Phu Dong” and “Phu Dong Thien Vuong” refer to the name (in short and long form) of a Vietnamese legendary hero who was equipped with an extraordinary power and an iron horse to fight against the northern invaders. 874 See Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd , supra note 872, at 8. 875 Id. at 3. 876 Id. at 17. 877 Id. at 8. 878 There is no provision on how to assess the criteria of a trademark, industrial design, appellation of origin, or invention to be protected in the language of the Civil Code and details of its regulatory implementation. This kind of matter is left to the National Office of Intellectual Property. This office has often issued a rule on the examination of each category that was unpublished and applied internally within this office for the examining procedures. See e.g., Rule No. 191/QC-XN dated 6 April 1994 of the National Office of Industrial Property, cited in the Findings of the Appeal Trial Council of the Supreme People’Court on the case Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd, supra note 872, p. 12. 879 See Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd , supra note 872, at 13. 880 Id. 13.

© Pham Hong Quat 187 infringement and the permissible exceptions to that act. The fact is that the court should request the evaluation of the National Office of Intellectual Property and use it as an important basis for finding a judgment in a patent case. In the case of Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd for the alleged infringement of a patent on wooden bead cutting knives,881 the Lao Cai Provincial People’s Court requested an evaluation from the National Office of Intellectual Property with respect to both the technical and legal aspects of the disputed technical solution being used by the dependent.882 Accordingly, the National Office of Intellectual Property not only rendered its own assessment of the technical elements, but also concluded in the non-infringing situation of the disputed technical solution by applying its own interpreted legal argument, without reference to any legal basis stated in the law or regulations.883

The uncertainty of legal grounds in the conclusion of the non-infringing situation of the disputed technical solution led to an appeal of the plaintiff against the evaluation made by the National Office of Intellectual Property regarding the case.884 The court seemed to be incapable of interpreting and applying the general provisions in the relevant law and regulation to deal with the case. Even if the technical evaluation on the disputed technical solution was available to it, the court still appeared to be in confusion when it made a further request of evaluation to the National Center of Natural Science and Technology upon the request of the plaintiff.885 It deemed that the court would follow the second evaluation if the plaintiff did not request suspension of the case for the objective reasons.886 When the second evaluation was not clear on the legal aspects as well, the difficulty for the court in finding the case would be still available since the lack of particular legal grounds in the relevant statutes.

2.1.2. Lack of professional judges

In the field of intellectual property, the courts are raising the complaint that there is a lack of necessary legal grounds for handling the disputes and claims of infringement of intellectual property rights.887 The unavailability and vagueness in the language of law becomes a more serious problem in the situation that the judges are now very limited in their professional

881 See Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd , Cases Record, Lao Cai Provincial People Court, 1997. 882 See Cong van yeu cau tham dinh cua Toa an Nhan dan Tinh Lao cai so 19/DS ngay 5 thang 3 nam 1997 (the Request of Lao Cai Provincial People’s Court No. 19/DS dated 5 March 1997), in Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd , supra note 881. 883 See Thong bao Tham dinh cua Cuc So huu cong nghiep so 294/KN ngay 28 thang 5 nam 1997 (the Notice of Evaluation of the National Office of Industrial Property No. 294/KN dated 28 May 1997), in Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd, supra note 881. 884 See Khieu nai cua nguyen don ve ket qua tham dinh ngay 10 thang 6 nam 1997 (the Statement of Disagreement with the Result of Evaluation by the Plaintiff dated 10 June 1997), in Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd , supra note 881. 885 See Cong van yeu cau than dinh cua Toa an Nhan dan tinh Lao cai so 53/DS ngay 18 thang 6 nam 1997 (the Request of Lao Cai Provincial People’s Court No. 53/DS dated 18 June 1997), in Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd , supra note 881. 886 The plaintiff requested the suspension of the proceedings of the case due to the governmental order of prohibiting the exploitation of rare woods for industrial production. The defendant in fact ceased its production and achieved an agreement with the plaintiff to halt the application of the disputed technical solution. See Don yeu cau cua nguyen don ngay 16 va ngay 25 thang 9 nam 1997 (Requests of the Plaintiff dated 16 and 25 September 1997), in Nguyen Lien Phuong vs. Sapa Afforestation and Viet Dai Co., Ltd, supra note 881.

© Pham Hong Quat 188 knowledge of intellectual property in general.888 Because there does not exist a specialized court and specialized judges in intellectual property, any judge of a provincial court or of the Supreme Court may be likely to involve in handling an intellectual property case.889 It is acknowledged that the protection of intellectual property rights is a new and unprecedented legal matter for the judges in the courts of all levels.890 The insufficiency of particular legal grounds in the statutory provisions makes it more difficult and confusing for judges in finding the merits of the case.891

Together with the lack of sound legal grounds in statutes, the lack of qualification of the judges on matters of intellectual property rights is the primary reason for the limited role of the courts in the settlement of intellectual property disputes at present.892 As mentioned earlier, in dealing with a particular patent case a judge in charge of the handling of the case deemed himself to be unconfident of being able to make a judgment and did not himself take an independent finding. The conclusion of the merits of case therefore would depend much upon the evaluation of the other authorities, including their opinion on the legal aspects of the case. Among other reasons, the situation of dependent findings of the court would certainly be due to the insufficient legal knowledge of the judges in this field.

Because the current law delegates the first instance of court hearings over intellectual property cases to all courts at the provincial level,893 most judges of provisional courts and the Supreme People’s Court are likely to be involve in dealing with intellectual property cases. While time is needed to provide the necessary professional skills and experience to the judges, the elaboration of particular provisions on the related matters in the statutes is a good option to enable the judges to be confident in hearing these cases.

2.2. Limited jurisdiction in interpreting substantive law

887 See Nguyen Van Luat, The Role of The Prople’s Courts in Enforcement of Intellectual Property Rights in Vietnam, The Supreme People’s Court, July 2004. 888 Id. 889 Id. See also Dinh Ngoc Hien, Legal Sanctions to Ensure the Enforcement of Industrial Property Rights in Vietnam, EC-VN Intellectual Property Project, Symposium on the Court and Intellectual Property Protection, Hanoi 6-7 March 2000. It is reported that there are about one hundred Justices working at the Supreme Court and about one thousand Judges working at the provincial courts. See Report on the Current Situation of Judge Staff in the Courts, the People’s Supreme Court, June 2003. 890 See Nguyen Van Luat, The Role of The Prople’s Courts in Enforcement of Intellectual Property Rights in Vietnam, The Supreme People’s Court, July 2004. 891 See Nguyen Van Luat, supra note 887. See also Dinh Ngoc Hien, Legal Sanctions to Ensure the Enforcement of Industrial Property Rights in Vietnam, EC-VN Intellectual Property Project, Symposium on the Court and Intellectual Property Protection, Hanoi 6-7 March 2000. 892 It is reported that the number of intellectual property cases brought before the courts is very limited in comparison with that brought before the National Office of Intellectual Property. See Nguyen Van Luat, supra note 887. 893 See Phap Lenh ve giai quyet cac vu an dan su nam 1989 (the Ordinance on Procedures of Handling Civil Cases of 1989), Vietnam Laws (the National Polictics Publisher, 2004).

© Pham Hong Quat 189 Under the provisions of the Constitution and the relevant laws, the courts have no jurisdiction to interpret substantive law provisions.894 The Supreme People’s Court is only empowered to provide the trial skills instruction in relation to the local courts.895 The courts are required to apply precisely the relevant law provisions in hearing the case.896 This requirement to a large extent prevents the judges from clarifying the vague language or general provisions existing in the legal documents in hearing the case. As mentioned in the above section, the Supreme People’s Court should refer to the kind of internal rules issued by the National Office of Intellectual Property in finding out about a particular legal matter of a case. The court itself can neither create the new norms nor provide the detailed criteria for understanding and applying the general provisions provided in the statutory language.897 The limited jurisdiction of the courts in the interpretation of law urges for the elaboration of detailed provisions in the new law on intellectual property to provide clear legal basis for the courts in handling the legal matters of the concerned disputes.

2.3. Problems in handling the issue of parallel importation

2.3.1. Unsound legal grounds

There is no provision applicable to the issue of parallel importation under the Civil Code of 2005.898 In the past, there was one clause of the Civil Code of 1995 providing an exception to patent rights that could be understood as a general legal basis to deal with this issue. Article 803 of the Civil Code of 1995 provided that the use of an object with an industrial property right having been put into the market place by the owner of the industrial property right, or with his consent, was excluded from the enforcement of the related industrial property right.899 This provision was not further clarified under the implementing regulation, Decree 63 on detailed provisions on industrial property.900 After the amendment of Decree 63 in 2001, the “market place” stated in Article 803 of the Civil Code of 1995 was explained as “including” foreign markets.901 Irrespective of the unsound statutory reasoning of this provision, this indicated the attitude of the government in favor of parallel importation practice.902 The Civil Code of 2005 takes away the particular provision on the exception

894 See Hien Phap cua nuoc Cong hoa Xa hoi Chu nghia Viet Nam nam 1992 (the Constitution of the Socialist Republic of Vietnam of 1992), art. 127, Vietnam Laws (the National Politics Publisher). 895 The Constitution of Vietnam of 1992, supra note 894, art. 127; Luat To chuc To an Nhan dan nam 2002, Law on Organization of the People’s Courts of 2002, art. 19, Vietnam Laws (the National Politics Publisher). 896 The Constitution of Vietnam of 1992, supra note 894, art. 130, Law on Organization of the People’ Courts of 2002, supra note 895, art. 5, Phap lenh tham phan (the Ordinance on Judges), art. 4. Vietnam Laws (the National Polictics Publisher). 897 See Findings of the Appeal Trial Council of the Supreme People’s Court on the case Hoai Nam Co., Ltd vs. Phu Dong Thien Vuong Co., Ltd, supra note 872, at 13. 898 See Bo luat Dan su nam 2005 (the Civil Code of 2005), Vietnam Laws (the National Polictics Publisher), Part. VI. 899 See Civil Code of 1995, supra note 749, Part. VI. 900 See Decree 63, supra note 728, art. 52. 901 See Decree 63, supra note 728, art. 52, as amended by Decree 06, supra note 728. 902 The Supreme People’s Court is prevented from the interpretation of the general provisions in the statutes, while the government is vested a large discretion in the “particularization” of the principle provisions in the Civil Code. Decree 63 did not only extend the scope of the provisions defined in the Civil Code of 1995, but also create the new norms of industrial property protection that found no relevant legal basis in this code. E.g. the protection of new categories was regarded as particularizing the term of “other objects” in the definition of

© Pham Hong Quat 190 mentioned above and retains only the general principles for intellectual property protection. The exclusion of the relevant provision in the Civil Code of 2005 precluded the statutory legal basis of the provision concerning the issue of parallel importation stipulated in Decree 63 as amended in 2001. For this reason, at the present, there is no statutory ground for the courts for handling the issue of parallel importation. An unsound and non-clarified legal basis created by a governmental regulation in this respect would not equip the judges with sufficient legal backgrounds and confidence in dealing with this issue.

2.3.2. Unclear instructions for implementation

Since there is common knowledge of the ineffectiveness in the settlement of intellectual property disputes under judicial proceedings, the parties to a dispute often opt for making a complaint to the administrative authorities rather than take a suit before the courts.903 Among the very limited number of patent related disputes brought to the courts, there is no case concerning parallel importation with respect to patented products.904 On the other hand, the National Office of Intellectual Property received a significant number of complaints concerning patent infringements, including those that may concern the issue of parallel importation.905

Because the National Office of Intellectual Property has no authority to handle a patent infringement dispute, this office is very often provides to the complainant a general evaluation of the claimed action and instructions on the relevant provisions applicable to that action. For example, in Official Letter No. 722/KN of the National Office of Intellectual Property dated 12 July 2001 responded the complaint filed by Honda Giken Kogyo Kabushiki Kaisha (Japan) (through Pham and Associates Patent Attorney) on the alleged infringement of its patent No. 1980 on the structure of a motorbike saddle, it stated that:

“(…)1. The National Office of Industrial Property has only responsibility of handling the complaints concerning the decisions of refusal of a patent application, of grant or refusal to industrial property rights stated in Article 781 of the Civil Code of 1995. See Decree 54/2000/ND-CP, supra note 749, art. 1. The legal basis for establishment of traditional industrial property rights did not support that of the new categories under the governmental regulation. Article 788 of the Civil Code of 1995 provided that granting the certificates of rights is the legal ground for establishment of industrial property rights. This principle did not stand for the protection of trade names and business secrets under the regulation of the government because the protection of these subject matters does not require any registration procedure or any certificates to be granted. See Decree 54/2000/ND-CP, supra note 749. This unsound legal ground for the protection of intellectual property rights would certainly cause the great difficulty in applying the legal basis to deal with the case in practice of the courts. It noted that the Supreme People’s Court has no power to interpret the statutory acts, review and nullify an unconstitutional statute or an against-law governmental regulation. Instead, the National Assembly and the Standing Committee of the National Assembly hold that kind of power. See the Constitution of Vietnam of 1992, supra note 894, arts. 84, 91. 903 See Nguyen Van Luat, supra note 887, at 15. 904 There has been insignificant number of patent infringement claims brought before the courts until now. See Dinh Ngoc Hien, supra note 889. See also Nguyen Van Luat, supra note 887, at 14. 905 The number of patent infringement complaints come to the National Office of Intellectual Property is increasing significantly: 2001: 2 complaints; 2002: 9 complaints; 2003: 23 complaints. See General Report of Enforcement Situation of Intellectual Property Rights in Vietnam, the Ministry of Science and Technology and the Ministry of Culture and Information, July 2004, p. 7.

© Pham Hong Quat 191 grant a patent, and no responsibility of handling a complaint concerning patent infringement. Therefore, the National Office of Industrial Property shall only consider your request of evaluation with respect to the suspected infringement object.

2. The results of the comparison between the “structure of motorbike saddle” being protected by Patent No. 1980 (…) with the structures of the motorbike saddle that are described in the materials provided by the complainant are presented hereunder. (…)

Based on the above table of comparison, it is possible to conclude that all elements constituted the invention of Patent No. 1980 (as described in the Claims of Patent No. 1980) present in the compared structures.

According to Article 805 of the Civil Code, if the structures of motorbike saddle described in the materials provided by the complainant are using by those persons other than Honda Giken Kogyo Kabushiki Kaisha, and if those persons are not licensed for the use of Patent No. 1980, and if those persons do not belong to those mentioned in Articles 801 and 803 of the Civil Code, and if such use is carried out after the granting date of Patent No. 1980 (…), such use will be considered an act of infringement of Patent No. 1980(…)”906 (Emphasis added)

As mentioned above, Article 803 of Civil Code of 1995 referred generally to the limitations of patent rights. Among others, the use of a patented products after having been circulated into the market place by the patent holder should not be considered an act of patent infringement. In this dispute, the respondent, the General Corporation of Transportation Mechanics of Vietnam, made the claim that it imported the patented motorbike saddles from a trading company in China to assemble the motorbikes for selling in the market of Vietnam.907 It was indicated that the motorbike saddles were marketed in China before their importation into Vietnam. Supposing that the circulation of the motorbike saddles in the market of China were made under the authorization of Honda Giken Kogyo Kabushiki Kaisha, the importation of such products could be argued to be an exception under Article 803 of the Civil Code 1995.

However, the language of Article 803 of the Civil Code itself did not state clearly that the exception was applicable with respect to the patented products having been marketed domestically or internationally. The argument based on this provision was deemed uncertain. The dependent might not understand fully the legal situation and consequences of its acts in

906 English translation made by the author. See Khieu nai ve xam pham quyen doi voi sang che cua cong ty Honda (Complaint of Patent Infringement by Honda Giken Kogyo Kabushiki Kaisha), Complaints Record of 2001, the National Office of Intellectual Property. 907 See Complaint of Patent Infringement by Honda Giken Kogyo Kabushiki Kaisha, Complaints Record of 2001, the National Office of Intellectual Property.

© Pham Hong Quat 192 the importation and assembly of the patented products. The word “if” together with the complicated structure and vague expression used in the official letter by the National Office of Intellectual Property might make the respondent confused when reading it. The instruction in the official letter of the National Office of Intellectual Property did not refer particularly to the act of importing the patented products, nor explain clearly the legal matters concerning this act. It would be clearer to the respondent if it explained that, were the motorbike saddles were legally marketed in China under the control of the patent holder of the corresponding patent obtained in China, the importation of such products into Vietnam for assembling and selling the motorbikes in Vietnam would not be considered an act of infringement.

The absence of that particular instruction was, on the one hand, legally attributable to the lack of clear provisions in the statutory language of Article 803 of the Civil Code of 1995. On the other hand, it was consistent with the policy of the government on preventing the importation of motorbikes and motorbike accessories from China at that time.908 The fact was that the motorbikes and the motorbikes with the accessories imported from China caused a serious concern in the society.909 Due to the massive importation of such products at very cheap prices, the traffic problems became insolvable in the urban areas.910 A series of severe accidents occurred because of low quality motorbikes.911 The interests of the domestic consumer could not be protected since the imported products were not accompanied by assurance services. Another aspect was that the domestic motorbike producers, like the Honda Vietnam Company, suffered a great disadvantage from the pressure of reduced prices whilst maintaining quality standards and the warrant services.912 The domestic motorbike industry, typically the Honda Vietnam Company, made great efforts to pressurize

908 E.g., Cong van so 3470/TCT/NV6 cua Tong cuc Thue ngay 16 thang 12 nam 2002 (Instruction No. 3470 TCT/NV6 of the Taxation Department dated 16 September 2002), the Taxation Department, the Ministry of Finance; Cong van cua Van phong Chinh phu so 5110/VPCP-KHTH ngay 16 thang 9 nam 2002 (Instruction of the Government Office No. 5110/VPCP-KHTH dated 16 September 2002) requested the Ministries of Finance, Trade, Industry, Planning and Investment, Transportation, Department of Customs and the other related agencies to strengthen the measures to restrict the importation of motorbikes and motorbike accessories; Cong van cua Thu tuong Chinh phu so 38/2002/QD-TTg ngay 14 thang 3 nam 2002 (Instruction No. 38/2002/QD-TTg dated 14 March 2002) of the Primer Minister requested the Ministry of Industry to impose the severe sanctions on the acts violating the importation policy on the domestically production of motorbikes, allowing the prohibition of the importation of motorbike accessories in the appropriate circumstances; Cong van cua Van phong Chinh phu so 15/TB-VPCP ngay 25 thang 1 nam 2002 (Instruction No. 15/TB-VPCP dated 25 January 2002 of the Government Office); Cong van cua Van phong Chinh phu so 136/TB-VPCP ngay 8 thang 8 name 2002 (Instruction No. 136/TB-VPCP of the Government Office dated 8 August 2002); Thong tu cua Bo Tai chinh so 69/2002/TT-BTC (Circular of the Ministry of Finance No. 69/2002/TT-BTC) entered into effect on 1 September 2002; Cong van cua Bo Tai chinh so 3645 TC/TCT ngay 6 thang 9 nam 2000 (Instruction No. 3645 TC/TCT of the Ministry of Finance dated 6 September 2000); Cong van cua Tong cuc Thue so 740/TCT-NV6 ngay 23 thang 3 nam 2002 (Instruction No. 740/TCT-NV6 of the Taxation Department dated 23 March 2001) on handling the violation acts in the importation and assembly of motorbike accessories. See Governmental Letters, the Taxation Department, the Ministry of Finance. 909 See ‘Tre em chet do tai nan giao thong tang dot biet’ (Suddenly increasing deaths of children for traffic accidents), in the Health News, released on VNExpress Online Newspaper of 15 December 2005, available at http://vnexpress.net/Vietnam/Suc-khoe/2005/12/3B9E510C/; ‘Gia tang xe may – Gia tang tai nan’ (Increasing number of motorbikes – increasing number of traffic accidents), in the Focused Problems, released on VTV homepage, available at http://www.vtv.vn/vi-vn/VTV1/tieudiem/2005/9/65149.vtv. 910 See ‘Xe may tu boc chay’ (Self-burning motorbike), in the Social News, released on VNExpress Online Newspaper of 9 September 2004, available at http://vnexpress.net/Vietnam/Xa-hoi/2004/09/3B9D64EC/. 911 See Increasing number of motorbikes – increasing number of traffic accidents, supra note 909.

© Pham Hong Quat 193 governmental agencies into resisting the free importation of cheap and low-quality motorbikes and motorbike accessories from China.913 The demands of social safety and domestic industrial development called for a protectionist policy with respect to those kinds of products. In this situation, an unclear instruction from the National Office of Intellectual Property on the matter of parallel importation with respect to patented products in such a case appeared to be appropriate.

What could be drawn from the analysis of the above example is that the real problems are not only generated from the uncertain legal grounds of the current legislation, but also from the unclear policies on parallel importation from different circumstantial aspects. In practice, these are problems facing both the administrative agencies and the courts in handling this issue. In support of the judges and other enforcement authorities who have less experience in the field of intellectual property, it is justifiable to elaborate clearly the provisions on this issue in the statutory language of the new law.

In the practice of Vietnam, the simple encouragement of parallel importation is not in every case a good option. The negative effects of this policy on the domestic industrial development, consumers’ interests and social security are in some cases are evident. Because of the geographical position adjacent to China, the sensitive market and industry of Vietnam is under high pressure from the cheap price production policy of its huge neighbor. This fact gives rise to the mandate of the new law in drawing out a justifiable solution for to inconsistent interests underpinning the policy of parallel importation.

2.3.3. Fluctuations in the wordings of the new law drafts

The fluctuation wordings of the different new draft laws show the unstable views of the drafters on the policy of parallel importation.914 This also reflects the prudential consideration of the legislators in this aspect of intellectual property protection in general and patent protection in particular. Examining the recent drafts reveals that there exist two main views on this issue. The first endorses the policy of parallel importation applied to every category of intellectual property rights in general.915 It means that it is not necessary to pose any different treatment or limitation to the implementation of this policy. The second prefers the separate treatment applied to each category of intellectual property.916 Accordingly, for example, the policy on patented products should be different from that of trademarks or copyrights. On this point, the reasoning for the adoption of this policy needs a more careful consideration based on the particular factual situation.

In the perception that the rationale underlining the regime of protection with respect to each category of intellectual property is not identical, the objectives of policy of parallel importation is not necessarily applicable to all kinds of objects of intellectual property rights. Otherwise, the demands of domestic industry and the interests of consumers may not be

912 See Report of Honda Vietnam, WIPO National Roving Working on the Enforcement of Intellectual Property Rights, Hanoi July 5-6, 2004. 913 Id. 914 See the Draft of Law on Intellectual Property (the third draft, fourth draft, fifth draft), supra note 848. 915 Id. (Particularly, the statement on the different suggestions and options in the third draft). 916 See the Draft of Law on Intellectual Property (the third draft, fourth draft, fifth draft), supra note 848.

However, how to verify the objectives or the effects of a policy, which is regarded a reasonable solution to a specific case is another question that is not easy to find an appropriate answer in reality. In each case, the consideration ought to focus on what is regarded being more important in the national policies. For example, in the case of Vietnam at the present, the policy of parallel importation with respect to patented products should be balanced at least among the interests of three groups: the patent holders, the domestic industrial development, and the domestic consumers.

