Negotiations Over a TRIPS Waiver for COVID-19 Vaccines Intensify Ahead of June 2022 WTO Ministerial

Negotiations Over a TRIPS Waiver for COVID-19 Vaccines Intensify Ahead of June 2022 WTO Ministerial

May 17, 2022, Covington Alert

As described in our previous alert, Members of the World Trade Organization (“WTO”) have been engaged in negotiations since late 2020 regarding a potential waiver of intellectual property (“IP”) protections for COVID-19 technologies under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”). Slightly over one year ago, in May 2021, the negotiations took a turn when the United States—which had initially opposed such a waiver—announced its support for a waiver limited to COVID-19 vaccines. While negotiations gained momentum following the U.S. announcement, WTO Members remained divided on key details, and negotiations again stalled in late 2021. 

In an effort to break the stalemate, WTO Director General Okonjo-Iweala launched small-group consultations in December 2021. Recently, this consultation process produced a new text proposal for a TRIPS waiver, which was circulated to WTO Members on May 3. Under this new proposal, eligible WTO Members would be permitted to waive certain IP protections in order to facilitate the production and supply of COVID-19 vaccines. Specifically, the waiver proposal would allow eligible WTO Members to authorize the use of compulsory licensing—an exception to the exclusive rights accorded to a patent holder allowing someone other than the patent owner to make, use, sell, or import the patented product without the consent of the patent owner—for patents required for the production and supply of COVID-19 vaccines.

Since its release, the May 3 text has prompted mixed reactions. Many WTO Members have reserved their comments on the text until they complete further review and domestic consultations. At the same time, some civil society organizations have argued the text does not go far enough, while other stakeholders assert that the waiver would undermine IP protections that promote innovation and the creation of new medical technologies. Negotiations over the May 3 text will intensify in coming weeks, as pressure mounts for WTO Members to reach an agreement on a TRIPS waiver as a deliverable for the next WTO Ministerial Conference, which is scheduled to take place June 12-15, 2022. Negotiations are expected to continue during meetings of the TRIPS Council, the body responsible for considering issues relating to IP at the WTO, during the week of May 16.

As reported in our previous client alert, negotiations regarding a potential WTO waiver of IP obligations for COVID-related products originated with a proposal put forth by India and South Africa in October 2020. That submission proposed a comprehensive waiver of WTO obligations relating to protection of copyrights, industrial designs, patents, and confidential information for wide range of COVID-19 products and technologies, including vaccines, medicines, personal protective equipment, and ventilators, among others. While attracting some support, particularly from developing countries, the proposal faced stiff opposition from several WTO Members, including the United States, European Union (“EU”), and other developed economies. While the United States was initially a staunch opponent of the waiver proposal, the Office of the U.S. Trade Representative (“USTR”) shifted its position in May 2021, when it announced that the United States would support a narrower WTO waiver of IP obligations limited to COVID-19 vaccines.

Following the U.S. announcement, negotiations gained momentum, with South Africa and India introducing a modestly revised waiver proposal in May 2021. The EU then submitted a competing proposal in June 2021, which proposed facilitating the use of existing flexibilities under TRIPS for compulsory licensing as an alternative to a waiver. Throughout the second half of 2021, WTO Members continued to discuss both the revised waiver proposal and the competing EU proposal, with pressure mounting for Members to reach an agreement on these IP-specific issues as part of a broader pandemic-related package for the WTO Ministerial Conference scheduled for late 2021. Divisions over the dueling proposals persisted, however, and a decision by WTO Members in November 2021 to postpone the WTO Ministerial Conference to June 2022 as a result of the outbreak of the Omicron variant of COVID-19 further slowed momentum.

