Over 5 Billion Not Served: The TRIPS Compulsory Licensing Export Restriction

Abstract:     
Disease and environmental destruction are two of the most pressing issues facing humankind in the twenty-first century. We rely on technological innovation and its widespread diffusion, to meet these global challenges. But as breakthrough technologies emerge on these fronts, the TRIPS Agreement frustrates product diffusion by prohibiting compulsory licensing to export markets (Article 31(f)). The contribution of this article to the literature on TRIPS compulsory licensing is twofold. First, an economic analysis is employed to argue that Article 31(f) is contrary to the patent and trade rationales embodied in the TRIPS Agreement. Specifically, TRIPS expresses a liability rule that balances the incentive to innovate with trade promotion and technological transfer rationales that justify compulsory licensing in situations of international patent abuse. Provided the incentive to innovate is maintained, serious product diffusion shortfalls in export markets can and should be remedied by compulsory licensing. Second, the article probes specific incentive and diffusion based factors that should be relevant to export market compulsory licensing. Business reasons for failing to sell or license on reasonable commercial terms are assessed for legitimacy from an incentive promotion perspective. At the same time, product demand must be assessed to gauge the magnitude of product diffusion-based problems in developing country markets. The article concludes by examining exhaustion rules and trade diversion concerns that would be central to a regime of international compulsory licensing.

Keywords: TRIPS, patent law, compulsory licensing, essential medicines, international trade

Accepted Paper Series