Some key actors in the WTO are insisting on the strengthening of the interests of the first group, that is, patent holders who are mainly the foreign owners of inventions. This request should certainly place in a priority position because of Vietnam’s objective of soon joining the WTO.917 It is noted that although this objective is regarded as an important target presently, the government has stated that it does not wish to enter the WTO at the expense of all other interests.918 In this statement, the government affirms its standpoint in supporting protectionism for the domestic industry and the public interest. In this controversy, the drafters of the new law seem unlikely to find a satisfactory solution to respond to all requirements from different aspects.

Conclusion

The present draft of the new law on intellectual property contains certain problems concerning the patent protection from the view of the TRIPS, the “incorporated” Paris Convention, and the WTO rules in general. The examination of the latest drafts reveals that inherent problems in the current legislation on the patent protection have not been settled. These problems may be well secure under the mandate of the Paris Convention, as it was practiced in Vietnam. However, the situation has changed since the incorporation of this treaty into TRIPS and the WTO legal system. For this reason, the drafters of the new law should pay more attention to the problems existing in the current regulations that mostly shifted into the language of the new law draft. The elimination of these problems should not only be in the statutory language of the new law, but also in its implementing mechanism. The objective of the issuance of the new law should be the compliance of the domestic law with the obligations under TRIPS, the “incorporated” Paris Convention and WTO jurisprudence. Accordingly, both the compliance of the new law at face value and in its practical implementation should be ensured.

917 See the First Submission of Draft of New Law on Intellectual Property, supra note 840, the Second Submission of Draft of New Law on Intellectual Property, supra note 838. 918 See ‘Vietnam will not enter the WTO at any cost’, in the Business News released on VNExpress Online Newspaper of 7 April 2005, available at http://vnexpress.net/Vietnam/Kinh-doanh/2005/04/3B9DD065/ (in English); ‘WTO accession difficulties continue’, in Interviews released on VNN Online Newspaper of 7 November 2005, available on http://english.vietnamnet.vn/interviews/2005/11/508789/ (in English).

© Pham Hong Quat 195 The second point in the conclusion of this chapter concerns the unsettled issue in drafting the new law regarding parallel importation caused by the systematic problems in the current legislation, policy and practice in handling this issue. The unsound legal basis and unclear instructions for the competent authorities are in fact generated from the difficulties and confusions in the perception and application of this policy in certain circumstances of the economy and society. This issue becomes a sensitive matter when Vietnam is facing the options for accession to the WTO. A reasonable solution to this issue should take into account the different interests and demands coming from various its various aspects. The currently indispensable accounts for a suggested solution should be flexible enough to stand for, at least, the interests of the patent holders, the rationale for international trade integration, domestic industrial development, and the interests of the consumers and the public, in different circumstances.

In the view that the examination of this issue in the light of the “incorporated” Paris Convention and the TRIPS would identify some legal justification as well as the likely challenges relating the issue of parallel importation, the next discussion will examine this issue in the development of the TRIPS and WTO jurisprudence. The national practices dealing with this question will be examined for an empirical suggestion for the new law and its implementing regulations.

International Exhaustion of Patent Rights under WTO Jurisprudence Implications for Vietnam

In connection to the issues having been examined in the previous chapters, this chapter discusses particularly issue of parallel importation of patented products under WTO jurisprudence. The discussion is going to investigate the appropriate answers for some disputable questions: What is the legal justification for the adoption of parallel importation of patented products under the “incorporated” Paris Convention, the TRIPS, and GATT? And are there any constraints or likely challenges from WTO jurisprudence to national legislation in dealing with the matter of parallel importation of patented products? It is expected that the analysis of the legal provisions under the different aspects, the development of WTO panel rulings, and the national practices in dealing with the relevant issue would reveal some implications for the case of Vietnam.

I. Parallel importation and international exhaustion of patent rights

1. The absence of a general definition

There is no definition of the parallel importation of patented products existing in the language of both the Paris Convention and TRIPS. Generally, the concept of parallel importation with respect to patented products refers to the unauthorized importation of patented products that have been marketed abroad with the authorization of the patented holder.919 The conception of parallel importation of patented products often happens in the event that a third party buys the patented products in a foreign market, and then imports and resells them in the domestic market in direct competition with the authorized distributors.920

919 E.g., parallel imports are regarded as “goods that are sold, or authorized for sale, abroad by the United States intellectual property owner, but are subsequently imported into the United States without the United States intellectual property owner's authorization”. See Margreth Barrett, ‘The United States' Doctrine of Exhaustion: Parallel Imports of Patented Goods’, Northern Kentucky University Law Review, (Vol. 27, 2000), p. 911. Both parallel imports and gray goods are used as distinct from counterfeit goods, which were initially produced and marketed unlawfully, without the authorization of the patent holder. Id. Parallel imports are "genuine goods or services imported by a reseller into a country without the authorization of the owner of the intellectual property right in that country". See Claude E. Barfield & Mark A. Groombridge, ‘The Economic Case for Copyright Owner Control over Parallel Imports’, the Journal of World Intellectual Property (Vol. 1, 1998), p. 903. "Parallel trade" is "the exportation and importation of products through distribution channels that are other than those authorized by the owner or licensee of a patented (..) product". See Harvey E. Bale, ‘The Conflicts Between Parallel Trade and Product Access and Innovation: The Case for Pharmaceuticals’, Journal of International Economic Law (Vol. 1, 1998), p. 637. At the beginning, the term "parallel imports" was adopted in the European Community, while the terms "gray goods" and "gray market" were used in the United States in a similar meaning. See Tait R. Swanson, ‘Combating Gray Market Goods in a Global Market: Comparative Analysis of Intellectual Property Laws and Recommended Strategies’, Houston Journal of International Law (Vol. 22, 2000), available at http://www.Lexis.com. Generally, gray goods are also regarded as genuine goods sold through unauthorized channels in direct competition with authorized distributors. Id.

© Pham Hong Quat 197 There exist different views on the legality of parallel importation of patented products. It is argued that parallel importation is allowable only if the imported product has been marketed in a territory in which the product is subject to the protection of a corresponding patent for the same invention.921 In other words, this argument connects parallel importation of patented products with the conception of parallel patents.922 It means that if a patented product was marketed in a foreign country where the patent holder may not seek a patent protection, or could not obtain a patent for that product, the parallel importation of that product would not be free from the charge of patent infringement.923 Otherwise, the recognition of the legality of parallel importation as to patented products whose first sale took place in a territory lacking the relevant patent protection is in fact accepted in certain cases.924

In other aspects, it is arguable that parallel importation can only be permitted in the case where the patented product is marketed with the consent of the patent holder, namely, it must be sold either directly by him or indirectly by his authorized licensee.925 Pursuant to this

920 See Hillary A. Kremen, ‘International Application of the First Sale Doctrine’, Syracuse Journal of International Law and Commerce, (Vol. 23, 1997), p. 161. Parallel imports are defined as “goods that are purchased in foreign markets by third parties and then resold in the domestic market in direct competition with authorized distributors”. Ako Shimada Williams, ‘International Exhaustion of Patent Rights Doctrine: Is Japan’s Move A Step Forward or Back from the Current Harmonization Effort?’, Detroit Journal of International Law & Practice (Vol.7, 1998), p. 327, available on http://www.Lexis.com. 921 See Nuno Pires de Carvalho, supra note 103, at 102. 922 Parallel importation is often examined in the cases where “patentees hold "parallel patents" for the same invention in several nations." See Hillary A. Kremen, supra note 920. See also Darren E. Donnelly, ‘Parallel Trade and International Harmonization of the Exhaustion of Rights Doctrine’, School of Law, Santa Clara University Santa Clara Computer and High Technology Law Journal (Vol. 13, 1997), p. 445. 923 See Nuno Pires de Carvalho, supra note 103, at 102. The findings of the European Court of Justice in two cases were referred for the relevant argument. In Centrafram BV et Adriann de Pejper v. Sterling Drug Inc., Case 15/74, European Court Reports 1974, p. 1147, the European Court of Justice found that a patentee could prevent the importation of protected products marketed by him or with his consent in another EC Member State in a situation where no restriction of trade “was necessary to guarantee the essence of the exclusive rights flowing from the parallel patents”. It is explained that this finding allowed the patentee to prevent parallel imports from the country where the patent right for the related products is not existent. In a previous case, Parke, Davis and Co. v. Probel, Reese, Beintema-Interpharm and Centrafarm Case 24/67, European Court Reports 1968, the European Court of Justice found that the patent owner (in Netherlands) could prevent the importation of products from a country where they were not patentable (Italy) despite the fact that the price of the products in the Netherlands, for the patent protection, were much higher than that in Italy. 924 E.g., in Merck & Co. v. Stephar BV, Case 187/80, European Court Reports 1981, p. 2063, the European Court of Justice held that patent rights in one EU Member State were exhausted with the sale in another member state where no patent protection was available. The fact was that Merck owned patents in the Netherlands on the composition and process for making the drug Moduretic and marketed the product in Italy where no patent protection was available. Id. Stephar purchased the drug wholesale in Italy and sought to resell it in the Netherlands. Id. Merck argued that the purpose of a patent is to allow the patentee to enjoy the rewards of the exclusive right to first market the patented article, and that this was not exhausted by the sale in Italy where there was no exclusive right. Id. The court, however, concluded that the patent right guaranteed the right to first market the product, but does not guarantee that the patentee would obtain a reward in all circumstances. It rejected Merck's argument, and held that, having chosen to market its product in Italy, Merck exhausted its right to block reimportation into the Netherlands. Id. at 2081-2082 925 The view that any sale with the right holder's consent can exhaust his patent right was made clear in the judgment of the European Court of Justice in Centrafram BV et Adriann de Pejper v. Sterling Drug Inc., Case 15/74, European Court Reports 1974, p. 1147. The fact that Sterling held parallel patents in several EU Member States, including Britain and the Netherlands, for the pharmaceutical Negram. Id., at 1148. With prices for

It is also opined that the importation of a patent product marketed abroad is only considered “parallel” where the importation is in the position of competing directly against the patented product that is made available in the domestic market by the patent holder or his authorized licensee.927 Accordingly, where the patent holder or his authorized licensee did not make available the patented product in the domestic market, by manufacture or importation, there would not exist parallel importation in the absence of the actual possibility of competition in regards to that patented product.928 However, there is no precedence in the courts to confirm this line of opinion.

2. Exhaustion of patent rights

The legality of parallel importation is related closely to the conception of exhaustion of patent rights. In relation to parallel importation, the exhaustion of patent rights refers generally to the situation that a patent holder has no right to control over the movement of the patented product after that product has been marketed with his consent.929 The sound reasoning for the pharmaceuticals 30% lower in Britain than in the Netherlands, Centrafarm purchased the drug in Britain for import into the Netherlands. Id. at 1149. The court held that Sterling's rights were exhausted upon its sale of the drug in Britain and clarified that parallel imports of a patented product were justified on the reasoning that the product had been put onto the market in a legal manner, by the patentee himself or with his consent, in the country from which it was imported, particularly in the case of a proprietor of parallel patents. Id., at 1147. 926 E.g., in Pharmon BV v. Hoechst AG, Case 19/84, European Court Reports 1985, p. 2281 (also available at httt://wwww.europa.int/cj), the European Court of Justice held that the marketing in an EU Member State under a compulsory license was not a consensual first sale that exhausted the patent rights, accordingly, parallel imports in that case were not allowed. Id. The court also found that national competent authorities in a Member State granted a compulsory license to a third party patentee which allowed him to carry out manufacturing and marketing operations which the patentee would normally have the power to prohibit, the patentee could not be regarded as having consented to the actions of the third party. Id. The court clarified further that its holding in no way depended on the conditions attached to the compulsory license by the granting State, such as the amount of royalties and whether the patent owner accepted or refused such royalties. Id. 927 The question of to which extent parallel importation and the products of the authorized distributors in a domestic market are regarded being in the “direct competition” is not clear in this perception. See Hillary A. Kremen, supra note 920. 928 One way of explanation is that parallel importation, in its literal meaning, indicates the patented product being imported into the territory of one country through unauthorized channels of distribution, which run in “parallel” to the channels established by the paten owner or its licensee (that is why it is called “parallel imports”). It is therefore opined that there is parallel importation only when the patented product is already being commercially distributed, after being locally manufactured or imported by the patented owner or its licensee. Where a distributor imports patented products that have been exhausted in another country but that are not available in the importing country, there is no “parallel” importation. See Nuno Pires de Carvalho, supra note 103, at 103. 929 The exhaustion of rights doctrine, in general terms, means that when an intellectual property right holder sells an article embodying those rights, they are exhausted with respect to that article, and therefore, a purchaser can resell the article without being liable for infringement. See Darren E. Donnelly, supra note 922. The doctrine of exhaustion contemplates that an intellectual property owner will have exclusive control over the first sale of goods embodying the intellectual property. See Margreth Barrett, supra note 919. A patent right is exhausted, in the sense that it is completely consumed and therefore ceases to exist, by the first act of introduction into the commercial circuit of the product incorporating the claimed invention, being the product itself or the process of directly manufacturing the product, as long as that introduction has been made by the patent owner or with the consent of the patent owner. See Nuno Pires de Carvalho, supra note 103, at 97.

© Pham Hong Quat 199 exhaustion of this right is that, by the first sale of the patented product, the patent holder has transferred all of his rights attached to that product to the buyer, and therefore, he cannot restrain the buyer from reselling that product.930 It is also reasoned that the patent holder has an opportunity to enjoy the reward for his invention after the first sale of the patented product, and this prevents him from collecting further reward from the subsequent transactions in relation to that product.931 In this respect, the so-called first sale doctrine is popularly adopted in the assumption that the patent holder exhausted his patent right after the first sale of the patented product.932 However, a big difference exists in the conception of whether the first sale that took place in foreign markets would exhaust the patent right of the patent holder in a

930 In dealing with the cases involving parallel patents obtained for the same invention, the U.S. courts provided different findings on exhaustion, e.g., the court in Holiday v. Mattheson, 24 F. (S.D.N.Y. 1885), p. 185, the court held that U.S. patent rights were exhausted if there were no prohibitions made in the bargain. The court explained: “When the owner sells an article without any reservation respecting its use, or the title which is to pass, the purchaser acquires the whole right of the vendor in the thing sold: the right to use it, to repair it, and to sell it to others; and second purchasers acquire the rights of the seller, and may do with the article whatever the first purchaser could have lawfully done if he had not parted with it.” In Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., 266 F. (2d Cir. 1920), pp. 71, 78, the court followed the presumption that the seller "intends to part with all his rights in the thing sold" in Holiday v. Mattheson and supported the international exhaustion principle, holding that goods sold by a patentee are released from the patentee's exclusive rights, including the exclusive rights in all domestic and foreign patents. In Sanofi v. Med-Tech Veterinarian Products., Inc., 565 F. Supp. (D.N.J. 1983), pp. 931, 938-39, the court held that an "unrestricted sale" prohibits the patent owner from later imposing restrictions on the use of the goods sold to the buyer. The court explained that to hold otherwise would defeat the purchaser's expectation of unrestricted ownership and use of the goods and also the presumption following a lawful sale that the seller intends to part with all of his rights in the goods. The court also stated that a buyer only receives rights in the goods purchased to the extent of the seller's rights in the goods sold. In this respect, another line of reasoning is to distinguish the patent right from the property right attached to an invention. It is argued that a patented article has embodied in itself the invention, but not the patent right. When the article is sold, the property right in the tangible thing is transferred along with the material possession of the article, but the patent right is not accompanied with it. The patent owner therefore may not oppose any act the buyer may wish to practice regarding the patented article. See Nuno Pires de Carvalho, supra note 103, at 98. 931 The U.S. Supreme Court presented the view that the purpose of patent law is to promote the progress of science and the useful arts by granting to the inventor a limited monopoly, the exercise of this purpose enables the inventor to secure the financial rewards for his invention. The patentee may surrender his monopoly in whole by the sale of his patent or in part by the sale of the article embodying the invention. The decisions of the court have uniformly recognized that the purpose of patent law is fulfilled with respect to any particular article when the patentee has received his reward for the use of his invention by the sale of the article, and that once that purpose is realized the patent law affords no basis for restraining the use and enjoyment of the thing sold. The purpose of the patent law is thus fulfilled with respect to any particular article once the patentee has received the reward for the use of his invention by selling the article. See United States v. Univis Lens Co., 316 U.S. (1942), pp. 241, 250-51. See also United States v. Masonite Corp., 316 U.S. (1942), pp. 265, 278; B. Braun Med., Inc. v. Abbott Lab., 124 F.3d (Fed. Cir. 1997), pp. 1419, 1426; Brandt Consol., Inc. v. Agrimar Corp., 801 F. Supp. (C.D. Ill. 1992), pp. 164, 173. The European Court of Justice has stated that the specific subject matter of patent rights is to reward the creative effort of the inventor by guaranteeing that the patentee has the exclusive right to use an invention with a view to manufacturing industrial products and putting them into circulation for the first time, either directly or by the grant of licenses to third parties, as well as the right to oppose infringements. See Cases 267-268/95, Merck & Co. Inc. v. Primecrown Ltd., European Court Reports 1997, p. 30 citing case 15/74, Centrafram BV. v. Sterling Drug Inc., European Court Reports 1974, p. 1147.

© Pham Hong Quat 200 domestic market.933 Concerning the rationale for parallel importation of patented products, whether the exhaustion of the patent right should be recognized either territorially or internationally in the context of the WTO is a matter still in dispute.934

For various reasons, different approaches to the exhaustion of patent rights are adopted in the practices of each country.935 There are also divergent arguments for and against the justification of parallel importation in terms of various aspects.936 In the legal aspect, the rationale of territorial exhaustion is against that of international exhaustion in the connection to parallel importation. Basically, when the patent right adherent to a patented product is regarded as being exhausted internationally after the first sale of the patented product, the

932 In relation to the practice of parallel importation, the "first sale" doctrine is discussed in the assumption that patent protection is usually limited to the first sale, that is, the patent holder loses rights to any royalty after the initial sale of the patented product. Therefore, the patent holder does not have any right to control subsequent sales because the patent rights have been "exhausted." Once a patent becomes "exhausted”, the initial purchaser may resell the goods without infringing on the patent held by the original seller. See Hillary A. Kremen, supra note 920. 933 E.g., in the practice of the United States, there are conflicting views on whether unauthorized first sales under foreign patents will exhaust U.S. patent rights when the U.S. patentee holds patents for the same invention in several nations. In Boesch v. Graff, 133 U.S. (1890), pp. 697, 701-02, the U.S. Supreme Court held that lawful sales abroad by someone unrelated to the patentee did not exhaust U.S. patent rights. In Griffin v. Keystone Mushroom Farm, Inc., 453 F. Supp. (E.D. Pa. 1978), p. 1283, the court rejected adopting the international exhaustion rationale. Differently, in Holiday v. Mattheson, 24 F. (S.D.N.Y. 1885), p. 185, the court held the sale abroad exhausted all of plaintiff's patent rights around the world. In Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., 266 F. (2d Cir. 1920), p. 71, the court supported the international exhaustion principle, holding that goods sold by a patentee are released from the patentee's exclusive rights, including the exclusive rights in all domestic and foreign patents. Though the fact that the U.S courts disagreed on the matter of exhaustion in relation with parallel importation, the courts appear to apply the territorial approach more than the international exhaustion approach. The prevailing reasoning is that there is generally no patent exhaustion where foreign sales were not authorized by the U.S. patent owner. See Tait R. Swanson, supra note 919. 934 See generally, Frederick M. Abbott, ‘First Report (Final) to the Committee on International Trade law of the International Law Association on the Subject of Parallel Importation’, Journal of International Economic Law (1998), p. 607. It is argued that a rule of territorial exhaustion, in the form of national or regional exhaustion, conflicts with the specific provisions of the WTO and TRIPs Agreement, and should be replaced by a rule of international exhaustion to be consistent with the mandate of the WTO. Id. On the contrary, it is argued that a rule of territorial exhaustion does not conflict with various provisions of GATT and TRIPS. See Barfield & Groombridge, supra note 919, at 91-93. See also S. K. Verma, ‘Exhaustion of Intellectual Property Rights and Free Trade – Article 6 of the TRIPS Agreement’, International Review of Industrial Property and Copyright Law (Vol. 29, 1998), pp. 552-58. It is also argued that a territorial regime of exhaustion is no longer justifiable in view of the increasing globalization of the world economy, the efforts for greater liberalization of international trade, and the drive towards the establishment of internationally uniform standards of intellectual property protection and their incorporation into a GATT-based international trading system. See Abdulqawi A. Yusuf, supra note 8, at 8. Similarly, it is reasoned that the GATT does not lend itself to a limitation of the worldwide exhaustion principle. See Bronckers, Marco C.E.I. Bronckers, ‘The Impact of TRIPs: Intellectual Property Protection in Developing Countries’, Common Market Law Review (Vol. 31, 1994), p. 1268. For the opposite view, see Alexander J. Stack, ‘TRIPs, Patent Exhaustion and Parallel Imports’, The Journal of World Intellectual Property (1998), at 685. 935 Generally, the different views of the countries on the issue of exhaustion may be classified into two basic categories: international exhaustion and territorial exhaustion, of which the developing countries favor the former, while the developed countries prefer the latter. However, there exist also different classifications of views. The special case of the EU invites the approach of “regional exhaustion”. In essence this may be regarded a kind of territorial exhaustion due to the uniform market of the EU. The patent right in certain cases is found to be exhausted in all members of the EU when it is exhausted in one member. As for the outside of the EU, the

© Pham Hong Quat 201 legality of parallel importation of the patented product will be recognized.937 By the contrast, if the patent right is regarded as being exhausted territorially, the legality of parallel importation in regards to the patented product will be generally precluded.938

The issue of exhaustion was such a fraught topic that the TRIPS negotiators could not achieve a necessary trade-off on it during the Uruguay Round of the GATT Negotiation. In the context of TRIPS setting aside this issue, the possibility of bringing a case concerning this matter before a WTO panel seems at present unlikely. It seems impractical for the argument that a complaint on the problems generated from parallel importation may be raised under certain provisions of GATT.939 Besides, many studies and various suggestions have been put forwards concerning an international harmonization regime of parallel importation in the WTO framework.940 Nevertheless, the existing disparity in the viewpoints of the WTO Members seems to make any suggestion impractical in the near future.941

In the connection to the concerns of parallel importation regarding patented products in Vietnam, the policy-makers deemed to accept the international exhaustion approach to pave the way for parallel importation. As stated in the Submissions of the Draft of Law on Intellectual Property, the option of international exhaustion serves the benefit of the domestic consumers. That is an appropriate decision going along with the general perception of the developing countries.942 In the particular circumstances of Vietnam, however, there still exist a number of concerns from different aspects, which have led to debate among the legislators rationale of EU regional exhaustion is not different from that of national exhaustion. International exhaustion of the patent right is generally not recognized in the EU member states. There is also the argument for the “modified” international exhaustion of the patent right adopted in the United States. This approach relied basically on the findings of the local courts in some special cases. This approach is in debate because it has never been endorsed by the U.S. Supreme Court. A similar view applies to the approach of a “modified” or “conditioned” international exhaustion of the patent right adopted in Japan. See Darren E. Donnelly, supra note 922; Tait R. Swanson, supra note 919. 936 See generally, Margreth Barrett, supra note 919 (discussing different views on various aspects of parallel importation of patented products). See also Frederick M. Abbott, supra note 934; Darren E. Donnelly, supra note 922. 937 See Hillary A. Kremen, supra note 920. See also Darren E. Donnelly, supra note 922. 938 Id. 939 See Abdulqawi. A. Yusuf, supra note 8. 940 See e.g., Frederick M. Abbott, supra note 934; Darren E. Donnelly, supra note 922; See Tait R. Swanson, supra note 919; Hillary A. Kremen, supra note 920; Ako Shimada Williams, supra note 920. 941 See Margreth Barrett, supra note 919 (generally viewing that in the long run international exhaustion will prevail for all intellectual property rights). 942 A footnote to TRIPS Article 28.1 elaborates that the right of importation "is subject to the provisions of Article 6." Article 6, in turn, provides that for the purposes of dispute settlement under the TRIPS Agreement, "nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights." Thus, while TRIPS requires adhering nations to provide a right of importation, it deliberately avoids directly addressing the applicability of the doctrine of exhaustion to temper that right. This is because the nations negotiating the TRIPS Agreement were unable to reach agreement about the applicability of the doctrine of exhaustion to goods sold internationally. While the developed nations took the position that intellectual property owners should be able to assert their intellectual property rights to prevent parallel imports in some or all instances, most developing countries advocated a rule of international exhaustion. See Ana M. Pacon, ‘What Will TRIPS Do For Developing Countries?’, in From GATT To TRIPs - The Agreement on Trade-Related Aspects of Intellectual Property Rights (eds. Friedrich-Karl Beier & Gerhard Schricker,) (IIC 1996), p. 329-337, Watal, ‘TRIPS and the 1999 WTO Millennium Round’, The Journal World Intellectual Property, (Vol. 3, 2000), pp. 17-18.

