Bio-innovation and International Trade

Professor Michael BlakeneyUniversity of Western Australiamichael.blakeney@uwa.edu.au

Outline

• International Trade Regime (WTO)• IP case study-Climate change and bio-innovation

(GM agriculture)• GM patenting and international trade• Bio-innovation, labelling and international trade• International trade and the SPS Agreement

International Trade Regime -The World Trade Organization

• Agreement establishing the WTO Annexes • 1A - GATT 1994 , related agreements (e.g. Agreements on

Agriculture, Subsidies, Technical Barriers to Trade (TBT) Agreement, Sanitary and Phytosanitary (SPS) Agreement1B- General Agreement on Trade in Services (GATS) and Annexes1C- Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)

• Annex 2 Understanding on the Rules and Procedures Governing the Settlement of Disputes (aka Dispute Settlement Understanding /DSU)

• Annex 3 Trade Policy Review Mechanism• Annex 4 Plurilateral Agreements (e.g. Agreement on Trade in

Civil Aircraft)

IP and Bio-innovationClimate Change: a case study

Climate stresses and agriculture:– Elevated carbon dioxide – Rainfall and associated water resource availability– Temperature – (evaporation)– Extreme weather events (wind, flood damage)

interact to affect agricultural productivity, pests and diseases.

The International IP System

• Encourages innovation by:–Conferring a period of exclusivity for

exploiting inventions (20 years), new plant varieties (trees and vines -25 years, others 20 years)–publishing and making known technical

information (during application process)

Climate change and patenting

Somvanshi identified 30 patents relating to drought tolerant genes.

V. S. Somvanshi ‘Patenting Drought Tolerance in Organisms’ (2009) 3 Recent Patents on DNA & Gene Sequences , 16-25, accessed at http://www.benthamscience.com/dnag/samples/dnag3-1/0003DNAG.pdf, at Table 2.

Somvanshi StudyThese included: (i) patents related to Proline biosynthesis; (ii) patented dehydration responsive element binding

factors (DREB) and C-repeat sequences binding factors (CBF);

(iii) patents related to Protein Kinases; (iv) various patents awarded for transcription factors

involved in improving drought stress tolerance in plants, and

(v) patents related to miscellaneous drought tolerance genes.

ETC Group, ‘Patenting the “Climate Genes”…and Capturing the Climate Agenda’ Communiqué, no.99, May/June 2008, Available at http://www.etcgroup.org/upload/publication/687/03/etcgroupclimategenesfinal05_08.pdf

• identified 55 patent “families” (a total of 532 patent documents) that were applied for and/or granted to a number of biotechnology companies on so-called “climate-ready” genes at patent offices around the world.

• ETC Group, ‘Gene Giants Stockpile Patents on “Climate-ready” Crops in Bid to become “Biomassters” Patent Grab Threatens Biodiversity, Food Sovereignty’ Issue no. 106, October 2010, Available at http://www.etcgroup.org/upload/publication/pdf_file/FINAL_climate-readyComm_106_2010.pdf

• noted “a dramatic upsurge in the number of patents published (both applications and issued patents) related to ‘climate-ready’ genetically engineered crops from June 30, 2008 to June 30, 2010, identifying 262 patent families and 1663 patent documents.

International Trade Impacts of IPRs• Infringement actions in markets where bio-

innovations are protected by IPRs– Patents– Trade secrets– Plant variety rights– Trademarks

Patents and Bio-innovation

EU Directive on the Legal Protection of Biotechnology Inventions, 1998

Art 5(2). An element isolated from the human body or otherwise produced by means of a technical process, including the sequence or partial sequence of a gene, may constitute a patentable invention, even if the structure of that element is identical to that of a natural element.

Patent infringement and GMOs• Infringement depends upon patentability of genetic

material• Note: decision of the US Supreme Court in

Association for Molecular Pathology et al. v. Myriad Genetics, Inc. (delivered 13 June 2013) that isolated DNA is not patentable if it retains the chemical composition of DNA in situ.

