Multilateral Investment Court impedes Intellectual Property Rights Reform

[Reposted from blog.ffii.org]  The following is an excerpt from the full working paper Multilateral Investment Court Assessment Obscures Social and Environmental Impacts, available here. 

Copyright does not work well in the digital world; the patent system is inefficient. Our societies could benefit from reform. ³³ The WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and other international agreements limit possibilities for reform. Expansive interpretation of international treaties would further limit our policy space.

It matters who can initiate cases and who interprets the TRIPS agreement. The WTO has its own dispute settlement mechanism, only available to members of the WTO, to interpret the TRIPS agreement. A new forum emerges. United States pharmaceutical company Eli Lilly claims 500 million Canadian dollars in ISDS arbitration after Canada made a minor adjustment to its patent law, to ensure better access to medicine. According to Eli Lilly, Canada’s patent reform in not compatible with the TRIPS agreement. Investment adjudicators interpreting and deciding on compliance with the TRIPS agreement would change the dynamic of interpretation, as investors have less restraint than states regarding policy space ³⁴ and there is a difference between seeing intellectual property rights as innovation stimulants and seeing them as assets. ³⁵

Eli Lilly contends the Canadian measures produced “absurd results” and accused Canada of expropriation and breach of minimum standard of treatment obligations (fair and equitable treatment). Eli Lilly lambasts the Canadian patent policy framework as “discriminatory, arbitrary, unpredictable and remarkably subjective”. Furthermore, Novartis filed an investment treaty notice to challenge a Colombian cancer drug price-cut. Minor reforms have already led to two supranational investment claims.

Existing investment agreements are very open to interpretation. Proposed trade and investment agreements would contain some additional provisions on intellectual property rights. However, Sean Flynn argues that “language in investment chapters that appear designed to carve out IP policy decisions from private attack in investment forums in fact invite and facilitate such attack.” For weaknesses in the EU TTIP proposal, see FFII.

Supranational investment protection can also have an effect on patentability of software. Pratyush Nath Upreti adds a new element; he argues that investors can use the proposed Unified Patent Court for investment treaty shopping. The MIC proposal does not eliminate this possibility. As a result, two supranational courts could take decisions on patents, a specialised patent court and specialised investment court – a double whammy of the supranational kind. ³⁶ The UPC – ISDS / MIC combination may lead to disproportionately high costs (unrelated to their market) for UPC member states.

A multilateral investment court would impede reform of intellectual property rights.

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FOOTNOTES:

³³ Statnews, UN panel urges wider access to medicines, but pharma slams the report; Regarding digital issues, the FFII (one, two) has argued that EU copyright and patent law has to be made compatible with the UN International Covenant on Economic, Social and Cultural Rights (ICESCR).

³⁴ See for instance Michael Geist on the U.S. State Department submission in the Eli Lilly ISDS case.

³⁵ See also Peter K. Yu, who proposes mitigating approaches in “The Investment-Related Aspects of Intellectual Property Rights”. Note that the article overlooks arbitrator bias and unfair procedural advantages for the US (page 50), weaknesses in TPP’s “right to regulate” clause (page 24, compare Van Harten, page 7), and uses old damages numbers in footnote 102 (compare Van Harten, pages 2-6). Taking these issues into account, mitigating approaches could be less effective than hoped for.

³⁶ See also Josef Drexl’s remarks on the UPC above.