In settling such concerns, it is worth clarifying two essential questions on the issue in the light of the development of the TRIPS and the panel rulings regarding the intellectual property protection. The first question is the legality of international exhaustion under the Paris Convention, the TRIPS and GATT. The second question is the justification under WTO jurisprudence for an appropriate national parallel importation policy in the situation of Vietnam. In the context of Vietnam being a party to the Paris Convention and expecting to be a party to TRIPS, it is supposed that the clarification of these two questions would be helpful for policy-makers to consider different aspects of the issue and decide an appropriate national patent policy in consistency with these treaties. Regarding the notion that the incorporated substantive provisions must comply with the TRIPS rules, and otherwise, the implementation of the obligations under TRIPS does not derogate the obligations under the Paris Convention, the next discussion will examine particularly these questions in relation to the “incorporated” Paris Convention, particularly Article 4bis of this Convention, and to the extent of its relevance, Article 6 of TRIPS. Then the subsequent discussion is going to examine the legal justification of this issue under WTO jurisprudence in the relation with the TRIPS and GATT.

II. Legality of international exhaustion under the Paris Convention

In the general view, it may be argued for international exhaustion in any case where a patented product has been marketed abroad by or under the authorization of the related patent holder. After the first sale of the patented product, all patent rights adherent to it will have been exhausted. It may not be taken into consideration the particular concerns relating to the patent holder, the distributor of the patented product, and the market where the patented product has been first distributed, for example, whether the conditions on the consent of the related patent holder(s), the validity of the related patents, the way of distribution of the patented product into the market place, the distribution of the exclusive licensee, the identification of the distributor and the market limitation on the product, etc. need to be accounted in the application of international exhaustion.943

In one particular view, it is perceived that international exhaustion is only relevant in the case where the sale and the importation of a patented product involves at least two patents being valid in two countries. Otherwise, international exhaustion would not be relevant in the case that the patented product is manufactured or first distributed in the market, where there does not exist an effective patent right with respect to that product, namely, the patented product being not subject to the control of a valid patent right in the exporting country. It is also arguable the applicability of international exhaustion concerning the patented product being subject to a patent compulsory license or a price control regulation of government, or that the product is not marketed by the same patent holder or under the direct consent of the original patent holder etc. The reasons may be that the patent right would not be considered as exhausted in the absence of the corresponding patent right adhering to the marketed patented 943 See e.g., Margreth Barrett, supra note 919 (discussing different views on various aspects of parallel importation of patented products).

Leaving the other concerns aside, it can be supposed that international exhaustion is clearly relevant in the case where the patented product involves two patents being valid in two countries for the same invention.945International exhaustion invites dispute regarding its legality under the principle of the independence of patents. The dispute stems from the different views on the consistency of international exhaustion under the provision on the principle of independence of patents. The main question remaining in the dispute is the difference in the perception on the scope of this provision. Taking this question into account, the discussion below will focus on the legality of international exhaustion under the principle of independence of patents in relation to Article 4bis of the Paris Convention.

The present controversies on this issue may be summarized in two main lines of prepositions. The first preposition argues that international exhaustion is in violation of Article 4bis of the Paris Convention.946 This proposition relies on the perception of Article 4bis of the Paris Convention in the broad meaning. Accordingly, both the existence and the exercise of a patent right granted by a patent in a Union country must be absolutely independent from the patent right subject to the corresponding patent existing in another Union country. On the contrary, the second proposition states that international exhaustion does not conflict with the principle of independence of patents since Article 4bis of the Paris Convention does not cover the issue of exercise of patent right.947 In the view of the author, the scope of Article 4bis is needed to understand in the broad meaning. However, the exercise of a patent right in a Union country is not necessarily perceived of absolute independence as far as that country is prohibited from referring to the situation of the corresponding patent right in another Union country for rendering its own decision on the issue of exhaustion. In this respect, the principle of independence of patents needs not to be understood as being extremely identical to the territorial principle in every aspect. The following discussion will explore further the arguments underpinning the mentioned above propositions.

944 See e.g., Nuno Pires de Carvalho, supra note 103, at 102-107. 945 See Darren E. Donnelly, supra note 922; Hillary A. Kremen, supra note 920; Ako Shimada Williams, supra note 920. 946 See Nuno Pires de Carvalho, supra note 103, at 104, 105. 947 See Decision of the Supreme Court of Japan in BBS Kraftfahrzeug Technik v. Jap-Auto Products (“BBS case”), the Supreme Court Decision on July 01, 1997, H6 (Ne) 3272 (“BBS Wheels III”), International Review of Industrial Property and Copyright Law (Vol. 15, 1998), pp. 331-335.

The argument for the restriction of international exhaustion is the perception that the principle of independence of patents under Article 4bis of the Paris Convention should be understood as the territorial principle of patent protection in the broadest sense, which covers all matters relating to patent rights and enforcement of patent rights.948 Accordingly, the patent rights exhausted in the territory of one country would have no impact on the patent rights of the patent obtained for the same invention in the territory of another country.949

It is argued that Article 4bis (2) only gives two examples of independence which relate to the validity and duration of a patent. Accordingly, the forfeiture and nullification of a patent in one country does not necessarily lead to the forfeiture and nullification of the corresponding patent in another Union Member on the same grounds. Similarly, the lapse of a patent due to the expiry of its term protection in one country does not automatically cause the lapse of the corresponding patent in the territory of other Union Members. The emphasis is placed on the open language of this provision. It must be explained that these are only examples that are mentioned in “particular” in response to the common practice of regulating the automatic invalidation and lapse of patents for the same invention following the invalidation and lapse of the patents in another country at the time of the Conference of London of 1934 leading to the addition of paragraph 2 of Article 4bis to the Convention.950 From this argument, an international exhaustion regime may be regarded as being in violation of Article 4bis of the

948 It is viewed that the general effect of Article 4bis is that the protection granted by a patent in one contracting country is not affected in any way whatsoever by the exercise of a parallel protection existing abroad. The consent given by the patentee to a licensee abroad to make and sell the subject matter of the foreign patent cannot legally be assumed or presumed to be also a consent with respect to his protection rights in another country. Furthermore, the theory that the patentee received his “reward” by exercising the exclusive right in country A and therefore cannot claim another reward by exercising an exclusive separate right in country B, and that his protection right was exhausted or consumed by the marketing of the products in country A and such products can now fully circulate in country B is a theory without any legal foundation whatsoever. See Stephen P. Ladas, ‘Exclusive Territorial Licenses Under Parallel Patents’, International Review of Industrial Property and Copyright Law (Vol. 3, 1972), p. 346. See also Straus, supra note 123, at 194, 195. 949 See Stephen P. Ladas, supra note, at 335-346. See also Straus, supra note 123, at 194. The reasoning for this view is that, under Article 4bis of the Paris Convention, Paris Union Members must treat patents applied for in the various countries of the Union by nationals of the countries of the Union as being “independent of patents obtained for the same invention in other countries, whether members of the Union or not.” This includes exhaustion, because “the foregoing provision is to be understood in an unrestricted sense”. In other words, the fact that patent rights are exhausted in the territory of one country “should have no impact whatsoever on the patent rights held in the territory of another country, given that those rights are entirely independent.” See Nuno Pires de Carvalho, supra note, at 104. 950 The scope of this provision should be, otherwise, understood in the broader view. It is argued that the core provision of paragraph 2 is that independence “is to be understood in an unrestricted sense”. It applies, therefore, to the enforceability of rights as well. See Nuno Pires de Carvalho, supra note, at 104, 105.

In short, under the argument for the inconsistency of international exhaustion with the principle of independence of patents, an international exhaustion regime violates the obligations under Article 4bis of the Paris Convention. Because the implementation of the obligations of TRIPS does not derogate the obligations under the Paris Convention, this argument supposes that a WTO Member who is at the same time a party to the Paris Convention should not adopt an international exhaustion regime in dealing with the issue of parallel importation.

2. The Paris Convention without relevance with exhaustion of patent rights

The proposition in this line of view reasons that Article 4bis of the Paris Convention has no relevance to the existence of a patent right. In this respect, the judgments of the Japanese Supreme Court in the case of BBS Kraftfahrzeug Technik AG v. K. K. Racimex Japan and K. K. Jap-Auto Products953 (“BBS case”) on this matter in dealing with disputes concerning parallel importation.

The Tokyo District Court found that Article 4bis of the Paris Convention is related to the existence of patent rights but not the exercise of patent rights.954 The Court opined that this article, underpinning the principle of patent independence as well as the principle of territoriality does not directly influence the decision of the Court on the admissibility of parallel importation.955 The Court interpreted the Japanese Patent Act and denied to introduce

951 It is argued that WTO Members that have adopted international exhaustion regimes in the area of patents are nonetheless in violation of Article 4bis of the Paris Convention. See Nuno Pires de Carvalho, supra note 103, at 105. 952 The reason is that although a number of WTO Members have implemented Article 6 provision in a way that is inconsistent with Article 4bis of the Paris Convention, Article 6 is not per se in conflict with the principle of independence of patents, many WTO Members have indeed adopted a national exhaustion regime, which is in full compliance with the principle of independence. See Nuno Pires de Carvalho, supra note 103, at 105. 953 See the Supreme Court Decision, supra note 947. The fact was that plaintiff BBS Kraftfahrzeug Technik AG ("BBS"), a German company, holds a patent entitled “Wheel for Automobile” in Japan and a patent in German for the same invention. The defendant K. K. Jap Auto Products ("Jap Auto"), a Japanese company, had been importing into Japan the aluminum wheels (“the patented product”) manufactured and distributed by the plaintiff in Germany. The codefendant K. K. Racimex Japan ("Racimex"), also a Japanese company, had been selling (“the patented product”) imported by Jap Auto. BBS sued Racimex and Jap Auto on the grounds that the acts of importation and resale of the patented products in the market of Japan without BBS’ s authorization was an infringement of BBS's Japanese patent. See Jinzo Fujino, Parallel Importation of Patented Goods, AIPPI Journal, July 1995, p. 205. 954 See the Tokyo District Court Decision on July 22, 1994, Case No. Hei 4 (wa) 16565 (“BBS Wheels I”), International Review of Industrial Property and Copyright Law (1996), p. 547. 955 See the Tokyo District Court Decision, supra note 954. Jap Auto appealed to the Tokyo High Court against the judgment of the Tokyo District Court, arguing that the court should adopt the principle of international exhaustion of patent rights. BBS, on the other hand, argued that international exhaustion of patent rights, which allows for the exhaustion of patent rights on a product in a foreign country to the exhaust patent rights on the same product in one's home country would violate the principles of patent independence and territorial jurisdiction. In addition, BBS invoked public policy and argued that parallel importation works against consumer protection especially where the patented product requires "strict quality control". See Jinzo Fujino, supra note 953.

© Pham Hong Quat 206 the principle of international exhaustion of patent rights and the parallel importation of patented products into Japan.956 The Tokyo High Court stated that the principle of patent independence and the principle of territoriality should mean that the effect of a patent right obtained on the basis of the Japanese Patent Act is to be determined by interpreting the Japanese Patent Act.957 The Court further reasoned that the question to what extent the lawful marketing of patented products abroad has to be taken into consideration is to be determined under Japanese Patent Law.958 The Court would consider whether the lawful putting into circulation of patented products abroad influences the scope of a patent right within Japan.959 The arguments for prohibiting international exhaustion of the patent right and parallel importation of patented products raised by the patentee and found that the patent right was exhausted by putting into circulation of the patented products abroad by the patentee.960 The Supreme Court upheld the Tokyo High Court’s decision and dismissed BBS' s appeal.961

In the circumstances that the decision of the Tokyo High Court received many comments from opponents and supporters,962 the Supreme Court found that Article 4bis of the Paris Convention relates only to the matters of existence of a patent right, such as the granting, validity and expiration of a patent etc., but does not concern the exercise of patent rights by the patentee.963 Accordingly, the issue of exhaustion is a matter of domestic patent law.964 The Supreme Court considered the relationship between the free movement of goods in international trade and the interests of the patentee.965 For the development of international trade, in common sense when the patentee transfers his patented products, it would imply that the patentee has transferred to transferee the rights to undertake the subsequent transactions with respect to the patented products, including the importation into Japan and the distribution of patented products in Japan.966 However, the Supreme Court further found that if, at the time of transfer, the patentee reserves his rights as to the subsequent transactions with respect to the patented products, and such reservation is clearly indicated on the patented products, the patentee may retain his right to control the importation or the distribution of the patented products in Japan.967

956 See the Tokyo District Court Decision, supra note 954, at 549. 957 See the Tokyo High Court Decision on March 13, 1995, Case No. Hei 6 (ne) 3272 (“BBS Wheels II”), International Review of Industrial Property and Copyright Law (1996), p. 552. 958 Id. 959 Id. 960 Id. at 554-55. 961 See the Supreme Court Decagon, supra note 947. 962 E.g., for the opposition views, see Hillary A. Kremen, supra note 920; Tait R. Swanson, supra note 919; Matthew R. Hicks, ‘Japanese-Auto Products v. BBS- Threat to Exacerbate U.S.-Japanese Trade Relations?’ Loyola of Los Angeles International & Comparative Law Review (Vol. 23, 1997), p. 161; Claude E. Barfield and Mark A. Groombridge, ‘Parallel Trade in the Pharmaceutical Industry: Implications for Innovation, Consumer Welfare, and Health Policy’, Fordham Intellectual Property, Media & Entertainment Law Journal (Vol. 10, 1999), p. 185, available on http://www.Lexis.com; and for the supportive views, see Darren E. Donnelly, supra note 922; Ako Shimada Williams, supra note 920. 963 See the Supreme Court Decision supra note 947, at 333. 964 Id. 965 Id. at 334. 966 Id. 967 Id.

© Pham Hong Quat 207 Generally, in the BBS case the Japanese Supreme Court upheld the view of the lower courts that Article 4bis of the Paris Convention is not relevant to the issue of exhaustion of patent rights. In contradiction with the view that this article prohibiting international exhaustion of patent rights, the Japanese courts endorsed the understanding this article in the sense that it leaves this issue to the domestic law to decide. In other words, the Paris Convention does mention the legality of any approach of exhaustion of patent rights.

For seeking an appropriate answer for the question of legality of international exhaustion of patent rights, the author’s view is that Article 4bis of the Paris Convention, on the face of it, does not oblige an understanding the scope of independence of patents in a narrow meaning. Otherwise, there is neither word in this article forcing an intrusive conception of the territoriality for the absolute independence of patents. In the situation of vagueness of the provision, an interpretation that would lead either to narrow down the scope of the provision or to the absolutism of some rule embed in that provision would easily result in the dispute. Under the mandate of the Paris Convention, this stands for the common rules of substantive law regarding the patent protection. National legislation may adapt those rules with specific interests and preferences. Even if the exercise of patent rights is covered by this provision, it would not possibly bind the exercise of patents of rights insofar the legality of international exhaustion of patent rights is excluded. Where there is no clear exclusion in the language of the Convention, national legislation may refer to the situation of exercising the relevant patent right in another country as a factual reference for its decision.

III. The Relevance of the TRIPS and GATT

As stated in Article 6, TRIPS precludes disputes concerning the exhaustion of patent rights from the WTO dispute settlement system. Accordingly, even if the policy of exhaustion adopted by a given WTO Member may cause some detrimental consequence to another WTO Member, there is not available an opportunity for the damaged member to bring a case before a WTO panel against that policy. However, the question is that, although exhaustion of rights is mentioned in Article 6 and some footnotes attached to some other provisions on patent protection and enforcement in TRIPS Agreement, TRIPS itself does not define clearly what is exhaustion of rights.

It is argued that Article 6 of the TRIPS, though precluding the disputes of exhaustion of rights from the WTO dispute settlement mechanism, does not prevent the parties from requesting a WTO panel to clarify the concept of exhaustion of rights inscribed in TRIPS.968 In practice, the exhaustion policy adopted by the national law of a WTO Member might become the disputed subject in the bilateral trade relations between the related WTO Members.969 However, there has been no claim brought before a WTO panel concerning a dispute on exhaustion related issues.970

968 See Frederick M. Abbott, ‘The Doha Declaration on the TRIPs Agreement and Public Health: Lighting a Dark Conner at the WTO’, Journal of International Economic Law (Vol.5, 2002), p. 493; William J. Davey and Werner Zdouc, supra note 655, at 69. 969 See Tait R. Swanson, supra note 919. 970 See http://www.wto.int/english/tratop_e/dispu_e/dispu_subjects_index_e.htm.

© Pham Hong Quat 208 There exist some different arguments on the legality of international exhaustion under TRIPS. Some scholars argue that Article 6 of TRIPS supports international exhaustion in the context of the GATT system underpinning the freer trade in goods.971 Others contend that TRIPS favors national exhaustion of patent rights when this question is placed in the context of Article 28.1 of TRIPS, which stands for patent rights in preventing the importation of a patented product.972

There are different views on the relevance of international exhaustion of patent products under TRIPS and GATT in the sense that it allows parallel importation. The debate on this issue is resulted from different understandings of the legal implications of Article 6 of TRIPS in relation with some other provisions of TRIPS and GATT. The possible interpretation of Article 6 of TRIPS in various ways results in the difference in the arguments for and against the legality of international exhaustion under the WTO rules.

The controversies on this issue may be summarized in three main lines of views regarding the legality of international exhaustion of patent rights under the TRIPS. The first view asserts that the TRIPS itself obliges WTO Members to protect the patent right holders against parallel importation of patented products.973 The second view argues that TRIPS and GATT mandates the approach of international exhaustion of rights in general and parallel importation of patented products in particular.974 The third view reasons that TRIPS, without relevance to the GATT and WTO rules, records the freedom of the WTO Members to regulate the matters of exhaustion of rights.975

The national legislation of the WTO Members, from such views, is subject to different extents of the constraints from TRIPS and WTO law in dealing with the issue of international exhaustion of patent rights. The recent development of WTO jurisprudence regarding the intellectual property protection, to certain extent, provided some grounds for reviewing the practical effect of the mentioned-above views. Accordingly, it might draw an empirical

971 See Frederick M. Abbott, supra note 919 (discussing a number of approaches to this issue, including arguments based on Article XI:1 of GATT 1994, GATT Art. III, GATT Art. XI and XX(d)). It is argued that a policy of territorial exhaustion is prohibited under the GATT and TRIPS. All things being equal, GATT and TRIPS favor international exhaustion standing alone. Id. See also Abudulqawi A. Yusuf TRIPS: ‘Background, Principles and General Provisions’, in Intellectual Property and International Trade: The TRIPs Agreement, eds. Carlos M. Correa and Abdulqawi A. Yusuf (Kluwer Law International, 1998), p, 18; S. K. Verma, supra note 934 (relying on GATT Art. III(4) and GATT Art. XI(1) to argue for the contrary). 972 Notwithstanding the language of Article 6 of the TRIPS, some commentators have argued that other provisions of TRIPS or other Agreements within the General Agreement on Tariffs and Trade, indirectly prohibit a policy of international exhaustion. See e.g., Thomas Cottier, ‘The Prospects for Intellectual Property in GATT’, Common Market Law Review (Vol. 28, 1991), pp. 399-400 (argument based on GATT Art. XXIII(1) (b)); Straus, supra note 123, at192-193 (relying on TRIPs Art. 27(1) and 28(1)); Harvey E. Bale, ‘The Conflicts Between Parallel Trade and Product Access and Innovation: The Case of Pharmaceuticals’, Journal of International Economic Law, (Vol. 7, 1998), pp. 637-644 (relying on TRIPs Art. 28). See also Watal, ‘TRIPs and the 1999 WTO Millennium Round’, The Journal of World Intellectual Property (Vol. 3, 2000), pp. 17-18 (describing similar arguments). 973 See Joseph Straus, supra note 123, p. 192. 974 See Frederick M. Abbott, supra note 934, at 633. 975 See Macro C. E. J. Bronckers, ‘The Exhaustion of Patent Rights under WTO Law’, Journal of World Trade (Vol. 32), p. 157.

In that connection, the discussion bellow is going to examine the three lines of views regarding the different effects of the TRIPS and GATT rules on international exhaustion of patent rights. Then it is trying to assess such effects in the recent development of WTO jurisprudence concerning intellectual property to seek an appropriate perception of the legality of this issue and the constraints on its application under WTO jurisprudence. At first, three views on the legal status of international exhaustion of patent rights under the TRIPS and WTO law will be discussed in turn.