• [Cf creation of a cDNA sequence from mRNA results in an exons-only molecule that is not naturally occurring and therefore patentable]

Australia- Patent Amendment (Human Genes and Biological Materials) Bill 2010

A Bill for an Act to amend the Patents Act 1990 to prevent the patenting of human genes and biological materials existing in nature, and for related purposes

• HoR - Mr Dutton, Mr Oakeshott, Mr Forrest and Mr Turnbull

Patent Amendment (Human Genes and Biological Materials) Bill 2010 [No. 2]

• Date introduced: 24 November 2010 • Senate - Senators Coonan, Heffernan, Siewert and

Xenophon

Patent Amendment (Human Genes and Biological Materials) Bill 2010

Repeal subsection 18(2) of the Patents Act substitute: (2) The following are not patentable inventions: (a) human

beings, and the biological processes for their generation; and

(b) biological materials including their components and derivatives, whether isolated or purified or not and however made, which are identical or substantially identical to such materials as they exist in nature.

After subsection 18(4) Insert: (5) In this section: biological materials includes DNA, RNA, proteins, cells and fluids.

Patent Amendment (Human GenesAnd Biological Materials) Bill 2010

Second Reading Speech, Sen Heffernan 24 Nov. 2010It was a little over two years ago, on 16 October 2008, that I

first rose to bring this important matter to the Senate’s attention. At the time I questioned the legality of a practice which had allowed Myriad Genetics and its exclusive Australian licensee, Genetic Technologies Limited, to monopolise human genes BRCA 1 and BRCA 2 – genes linked to breast and ovarian cancers. No one invented these genes. Yet, relying on four patents granted by IP Australia, on 8 July 2008, Genetic Technologies attempted to close down all public laboratory genetic breast and ovarian cancer gene testing when it sent a letter threatening to sue each of them for patent infringement. I said then and I say now that this “is a disgrace”.

Trading in Patented Products

• Infringement where importation of patented DNA by an unauthorised person

• provided that DNA continues to perform its function (see Monsanto Technology LLC v. Cefetra BV, Case C 428/08 ECJ concerning ‑importation into Europe of soy meal made from GM soy)

Trade secrets

• Pioneer Hi-Bred International v. Holden Foundation Seeds 35 F.3d 1226 (8th Cir. 1994) United States Court of Appeals for the Eighth Circuit held that the genetic composition of proprietary seed was protectable as a trade secret

• Similarly see Franklin v Giddings [1977] Qd. R 72 in which the Supreme Court of Queensland held that the genetic information contained within the budwood of early ripening nectarine trees was protectable confidential information.

Plant variety rights

8 Dec 2006, the customs office at Amsterdam-Schiphol airport (the Netherlands) blocked a batch of gerbera cut flowers from Israel, as requested by the gerbera breeder.

Trademarks

Infringement by wrongful appropriation of a registered trademark or registered plant variety designation

Bio-innovation, labelling and international trade-

The WTO/SPS Agreement

WTO members have the right to adopt

measures to protecthuman, animal orplant life or health

Art 2.1

but

these must not constitute

unjustifiable discrimination between

Members or adisguised restriction

on international TradeArt 2.2

Risk assessment

• SPS measures to be based on assessment of risks to human, animal or plant

life or health, taking into account risk assessment techniques developed by international organizations.

available scientific evidences; process and production methods; inspection & sampling methods; prevalence of specified disease or pests; existence of pests/disease-free areas,etc

relevant economic factors & cost effectiveness of alternate approaches

• Avoid arbitrary/unjustifiable distinctions in the levels in different situations if these result in disguised restrictions

No unjustifiable discrimination

– between Members with similar conditions– between own territory and other Members

