Treaty Protection For Global Patents: A Response To A Growing Problem For Multinational Pharmaceutical Companies

Patents held by multinational pharmaceutical companies are under assault in the developing world. Novartis is mired in a years-long case seeking to patent one of its drugs in India, and it is now challenging before the Supreme Court of India a provision of the Indian Patents Act that Novartis says violates international law.1 Roche recently lost a major patent infringement case in India's courts, thereby allowing a massive generic manufacturer headquartered in India to continue marketing a generic version of Roche's cancer-treatment drug.2 And Pfizer is reportedly being targeted for a compulsory license by another Indian generic drug manufacturer, which would allow the manufacturer to infringe Pfizer's patent with the imprimatur of the Indian State, and perhaps even export that infringing product abroad.3 But the most newsworthy case has been Bayer's. Last March, an Indian court granted an Indian generic drug manufacturer a compulsory license to manufacture and market one of Bayer's patented drugs, essentially expropriating Bayer's intellectual property in exchange for a mere 6 percent royalty.4 The decision appears plainly discriminatory—the court specifically justified the outcome on the fact that Bayer's drug was produced in Germany, and not in India. Bayer appealed this decision, but only days after argument, the Indian appellate court denied Bayer's request to stay the lower court's order—thus allowing the infringement to continue while the appeal is pending.5 This is not an issue unique to India. China, too, has recently issued a new regulation setting out detailed procedures for applying for compulsory licensing.6 This new trend toward compulsory licensing presents a material risk to multinational pharmaceutical companies because the essence of a patent is the right to exclude others from making and marketing infringing products. By forcing a compulsory license, the state is appropriating that valuable property right. Worse still, local courts provide little respite for these discriminatory and expropriatory actions. India's court system is notoriously slow, and foreign patent holders have had little recent success in protecting their patent rights in Indian courts. While the rule of law is emerging in China and India, both countries still have a distance to travel in protection of intellectual property and other rights. The most recent "Worldwide Governance Indicators" published by the World Bank put both countries at or below the 50th percentile for "Rule of Law" and for "Regulatory Quality."7 Investment Treaty Protection: A New Way Forward Bilateral Investment Treaties ("BITs") generally include a compulsory clause for the settlement of disputes that arise between a signatory state and a foreign investor of another signatory state. Thousands of BITs are now in force worldwide. China and India together have signed and placed into force 168 BITs with foreign countries, including the United Kingdom, Germany, France, and Switzerland—homes to many of the world's leading pharmaceutical companies.8 These treaties enable protected foreign investors from one signatory state to bring claims against the other signatory state before an international arbitral tribunal. In the words of one U.S. court upholding the compulsory nature of BIT arbitration, "[a]ll that is necessary to form an agreement to arbitrate is for one party to be a BIT signatory and the other to consent to arbitration of an investment dispute in accordance with the Treaty's terms. In effect, [the Contracting State's] accession to the Treaty constitutes a standing offer to arbitrate disputes covered by the Treaty; a foreign investor's written demand for arbitration completes the 'agreement in writing' to submit the dispute to arbitration."9 The...