1. The TRIPS precluding international exhaustion of patent rights

Article 6 of TRIPS provides:

“For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.”976

The view of the TRIPS precluding the international exhaustion of patent rights relies on the narrow interpretation of Article 6 of the TRIPS. Accordingly, the wording “for the purpose of dispute settlement under this Agreement” is perceived as a procedural provision of the TRIPS. In this view, Article 6 of the TRIPS is intended only to exclude the issue of exhaustion from the TRIPS dispute settlement procedure. It does not preclude or derogate any obligation of the WTO Members derived from the substantive provisions of the TRIPS. 977 With regards to patents, it is argued that Article 6 should be read in the relation with the substantive provisions set forth in Articles 27.1 and 28.1 of the TRIPS.978 The provisions of Article 27.1, in conjunction with Article 28.1, obliges the WTO Members to grant the patentees the right to prohibit the sale and the importation by third parties of a patented product, or a product obtained directly by a patented process, regardless of where the products were produced. 979 Those substantive provisions of the TRIPS amount to a barrier to international exhaustion of patent rights.980 The provisions of Article 6 and the footnote reference in Article 28.1 does not

976 See the TRIPS supra note 10, art. 6. 977 See Joseph Straus, supra note 123, at 192. 978 Articles 27.1 provides that patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application, and patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced. See the TRIPS, supra note 10, art. 27.1. Article 28.1 provides that the patent holders shall have the exclusive rights to prevent third parties not having the owner’s consent from making, using, offering for sale, selling, or importing the patented products. See the TRIPS, supra note 10, art. 28.1. 979 It could be inferred from this argument that, the non-discrimination rules under Article 27.1, applying to the patent rights provided in Article 28.1, would prevail the effect of Article 6 of the TRIPS. It based on the reason that Articles 27.1 and 28.1 providing the non-discrimination rules and patent rights are the substantive provisions, while provision of Article 6 is only a procedural provision. 980 Id.

It is reasoned that the language of Article 6 itself, by using the words “nothing in this Agreement”, infers the understanding that the substantive rules of the TRIPS contain the provisions that may be invoked to argue against the application of the international exhaustion principle. To this point, the meaning of Article 6 needs to be construed in the relation with the principles worded in the preamble and the rules embedded in the substantive provisions of the TRIPS.982

It is also alleged that the principle of international exhaustion of patent rights directly contravenes both the substantive provisions of the TRIPS and the fundamental TRIPS rationale, which stands for the greater protection given to the patented products. That rationale is still appropriate at the present situation and in the foreseeable future of the world market of products in general, of certain products such as pharmaceuticals in particular. For that reason, there does not exist legal and practical grounds for the argument in favor of the principle of international exhaustion of patent rights under the TRIPS.983

For the reasoning that Article 6 does not derogate the obligations under the substantive provisions in Articles 27.1 and 28.1 of the TRIPS, it is asserted that a WTO Member would not be in the position to fulfill its obligations regarding the patent protection if it adopted the principle of international exhaustion of patent rights.984 In such a case, a patent holder in that country would not be able to control the distribution and the production of the patented products in the relevant market by resorting to the patent rights conferred by his patent. In other words, the patent he was granted in that country would have no sense by the application of the principle of international exhaustion of patent rights. This situation would entail a reduction in the filing of the applications for the grant of patents and not an increase in technology transfer. Such undesirable consequence would go against the objectives of the TRIPS.985

Based on that reasons, the proponents of the narrow view on the scope of Article 6 of the TRIPS argues against the legality of international exhaustion of patent rights under the TRIPS. On one hand, Article 6 of the TRIPS is a procedural rather than a substantive provision. On the other hand, the obligations under the substantive provisions of the TRIPS are not affected by the procedural provision. Accordingly, the TRIPS obliges the WTO Members to preclude the application of the principle of international exhaustion of patent rights to give effect to the provisions of Articles 27.1 and 28.1 of the TRIPS. The application of international exhaustion does not only fail of the fulfillment of the obligations under the TRIPS substantive provisions, but also undermine the basic principles and objectives of the TRIPS. In both legal and factual aspects, this view did not find any justification for the option of international exhaustion of patent rights under the TRIPS rationale. The national legislation of the WTO Members, in this view, should preclude the option of international exhaustion of

981 Id. 982 See Joseph Straus, supra note 123, at 193 983 Id. 984 Id. at 194. 985 Id., at 195.

© Pham Hong Quat 211 patent rights for their compliance with Articles 27.1 and 28.1 of the TRIPS. National laws therefore cannot invoke Article 6 of the TRIPS to permit the parallel importation with respect to the patented products.

2. The TRIPS and GATT mandating international exhaustion of patent rights

The proponents supporting the legality of international exhaustion of patent rights under the TRIPS provides a broader view in understanding Article 6 of the TRIPS. It does not conceive Article 6 of the TRIPS as only a procedural provision to exclude the issue of exhaustion from the TRIPS dispute settlement procedure. Moreover, with the reference footnote in Article 28.1,986 the elimination of Article 6 reading in the patent context contains an implication that a third party having the owner’s consent to manufacture and sell a patented product in one WTO Member might be entitled to parallel export that product to another market.987 In this respect, the patent rights mentioned in Article 28.1 is subject to the elimination of Article 6 not only in the procedural aspect, but also in the substantive aspect. Although Article 6 itself would not resolve the questions of parallel importation in general, the implication for parallel importation with regards to patented products was under the sufficient estimation of the drafters of Article 28 of the TRIPS, when they made the reference of this matter back to Article 6.988

In this view, Article 6 of the TRIPS only says that “nothing in this Agreement” is used to address the question of exhaustion of rights. Accordingly, it does not exclude the possibility of invoking provisions of other agreements to deal with the issue where they are relevant.989 The concern may be that international exhaustion and parallel importation would have the affect as providing subsidized exports of licensed products to countries.990 Therefore, the application of international exhaustion, while it is consistent with the TRIPS, may frustrate the legitimate expectations of the right holders for the greater protection. It may result in nullification and impairment under the unfair trade and competition conditions.991 Such concerns would be dealt with by invoking to the relevant rules of GATT.992 To overcome the situation mentioned in the above example, the rules on nullification and impairment under Article XXIII (1) (b) of GATT would be applied.993 For the reason that the rules applicable to the application of doctrines of exhaustion are available under GATT law, there is no need to modify Article 6 of the TRIPS to regulate that practice.994

986 Footnote 6 to Article 28.1 says: “This right, like all other rights conferred under this Agreement in respect of the use, sale, importation or other distribution of goods, is subject to the provisions of Article 6.” See the TRIPS, supra note 10, art. 28.1. 987 See Frederick M. Abbott, supra note 934, at 633. 988 Id. 989 Id. 990 See Thomas Cottier, ‘The Prospects for Intellectual Property in GATT’, Common Market Law Review (Vol. 28, 1991), p. 399. 991 Id. 992 Id. 993 Id. at 400. 994 In the same vein, the GATT rules continue to govern the other aspects of exhaustion and parallel importation: Article XX(d) provides the basis to justify the exclusion of parallel importation for the application of national exhaustion. Article XXIV of GATT continues to provide the basis for the application of regional exhaustion within the customs unions or free-trade areas. See Thomas Cottier, supra note 972, at 400.

© Pham Hong Quat 212 The justification for the application of international exhaustion also stays behind the argument that national exhaustion may amount to a restriction on imports or a barrier to international trade that GATT rules intend to remove.995 In this regards, Articles XI and XX (d) of GATT provide the general basis for the exclusion of the rules against parallel importation in the WTO context.996 Exceptionally, Article XX (d) may be invoked to justify an exception for the case of markets being distorted by government intervention with respect to the patented products. The application of national exhaustion would create a discrimination against imported products, and therefore, Article III:4 of GATT may also be applicable.997 However, to the extent that Article 6 of the TRIPS is an “agreement to not agree”, the invocation of such rules of GATT may be not necessary in practice.998 At any rate, in this view, GATT rules mandate international exhaustion rather than national exhaustion. The application of international exhaustion is generally appropriate to the rationale underpinning the WTO system, which is, eliminating barriers and discriminations that hamper international trade.999

For the reasoning that TRIPS and GATT rules mandate the principle of international exhaustion of patent rights and parallel importation, the national legislation of the WTO Members should adopt this principle to be in position of compliance with the TRIPS and GATT rules. The application of international exhaustion, otherwise, must be taken in the way that assures the conditions of fair trade and competition, as required by GATT law, with regards to parallel imports. The view arguing for international exhaustion and parallel importation under the GATT mandate results in a consequent effect. The GATT rules restrain generally national legislation from taking the option of national exhaustion that is left open by Article 6 of the TRIPS.1000 The application of exhaustion should comply with not only the principles of the TRIPS, but also the relevant rules of GATT. National legislation therefore is governed by the GATT disciplines, and may be subject to the WTO dispute settlement procedures for the GATT relevance, applicable to the issue of parallel importation.1001

There is also an argument for the prevailing effect of GATT rules over the TRIPS based on provision of Article XVI (3) of the WTO Agreement.1002 In this view, the basic GATT principles is made applicable to the TRIPS and any conflict between the WTO Members’ obligations under the TRIPS with any covered Agreement will be governed by the GATT rules.1003 By that reason, the principle of exhaustion should not be applied in derogation with the WTO Members’ obligations under the WTO.1004 The national or territorial exhaustion, in 995 See Frederick M. Abbott, ‘First Report (Final) to the Committee on International Trade law of the International Law Association on the Subject of Parallel Importation’, Journal of International Economic Law (1998), p. 633. 996 Id. 997 Id. 998 See Frederick M. Abbott, supra note 934, at 633. 999 Id. 1000 Id. 1001 Id. 1002 It is also argued that both the TRIPS and GATT stand for the liberalization of trade, relying on the language of the Preambles of these agreements. See S. K. Verma, supra note 934, at 553. Also relying on the Preamble of GATT, it is viewed that GATT should subordinate trade concerns to welfare interests where a measure is welfare-enhancing but decreases trade. See Alexander J. Stack, ‘TRIPs, Patent Exhaustion and Parallel Imports,’ The Journal of World Intellectual Property (Vol. 1, 1988), p. 685. 1003 See S. K. Verma, supra note 934, at 553. 1004 Id.

© Pham Hong Quat 213 this view, is a discriminatory treatment in favor of the national right holder and inconsistent to the national treatment principle of GATT under Article III(4).1005 By the same token, in the term “other measure” restricting imports, territorial exhaustion is inconsistent to Article XI (1) of GATT.1006

3. The TRIPS leaving freedom to national laws without the relevance of GATT

The third view argues for the entire freedom left by Article 6 of the TRIPS to national option regarding exhaustion of rights without the relevance of GATT.1007 Accordingly, WTO law neither obliges countries to adopt nor prohibits them from adopting the international exhaustion of patent rights.1008 International exhaustion in this view is not a legal obligation and could not be enforced under WTO law.1009 This view argues for the understanding of Article 6 of the TRIPS in the broadest meaning. By the eliminating wording of this article, the drafters of the TRIPS were under the careful consideration of the exhaustion issue and failed to reach a consensus, in so far as they did not accept this issue be resolved through the WTO dispute settlement proceedings.1010 By the same token, the reference footnote in Article 8.1 of the TRIPS showed that the drafters of the TRIPS did not want the question of exhaustion of patent rights to be resolved through the WTO dispute settlement proceedings.1011 From the referent wording of the footnote, it cannot draw any implication regarding whether a third party “having the owner’s consent” to manufacture and sell the product in one Member implies the right to parallel import that product to another Member.1012

Accordingly, Article 6 of the TRIPS represents the agreement to disagree in the sense that it reserves the sovereignty of WTO Members regarding this issue.1013 This article gives each

1005 The reason is that national exhaustion does not allow the goods under parallel importation to be distributed freely in the importing country, while the goods provided by the right-holder himself or with his consent will not be subject to such a restriction. See S. K. Verma, supra note 934, at 553. The opposite view argued that all systems of exhaustion of rights, whether national, regional, international, affect the sale of domestic and imported products in a similar way. There is no discrimination against the origin of products because both domestic and imported products are subject to the same condition about the consent of the right holder. Particularly, systems of national and regional exhaustion of rights equally restrict the marketing of both internally traded and imported products in the relevant territory, if that marketing in that territory takes place without the consent of the right holder. Both domestic products and products originating from another WTO Member that are marketed with the consent of the right holder can be traded without restriction within that country. Otherwise, where the domestic products are exported from that country and then marked abroad by or with the consent of the right holder. As with the importation of foreign products, the re-importation of the products in question to that country without the consent of the right holder could be blocked by the rule of national exhaustion. From this view, domestic products and products from other WTO Members are accorded the same treatment. The system of national exhaustion therefore does not distinguish according to the origin of the goods and is consistent to Article III:4 of GATT 1994. Consequently, Article XI:1 of GATT 1994 is not applicable to systems of national and regional exhaustion of rights. See Macro M. Slotboom, ‘The Exhaustion of Intellectual Property Rights’, The Journal of World Intellectual Property (Vol. 6, 2003), p. 437. 1006 Id. 1007 See Macro C. E. J. Bronckers, supra note 975, at 138-157. 1008 Id. 1009 Id. at 146-157. 1010 Id. at 152. 1011 See Macro C. E. J. Bronckers, supra note 975, at 145. 1012 Id. at 141-142. 1013 Id. at 142.

© Pham Hong Quat 214 WTO Member the discretion to decide its own policy regarding exhaustion.1014 For example, developing countries are free to adopt the policy of international exhaustion without taking any risk under WTO law. Similarly, as for the countries wishing to follow national exhaustion or regional exhaustion, they have freedom to take their option.1015 Otherwise, Article 6 of the TRIPS is not only a technical-procedural provision. Rather, it is a substantive provision in the sense that it creates discretion for WTO Members on issue of exhaustion.1016

It is also argued that the WTO rules and especially the GATT principles are not relevant to address the issue of exhaustion of rights mentioned in the TRIPS. The WTO mandate that stands for open trade or trade liberalization is not appropriate to the interpretation of TRIPS regarding the issues of intellectual property protection. 1017 In this regards, the TRIPS strikes to the balance between trade liberalization and increased intellectual property protection.1018 It is reasoned that the issue of intellectual property were referred back to the GATT to decide only on the basis of the rules for liberalization of trade, the balance recorded in the TRIPS would not be achieved.1019

The above-mentioned argument finds some other supportive points from the text of the TRIPS. For example, Article 28.1 in conjunction with Articles 3 and 4 of the TRIPS requires the right to import conferred by a patent to be ensured against the discrimination based on the nationality of the patent right holders. Concerning the exhaustion of rights, the reference in Article 6 to Articles 3 and 4 of the TRIPS conveys the meaning that whatever the WTO Members may decide the matter of exhaustion, they cannot discriminate between foreign and national right holders, nor between foreign right holders.1020 That limitation on exhaustion would not be appropriate to be reviewed and enforced under the GATT rules.1021 It is reasoned that while the footnote in Article 28.1 mentions the reference only to Article 6 of the TRIPS, it does not contain any reference to the GATT provisions or the GATT dispute settlement. 1022Therefore, the review of the performance of the patent rights, in terms of exhaustion, under the GATT rules and the GATT dispute settlement would be outside the scope of Article 28.1

1014 Id. 1015 To this end, the TRIPS does not contain the substantive rules on exhaustion of patent rights because the TRIPS itself excludes the enforcement of any substantive rule in Article 6. See Macro C. E. J. Bronckers, supra note 975, at 142. 1016 See Macro C. E. J. Bronckers, supra note 975, at 142. 1017 The statement of the Preamble of the TRIPS on the need to promote the effective and adequate protection is specially adopted in the TRIPS. Therefore, it is arguable that this statement stands for maintaining certain restrictions rather than eliminating them totally from international trade. See Macro C. E. J. Bronckers, supra note 975, at 143. 1018 See Macro C. E. J. Bronckers, supra note 975, at 144. 1019 For this reason, the issue concerning increased protection of intellectual property that amounts to increased trade restrictions needs to be reviewed under the TRIPS principles rather than other WTO principles. See Macro C. E. J. Bronckers, supra note, at 144. 1020 See Macro C. E. J. Bronckers, supra note, at 144. 1021 It is noted that Articles I and II:4 of GATT prohibit discrimination relating to the origin of goods, rather than the discrimination relating to the nationality of the right holders. That is the reason why Article 6 of the TRIPS provides that the question of exhaustion will not be addressed through the dispute settlement procedures “under this Agreement”. See Macro C. E. J. Bronckers, supra note 975, at 146. 1022 See Macro C. E. J. Bronckers, ‘The Exhaustion of Patent Rights under WTO Law’, Journal of World Trade (Vol. 32), p. 147.

© Pham Hong Quat 215 in conjunction with Article 6 of the TRIPS.1023 It is argued that it would be unreasonable to say that the drafters of the TRIPS intended to eliminate the dispute settlement about exhaustion, apart from the issues concerning discrimination, from the TRIPS, but allow the litigation of that question in the context of the GATT.1024

It is also argued that for the conclusion of the TRIPS within the GATT negotiation framework, the TRIPS reflects a more contemporary understanding of the relationship between trade liberalization and intellectual property protection than the original, exceptional provision of Article XX of the GATT drafting from 1947.1025 With the inclusion of TRIPS, the WTO has upgraded intellectual property protection in seeking the balance between trade liberalization and the protection of intellectual property rights, and the protection of intellectual property rights is effectively protected and not dealt with as an exception.1026 Based on that perception, it was reasoned that the entry into force of the TRIPS diminished the scope of application of the GATT 1994 under Articles XX (d) and XI.1027

The view in this line argued for the prevailing effect of the TRIPS regarding the issues of intellectual property protection, including the exhaustion question. The TRIPS as a lex specialist or sui generis agreement on intellectual property would take the absolute precedence over the GATT as far as the matters related to intellectual property protection are concerned.1028 Accordingly, in this view, Articles 28.1 and 6 of the TRIPS remove the issue of exhaustion of rights, except for the question of discrimination, from the WTO dispute settlement. Article 6 creates effectively discretion for each WTO Member to legislate this issue upon its own policy. The WTO would not at any rate interfere with the sovereignty of the WTO Members in deciding the option regarding exhaustion of rights.1029

1023 Arguably, it would make the footnote to Article 28.1 meaningless and therefore contradicts the fundamental principle of effectiveness in treaty interpretation. See Macro C. E. J. Bronckers, supra note 975, at 147. 1024 In this respect, the term “under this Agreement” in Article 64(2) of the TRIPS, similar to the term used in Article 6, supports the understanding that non-violation complaints, which concern nullification or impairment, in respect of intellectual property would be settled in the TRIPS dispute settlement rather than in another WTO agreement like the GATT. See Macro C. E. J. Bronckers, supra note 975, at 147. 1025 See Macro C. E. J. Bronckers, supra note 975, at 150. 1026 The argument based on the view that in Article XX(d) the GATT 1947 recognized the protection of intellectual property only as an exception to the trade liberalization principles inscribed in Article XI and other provisions. See Macro C. E. J. Bronckers, supra note 975, at 150. 1027 The reason based on the fact that there was no precedent concerning international exhaustion under the GATT 1947. In addition, there was no indication that the GATT 1994 sought to change the position of its members on the question of exhaustion, either. If the WTO Members wished to do such a change, they should express clearly in the language of the GATT 1994. While language of Articles XI and XX(d) are kept unchanged, the reinterpretation of these articles would be improbable. See Macro C. E. J. Bronckers, ‘The Exhaustion of Patent Rights under WTO Law’, Journal of World Trade (Vol. 32), p. 150. 1028 In other words, the TRIPS would govern all issues relating to intellectual property protection exclusively. See Macro C. E. J. Bronckers, supra note 975, at 151. 1029 There is also another view in the light of the broadest meaning of Article 6 of the TRIPS. It was reasoned that since the issue of exhaustion is excluded from the multilateral dispute settlement in the WTO, Article 6 of the TRIPS leaves open the possibility for the WTO Members to resolve the conflicts concerning this issue under the bilateral solutions. Article 6 does not represent the agreement to disagree. Rather, it removes the issue of exhaustion from the WTO Agreement entirely. It is therefore impossible to read any legal obligation on the exhaustion of intellectual property rights into the TRIPS, the GATT or any other WTO rule. Moreover, a WTO Member might be able to place pressure on another WTO Member to change its position on exhaustion of rights.

© Pham Hong Quat 216 In general, the proponents following the broadest view in understanding Article 6 of the TRIPS asserted that international exhaustion of patent rights was not mandated under the TRIPS and any other rule of WTO law. A WTO Member might prohibit unconditionally or conditionally parallel importation. It might allow the patent right holders to block partially or totally parallel imports of patented products in certain circumstances. WTO law places no restriction on national legislation in regulating the matter of exhaustion of rights. Because the TRIPS is the agreement governing exclusively the issues of intellectual property protection in the WTO system, the issue of exhaustion will not fall within the ambit of any other WTO rule.

In this line of view, international exhaustion of patent rights would not be subject to any challenge under the TRIPS and WTO law. The application of this principle in national legislation would therefore be free from the constraints of the GATT rules and WTO dispute settlement procedures.

4. Likely challenges in application of international exhaustion of patent rights

The discussion above reveals different views on the legality of international exhaustion of patent rights under the TRIPS and WTO law. Accordingly, national legislation may be subject to different constraints of the TRIPS and GATT rules regarding the adoption of international exhaustion and parallel importation of patented products. Is the legality of international exhaustion clarified in the development of the TRIPS practice? Which constraints are still the likely challenges to national legislation from WTO jurisprudence in compliance with the TRIPS? For seeking the appropriate answers to these questions, the discussion below is going to examine the effect of the prevailing arguments mentioned above in the practice of the TRIPS and the WTO panel rulings on the relationship between the TRIPS and GATT 1994.

4.1. The Doha Declaration on the TRIPS Agreement and Public Health

A significant point in the TRIPS implementation process is the adoption of the Declaration on the TRIPS Agreement and Public Health (hereafter “Doha TRIPS Declaration”) by the Ministerial Conference in Doha on 14 November 2001.1030 The adoption of the Doha TRIPS Declaration recorded the great effort of the developing countries in driving the focus of the TRIPS effect on the public health problems, particularly those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics. Paragraph 4 of the Doha TRIPS Declaration contains an important “agreement” of the Ministers on the effect of the TRIPS on the sovereignty of the WTO Members in regulating the issues of public health:

“We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health.

It is even alleged that a WTO Member might impose trade restrictions against the other Member to express its displeasure on the latter’s policy of exhaustion of rights. See Adrian Otten, ‘The implications of the TRIPS Agreement for the protection of pharmaceutical inventions’, 11 WHO Drug Information Bulletin (No. 1, 1997), pp. 12-13, quoted by Macro C. E. J. Bronckers in ‘The Exhaustion of Patent Rights under WTO Law’, Journal of World Trade (Vol. 32), p. 157. 1030 See Declaration on the TRIPS Agreement and Public Health [hereafter “Doha TRIPS Declaration”], available at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.doc.

© Pham Hong Quat 217 Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.”1031 (Emphasis added)

Admittedly, the express agreement of the Ministers on the way to interpret and implement the TRIPS, by the statement “we agree” in Paragraph 4 mentioned above, constitutes the legal status of the Doha TRIPS Declaration in the WTO system. Because the Doha TRIPS Declaration was adopted by consensus of the Ministers and the language was expressed in form of an agreement, it would be regarded as a “decision” of the WTO Members under the provisions of Article IX: 1 of the WTO Agreement.1032 The Doha TRIPS Declaration therefore may be regarded as an agreement on the method of application of the agreement and likely to become a “subsequent agreement” of the TRIPS within the meaning of Article 31(3) (a) of the Vienna Convention on the Law of Treaties.

Although the Doha TRIPS Declaration is not an authoritative interpretation of the TRIPS under the provisions of Article IX: 2 of the WTO Agreement for not basing on a recommendation of the TRIPS Council, it appears to be an “approximation” of an interpretation of the TRIPS. 1033 By that way, the agreement of the Ministers on a method of application of the TRIPS stated in the Doha TRIPS Declaration poses an effect on the way of implementation of the TRIPS by the WTO Members.