Non-discriminationNon-discrimination

Article 2.3

24

SPS Disputes• Food safety:– US/Canada vs. EC - Hormones (WT/DS26, 48)– US/Canada/Argentina vs. EC - Biotech (WT/DS291, 292, 293)– EC vs. US/ Canada - Retaliation on Hormones (WT/DS320, 321)

• Animal health:– Canada / US vs. Australia - Salmon (WT/DS18, 21)

• Plant Protection:– US vs Japan - Variety Testing (WT/DS76)– US vs. Japan – Fire blight (WT/DS245)– Philippines vs. Australia - Tropical Fruit (WT/DS270)– New Zealand vs. Australia - Apples (WT/DS367)

SPS Disputes and Bio-innovation

• Most SPS disputes have involved concerns with innovative technologies

• Irrespective of the result in the WTO, the negative publicity generated by the dispute has had a negative impact upon consumer acceptance

Eg EU – US Beef Hormone Dispute1981 EU adopted restrictions on the use of

hormones in beef1989 EU fully implemented ban on imports of meats

treated with hormones Loss of $100 million annually for the US

Hormones in Question

Naturally Occurring• Oestradiol• Progesterone• Testosterone

Artificially Produced• Zeranol• Melengestrol• Trenbolon

EU Bans – political influences

• “mad cow” crisis; Italian “hormone scandals”; discovery in 1980 of presence of diethylstilbestrol (DES), a synthetic hormone, in veal-based baby foods

• European Consumers' Organisation lobbied for a total ban upon growth hormones

• 1981 resolution of European Parliament passing by a majority of 177:1 in favour of a general ban. MEPs having been directly elected for the first time in 1979, were said to be taking the opportunity of public attention on the issue to strengthen the Parliament's rôle.

WTO Appellate Body decision Feb. 13, 1998. • [W]e find that the European Communities did not actually proceed to

an assessment, within the meaning of Articles 5.1 and 5.2, of the risks arising from the failure of observance of good veterinary practice combined with problems of control of the use of hormones for growth promotion purposes.

• The absence of such risk assessment, when considered in conjunction with the conclusions of the scientific studies ... leads us to the conclusion that no risk assessment that reasonably supports or warrants the import prohibition embodied in the EC Directives was furnished to the Panel.

• ...the EC import prohibition is not based on a risk assessment within the meaning of Articles 5.1 and 5.2 of the SPS Agreement and is, therefore, inconsistent with the requirements of Article 5.1.

EU claims of new evidence in 2004

• New evidence was released by the EC in 2003 that the hormones used in treating cattle remain in the tissue

• The EC claimed that high amounts of hormones in areas where there are dense cattle lots affected waterways and nearby wild fish.

• The WTO upheld the earlier decision as contamination of North American waterways by hormones would not, however, have any direct impact on European consumers or their health.

Effects of the dispute in the US

• Consumer Federation of America and the Center for Science in the Public Interest pressed for an adoption of a ban within the U.S. similar to that within the EU.

• A 2002 study of US consumers reported that 85% of respondents wanted mandatory labelling on beef produced with growth hormones

• Jayson Lusk and John Fox, ‘Consumer Demand for Mandatory Labeling of Beef from Cattle Administered Growth Hormones or Fed Genetically Modified Corn.’ Journal of Agriculture and Applied Economics. Apr 2002.

TBT Agreement, Article 2.1

• [WTO] “Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.”

“Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfill a legitimate objective, taking account of the risks non-fulfillment would create…”

Article 2.2 (TBT)

United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (Tuna

Dolphin) WT/DS381/R, 15 September 2011.

This WTO dispute concerned two measures adopted by the US concerning the importation, marketing and sale of tuna and tuna products.

Regulations promulgated under the US Dolphin Protection Consumer Information Act regulated the use of the term "dolphin-safe" when it appeared on tuna products, requiring the expression “dolphin-safe” to be used for tuna harvested in the Eastern Tropical Pacific Ocean by large purse seine vessels.

