Jan 19, 1998


Geneva 16 Jan (Chakravarthi Raghavan) -- The WTO's Dispute Settlement Body Friday adopted a ruling against India on TRIPs, the ruling by a dispute panel as modified by the appellate body.  

The DSB also accepted a South Korean request and referred to a panel a dispute over the continued application of anti-dumping duties by the United States on imports from Korea of Dynamic Random Access Memory (DRAM) semiconductor chips of one megabyte or above. 

The ruling against India on TRIPs is over its failure to provide from 1 January 1995 a procedure to receive 'mailbox applications' for product patents in the area of pharmaceutical and agri-chemicals, to be disposed of when, but no later than 2005, India undertakes this obligation for TRIPs product patenting; and meanwhile to provide exclusive marketing rights in respect of products covered by such patents. 

The appellate body upheld the substantive ruling of the panel on India's obligation to provide a mechanism to receive applications, but set aside the panel's views about transparency obligations and its importing of the general GATT rules about "reasonable expectations" of trade partners, used in the GATT non-violation disputes that do not kick in under TRIPs for atleast five years.  

Under the DSU, India has to indicate within 30 days its intention over the ruling, and its plans to abide by the ruling and bring its law and trade measures into conformity.  

The DSU envisages, in the absence of agreement between the parties, recourse to arbitration for settling the period, with the arbitrator given a general guidance that this period should not exceed 15 months.  

US Ambassador Rita Hayes, told the DSB Friday, that given the Indian obligation to have such a provision effective 1 January 1995, and given the lapse already of three years, the implementation of the ruling should be without "any significant delay".  

In a lengthy statement to the DSB, the Indian Ambassador S. Narayanan stressed the need for a process to enable outside legal experts to be able to study such reports and publish their own comments and views in learned journals. To facilitate this, he suggested that while the appellate body, given the ticklish legal issues and time pressures on it, may not find it possible to repeat in its report all the points made before it by parties, should atleast publish them as annexes to its report.  

Colombia supported this suggestion. 

The Indian statement to the DSB went into details about the panel ruling, the appellate body's findings and the legal issues. None of these though affect the ruling, as modified by the appellate body. Whether it will have any influence in the way panels and the appellate body functions remains to be seen. It may have some value in terms of the WTO members and their required review of the DSU by end of next year. Even this though is problematic again.

Narayanan noted that the panel had said the TRIPs should be interpreted to protect "reasonable expectations" regarding future conditions of competition, but that appellate body had completely rejected this approach about "legitimate expectations" relating to conditions of competition under GATT. India was glad that the appellate body had ruled that such 'legitimate expectations' must be found from the language of the treaty, and not require nor condone importation into the treaty of words not found there or of concepts not intended. 

The appellate body ruling, Narayanan said, should ensure that panels in future will not create new obligations under the TRIPS on basis of legal concepts not found in the agreement.  

Narayanan however regretted the "slight dichotomy" in the approach of the Appellate Body in that after having provided this exposition on general interpretative issue of standards applicable to the TRIPS, the appellate had deviated from its own standards in dealing with the specific obligations under Art. 70.8 and 70.9. 

The Indian ambassador noted that the panel had wrongly concluded that developing countries had not only an obligation to provide for a mailbox application procedure for the filing product patent applications and the allocation of filing and priority dates for them, but that they have an obligation to take away "any reasonable doubts" whether the mailbox applications and eventual patents could be rejected or invalidated because at the time of filing the protection sought was unpatentable in the country. 

The appellate while upholding the panel view that India's mailbox should have a "sound legal basis" that deleted the ruling that it was also India's obligation "to eliminate any reasonable doubts.." about the validity of the mailbox.

Narayanan noted that the only evidence produced by the US -- that India's administrative procedures to receive mailbox applications were "legally insufficient" to prevail over the mandatory provisions of the Indian Patents Act -- was only its own reading of the plain text of the Patents Act. On this basis the panel had held that it had reasonable doubts whether these procedures could prevail over the Patents Act provisions in a legal challenge before an Indian court. In upholding this view of the burden of proof, the Appellate body had ignored India's interpretation of its own laws, and that the panel's "reasonable doubt" was sufficient to hold that India had not complied with the TRIPs. The appellate body had ignored India's arguments about the 'standard of proof' required in adjudging the validity of India's domestic law - ignoring also earlier GATT panels that gave the 'benefit of doubt' to Canada in the Gold Coins case and to the US in the Malt beverages case where interpretations of domestic law became the issue. 

Both the panel and the appellate body had ignored that over 1924 applications had been received by India between 1 January 195 and 15 October 1997, and not one of them had been rejected or invalidated.  

The appellate body appeared to have been unfortunately influenced by the fact that the administrative procedure was not the initially chosen means of India to implement the obligation.  

India was gratified that the Appellate body had upheld India's contention, and reversed the panel ruling interpreting a transparency obligation of India under Art 63 of TRIPS, even though the US had not raised this issue in the original complaint and consultations. 

As for exclusive marketing rights obligation under Art. 70.9, the issue in dispute was not whether India had denied such rights to eligible products, but whether there should be a system under domestic legislation for this, even when request for such exclusive marketing rights had not been received. 

Narayanan also found fault with the appellate body for assessing India's arguments in the light of Art XVI:4 of the WTO (about obligation of a Member to ensure conformity of laws, regulations and procedures with WTO obligations). This particular WTO agreement provision, India argued, could kick in only when an obligation has been established, and not the scope of the obligations with which the domestic law must be brought into conformity. 

Narayanan also complained that without adducing any proof of an application for exclusive marketing rights having been made and rejected by India, but merely on the basis of a letter from a US party about its "readiness to request marketing approval (and not exclusive marketing rights)", the panel had ruled against India on this issue and had said that India had produced no counter-evidence to establish that it had not received a request for exclusive marketing rights.