Concerning the issue of exhaustion of rights, Paragraph 5(d) of the Doha TRIPS Declaration states:

“5. Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:

(…)

(d) The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4.”1034 (Emphasis added)

The language in Paragraph 5(d) mentioned above states clearly that the TRIPS leaves each WTO Member the freedom to legislate the issue of exhaustion. Whichever option of exhaustion a national legislation may take, its legality would be recognized under the TRIPS. Moreover, apart from the requirements of Articles 3 and 4, national legislation would not be

1031 Id. at 4. 1032 See Frederick M. Abbott, supra note 968, at 493. 1033 Id. 1034 See Doha TRIPS Declaration, supra note 1030, para. 5(d).

© Pham Hong Quat 218 subject to any “challenge” from any other provisions in the TRIPS. According to this statement, the argument for the restriction of Articles 28.1 and 27.1 of the TRIPS on the international exhaustion of patent rights and the parallel importation of patented products appears is no longer survival.

As long as the application of international exhaustion of patent rights does not result in a discrimination against the patent right holders, as required by the national treatment and MFN treatment principles of the TRIPS, national legislation adopting this principle would be free from the obligations derived from other substantive provisions of the TRIPS. The effect of the provisions in the TRIPS, including Article 6 and the reference footnote in Article 28.1, would not by any way create a challenge to national legislation in taking an option of the exhaustion regime. That “effect” is unanimously “recognized” and expressly stated in the aforesaid statement.

Regardless of Article 6 is considered as a procedural or substantive provision, the interpretation and implementation of this article should give effect to the freedom of the national legislation of the WTO Members in regulating the issue of exhaustion. Moreover, the recognition of the freedom “without challenge” might provide a ground to believe that the effect of Article 6 is not limited by the effect o the rules provided in Articles 28.1 and 27.1 of the TRIPS. Otherwise, the substantive provisions under Article 28.1 and 27.1 would be subject to the conditions provided in Article 6 of the TRIPS.

For that reason, the adoption of the Doha TRIPS Declaration consolidates the legality of international exhaustion of patent rights under the TRIPS. 1035 In addition, it excludes the concern about the challenge against international exhaustion of patent rights, as argued by some, generated from the “inside” of the TRIPS. National legislation may be free to adopt that principle without constraint from any TRIPS obligations, except for those provided in Articles 3 and 4.

As for the challenges might come from the “outside” of the TRIPS, is there exist some ground to believe that the relevance of the GATT rules is excluded from the issue of international exhaustion and parallel importation? The answer seems to be negative pursuant to the panel rulings on the recent TRIPS case as analysed below.

4.2. The WTO rulings on the relationship between the TRIPS and GATT 1994

4.2.1. The cumulative application of TRIPS and GATT 1994

1035 See Nick Gallus, ‘The Mystery of Pharmaceutical Parallel Trade and Developing Countries’, The Journal of World Intellectual Property (Vol. 7, 2004), pp. 170; Daya Shanker, supra note 485, pp. 722-771; Thomas F. Cotter, ‘Market Fundamentalism and the TRIPS Agreement’, Yeshiva University Cardozo Arts & Entertainment Law Journal (Vol. 22, 2004), p. 307. For the opposite view (Doha TRIPS Declaration does not have binding legal force in a WTO dispute), see Alan O. Sykes, ‘Public Health and International Law: TRIPS, Pharmaceuticals, Developing Countries, and the Doha “Solution”’, Chicago Journal of International Law (2002), available on http://www.Lexis.com.

© Pham Hong Quat 219 The rulings of the Panel on the double cases of EC-Geographical Indications,1036 affirmed that the national treatment principles of TRIPS and GATT 1994, in despite of the differences, could be cumulatively applied to the issue of intellectual property protection. From different aspects, Article 3.1 of TRIPS and Article III: 4 of GATT 1994 could be invoked at the same time to challenge a government regulation allegedly constituting a discrimination in the protection of intellectual property. That perception may be drawn from the following finding of the Panel:

Applying the approach of the relationship between GATS and GATT, the Panel clarified that the TRIPS and GATT 1994 have equal legal status in the sense that the obligations under these two agreements can “co-exist” and “one does not override the other”. Accordingly, the obligations under the TRIPS and GATT 1994 are of the same significance to the WTO Members. The fulfilment of the obligations of a WTO Member under the TRIPS does not escape or exempt its relevant obligations under GATT 1994. Assumedly, the obligations under the principles of the TRIPS, which stand for the increased protection of intellectual property, would not prevail the obligations under the principles of GATT, which stand for the trade liberalization, and vice versa.

4.2.2. The relevance of GATT 1994

The finding of the Panel in these cases gives a negative response to the arguments in the broadest view in understanding Article 6 of the TRIPS, which intended to exclude the effect and the relevance of GATT 1994 from the ambit of WTO law regarding the intellectual property protection in general, the issue of exhaustion of rights in particular. The above finding also clarified the legal relationship between the TRIPS and GATT in dealing with the matters of intellectual property protection within the WTO system. Accordingly, the TRIPS could not be regarded an agreement governing exclusively the matters relating to the

1036 See Panel Report, EC-Geographical indications, Complaint by US, supra note 411; Panel Report, EC- Geographical indications, Complaint by Australia, supra note 411. 1037 See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.244

© Pham Hong Quat 220 intellectual property protection. Otherwise, other rules of the WTO Agreement, particularly GATT 1994 in the above-mentioned cases, may also be applicable from the relevant aspects.

The rulings on the continuing effect of GATT 1994 over the issue of intellectual property protection legally decline the argument that the issue of intellectual property is no longer relevant to GATT 1994 by the existence of the TRIPS. These rulings encourage the argument that the question of exhaustion of rights might be subject to the WTO dispute settlement and bound by the GATT rules.

Supposed that the cumulative applicability of the TRIPS and GATT 1994 would not be nullified by the reason of the effective interpretation that the Appellate Body has applied in some cases. It seems reasonable to believe that the constraints regarding the question of exhaustion coming from the GATT rules and WTO dispute settlement procedures are existent.

4.2.3. Place of production and discrimination against imported products

The rulings on the cumulative applicability of the TRIPS and GATT 1994 with respect to the issue of intellectual property protection contains another point that may give some implication to the way of applying the international exhaustion principle. The connection for the applicability of GATT 1994 in the case mentioned above is the requirement concerning place of production of products, for purpose of intellectual property protection.1038 That requirement

1038 In dealing with the connection between the requirement regarding place of production and the discrimination against the nationality of the right holders, the Panel rendered a significant finding. It said that the even in case that national legislation imposes some kind of requirement no directly concerning nationality, for example relating to place of production, it might be regarded a discrimination in terms of the national treatment obligations under the TRIPS. The reason is that such kind of requirement may undermine the object and purpose of the TRIPS enshrined in Articles 3.1 in conjunction with Article 1.3 of the TRIPS. In this regards, the Panel states: “The object and purpose of the TRIPS Agreement depends on the obligation in Article 1.3 to accord the treatment provided for in the Agreement to the nationals of other Members, including national treatment under Article 3.1. That object and purpose would be severely undermined if a Member could avoid its obligations by simply according treatment to its own nationals on the basis of close substitute criteria, such as place of production, or establishment, and denying treatment to the nationals of other WTO Members who produce or are established in their own countries.” (Emphasis added) See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.235. In particular, a WTO Member may not accord the different treatments on the basis of the “close substitute criteria”, as defined in the footnote to Article 1.3, to its own nationals and the nationals of other WTO Members. The “close substitute criteria” include the requirements regarding place of production of products and establishment of producers, which are similar to the criteria used for the assimilation of nationals in Article 3 of the Paris Convention. This point may be read in the following finding of the Panel: “The text of the TRIPS Agreement contains a recognition that discrimination according to residence and establishment will be a close substitute for nationality. The criteria set out in footnote 1 to the TRIPS Agreement, which apply in the case of a separate customs territory Member of the WTO, are clearly intended to provide close substitute criteria to determine nationality where criteria to determine nationality as such are not available in a Member's domestic law. These criteria are "domicile" and "real and effective industrial

© Pham Hong Quat 221 closely relevant to a discrimination against the origin of products within the meaning of Article III: 4 of GATT 1994. The Panel found the relevance of the national treatment under Article III: 4 of GATT 1994 regarding the protection of intellectual property products as follows:

“The Regulation links the protection of the name of a product to the territory of a particular country. In the case of "designations of origin", as defined in Article 2 of the Regulation, this is the place of production, processing and preparation of the product and, in the case of "geographical indications", as defined in Article 2 of the Regulation, this is the place of production, processing and/or preparation. It is not disputed that in most cases these criteria are sufficient to confer origin on the products. Given that the Panel has found that the protection of names of products from other WTO Members is contingent on satisfaction of certain conditions of equivalence and reciprocity that do not apply to the names of products from the European Communities, the Regulation formally discriminates between imported products and products of European Communities origin within the meaning of Article III: 4 of GATT 1994.”1039 (Footnote omitted and emphasis added)

From the reasoning on the connection between place of production and origin of products, the Panel found that the requirement concerning place of production, subject to the equivalence and reciprocity conditions, constituted the discrimination under the national treatment provision of GATT 1994. Therefore, the Regulation of the EC that imposed the requirement concerning place of production under the equivalence and reciprocity conditions was in violation of Article III: 4 of GATT 1994: 1040

or commercial establishment". They are taken from the criteria used for the assimilation of nationals in Article 3 of the Paris Convention (1967). It is clear that, in using these terms, the drafters of footnote 1 of the TRIPS Agreement chose terms that were already understood in this pre-existing intellectual property convention. Under Article 3 of the Paris Convention (1967), "domicile" is not generally understood to indicate a legal situation, but rather a more or less permanent residence of a natural person, and an actual headquarters of a legal person. A "real and effective industrial and commercial establishment" is intended to refer to all but a sham or ephemeral establishment.” (Footnote omitted and emphasis added) See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.234. In the above findings, with reference to the provisions of the Paris Convention, the Panel found that reciprocity conditions in the requirement of place of production of products amount to the discrimination on basis of the “close substitute criteria” defined in the TRIPS Agreement, and therefore, come within the application scope of the national treatment principle of the TRIPS. In that connection, the cumulative applicability of both TRIPS and GATT national treatment provisions was determined. 1039 See Panel Report, EC-Geographica indications, Complaint by Australia, supra note 411, at 7.264. 1040 At the same time, that Regulation was also in violation of the national treatment principle under Article 3.1 of the TRIPS:

© Pham Hong Quat 222 “[T]he Panel concludes that, with respect to the equivalence and reciprocity conditions, as applicable to the availability of protection, the Regulation accords less favourable treatment to imported products, inconsistently with Article III:4 of GATT 1994”1041 (Footnote omitted)

The above findings of the Panel clarified the disputed question on the WTO jurisprudence regarding the intellectual property protection. The rulings invalidate the arguments for the irrelevance of GATT 1994 in regulating the issue of intellectual property. However, whether the GATT rules are relevant in regulating the particular issue relating to international exhaustion and parallel importation is still an open question.

Supposedly, GATT 1994 might be relevant in regulating this issue in certain aspects, the disputable question concerning international exhaustion and parallel importation is the applicability of GATT rules rather than the legality of this principle under GATT. To this end, it is arguable that the constraints of WTO law regarding the application of international exhaustion are located in the requirements of Articles 3 and 4 of the TRIPS, and likely hidden somewhere in the GATT regulation.

5. Implications for the case of Vietnam

Supposed that the issue of exhaustion might be subject to the WTO dispute settlement procedures, the question is that whether the application of international exhaustion of rights is quite “safe” under GATT 1994. Or in which way the rules of GATT 1994 might constitute an “outside” constraint with respect to national legislation in applying international exhaustion of rights? Reviewing the practice of Vietnam in applying international exhaustion in the light of the above rulings of the Panel may induce some suggestion in this aspect.

A general implication may be derived from the rulings of the Panel mentioned above. That is, in case that a national regulation imposed some discriminatory requirement relating to imported products, even for the purpose of intellectual property protection, it would likely run risk under Article III: 4 of GATT 1994. Particularly, when the requirement constituted a less favourable treatment or a discrimination against imported products, it might be subject to the challenge from that article. This implication to certain extent might be meaningful for Vietnam in seeking the safe way to adopt and implement the principle of international exhaustion of rights.

The fact is that Decree 63 issued in the year of 1996 permits the persons who “use” the patented products, which have been produced and marketed by the patent right holders or

“[T]he Panel concludes that, with respect to the equivalence and reciprocity conditions, as applicable to the availability of GI protection, the Regulation accords treatment to the nationals of other Members less favourable than that it accords to the European Communities' own nationals, inconsistently with Article 3.1 of the TRIPS Agreement.” See Panel Report, EC-Geographical indications, Complaint by Australia, supra note 411, at 7.249. 1041 Id. at 7.272.

© Pham Hong Quat 223 with their authorization, to be free from the liability of infringement.1042 After that, the government issued a supplemental regulation in the year of 2001.1043 The supplemental regulation stipulates that the patented product having been produced and marketed in foreign markets be also subject to the above exception.1044 Despite the lack of legal ground in the statutory language of the Civil Code,1045 by this regulation the principle of international exhaustion of patent rights is generally adopted in Vietnam.

Subsequently, some governmental authorities issued the administrative instructions to implement the supplemental regulation.1046 Accordingly, these instructions required the importers and the domestic distributors to submit the certificate to prove that the imported products were produced and marketed in foreign markets by the relevant right holders or their licensees. If the certificate is not furnished timely, the imported products will be detained for the verification of the non-infringement situation of those products. In case that the importers or the distributors did not supply the relevant documents to prove the non-infringement situation within a defined time limit, the permission of importation or of distribution of the imported products will be suspended.1047 This requirement is applied to certain kinds of imported products, which are determined by the enforcement authorities.1048 In practice, the enforcement authorities, including customs and economic polices, conducted massively the investigation and the detainment of imported products at the borders and in the domestic market.1049 The products subject to the investigation included motorbikes, accessories of motorbikes, electronic products, electronic accessories and some other kinds of industrial products.1050 Responding to the request of the relevant domestic industries or other government authorities, the enforcement might change their focus of investigation on different kinds of products.1051

In fact, seeking the certification of the original source of goods is not easy work for the importers and the domestic distributors. That requirement becomes more difficult with respect to small importing and distributing businesses. In almost cases they could not furnish timely the appropriate certificate upon the request of the enforcement authorities.1052 Consequently,

1042 See Decree 63, supra note 728, art. 52. 1043 See Decree 06, supra note 728, art. 1.23. 1044 Id. 1045 There is no provision on international exhaustion of rights in the Civil Code of 1995. See Civil Code of 1995, supra note 749. 1046 See e.g., Official Response Letter No. 1080/PC-QL of the National Office of Intellectual Property, supra note 804; Official Response Letter No. 668/PC-QL of the National Office of Intellectual Property supra note 812; Official Response Letter No. 1832/PC-QL of the National Office of Intellectual Property supra note 815. 1047 Id. 1048 See Official Notice of the General Customs No. 5799/TCHQ-GSQL, supra note 810. 1049 See Official Notice of the Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the Police of Hanoi City No. 312 supra note 810. 1050 Id. 1051 See Official Notice of the Police of Hanoi City No. 312 supra note 810; Official Notice of the Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the Police of Hanoi City No. 312 supra note 810. 1052 See Official Notice of the Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the Police of Hanoi City No. 312 supra note 810.

© Pham Hong Quat 224 the importation and distribution of the related imported products are suspended to await the verification.1053 The verification of the non-infringement status of the imported products often takes much time for the involvement of many competent authorities and complicated procedures.1054 As a result, the above requirement, in terms of intellectual property protection, was likely to constitute an effective barrier to the imported products in certain areas.

Supposedly, Vietnam were a WTO Member and the application of the above regulations created the frustration of importation with respect to certain products, as far as Vietnam involved in a WTO litigation under the WTO dispute settlement procedures. Should such regulations be challenged under Articles 3 and 4 of the TRIPS? Or should they amount to a de jure or a de facto discrimination regarding origin of products within the meaning of Article III:4 of GATT 1994? and if it were the case, would they be justifiable under Article XX(d) of GATT 1994, as a measure necessary to secure compliance with the national law on the intellectual property protection? It is also noted that under Article XXIII of GATT 1994 allows a WTO Member to take a WTO litigation where they consider that any benefit accruing to it directly or indirectly under GATT 1994 is being “nullified or impaired” as the result of the application by another Member of any measure, “whether or not it conflicts with the provisions of this Agreement”, or even “the existence of any other situation”1055.

It is arguable that the above regulations imposed the requirements concerning certification of place of production and of place of the first distribution with respect to imported products, directly relating to the application of international exhaustion of rights. Such regulations did not specify any discriminatory requirement in terms of the nationality of the right holders for the purpose of intellectual property protection. In this regards, it seems difficult to challenge such regulations under the national treatment and MFN requirements of Articles 3 and 4 of the TRIPS.

The remained questions relates to the applicability of GATT 1994 with respect to the application of national legislation on international exhaustion of rights. Certainly, there would be no appropriate answer for these questions relying on the basis of the present WTO jurisprudence. In the light of the mentioned-above rulings of the Panel, one suggestion may be confident of is that, the potential challenges from Article III: 4 of GATT 1994 to a national legislation in its practice of applying the principle of international exhaustion of rights would not be precluded.

IV. National practices dealing with exhaustion of patent rights

1. The United States

1053 See Official Notice of the General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the Police of Hanoi City No. 312, supra note 810. 1054 See Decree 12, supra note 728, art. 14. See also Official Notice of the Market Inspection of Hanoi City No.30, supra note 810; Official Notice of the General Customs No. 5799/TCHQ-GSQL supra note 810; Official Notice of the Police of Hanoi City No. 312, supra note 810. 1055 See GATT 1994, supra note 10, arts. XXIII. 1(b), (c).

© Pham Hong Quat 225 It was argued that the United States historically adopted the principle national exhaustion, and then followed a doctrine of “modified” international exhaustion of rights in the filed of patents.1056 However, the recent judgment of the Court of Appeals for the Federal Circuit (“CAFC”) made in the late 2001 over the case of Jazz Photo v. ITC1057 appears to overrule the earlier precedent on this matter. The current rule affirmed that the principle of national exhaustion of patent rights is applied in the United States.

1.1. The U.S. Supreme Court’s decision in Boesh v. Graff in 18901058

In Boesh v. Graff, the inventor of lamp burner held parallel patents in Germany and the United States. The U.S. patentee, Graff, held a parallel patent in Germany.1059 Under German law, there was a “prior use” exception that allowed a third party to lawfully manufacture and sell a patented product in Germany.1060 The lamp burners that were sold in Germany and sent to the United States were made and sold by a party other than the patent holder under the prior use exception.1061 The U.S. patent holder had not placed the goods on the market in Germany, and had not exhausted its U.S. patent rights with respect to those goods.1062 The Supreme Court held that Boesch infringed the U.S. patent by importing the burners into the United States. The Supreme Court appears to adopt the principle of national or territorial exhaustion as to patent rights:

“The right which Hecht had to make and sell the burners in Germany was allowed him under the laws of that country, and purchasers from him could not be thereby authorized to sell the articles in the United States in defiance of the rights of patentees under a United States patent.”1063

1.2. The decision of the Court of Appeals for the Second Circuit in Curtiss Aeroplane v. United Aircraft in 1920

In Curtiss Aeroplane v. United Aircraft,1064 a holder of U.S. patents on aircraft components had licensed the British government to produce aircraft in Canada under its patents without restriction (for use in the First World War).1065 After the war, the British government sold some of the aircraft it had produced to a third party that imported them into the United States

1056 See Margreth Barrett, supra note 919. 1057See Jazz Photo Corp. v. Int’l Trade Comm’n, 264 F.3d 1094, 1105 (Fed. Cir. 2001), available on http://www.Lexis.com, at Jazz Photo Corp. v. Int'l Trade Comm'n, 264 F.3d 1094, 1105 , 59 USPQ2d 1907, 1914 (Fed. Cir. 2001). 1058 See Boesch v. Graff, 133 U. S. 697, available at http://www. Lexis.com, at Boesch v. Graff, 133 U.S. 697, 701-703, 33 L. Ed. 787, 10 S. Ct. 378 (1890). 1059 Id. 1060 Id. 1061 Id. 1062 Id. 1063 See Boesch v. Graff, 133 U. S. 697, available on http://www. Lexis.com, at Boesch v. Graff, 133 U.S. 697, 701-703, 33 L. Ed. 787, 10 S. Ct. 378 (1890). 1064 See Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., 266 F.71 (2d Cir. 1920), available on http://Lexis.com, at Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., 266 F. 71, 77-79 (2d Cir. 1920). 1065 Id.

© Pham Hong Quat 226 for resale.1066 The Court of Appeals for the Second Circuit held that the U.S. patent holder, in consenting to the use of its patent for the manufacture of airplanes in Canada, had exhausted its right to control the importation of the resulting aircraft into the United States. 1067 The court seems to apply the principle international exhaustion of patent rights in its judgment:

“If a patentee or his assigned sells a patented article, that article is freed from the monopoly of any patents which the vendor may possess. If the thing sold contains inventions of several United States patents owned by the vendor, the article is freed from each and all of them; and if the vendor has divided his monopoly into different territorial monopolies, his sale frees the article from them all. If the vendor's patent monopoly consists of foreign and domestic patents, the sale frees the article from the monopoly of both his foreign and his domestic patents, and where there is no restriction in the contract of sale the purchaser acquired the complete title and full right to use and sell the article in any and every country.”1068

1.3. Decision of the Court of Appeals for the Federal Circuit in Jazz Photo Fuji v. ITC in 2001

In Jazz Photo Fuji v. ITC, Fuji Photo initiated an appeal by to the CAFC against a decision made by the International Trade Commission in an action pursuant to Section 337 of the Tariff Act of 1930.1069 Fuji sought to prevent importation of used disposal cameras in which third parties had replaced film.1070 Some of those disposal cameras were first sold in the United States and exported for film replacement, and some were first sold abroad.1071 Fuji holds a number of patents on the disposable cameras in the United States and other countries.1072

The CAFC held that Fuji exhausted its patent rights concerning the disposable cameras when they were first sold, and it could not prevent third parties from refurbishing and reselling them. The CAFC further found that exhaustion of the patent holder’s rights only took place regarding products that had been first sold in the United States.1073 The CAFC expressed its intention to apply the doctrine of national exhaustion of patent rights:

“Fuji states that some of the imported LFFP cameras originates and were sold only overseas, but are included in the refurbished importations by some of the respondents. The record supports

1066 Id. 1067 Id. 1068 See Curtiss Aeroplane & Motor Corp. v. United Aircraft Engineering Corp., supra note 1064. 1069 See Jazz Photo Corp. v. Int’l Trade Comm’n, supra note 1057. 1070 Id. 1071 Id. 1072 Id. 1073 See Jazz Photo Corp. v. Int’l Trade Comm’n, supra note 1057.