Tuna Dolphin• The panel determined that "less favourable treatment"

would be afforded to Mexican tuna products in respect of the measures if they were placed at a disadvantage compared to US and/or other imported products with respect to the preparation, adoption or application of the US dolphin-safe measures.

Tuna-Dolphin• Mexico submitted that the US dolphin-safe provisions were

inconsistent with Article 2.2 of the TBT Agreement because they did not fulfil a legitimate objective or that those objectives could be fulfilled using less trade-restrictive measures.

• The Appeal Body ruled against the US as it had not demonstrated that the difference in labelling conditions for tuna products was "calibrated" to the risks to dolphins arising from different fishing methods in different areas of the ocean. As a consequence, nations such as Mexico which used fishing methods outside those permitted in the legislation were discriminatorily affected.

Summary

• Bio-innovations in international trade have to negotiate the potential obstacles of IP laws and the SPS and TBT agreements.

• National bio-safety legislation may also attract international sanctions, eg Australian tobacco product laws

TPCPI Regulations

• A package in which tobacco is sold at retail ("a retail package") and which is manufactured in Australia, or imported into Australia, must be labelled in accordance with Pt 3 or Pt 4 of the TPCPI Regulations.

• Warning and explanatory messages and photographs taking up 75% of the front surface of each package and 90% of the back are mandatory from 1 December 2012. TPCPI Regulations, Scheds 1 and 2.

The Australian cigarette pack from 2012

Ukraine-Australia Tobacco Trade

“tobacco trade between Ukraine and Oz is zero”http://johnquiggin.com/2012/08/18/maintenance-and-champerty/Ukraine has a long and complex history with Big

Tobacco. As recently as 2008, Philip Morris International, Japan Tobacco International, Imperial Tobacco and BAT produced 30% more cigarettes in Ukraine than were consumed domestically.

On 13 March 2012, the Government of Ukraine ("Ukraine") requested consultations with the Government of Australia ("Australia") pursuant to:

• Art. 4, Understanding on Rules and Procedures Governing the Settlement of Disputes

• Art. 64.1, Agreement on Trade-Related Aspects of Intellectual Property Rights (the "TRIPS Agreement")

• Art. 14.1, Agreement on Technical Barriers to Trade (the "TBT Agreement")

• Art. XXII of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994")

• concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging (the "measures").

http://www.dfat.gov.au/geo/ukraine/ukraine_brief.html

Bilateral economic and trade relationshipAustralia's trade relationship with Ukraine is modest.

Merchandise exports from Australia were valued at A$69.82 million in 2009 and consisted mainly of manganese ores and concentrates. In the same period, Australia imported A$35.25 million worth of products from Ukraine, mainly fertilisers and electrical circuits equipment.

http://business-ethics.com/2012/11/29/10445-tobacco-industry-uses-trade-agreements-to-

challenge-anti-smoking-measures/• Cigarette makers are paying for heavyweight lawyers to

represent Ukraine, Honduras and the Dominican Republic and press ahead with the challenges.

• As company representatives have told FairWarning, Philip Morris International is paying the firm of Sidley Austin to represent the Dominican Republic, while British American is picking up legal expenses for Ukraine and Honduras.

• “We are happy to support countries who, like us, feel plain packaging could adversely affect trade,” said British American spokesman Jem Maidment.

• Tobacco exports from Ukraine to Australia are nonexistent, according to figures from Australia’s Department of Foreign Affairs and Trade. During the last three years, tobacco exports from Honduras and Dominican Republic have averaged $60,000 (U.S.) and $806,000, respectively.

Conclusions• Bio-innovations in international trade have to

navigate the restrictions imposed by:– IP Laws (implementing the WTO TRIPS Agreement)– WTO SPS Agreement – WTO TBT Agreement

• Note also the trade impacts of laws based upon– international bio-safety agreements (eg Cartagena

Protocol)– Access and benefit-sharing laws eg based on the Nagoya

Protocol.