© Pham Hong Quat 227 this statement, which does not appear to be disputed. United States patent rights are not exhausted by products of foreign provenance. To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent. See Boesch v. Graff, 133 U.S. 697, 701-703, 33 L. Ed. 787, 10 S. Ct. 378 (1890) (a lawful foreign purchase does not obviate the need for license from the United States patentee before importation into and sale in the United States). Our decision applies only to LFFPs for which the United States patent right has been exhausted by first sale in the United States. Imported LFFPs of solely foreign provenance are not immunized from infringement of United States patents by the nature of their refurbishment.”1074

The CAFC held that Fuji could not prevent importation of cameras that had first been sold in the United States, exported for repair, and then re-imported.1075 However, because U. S. patent rights as to cameras first sold outside the United States were not exhausted, importation of cameras first sold and repaired outside the United States could be blocked. The CAFC held in the conclusion of its judgment:

“The judgment of patent infringement is reversed with respect to LFFPs for which the patent right was exhausted by first sale in the United States, and that were permissibly repaired. (…) LFFPs whose prior sale was not in the United States, or LFFPs remanufactured by procedures more extensive than those we hold to constitute repair, or whose remanufacturing procedures were withheld or insufficiently disclosed to the Commission, remain subject to the Commission's orders. For these products the Commission's orders are affirmed.”1076

Clearly, in this case the CAFC reconfirmed the adoption of the principle of national exhaustion of patent rights. This case invited much criticism for the approach running against the earlier tendency that supported the approach of “modified” international exhaustion of patent rights in the practice of the U. S. courts.1077

2. Exhaustion of patent rights in the EU

In Centrafarm v. Sterling Drug1078 the European Court of Justice (“ECJ”) first held that national patent rights were exhausted with respect to products marketed in another EC member state by the patentee or with its consent.1079 The ECJ found that in marketing the 1074 Id. 1075 Id. 1076 Id. 1077 See Daniel Erlikhman, ‘Jazz Photo and the Doctrine of Patent Exhaustion: Implications to TRIPs and International Harmonization of Patent Protection’, Hastings Communications and Entertainment Law Journal (Vol. 25, 2003), available on http://www.Lexis.com. 1078 See Centrafram BV et Adriann de Pejper v. Sterling Drug Inc., supra note 926. 1079 Id.

© Pham Hong Quat 228 patented products within the European Union (“EU”) first through its British subsidiary, Sterling Drug exercised the right, which was the specific subject matter of patent protection, and thereby exhausted its patent rights.1080 The measure that Dutch subsidiary invoked to block the parallel imports was thus in derogation of the free movement of goods within the EU market.1081

The decision of the ECJ in Pharmon v. Hoechst1082 reconfirmed that the first marketing of the patented product exhausted the related patent right within the EU market.1083 In this case, the ECJ added the rule that sales under a compulsory license do not exhaust patent rights, because the patentee is not freely consenting to the exercise of his rights with respect to the related patented products.1084

Patent rights throughout the EU are exhausted by a first intra-EU sale despite the legal preclusion of patent protection for the relevant marketed products. This principle was adopted in the decision of ECJ in Merck v. Stephar.1085 The ECJ found that the patentee exhausted its right to prevent importation of the goods in the case that the patent holder sold the pharmaceuticals in a EC member state market where no patent protection was available.1086

Generally, the ECJ adopted the approach of regional exhaustion, namely, the patented products having been first marked by the patentee or with his consent in an EC member state market, are freely imported into the markets of other EC member states. There is no indication that ECJ will accept the approach of international exhaustion of patent rights.1087

3. Switzerland

The Swiss Federal Supreme Court recently decided a case in which the court referred specially to the way of understanding and applying the issue exhaustion of patent rights under Article 6 of the TRIPS.1088 The court addressed particularly the question whether Article 6 of

1080 Id. 1081 Id. 1082 See Pharmon BV v. Hoechst AG, supra note 926. 1083 Id. 1084 Id. 1085 See Merck & Co. v. Stephar BV, supra note 924. 1086 Id. 1087 See Domenico Sindico, ‘On Parallel Importation, TRIPs and European Court of Justice Decisions’, The Journal of World Intellectual Property (Vol. 5, 2002), pp. 505-516; Graeme Fearon, ‘Parallel Imports – Are we Any Closer to a Definite Rule of Law? The Possible Impact of Recent Legal Developments on European Law and Trade’, The Journal of World Intellectual Property (Vol. 1, 1998), pp. 495-505; Maarten Meulenbelt, ‘Parallel Imports of Medicinal Products A New Balance?’, The Journal of World Intellectual Property, Property (Vol. 1, 1998), p. 537; Macro M. Slotboom, supra note 1005, p. 439; Paul Demaret and Inge Govaere, ‘Parallel Imports, Free Movement and Competition Rules, The European Experience and Perspective’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Minchigan Press, 2003), pp. 144-145. 1088 The decision of the court in the case of Kodak v. Jumbo-Markt, 4c.24/1999/rnd (7 December 1999), quoted by Pedro Roff in Resource Book on TRIPS and Development, (Cambridge University Press, 2005), p. 112, also available on http://www.iprsonline.org/unctadictsd/ResourceBookIndex.htm. The case was decided earlier by the Federal Supreme Court which also adopted the approach of national exhaustion of patent rights. However, the reasoning of the court is that the EC member countries have the obligation of reciprocity with respect to the regional exhaustion of patent rights, whereas the countries such as Switzerland cannot expect to benefit of

© Pham Hong Quat 229 the TRIPS allows each WTO Member to adopt its own exhaustion regime in the field of patents.1089 The court considered a number of prevailing theories of the European scholars on exhaustion of rights and found that exhaustion and parallel importation are reserved to national law of each WTO Member pursuant to Article 6 of the TRIPS. 1090 Based on that argument, the Swiss Federal Supreme Court decided in favor of the national exhaustion of patent rights based on the interpretation of the national patent law.1091

4. Japan

international exhaustion in other countries when they implement international exhaustion in their own jurisdiction. See Ingo Meitinger, ‘Parallel Imports into Swizerland – A Spot of Global Free Trade amidst Fortress Europe’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Minchigan Press, 2003), p. 220. 1089 See Pedro Roff, Resource Book on TRIPS and Development, (Cambridge University Press, 2005), p. 112, also available on http://www.iprsonline.org/unctadictsd/ResourceBookIndex.htm. 1090 The following reasoning of the Federal Supreme Court stated its argument on the freedom of national law in deciding exhaustion of patent rights under Article 6 of the TRIPS: “3 b) Pursuant to Article 28 of the TRIPs Agreement, the patent holder has inter alia right to prevent third parties selling patented objects and importing such for this purpose. This provision with its protection of imports merely lays down that the import of products that infringe the patent must be prohibited, without itself laying down a prohibition on parallel imports. This follows not only from Article 6 of the TRIPs Agreement but is also clarified in a reference to Article 6 in a footnote to Article 28 of the Agreement (GATT Mesaage 1, 1994 Federal Gazette IV, p. 301/2; cf. also Bollinger, Die Regelung der Paralellimporte im Recht der WTO, sic! 1998, p. 548; Alesch Staechelin, Das TRIPs-Abkommen, 2nd ed., Bern 1999, p. 57 et seq. and 148/9; Cottier and Stucki, loc. Cit., p. 52; Cohen Jehoram, International Exhaustion versus Importation Right: a Murky Area of Intellectual Property Law, 1996 GRUR Int., p. 284). The claim expressed occasionally in the literature that the substantive protection of importation practically requires national exhaustion through the TRIPs Agreement is not, on the other hand, convincing (argued by Straus, Bedeutung des TRIPs fur das Patentrecht, 1996 GRUR Int., p. 193/4); for the attempt to derive the exclusive application of national exhaustion from this agreement ignores and misinterprets the objectives of the agreement to establish the World Trade Organisation dated April 15, 1994, on element of which is the TRIPs Agreement, namely to eliminate all kinds of trade restrictions. One the contrary, TRIPs is intended to balance two sets of interests, namely the demand for the freedom of trade on the one hand and an increased protection of intellectual property rights on the other hand (Bronckers, The Exhaustion of Patent Rights under WTO Law, Journal of World Trade 1998, p. 144). Exhaustion, and hence the question of whether in particular parallel imports can be prohibited by the party entitled to the patent, is not, however, regulated by Article 28 of TRIPs, but expressly reserved to national law pursuant to Article 6 of the Agreement (cf. also Kunz-Hallstein, Zur Frage der Parallelimporte im internationalen gewerblichen Rechtsschutz, 1998 GRUR, p. 269/70).” See the decision of the Federal Supreme Court in the case of Kodak v. Jumbo-Markt, 4c.24/1999/rnd (7 December 1999), quoted by Pedro Roff in Resource Book on TRIPS and Development, (Cambridge University Press, 2005), p. 112, also available on supra note 1089. 1091 See Pedro Roff, supra note1089. The approach of national exhaustion of patent rights is also strongly affirmed by the Germany courts. See Johann Pitz, Exhaustion of Industrial Rights from the German Perspective’,

© Pham Hong Quat 230 Japan historically adopted the principle of national or territorial exhaustion of patent rights.1092 As discussed earlier, the recent decision of the Tokyo High Court changed this approach by allowing international exhaustion of patent rights and parallel importation of patented products.1093 The Supreme Court did not reverse the decision of the Tokyo High Court but changed the reasoning of the court decision.1094 Accordingly, the patentee can prohibit parallel importation of patented products under some conditions. Namely, when the patentee (or his licensee), markets the patented products abroad, he needs to express his intension to prevent parallel importation of such products by an indication on the related products and an agreement with the buyers.1095 Where he does not express clearly his intension to prevent the parallel importation with respect to the related products, such products may become the object of parallel importation, for the implied license he granted to the buyers.1096 The application of the implied license theory is relied on the justification in favor of international trade development.1097

There are different views on the decision of the Supreme Court. Some viewed that the Supreme Court decision accepted international exhaustion of patent rights.1098 Some commented that the Court adopted the “modified” or “conditional” international exhaustion approach of patent rights.1099 The reason is that, by the implied license theory, the patent rights of the patentee will be exhausted automatically if he does not express clearly his intension to reserve his rights to prevent the parallel importation when he markets abroad his patented products.1100

By contrast, the other argued that the decision of the Supreme Court might be viewed as a decision to deny international exhaustion of patented products.1101 The reason is that, the possible exclusion of patent rights of the patentee with respect to the patented products having marketed abroad, by him or his licensee, is not an exclusion coming from a provision of the law.1102 The possibility of exclusion is determined case by case, depending on the will of the

The Journal of World Intellectual Property (Vol. 4, 2001), p. 235. 1092 See Teruo Doi, ‘The Territoriality Principle of Patent Protection and Conflict Laws: A review of the Japanese Court Decisions’, Fordham International Law Journal (Vol. 26, 2003), available on http://www.Lexis.com (discussing the national exhaustion applied in the case Brunswick Corp. v. Orion Kogyo KK, decided by the Osaka District Court in 1969). See also Nobuhiro Nakayama, Industrial Property Law, (Vol. 1 Patent Law 2nd revised) (Koubundou Publishers, 2000), p. 366, available at http://www.iip.or.jp/e/index.html. 1093 See Tokyo High Court Decision, supra note 957. See also Nobuhiro Nakayama, supra note 1092; Teruo Doi, supra note 1092. 1094 See the Supreme Court Decision, supra note 947. See also Nobuhiro Nakayama, supra note 1092. Teruo Doi, supra note 1092. 1095 Id. 1096 See the Supreme Court Decision, supra note 947. See also Nobuhiro Nakayama, supra note 1092; Teruo Doi, supra note 1092. 1097 Id. 1098 See Teruo Doi, supra note 1092. 1099 See Daniel Erlikhman, supra note 1077. See also Tait R. Swanson, supra note 919. 1100 Similar to the argument for the earlier adopted “modified” international exhaustion in some court decisions in the United States. See Daniel Erlikhman, supra note 1077. See also Tait R. Swanson, supra note 919. ; Margreth Barrett, supra note 919. 1101 See Nobuhiro Nakayama, supra note 1092, at 370. 1102 Id. at 370-373.

© Pham Hong Quat 231 patentee and his express intension, by the indication on the marketed products and by agreement with the buyers.1103 It therefore might be argued that the exhaustion of patent rights with respect to the abroad marketed products is not a legal principle of the patent law.1104 Otherwise, it might be viewed that the Supreme Court accepts the basis territorial nature of the patent protection but limits the consequences of this nature for the free movement of goods in the international trade.1105

In this respect, the disputable question may be that, among exclusive rights and the exclusion of exclusive rights as to the patented products having been marketed abroad, which would be termed as the legal principle and which would be considered as an exception to the other. 1106 To this point, it may be perceived that the decision of the Supreme Court did not affirm international exhaustion of patent rights to be adopted in Japan in a certain legal ground.1107 However, the justification in favor of international trade in deciding the matter of parallel importation of patent rights is viewed as a significant point of the court decision.1108 This point of the court reasoning supports the mandate of the WTO on liberalization of trade.

1103 Id. 1104 Id. 1105 See Frederick Abbott, The International Intellectual Property System: Commentary and Materials (Springer, 1999), p. 676. 1106 Nobuhiro Nakayama, ‘Tokkyo Seihin No Heikou Yunyuu Mondai Ni Okeru Kihonteki Shiza (Basic Viewpoint concerning the Issue of Parallel Imports of Patented Products)’, Jurist, (No. 1094), p. 68. 1107 See Mittsuo Matsushita, ‘Issues Regarding Parallel Importation of Trademarked and patented Products and Competition Policy in Japan’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 193. 1108 See Nobuhiro Nakayama, supra note 1092, at 371.

The national practices of the developing countries in dealing with the issue of exhaustion of patent rights are in diversity. Some of countries are in favor of international exhaustion of patent rights in the language of national laws or administrative regulations.1109 Others do not express clearly their option in the statutory language.1110 Some of them adopted the approach of national exhaustion.1111 The Legislative Assistance provided by the WIPO in relation to Implementation of the TRIPS reported that among 38 countries reported, 20 countries allows, clearly or unclearly, the adoption of international exhaustion of rights. The table below will show the recent situation of the developing countries in dealing with the issue of exhaustion:

1109 E.g., Patent Law of Thailand provides a general clause “any act in respect of products acquired in good faith”. See Patent Law of Thailand of 1992, art. 36.2(3), in Intellectual Property Laws (compact disc) (Japan Patent Office, 2002). This clause may be interpreted to adopt international exhaustion of patent rights. It is reported that Thailand government recently issued a regulation that appears to be in favor of international exhaustion of patent rights. See Tait R. Swanson, supra note 919. 1110 E.g., Patent Law of China might be interpreted in favor of international exhaustion although there is no clear language exiting in the patent law. “Article 63. Acts not deemed to be Infringement of Patent Right None of the following shall be deemed an infringement of the patent right: (1) Where, after the sale of a patented product or a product directly obtained by a patented process that was made, imported by the patentee or with the authorization of the patentee, any other person uses, offers for sale or sells that product” See Patent Law of China of 2000, art. 63.1, in Intellectual Property Laws (compact disc) (Japan Patent Office, 2002). 1111E.g., India does not adopt the principle of international exhaustion as to patents. There is no clause allowing parallel importation of patented products in the Patent Act of India. See Patent Act of India of 1995, in Intellectual Property Laws (compact disc) (Japan Patent Office, 2002). It is argued that there is no prevailing reasoning for adoption of international exhaustion of patent rights in India. See Jayashree Watal, ‘Parallel Imports and IPR-Based Dominant Positions: Where Do India’s Interests Lie’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 222. It is reasoned that Australian patent exhaustion depends on the circumstances surrounding the first foreign sale. If an Australian patent owner makes a foreign sale, the buyer is given an implied license to sell the patented invention in Australia. If someone other than the patentee makes the foreign sale, then no implied license is transferred with the sale. The implied license depends on the authority of the foreign seller to also sell in Australia, thus patent exhaustion really depends on the circumstances of the case. Generally, domestic patent exhaustion appears to apply, unless the Australian patent owner makes the first sale without any express restrictions. See Tait R. Swanson, supra note 919.

Country Exhaustion of rights National International Antigua & Barbuda X(1) Argentina X Barbados X Belize X Bolivia X Botswana X Brazil X Chile China N/A N/A Colombia X Congo X(2) Costa Rica X Dominican Republic X Egypt X El Salvador X Gabon X(2) Ghana X(2) Guatemala X Honduras X India X Indonesia N/S N/S Jamaica N/A N/A Kenya X(3) Malaysia N/S N/S Mauritius X(1) Mexico X Morocco X Namibia X Nicaragua X Nigeria X(1) Paraguay X(4) Philippines N/A N/A Republic of Korea X South Africa X Thailand N/S N/S Tunisia X Trinidad & Tobago X(4)

1112 This date is quoted from the date list prepared in 2001 by The Legislative Assistance provided by the WIPO in relation to Implementation of the TRIPS, available at http://wipo.int/cfdiplaw/en/trips/index.htm.

© Pham Hong Quat 234 Venezuela X Vietnam N/A N/A * notes: N/A Information not available on the matter. N/S The law provides for exhaustion of rights, but does not specify whether it is national or international. (1) Draft legislation notified to the WTO. (2) Regional exhaustion of rights. (3) Law from 1989 and notified to the WTO. (4) This law was enacted in the year 2000, but has been not yet notified to the WTO.

In summary, national practices of developed and developing are divergent in dealing with the issue of exhaustion of patent rights. In some developed countries, the courts in certain circumstances are in favor of international exhaustion approach. The tendency of the U.S. court practice shows that the United States is not going to adopt the international exhaustion principle of patent rights. The judicial practice of Japan relating to exhaustion of patent rights does not show clearly that the principle of international exhaustion of patent rights is accepted in Japan. The EC member countries appear to endorse the national exhaustion, except for the case where the reciprocity application of regional exhaustion among the EC member countries is applied. The ECJ adopted the regional exhaustion approach in dealing with the cases relating patents, which allows the free movement of patented products within the EU market. While some developing countries tend to adopt international exhaustion of patent rights, a number of them are still following the national exhaustion approach.

This situation reflects the fact that, even international exhaustion of patent rights may be regarded being appropriate to the mandate of liberalization of trade under the WTO, each country follows specific preferences and interests to decide its option. It might be said that, in the legal aspect, the likely challenge to national legislation in the application of international exhaustion of patent rights is not totally excluded from WTO jurisprudence. The actual challenge seems to be difficult to execute in the current situation of national practices regarding this issue. In this respect, the legal justification under WTO jurisprudence appears realizable, in despite of some seldom challenge having been not precluded in the practice of applying international exhaustion of patent rights.

The next relevant question is how this policy may be adopted in the circumstances of Vietnam. The recent decision of the Japanese Supreme Court referred to a significant justification in favor of the development of international trade in consideration of the interest of the patentee. From different aspects, the Supreme Court decision has a certain influence on the national practice of the other WTO Members.1113 Though inviting much discussion on the uncertainty, 1114 the decision of the Japanese Supreme Court might be regarded as a specific

1113 See Tait R. Swanson, supra note 919. See also Darren E. Donnelly, supra note 922; Ako Shimada Williams, supra note 920. 1114 See Mitsuo Matsushita, ‘Issues Regarding Parallel Importation of Trademarked and Patented Products and Competition Policy in Japan’, in Intellectual Property: Trade, Competition, and Sustainable Development, World Trade Forum, (Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 193; Jinzo Fujino, Parallel Imports of Patented Goods, The Supreme Court Talks About Its Legality, available at http://www.okuyama.com/c3v01ok.htm.

© Pham Hong Quat 235 national court judgment expressed the view supporting the international trade development in dealing with issue of exhaustion of patent rights.1115 To this point, it might be worth examining the justification developed by the Japanese Supreme Court for seeking some implications for the case of Vietnam.

V. Reasoning for parallel importation of patented products

1. Clarifying legal reasoning in the new law draft of Vietnam

An important matter that should be taken into account in this aspect is that the Japanese courts are vested the discretion of law interpretation to an extent much larger than that of the courts Vietnam. As discussed in the previous chapter, the courts of Vietnam have very limited jurisdiction in the interpretation of the statutory provisions. The courts cannot invoke any legal grounds other than those that are specifically mentioned in the relevant statutes. This rule is also applied to the People’s Supreme Court. In judging a case, this court may not interpret the law in a way of creating any new legal theories or legal grounds that are not clearly stipulated in the language of the statutes. The authority for clarifying the general provisions or principles provided in the law language is otherwise vested to the government. When the government does not issue in time a detailed regulation of the implementing the law on a specific issue, the courts become confused in the handling of the related case due to the lack of legal grounds and reasoning available in the law.

This problem would be worse but for the fact that the judges of Vietnam are regarded as having less experience in dealing with matters of patent protection. Unless concrete justifications are made clear in the relevant legal documents, the courts cannot be empowered with sufficient reasoning to find properly the merits of case. In such a situation, in order to enable the courts to introduce an appropriate regime of parallel importation with respect to patented products in Vietnam, it is indispensable to clarify all particular justifications underpinning this regime, together with the reservations or exceptions in its implementation. The clarification needs to be first available in the language of the new law, and when necessary, in the detailed regulations of the government for implementing the law after its enactment.

In consideration of the concerns of Vietnam in favor of parallel importation in the particular circumstances of the country, the next discussion will place the focus on selected aspects in analyzing the judicial experience of Japan and the other countries, where it is relevant. Those

1115 See e.g., Tait R. Swanson, supra note 919.

© Pham Hong Quat 236 accounts that are assumedly helpful for the current consideration of the legislators and judges of Vietnam in the application of parallel importation policy may be the interests of the domestic consumers and patent holders, the development of industry, the security of the society and the integration into the international trade. The consideration of these accounts pursuant to the view of Japanese courts will be analyzed below.

2. Reasoning in favor of international trade

2.1. The balance between patent value and the public interest

In finding the rationale for parallel importation of patented products, the courts of Japan first considered the basic reasoning based on the balance between the interest of the patent holder and that of the public and the development of industry. It is noted that this balance is measured by the courts in the absence of the particular provisions of the patent law on this issue. The attitude of the court in dealing with the particular case, therefore, is very important. In the relation to the BBS case, the Tokyo High Court expressed its view on the balance between the patent protection and the public interest.

In its findings, the court affirmed that a patent right is exhausted after the first sale of the patented product that the patent right is adherent to. The reasoning for that is the balancing of the patent value with the public interest, including the development of industry. If the patent right was extended to the patented product after its first sale, the balance would be broken. In particular, the extension of the patent right in such a case would provide the related patent an unfair increase of value at the expense of the public interest. 1116 The development of industry would also be damaged because of the unfair increase in the value of the patent. The court declined the extension of the patent right to the patented product as long as such a product has been legitimately marketed. For the purpose of exhaustion, the court required that the patented product should be put into the market in a legitimate way. It is noted that these findings of the court stand in a line with the view of the continental law courts and the United States courts. The Supreme Court mentioned the balancing interest as a principle for interpreting the concept of exhaustion of patent rights.1117

2.2. Implied license of reselling the marketed products

Although it is reasoned on the basis of the balance of the public interest, the Tokyo High Court did not specify the legal reasoning in declining the extension of a patent right to the patented product after its first sale. Moreover, the court did not clarify in which way the development of industry would be affected by that extension. In this respect, the Supreme Court made it clearer in its findings.1118 The Supreme Court stated clearly the legal reasoning

1116 The Court considered that extending the scope of patent law beyond the lawful putting into circulation would make patent right exceeding strong, thereby upsetting the balance of protection public interest accomplished through industrial development. The stability of trade would also be affected, the free movement of the patented products impeded and thereby great damage inflicted on economic development. See the Tokyo High Court Decision, supra at 552. 1117 See the Supreme Court Decision, supra note 947. 1118 The Supreme Court referred to the implied license in the sense that when the patented products are distributed on the market, the transferee obtains an object from the patentee whose exercise of the right suggests that the right in further acts of re-sale has been transferred as well. See the Supreme Court Decision, supra note

© Pham Hong Quat 237 to explain why the first sale of patented product exhausts the patent right adherent in it. That is, the movement of a patent right is accompanied by the sale of the patented product. The view that the patent right is transferred together with the patented product is generally recognized by the courts in both the common law and continental law countries. However, the conception that the seller of a patented product passed all the rights he has over the product to the buyer when he sold the product is prevailing in the court practice of the continental law countries. Otherwise, the idea that the buyer received from the seller the implied license of reselling the purchased patented product is well acknowledged in the practice of the courts in the United States.1119 Under the implied license, the seller may retain some right over the product after selling if he wishes so and expresses his intension through an agreement or a notice provided in advance to the buyer. The implied license is the legal reasoning for the courts to recognize the right of the seller to prevent the buyer from reselling or importing the purchased product by a contractual agreement or notice on the product. On this point, the reasoning of the Supreme Court of Japan goes in the same vein with the reasoning of the courts in the United States.

2.3. The development of industry and trade-related aspect of patent right

As for the reasoning regarding public interest and the development of industry, the findings of the Supreme Court made it clearer in some points.1120 The Supreme Court reasoned that the extension of the scope of a patent right to the patented product after its first sale would impede industrial development. The court also indicated the way that the extension scope of a patent right would impede the public interest is that the free circulation of the patented product would be circumvented by the control of the patent holder. The extension of the scope of the patent right in such a case, therefore, would contradict the purpose of the national patent law. The Supreme Court mentioned the affect on trade in goods as the first reasoning for the recognition of exhaustion of a patent right after the first sale of the patent product.

This point indicates that the Supreme Court weighted the trade-related aspect of a patent right for the purpose of exhaustion. In this respect, the similar justification regarding the balance of interests may be also found in the practice of the courts of the United States.1121 Nevertheless,

947, at 332. 1119 The concept “implied license” exhaustion is used in relation to the “doctrine of first sale” and in distinction with “doctrine of exhaustion”. It is argued that under the "doctrine of exhaustion," sale of a patented product exhausts the patentee's rights with respect to the product even if the parties intended otherwise, while under the "doctrine of first sale," exhaustion of rights is a default rule that applies when the parties to the sale expressed no intention to the contrary. The U.S. courts generally adopt the conception of “implied license” exhaustion in the term of the doctrine of first sale. While the courts in the continental countries acknowledge the doctrine of exhaustion. See Margreth Barrett, supra note 919; Christopher Heath, ‘Parallel Imports and International Trade,’ International Review of Industrial Property and Copyright Law (Vol. 28, 1997), pp. 625-627 (distinguishing between continental or "absolute" exhaustion and common-law or "implied license" exhaustion). 1120 The Supreme Court found that if any acts of marketing patented products must be subject to the consent of the patentee, the free movement of gods would be seriously impeded, the smooth distribution of patented products would be hampered, and as a result, the interest of the patentee himself would suffer. It seems not necessary to provide the patentee or the licensee rights beyond the first act of marketing and give unnecessary double reward in the course of distribution. See the Supreme Court Decision, supra note 947, at 333. 1121 See Margreth Barrett, supra note 919.

2.4. Reasonable reward to the patent holder

As for the reward to the patent holder, the Supreme Court reasoned that the patent holder is provided with a sufficient opportunity to collect the necessary remuneration by the first sale of the patented product. In other words, the public has reasonably rewarded the patent holder for the disclosure of his invention to the public after the patent holder marketed his patented product.1123 The Supreme Court endorsed the finding of the lower court and added that the reward to the patent holder is considered to be sufficient when he collected a royalty from granting a license of the patent instead of selling the patent product.1124 The court found that:

As reasoned by the Supreme Court, the balance between the interest of the patent holder and that of the public has been achieved after the first sale of a patented product. For that reason, there is no need to provide another opportunity to the patent holder to get double profits for the product at the expense of the public. Although the court did explain clearly, it is supposed that the public interest in this case should first be the interest of the consumers. The court also supplemented that the royalty that the patent holder receives from granting a patent license is also regarded the reasonable reward for the public disclosure of his invention. The first sale of the patented product that was marketed by the patent licensee, therefore, would also exhaust the patent right of the patent holder embedded in that product.

In consideration of the reasonable reward to the patent holder, the court referred generally to the first sale of a patent licensee in relevance to the domestic market. There is no mention to the difference between an exclusive licensing and a non-exclusive licensing, nor different interests of the patent holder obtained from to the sale of the licensing patented product in the different cases. In this respect, the reasoning of the court is similar to that of the courts of the United States in finding the exhaustion of the patent holder’s patent right after the first sale of the licensee. However, in evaluating the reasonable reward to the patent holder, the courts of the United States seem to follow a more careful approach in considering the benefit the patent holder in the case of the patented product being sold under licensing.1125 The conflict between the interests of the patent holder and his patent licensees may become greater and more complicated in the context of international trade, where the movement of the marketed patented products is sometimes stuck in the overlap of the different patent right holders.

In sum, the Japanese courts raised two important points in the reasoning for the balance of interests as the rationale for the exhaustion of a patent right, domestically. The first is the trade promotion of the patented products after its first sale. The second is the reasonable reward to the patent holder having been obtained in the first sale of the patented products. A more important question is how this rationale is applied internationally to seek justification

1122 Id. 1123 See the Supreme Court Decision, supra note 947, at 333. 1124 The Supreme Court found that by making the invention available to the public, the patentee would have opportunity to obtain reward from selling the product or granting licensing fee. See the Supreme Court Decision, supra note 947, at 333. 1125 Margreth Barrett, supra note 947.

2.5. Reasoning in favor of the development of international trade

The Supreme Court of Japan considered the development of international trade as a justification for application of implied license theory internationally.1126 The court said it is necessary to consider the relationship between the free movement of goods in international trade and interests of the patentee. The free movement of goods is placed in the priority position at the expense of the double reward of the patentee. The court reasoned that it cannot be argued that although selling the products under a parallel patent would give a double reward.1127 Because the current context of the international trade development, even if economic transactions have been made abroad, generally the transferee obtains not only the object as such, but also the rights vested in that object, including the right to undertake the further transactions with third parties, including the importation and distribution into domestic market of Japan.1128

2.6. Notice of restriction or reservation

In the application of the implied license theory in the international context, the Supreme Court made some reservations. The Supreme Court found that if the patented were marketed abroad, then it could be naturally expected that such goods may be imported into Japan if the patentee puts such goods into circulation broad without any reservations at the time of transfer. 1129 The transferee or any subsequent purchaser is understood that they have purchased that goods without any restriction and might import or distribute in Japan.1130 Otherwise, if the patentee reserves his rights at the time of transfer for the distribution of such goods in Japan, he should agree with the transferee that the sale or use of the products in Japan should not be permitted. In addition, if the patentee displays the clear indication of restriction on the products the subsequent purchasers should be subject to such restriction.1131

By such findings, the Supreme Court decision allows the patentee to exercise his patent right to prohibit parallel importation in certain conditions. The restriction is effective when there exists an explicit agreement between the buyer and the seller and a clear indication on the related products, which excludes the Japanese market from parallel importation. The restriction of international exhaustion in the same vein may be found in the reasoning of a local court in the United States, though the Supreme Court or the Appellate Courts of the United States has not ever confirmed that reasoning.1132

1126 See the Supreme Court Decision, supra note 947, at 334. 1127 Id. 1128 Id. 1129 Id. 1130 See the Supreme Court Decision, supra note 947, at 334. 1131 Id. 1132 See Darren E. Donnelly, supra note 922. See also Tait R. Swanson, supra note 919; Hillary A. Kremen supra note 920. See Margreth Barrett, supra note 919. See also Darren E. Donnelly, supra note 922; Hillary A. Kremen, supra note 920.

© Pham Hong Quat 240 The findings on the reservations given to the patentee on restriction of parallel importation of patented products triggered a controversy among the scholars. Some criticized the uncertainty in practicing the decision and the negative effect of the decision on parallel importation of patented products in the Japanese market.1133 Nevertheless, the empirical significance of the court decision on the justification in favor of parallel importation in the current context of international trade cannot be denied.

2.7. Concerns with technology transfer and quality of parallel importation goods

Although there is no relevant endorsement in the findings of the Supreme Court, the Tokyo High Court expressed its assessment of the concern that the parallel importation of patented products would affect the expectation of obtaining patent licenses under foreign patents. The court examined the practice of parallel importation in Japan and found that there is no evidence that technological development have been adversely affected by the parallel importation of patented products.1134 Therefore, there does not exist any practical grounds for the argument that permitting parallel importation into Japan has weakened the incentive for Japanese companies to obtain licenses under foreign patents. 1135

The assessment of the Tokyo High Court provides a practical view of national judicial authority in support of the argument favoring parallel importation under the WTO. As reported, there is no empirical study that confirmed the allegations regarding the adverse effects of parallel importation on technology transfer.1136

In regards to the argument of insufficient quality control in the case of parallel importation, the court stated that the quality control of products is not a matter of patent law. It is rather a matter of business morality and relates to the good faith of the partners in a business transaction.1137

Absence of guarantees of service and insufficiency of quality control are the negative aspects of parallel importation as suggested by some commentators. However, in the view of the Tokyo High Court, this concern is outside the realm of patent law regulation. It may be subject to the self-regulation of entrepreneurs, or to some extent, the regulation of the law in the other fields.

2.8. Scope of regulation

As to the scope of applying the regulation on parallel importation with respect to the patented products, the Supreme Court clarified that there is no distinction between a product sold by the patent holder and that sold by an entity subject to the control of the patentee. The patented

1133 See Mittsuo Matsushita, supra note 1107. 1134 See the Tokyo High Court Decision, supra note 957, at 555. 1135 Id. 1136 See Jayashree Watal, ‘Parallel Imports and IPR-Based Dominant Positions: Where Do India’s Interests Lie’, in Intellectual Property: Trade, Competition, and Sustainable Development (World Trade Forum Vol. 3, eds. Thomas Cottier and Petros C. Mavroidis) (The University of Michigan Press, 2003), p. 222. 1137 See Tokyo High Court Decision, supra note 957, at 555.

In short, the findings of the Tokyo High Court and the Supreme Court on the BBS case revealed the prevailing opinion of the Japanese courts, to different extent, in favor of patented product parallel importation. Weighing the public interest, the courts supposed that the reward to the patent holder is reasonably obtained after the first sale of the patented product. The consideration of reasonable reward in the case of patented product marketed abroad needs to be taken into account the interest of the traders in the international markets. The implied license for the resale of the purchased product in the context of the globalization of trade is an important reasoning for acceptance of parallel importation of patented products. The justifications of the decision of the Supreme Court relied on the development of international trade is of significance supporting the mandate of the WTO on liberalization.

VI. Implications for parallel importation in Vietnam

The examination of the issue of international exhaustion of patent rights under the Paris Convention, the TRIPS, and GATT revealed that its legality could be confident. However, the likely challenge from WTO jurisprudence, in certain aspects, to the application of this approach is not precluded yet. The national legislation still takes into account the way of applying international exhaustion of patent rights in the particular circumstances.

For the purpose of seeking an appropriate answer to the question of how international exhaustion could be adopted in the circumstances of Vietnam, the above section discussed the legal reasoning and justifications for the adoption of parallel importation in the recent judgments of the Japanese courts. The adoption of this policy in the new intellectual property law of Vietnam, however, should take into consideration the particular situation of Vietnam and the concerns of the legislators from different aspects, such as patent holders, consumers and society, and international trade integration. To a certain extent, the analysis of the findings of the Japanese courts may lead to some suggested justifications for the policy of parallel importation of patented products in the new intellectual property law of Vietnam. The following points need to be clarified in the language of the new law.

1. Towards the balance of patent rights and the public interest

1138 The Supreme Court found that in the case that the marketing abroad have been taken by an affiliated company, a subsidiary or an equivalent to the patentee, the case should be treated as if the patentee himself had marketed the patented products. See the Supreme Court Decision, supra note 947, at 335. On this point, the Tokyo High Court found that when the product is sold outside Japan by a subsidiary or an affiliated company which can be regarded as an entity identical to the patentee, such transactions should be deemed as the sale of the patented product by the patentee itself. See the Tokyo High Court Decision, supra note 957, at 554.

© Pham Hong Quat 242 The current patent regulations of Vietnam contain no provision for the purpose and principle of the patent protection, which may be interpreted as the legal basis for balancing patent protection and the public interest. There is no such provision in the present draft of the new intellectual property law. This absence would certainly be a difficulty in interpreting the legal provisions for the purpose of adopting parallel importation of the patented products.

The first necessary provision to be added in the new draft law is the statement on the general purpose and principle of the national patent law. Accordingly, the ultimate objective of the patent law should be the benefit of the public, for example, the development of industry or the promotion of inventive creation. On the balance, the patent holder is granted the exclusive right in controlling the first sale of the patented product. It is perceived as a reasonable reward from the public to compensate for the disclosure of the invention to the public and promote inventive contribution to the development of industry. The purpose of the patent law, therefore, prevents the patent holder from receiving an extra reward from the subsequent transaction after the first sale of a patented product.

The control of the patent holder over the subsequent transaction of a patented product therefore should be considered an excessive exercise of a patent right. The extension of a patent right provides the patent holder the right to approve every transaction relating to the patented product. The extension of a patent right, therefore, affects the public interest in the sense that it interrupts the normal distribution of goods in the market place. For that reason, the principle of balancing the public interest in patent protection does not allow the extension of the scope of a patent right to the commercial transactions subsequent to the first sale of a patented product.

Providing with the judges a clear reasoning in handling the intellectual property cases is considered a significant duty of the new law. The provisions on the purpose and the principle of patent protection therefore should be made available and transparent in the language of the new law and its implementing regulations.

2. Implied license and the first sale of a patented product

It is suggested that there be a clarification of the reasoning for the exhaustion of a patent right after the first sale of the patented product in the particular provisions of the new law. The implied license principle may be applied with the assumption that the buyer receives all rights of the patent holder, which has been implicitly transferred to the buyer by the first sale of the patented product. The buyer therefore has the right to engage in the transactions relating to the purchased patented product without interference from the patent holder.

The implied license also contains the meaning that the patent holder cannot retain his patent right in the control of a patented product after the first sale of that product. However, if the implied license is applied, it should be optional for the patent holder to make a reservation of the purpose and the scope of use in respect of the patented product in the deal. The legitimate expectation of the buyer is therefore protected in the consideration of the lawful negotiation of the patent holder. In such a case, the particular conditions on an explicit agreement and a clear indication may be required to make a reservation valid.

© Pham Hong Quat 243 When the implied license is applied with respect to the patented product marketed abroad, it would be a good opportunity for the patent holder to restrict the parallel imports of patented products in many cases. Consequently, it might destroy almost all of the effects of international exhaustion in the end. In the view of the protectionist, that option would provide young domestic industry an effective measure of self-protection against the flood of the competitive products flowing from neighboring countries. However, in the view of the public interest, the protection of the domestic consumers should prevail in the consideration of that option.

In the situation of Vietnam, if the implied license is chosen, the allowance of a reservation for international exhaustion made by the patent holder should be done in with very careful consideration. It is advised that the new law does not necessarily allow the patent holder to have the possibility of reservation in the language of the law. Instead, the law should empower the government to appropriately interference to support the patent holder in the case of necessity. For example, the government may issue a temporary regulation to allow the patent holder to restrict the parallel importation of patented products in certain areas. It is noted that, in terms of the exhaustion of patent rights, Article 6 of TRIPS only requires the national policy on parallel importation to comply with the national treatment and MFN treatment obligations of TRIPS. The wording of this article, together with the reference to it in the footnote inserted in Article 28.1 and, to some extent, in the footnote of Article 51.1 of TRIPS, exempts national legislation on parallel importation of patent products from the requirement of the anti-discrimination rule under Article 27.1 of TRIPS. Accordingly, the government may consider the current circumstances of the economy and society to impose a restriction on the parallel importation of a particular product during a certain period, when necessary.

3. International trade and the principle of independence of patents

The principle of independence of patents allows the national legislation to be independent in considering an opportunity for the patent holder to obtain double profits for a patented product marketed abroad. In other words, this principle does not prevent at any rate the national patent law from either permitting or restricting the patent holder in the enforcement of his patent right against the patented product subject to a corresponding patent in the territory where the first sale took place. However, the argument for the possibility of receiving double profits may be a justification for the assumption regarding the independent rewards should be obtainable from the independent patents for the same invention.

In dealing with such an argument, the rationale for international trade development should be weighed in the consideration of the balance between the interests of the public and that of the patent holder. In addition, the legitimate expectation of the buyer and the effect of the implied license in response to the patented product marketed abroad needs to be admitted in the context of international trade. In this event, the context of international trade may be used as a reason to overcome any constraints to patented product parallel importation that may be argued on the basis of the principle of the independence of patents.

It is suggested that the new law may have some words to inscribe the development of international trade as a justification for the adoption of parallel importation with respect to the

© Pham Hong Quat 244 patented products. The application of the public interest principle in the context of international trade would be a good rationale for the new law to encourage parallel importation of the patented products in the areas indispensable to public demands. In the circumstances of Vietnam, the greatly significant products needed in the first place would include pharmaceuticals, medicines, food-stuffs for persons and animals, and chemical products for agriculture and aquaculture.

The law may contain a particular statement allowing the government to issue a special regulation applied to the parallel importation of patented products in the important areas. An open conception of international exhaustion and the most convenient conditions may be made available in that case. Accordingly, it is unnecessary to apply any condition or limitation relating to the parallel importation of indispensable products. The government may follow the broadest approach in defining a parallel importation to facilitate the importation of such products.

4. Concerns of product quality and social security

As discussed in the previous chapter, parallel importation may result in products of low quality with resultant problems of social security. These are practical concerns in the case of Vietnam. The flow of cheap products, in terms of the parallel importation of patented products, may cause not only great pressure on the domestic industry, but also the concern of the consumers and society regarding insufficient control of quality and assurance. The concern of product quality is realistic when there is no indication in relation to the patent holder or his patentee on the products. The consumers in many cases cannot identify the primary source of the parallel importation patented products. The enforcing authorities, otherwise, may not initiate control measures that it may apply to products that are illegal or counterfeit. These concerns may be true, however, they do not fall into the spectrum of patent law.

The law and regulations in other fields may be invoked to deal with the concerns mentioned above. For example, the government may issue a regulation to apply a particular measure to control the quality of parallel importation products when it relates to the security of society and the consumers. Government regulation may require the importers of parallel importation patented products to display detailed indication on the products, which would provide sufficient information to the consumers on the source of the products. In addition, the regulation may allow the enforcing authorities to request that the importers provide the necessary information regarding the source of products when it receives claims of low quality or lack of safety in imported goods.

General Conclusions

Viewing from the development of WTO jurisprudence, the new challenges to national legislation in compliance with the “incorporated” Paris Convention, the TRIPS and WTO law are disclosed in different aspects. The implications from clarifying the new constraints of WTO jurisprudence serves for a review of the national patent legislation of Vietnam for the purpose of bringing it into conformity with TRIPS and WTO law. The review reveals certain problems are existent in the current patent legislation of Vietnam. Such problems can no longer be justifiable under the “incorporated” Paris Convention as well as the TRIPS regulation. The streamline of arguments presented in different sections of this paper may be summarized in the following points:

I. Under WTO jurisprudence, the conception of sovereignty needs to be perceived in the context of globalization and interdependence of trade and economic interests. Departure from the Paris Convention, the TRIPS requires an intensive erosion of sovereignty in freedom of legislation in different aspects, especially with respect to the less-developed countries.

1. The conception of sovereignty is changing for the development of international trade and the globalization. There exist different views on the issue of sovereignty of the WTO Members and the freedom of legislation under WTO jurisprudence. Some thought that they would loss sovereignty when attended the WTO. By contrast, others argue for the strengthening of sovereignty of the member states by the WTO. The prevailing view contends the erosion of sovereignty in compliance with WTO law. The challenges to sovereignty may come from different aspects, especially the rule-oriented dispute settlement mechanism of the WTO. Generally, the prevailing is that the good governance of an international organization requires the member states to comply with the common rules with certain erosion of sovereignty.

2. However, at any rate, the developing countries must be subject to a more intensive pressure in the WTO framework. The TRIPS is one typical example for the burden of the WTO obligations with respect to the developing countries. Some complaints come from different angles. The author looks into this problem in the development from the Paris Convention to the TRIPS regulation, and then, in the development of WTO jurisprudence. It reveals that WTO jurisprudence is extending some new challenges to the freedom of legislation the developing countries in compliance with the TRIPS, the incorporated Paris Convention and WTO law.

II. The new challenges to compliance with the incorporated Paris Convention are reflected in the change of nature and scope of the Paris Convention as incorporated into the WTO system.

© Pham Hong Quat 246 3. The WTO rulings place certain constraints on the freedom of legislation under the Paris Convention as incorporated into TRIPS. As the Paris Convention is incorporated into TRIPS and thereby, the WTO system, the implementation of the incorporated substantive provisions of the Paris Convention must comply with the principle of national treatment and MFN of the TRIPS, the surveillance of GATT and the WTO rulings of WTO and patents is subject to the regulation of the TRIPS and the WTO rules. The first constraint on national legislation comes from the “incorporated” Paris Convention itself. The findings of the Appellate Body affirm the application of GATT standards in terms of less favorable treatment, as provided in TRIPS, is extended to the examination of the consistency with the national treatment obligation of the “incorporated” Paris Convention. At the very least the extension of the GATT standards is practical in the application of the standard examination of an “extra hurdle”, without distinction between a treatment “not less favorable than”, as required by Article 3.1 of TRIPS, and the same treatment, as required by Article 2(1) of the Paris Convention. In other aspects, the WTO panel also endorsed the extension of the national treatment principle and the rule of assimilation with nationals under Articles 2 and 3 of the Paris Convention, as qualified by Article 1.3 of TRIPS, to the WTO system. The change in the nature and scope of the national treatment obligations of the Paris Convention may be regarded as the new challenges to national legislation in compliance with the TRIPS regulation under the WTO rules. III. National legislation runs risk under the surveillance of the GATT practice in interpreting the TRIPS obligations and the newly concepts developed in examining the compliance of domestic law with the TRIPS regulation and WTO law.

4. The second constraint generates from the obligations under the main principles and norms of TRIPS. The extension of rules of non-discrimination to the exceptions and limitations of patent rights nullifies the special effect of these exceptions for the public interest as some might expect. Strict requirements on patent term protection and the extension of effect of this norm to the “existing subject matter” get national legislation to apply “retroactively” the requirement of patent term protection. The disciplines that the WTO panels and the Appellate Body developed from the practices of GATT and TRIPS makes the national treatment and MFN treatment obligations under TRIPS greater burden in regards with domestic legislation. The new concepts developed by the panels and the Appellate Body in examining domestic law in the TRIPS related cases place more contingent challenges to national legislation in both language and application of law. The “extra hurdle”, “fundamental thrust and effect”, “possible application”, “practical implication” give rise to the difficulty of fulfilling the obligations under these principles. Domestic patent legislation is also getting more risky in compliance with the TRIPS before the challenge of legislation “as such” (i.e. in terms of its actual wording) in TRIPS practice.

5. The requirement for the availability and security of a legal basis in domestic legislation is also one constraint to national legislation in compliance with the incorporated Paris Convention. This requirement becomes more burdensome for domestic patent legislation in the fact that TRIPS is a specific regime in the WTO system, which contains many substantive provisions on the protection of intellectual property rights. For many reasons, the lack of or the soundlessness of the legal basis in a given domestic law on a particular aspect of the patent protection may result in the relevant national legislation being subjected to an adverse ruling from a WTO panel on the grounds of its inconsistency with TRIPS obligations. The

© Pham Hong Quat 247 security requirement of the legal basis does not exempt any national legislation from the obligation to implement adequately and effectively the TRIPS standards. Different from the Paris Convention, TRIPS does not give much meaning to the differential or preferential treatment provided to the members who are less-developed and developing countries. The narrow differential treatment becomes thinner under the WTO rulings on the TRIPS obligations. The non-working effect of the objectives and principles stated in the TRIPS did not help to modify any TRIPS obligations as some often predict or suggest.

6. The recent development of the rulings of the WTO panels in examining the compliance of domestic law to WTO law is a significant constraint on the national legislation. The rulings on the possible violation of discretionary legislation and the detailed examination of the WTO panels with respect to domestic law have a special effect on domestic legislation in terms of the implementation of the TRIPS substantive norms. The possibility of taking an independent explanation of a particular provision of the relevant domestic law is actually the challenge to domestic legislation in interpreting and implementing the TRIPS obligations. Not only the statutory language but also the national administrative and judicial practices may be subject to the detailed examination of a WTO panel and the Appellate Body, when it is necessary for assessing the compliance of domestic law with WTO obligations. Additionally, the requirement for an active response to compliance with WTO law is an actual challenge to domestic legislation, something that never happened in the mandate of the Paris Convention.

IV. Hidden problems are still existent in the current patent legislation of Vietnam from the view of WTO jurisprudence

7. Different from the perception regarding the full compliance of the current patent legislation with TRIPS and the WTO, the examination of the patent related regulations of Vietnam in the light of WTO jurisprudence regarding TRIPS and the “incorporated” Paris Convention, revealed certain problems in the national regime of patent protection. The identified problems in the current national legislation that may be justified under the mandate of the Paris Convention would not be the case under TRIPS. For examples, the unavailability and insecurity of the legal basis in the patent protection for pharmaceutical product inventions is a problem that can be no longer permitted under the requirement of Article 27.1 of TRIPS. Similarly, the lack of procedure for judicial review of the revocation of a patent in the national legislation system may make the domestic legislation be subject to a challenge on the basis of the legislation “as such”, for its inconsistency with the obligations under the requirements of Article 32 of TRIPS.

8. The additional procedure applied to the renewal of term protection with respect to the patents with the priority claim granted in the old regulation may be regarded as an “extra hurdle”. This “extra hurdle” may constitute a less favorable treatment to foreign patents. Under the rule of anti-discrimination, the rationale of independence of patents seems unlikely to advocate this kind of discriminatory treatment towards foreign inventions. The existence of the “extra hurdle” in the particular practice of patent protection in Vietnam may also invite a claim on the basis of its inconsistency with the requirement of national treatment of TRIPS. Moreover, when the GATT standards are also applied in examining the national treatment obligation of the “incorporated” Paris Convention, that “extra hurdle” may violate at the same time the national treatment obligation under Article 2(1) of the Paris Convention, as

© Pham Hong Quat 248 incorporated by Article 2.1 of TRIPS. If the fact that only foreign patentees hold the patents subject to the “extra hurdle” is proved, the patent renewal procedure will be subject to the rulings of the WTO panels on de facto discrimination, pursuant to the practice of Article III: 4 of GATT and Article 3.1 of TRIPS.

9. A challenge of inconsistency with the MFN treatment obligation of TRIPS may come with the discriminatory treatment in the provision of the legal grounds of patent revocation. The difference in the language of the bilateral trade agreement with the United States and in the domestic patent regulations may create a less favorable treatment to foreign countries other than the United States in patent revocation. In this connection, the regulation regarding patent revocation as an administrative sanction may be subject to a challenge of legislation “as such”. The ruling of “fundamental thrust and effect” may be applied in that case for the reason that it causes the actual effects or the practical implications of an inequality of opportunities in the protection of patents.

10. The requirement for displaying the source indication on products produced under a foreign licensing is likely to face a claim of inconsistency with the rule of anti-discrimination on the place of invention. At the same time, that requirement may also be subject to the argument of inconsistency with the national treatment principle of TRIPS. Not only the discriminatory language in the related regulations may face a challenge of legislation “as such”, but also the actual application of these regulations may be criticized under the claim of discrimination against foreign originated patents and foreign patent holders. The argument for the public interest under the principles provided in Article 8.1 of TRIPS seems unjustifiable because the discriminatory requirement itself is not consistent with the other provisions of TRIPS. Where the standards of less favorable treatment is practically applied to measure the national treatment obligation of the Paris Convention, the “extra hurdle” caused by the imposition of the discriminatory requirement may also be a violation of the national treatment obligation under Article 2(1) of the Paris Convention, as incorporated by Article 2.1 of TRIPS.

11. For the change in the scope of the national treatment principle and the rule of assimilation of the “incorporated” Paris Convention, the current regulation on the claim of the priority right of Vietnam becomes incompatible with the requirement of the extended rule, as it works in the WTO system. The principles and particular provisions of the regulations on patent protection do not support any possibility of extending the application of the privilege on the claim of the priority right under the Paris Convention to the WTO system. This incompatible point in the current domestic legislation may call for a challenge of the legislation “as such” for its likely inconsistency with the national treatment principle and the rule of assimilation under Articles 2.1 and 3 of the Paris Convention, as affected in the WTO system by Articles 1.3 and 2.1 of TRIPS. A less favorable treatment in relation to the claim of the priority right may subject the domestic legislation to the findings on the violation of the national treatment and MFN treatment obligations under TRIPS, as well.

12. The requirement of reciprocity in according the patent protection to the nationals of the countries outside the Paris Union is incompatible with the national treatment of the TRIPS and WTO. The lack of procedure for reviewing the administrative decisions on compulsory licenses, the narrow scope of regulation on compulsory licenses, and the greater protection in

© Pham Hong Quat 249 controlling the exportation of goods might be the disputable problems existing in the legal system. The inconsistency on the face of the domestic law may result in some complaints under a number of provisions of the TRIPS, including Articles 1, 3, 4, 31, 34, 42 of the TRIPS. In addition, the situation of abuse of intellectual property protection for the purpose of prevent arbitrarily the importation of certain types of products to a large extent might lead to a challenge from WTO jurisprudence for the cumulative application of the TRIPS regulation and GATT 1994 rules. Such problems might be dealt with in the language of the new law to certain extent to avoid the direct inconsistence with the TRIPS and WTO law. In a long term, it requires to amend some basic laws of Vietnam, including the Civil Code and Law in Customs. In this respect, the sovereignty and the freedom of legislation sometime need to be eroded for its compliance with the TRIPS and WTO law.

13. In the same situation as mentioned above, the draft of the new law on intellectual property contains potentially problems similar to those existing in the current legislation. The drafters may invoke the rationale of the principle of independence of patents to advocate the defects in the draft of the new law concerning the different aspect of patent protection. However, with the appearance of the constraints from TRIPS, the incorporated Paris Convention and the WTO rules, that rationale may not help to advocate those defects any more after Vietnam has entered into the WTO system. For such reasons, the problems protected under the rationale of that principle should be excluded totally. Any solution for eliminating the identified problems from the current legislation should take into account the strict requirement for an active response to compliance with TRIPS and WTO law. The non-discrimination standards should be secured not only in the statutory language of the law, but also in the implementing mechanism. The drafters of the new law are advised to pay in full the attention to the problems implicated in the specific provisions of the current drafts. One of the issues is now in debate is the problem of international exhaustion of patent rights and parallel importation. Examining the legal justification and the challenges under WTO jurisprudence may help the legislators being more confident of what they wish to decide.

V. The legal justification of international exhaustion under WTO jurisprudence might be confident for the development of the TRIPS. However, the likely challenges from the GATT rules, the TRIPS and the “incorporated” Paris Convention are still available.

14. The controversies around the legality of international exhaustion of patent rights under the Paris Convention have been not ended yet. There are different views on the inconsistency of international exhaustion of patent rights under the Paris Convention, the TRIPS and the WTO. Some argue for the exclusion of international exhaustion due to it goes against the Paris Convention and the TRIPS. Some argue for the obligation of applying international exhaustion which comes from the GATT and WTO rules and mandate. Others view that exhaustion of patent rights is outside of the Paris Convention regulation or outside the GATT 1994 relevance. Viewing from the development of the TRIPS may be found that the legality of international exhaustion of patent rights is not excluded by any obligations under the TRIPS and GATT and the Paris Convention. However, the likely challenges from the Paris Convention and GATT appear to be existent.

VI. The disparity in national practices would prevent a possible challenge under WTO jurisprudence regarding exhaustion of rights. The justification in favor of parallel

15. National practices concerning international exhaustion are in the disparity. It might be a factual ground for a suggestion that there is little possibility of happening an actual challenge to national legislation in this respect under the WTO dispute settlement procedures. To a certain extent, the experience of Japan, as an internationally influential court precedent in dealing with the issue of parallel importation of patented products, the empirical reasoning of the Supreme Court of Japan regarding international trade development would help some developing country like Vietnam to be more confident of the acceptance of international exhaustion and parallel importation of patented products under WTO jurisprudence.

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Introduction I. Vietnam and its intricacy in compliance with the TRIPS and WTO law 1 II. New challenges from WTO jurisprudence in compliance with the TRIPS 3 1. The extension of GATT to the “incorporated” the Paris Convention 3 2. The surveillance of GATT rules in the TRIPS practice 5 3. WTO jurisprudence and international exhaustion of patent rights 6 Abstracts 8

Chapter One Sovereignty and Freedom of Legislation under WTO Jurisprudence I. Sovereignty and WTO law 9 1. Loss of sovereignty 9 2. Strengthening of sovereignty 10 3. Erosion of sovereignty 11 I. II. Compliance under WTO Jurisprudence 12 1. Panel rulings 12 II. 2. Deference to national law 13 3. Challenges to developing countries 14 4. Compliance with the TRIPS 15 5. Challenges from WTO jurisprudence 17

Chapter Two Freedom of legislation under the Paris Convention and the TRIPS regulation II. Freedom of legislation under the Paris Convention 18 1. The same treatment as to advantages 18 2. Rules of substantive law 22 3. Reservation of dispute settlement procedure 27 4. Reservation of obligations 28

© Pham Hong Quat 252 II. Freedom of legislation under the TRIPS regulation 29 1. From the Paris Convention to the TRIPS 29 1.1 The influence of the United States 29 1.2 The North-South tension on intellectual property 31 1.3 From the WIPO forum to the GATT forum 32 1.4 The cross-linkage of negotiations 33 1.5 The North-North bargains at the expense of the South 34 2. Not less favorable treatment and minimum standards 35 2.1 Adoption of GATT-standards principles into the TRIPS 35 2.2 Not less favorable treatment 36 2.3 Nondiscrimination and MFN 38 3. Statements on objectives and principles 41 3.1 Public interest 41 3.2 Balance of rights and obligations 42 4. Norms and restrictive rules 42 4.1 Patentable subject matters 43 4.2 Rights and obligations of patentee 44 4.3 Criteria of exceptions and limitations of exclusive rights 45 4.4 Minimum standard of the term of protection 46 5. Limitations of the special and differential treatment 46 6. Enforcement of rights 47 6.1 Enforcement obligations 47 6.2 Enforcement supervision 49 7. Application of WTO dispute settlement mechanisms 50 7.1 WTO jurisdiction over intellectual property right 50 7.2 Specified dispute settlement procedures 51 Conclusion 52

Chapter Three New Challenges from WTO jurisprudence to the “incorporated” Paris Convention I. Incorporation of the Paris Convention into the TRIPS 53 1.Incorporation of the contents and context 53 (United States - Section 110(5) of the US Copyright Act)

© Pham Hong Quat 253 2.Incorporating beyond the TRIPS negotiating history 59 (United States - Section 211 Omnibus Appropriations Act 1998) II. Compliance with the TRIPS norms and WTO dispute settlement rules 63 1. Incorporated provisions and the TRIPS principles 63 1.1 Prevailing effect of TRIPS national treatment and MFN principles 63 (United States - Section 211 Omnibus Appropriations Act 1998) 1.2 Impracticability of the objectives and principles under Articles 7 and 8 of TRIPS 66 (Canada - Patent protection of pharmaceutical products; European Communities - Geographical indications) 2. TRIPS substantive provisions prevailing the incorporated provisions 68 (United States - Section 110(5) of the US Copyright Act; United States – Section 211 Omnibus Appropriations Act of 1998) 3. Subject to the WTO dispute settlement procedures 70 (United States – Section 211 Omnibus Appropriations Act of 1998) III. The extension of the GATT practice to the “incorporated” Paris Convention 72 1. “Effective equality of opportunities” and “no less favorable” standards 72 (United States - Section 211 Omnibus Appropriations Act of 1998) 2. Extension of the rule of assimilation 81 (European Communities – Geographical indications) Conclusion 84

Chapter Four Increasing Risky in Compliance with the TRIPS under WTO Jurisprudence I. Securing the obligations under the TRIPS norms 85 1. Rule of anti-discrimination 85 (Canada - Patent protection of pharmaceutical products) 2. “Availability” and “extra” term of patent protection 90 (Canada - Term of patent protection) 3. Availability and security of legal basis 96 (India - Patent Protection for Pharmaceutical and Agricultural Chemical Products) II. GATT standards for securing the TRIPS obligations 104 1. Challenge of legislation “as such” and “extra hurdle” 105 (United States - Section 211 Omnibus Appropriations Act of 1998) 1.1 National treatment obligation 105 1.2 MFN treatment obligation 108

© Pham Hong Quat 254 2. Adaptation of the GATT “fundamental thrust and effect” 111 (European Communities - Geographical indications) 2.1 The TRIPS national treatment obligation 111 2.2 TRIPS MFN treatment obligation 118 III.III. Domestic law under WTO Jurisprudence 120 1. Possible WTO law violation of discretionary legislation 121 1.1“Chilling effect” of domestic legislation 124 1.2 Article XVI:4 of the WTO Agreement 126 2. Detailed examination and independent assessment of the WTO panels on domestic law 129 2.1 Detailed examination of the panels regarding the relevant domestic law 130 2.2 Detailed examination of the Appellate Body regarding the relevant domestic law 132 3. Independent explanations of the panels on the domestic law in question 134 Conclusion 138

Chapter Five Hidden Problems of the Patent Legislation of Vietnam in Compliance with the TRIPS and WTO Rulings 140 I. Vietnam Patent Legislation under the Paris Convention 141 1. Unavailability and insufficiency in the protection of patents 141 2. Legal grounds for refusal of patents 142 3. Legal grounds and procedures for revocation and invalidation of patents 143 4. Term of patent protection 144 5. Different treatment for inventions of foreigners 144 II. Establishment of legal framework in conformity with the TRIPS 146 1. The Civil Code of 1995 146 2. The Governmental Regulations 147 2.1 Decree 63 on industrial property regulation 147 2.2 Revision of Decree 63 and supplemental regulations 148 3. Substantive provisions on patent protection 149 3.1 Patentability 149 3.2 Patent rights 150 3.3 Exceptions of patent rights 150 3.4 Enforcement of patent rights 151 III. The hidden problems of the current patent legislation 152 1. Patentable subject matters: absence of detailed examining procedures 152

© Pham Hong Quat 255 2. Revocation of patents: uncertainty of legal basis and problem of MFN obligation 153 (i) 2.1 Incompatibility with Article 32 of TRIPS 153 (ii) 2.2 Problems with MFN treatment requirements 157 3. Term of protection of patents: “extra hurdle” in renewal procedure 162 4. Requirement of source indication with respect to foreign licensing 163 5. The right of priority: incompatible with the extended rule of assimilation 170 6. Reciprocity in the protection of patent for foreigners 172 7. Incompatible requirements regarding compulsory licenses 173 8. Absence of procedures for enforcement of patent rights 175 9. Procedural burden and ex officio enforcement 176 10. Greater protection 177 Conclusion 178 IV. Compliance of the New Intellectual Property Law Draft of Vietnam with the TRIPS and WTO Law 179 1. The problems inherited from the current regulations 180 1.1 Ineffective examining regime for patents of pharmaceuticals 180 1.2 Incompatibility and discrimination in revocation of patents 181 1.3 Procedural requirement for renewal of patent duration 181 1.4 Irrelevant regulations on the priority right 182 1.5 The source indication requirement regarding “foreign licensing” 182 1.6 Other problems 183 2. Unsettled issue in the new law draft -parallel importation of patented products 184 2.1 Systematic problems in the current domestic legislation 185 2.1.1 Lack of statutory provisions in settlement of intellectual property disputes 185 2.1.2 Lack of professional judges 187 2.2 Limited jurisdiction in interpreting substantive law 189 2.3 Problems in handling the issue of parallel importation 189 2.3.1 Unsound legal grounds 189 2.3.2 Unclear instructions for implementation 190 2.3.3 Fluctuations in the wordings of the new law drafts 193 Conclusion 194

Chapter Six

© Pham Hong Quat 256 International Exhaustion of Patent Rights under WTO Jurisprudence – Implications for Vietnam I. Parallel importation and international exhaustion of patent rights 196 1. The absence of a general definition 196 2. Exhaustion of patent rights 198 IV. II. Legality of international exhaustion under the Paris Convention 202 1. The Paris Convention prohibiting international exhaustion 204 2. The Paris Convention without relevance with exhaustion of patent rights 205 III. The Relevance of the TRIPS and GATT 207 (iii) 1. The TRIPS precluding international exhaustion of patent rights 209 2. The TRIPS and GATT mandating international exhaustion of patent rights 211 3. The TRIPS leaving freedom to national laws without the relevance of GATT 213 4. Likely challenges in application of international exhaustion of patent rights 216 4.1 The Doha Declaration on the TRIPS Agreement and Public Health 216 (iv) 4.2 The WTO rulings on the relationship between the TRIPS and GATT 1994 219 (v) 4.2.1 The cumulative application of TRIPS and GATT 1994 219 4.2.2 The relevance of GATT 1994 220 4.2.3 Place of production and discrimination against imported products 220 5. Implications for the case of Vietnam 222 IV. National practices dealing with exhaustion of patent rights 225 1. The United States 225 1.1 The U.S. Supreme Court’s decision in Boesh v. Graff in 1890 225 1.2 The decision of the Court of Appeals for the Second Circuit in Curtiss Aeroplane v. 226 United Aircraft in 1920 1.3 Decision of the Court of Appeals for the Federal Circuit 226 in Jazz Photo Fuji v. ITC in 2001 2. Exhaustion of patent rights in the EU 228 3. Switzerland 229 4. Japan 230 5. Developing countries 232 V. Reasoning for parallel importation of patented products 235 1. Clarifying legal reasoning in the new law draft of Vietnam 235 2. Reasoning in favor of international trade 236 2.1 The balance between patent value and the public interest 236

© Pham Hong Quat 257 2.2 Implied license of reselling the marketed products 236 2.3 The development of industry and trade-related aspect of patent right 237 2.4 Reasonable reward to the patent holder 238 2.5 Reasoning in favor of the development of international trade 239 2.6 Notice of restriction or reservation 239 2.7 Concerns with technology transfer and quality of parallel importation goods 240 2.8 Scope of regulation 241 VI. Implications for adoption of parallel importation in Vietnam 241 1. Towards the balance of patent rights and the public interest 242 2. Implied license and the first sale of a patented product 242 3. International trade and the principle of independence of patents 243 4. Concerns of product quality and social security 244

Chapter Seven General Conclusions 245

Bibliography I. Cases 251 1. WTO cases 251 1.1 Panel Reports 251 1.2 Appellate Body Reports 252 2. Domestic Cases 252 II. Primary materials 254 1. WTO documents 254 2. International treaties, reports and foreign laws 255 3. Legislation 257 4. Governmental letters 258 5. Court findings and case-related materials 260 6. Domestic Reports 261 III. Secondary materials 262 1. Books and collections of essays 262 2. Articles 267 3. Internet, newspapers and others 271

© Pham Hong Quat 258 Appendices Appendix 1. The Fourth Daft of the New Law on Intellectual Property Law of Vietnam 273 Appendix 2. The Civil Code of 1995 of Vietnam (Abstract) 380 Appendix 3. Decree No. 63/CP detailed regulation on industrial property, as amended by Decree 06/CP 385 of 2001

I would like to express my gratitude to my academic supervisor, Professor SABURI Haruo, who gave me great supports and invaluable advice and lectures during all time of my study in the Graduate School of Law, Nagoya University, and preparation of this dissertation as well. Without his excellent supports and instructions, I could never complete this academic research work. My special thanks to my sub-supervisors, Professor SUZUKI Masabumi and Professor OBATA Kaoru. Their comments and instructions on the draft of dissertation actually lightened me the questionable points in the arguments and discussions I included in the dissertation. I am greatly thankful for very kind assistance and great time I received day by day, both in study and daily life, from Assistant Professor OKUDA Haruo. I never forget the days in the Graduate School of Law, Nagoya University together with the warm smile and voice of hers in my life. I owed much Mss. Haiyashi, a nice friend and good staff of Administration Office of the Graduate School of Law, who provided me everything possible to help me to make easy the studying the school and living in Nagoya city. All my thanks to the MONBUSHO scholarship program, without its significant financial support, I may not finish the hard and expensive study of mine in Japan for such a long period. I am grateful to the AIPPI Japan, Kannosuke Nakamatsu Funding, Kyosei International Patent Office Japan, the VCCI Japan, the Ministry of Science and Technology of Vietnam, the National Office of Intellectual Property of Vietnam. The material supports of yours enable me to complete my difficult duty of research in Japan. I would like to thank very much all professors, tutors, assistants, librarians, administration officers, classmates and study-roommates of mine. All have kindly extended to me indispensable guidelines and assistance to my study job in the school, particularly in preparation of this dissertation. Finally, I would like to give my love and great thanks to my family, my mother, father, young brother and sister, and my wife and lovely son and daughter for everything they did for me during I studied and prepared this dissertation. Their love and assistance given to me everyday encouraged me to go to the end of this work.

Nagoya, 20 December 2006