In an effort to break the negotiating stalemate, WTO Director General Okonjo-Iweala launched a small-group consultation process in December 2021 with the United States, EU, India, and South Africa (collectively referred to as “the Quad”). In March 2022, an early version of a potential new text proposal coming out of the Quad consultations leaked to the public, and on May 3, the WTO Director General presented an official version of the text to the full WTO Membership for consideration. Despite minor updates, the official text released on May 3 largely resembles the text leaked in March 2022.

The waiver text coming out of the Quad negotiations is narrower than the waiver proposals previously put forth by South Africa and India in 2020 and 2021 in several respects. Most notably, the May 3 text does not envision a broad waiver of TRIPS obligations for all COVID-19 technologies. Instead—with some exceptions discussed in more detail below—the majority of provisions focus on waiving specific patent-related obligations for vaccines only. In particular, paragraphs 1 and 2 of the draft seek to allow WTO Members greater flexibility to use compulsory licenses as a means to increase the production and supply of COVID-19 vaccines, without requiring the consent of the patent holder to do so. The May 3 draft specifies that the waiver would apply not only to the vaccines themselves, but also to ingredients and processes necessary for the manufacture of such vaccines. Under paragraph 5, WTO Members issuing compulsory licenses under the waiver would be required to notify the TRIPS Council of such action.

Another limitation built into the May 3 text is language that would restrict eligibility to use the waiver to certain WTO Members. Specifically, footnote 1 of the draft contains two options defining eligibility, suggesting that Quad negotiators failed to reach agreement on either definition. The first bracketed option is more permissive, as it would allow any “developing country Member” to utilize the waiver, while encouraging those with the capacity to export vaccines to opt out voluntarily. Because WTO Members may self-designate as a “developing” country, this approach to eligibility would be quite broad. The second option is more limited, and would more explicitly exclude from waiver eligibility developing country Members that exported more than 10 percent of world exports of COVID-19 vaccines in 2021. According to WTO data, this second option would have the specific effect of preventing China from utilizing the waiver.

By contrast, there are also several provisions in the May 3 text with the potential to broaden the waiver, in terms of both scope and duration:

• First, while the bulk of the draft addresses patent-related TRIPS obligations, paragraph 4 contains a general waiver of TRIPS obligations relating to protection of undisclosed test and other data, such as trade secrets. Specifically, TRIPS Article 39.3 obligates WTO Members to protect from disclosure or unfair commercial use test or other trade secret data received from firms seeking marketing approval for pharmaceutical products. The May 3 draft text would waive this obligation, thereby allowing governments to disclose or share such confidential data if doing so would enable the effective implementation of a compulsory license issued under the waiver.
• Second, paragraph 8 contemplates possible expansion of the waiver in the future to cover not only vaccines, but also diagnostics and therapeutics. Specifically, the May 3 draft text provides that WTO Members shall decide whether to adopt such an extension within six months (though WTO Members could agree to extend this decision deadline).
• Third, paragraph 6 provides that the waiver shall be in effect for an initial period of either three or five years, and may be reviewed or extended beyond that initial period.

  In addition, paragraph 3 of the May 3 text would create additional flexibility for WTO Members by clarifying the application of several provisions of TRIPS Article 31, which sets forth the conditions under which WTO Members are permitted to use compulsory licenses. In particular:

• While Article 31(a) of the TRIPS Agreement requires WTO Members to evaluate specific compulsory licenses on their individual merits (thereby seeming to prohibit automatic issuance of compulsory licenses for multiple patents meeting certain pre-established conditions), the May 3 draft would allow WTO Members to issue a single compulsory license for multiple patents relating to the production or supply of a COVID-19 vaccine. Notably, this provision remains bracketed, suggesting that there was disagreement among Quad members.
• The TRIPS Agreement establishes requirements for negotiating with and remunerating patent holders when issuing a compulsory license. The May 3 text clarifies that WTO Members may issue a compulsory license for production or supply of COVID-19 vaccines even if no efforts were made to obtain the patent holder’s consent, and that remuneration may take into account the humanitarian and nonprofit purposes of specific vaccine distribution programs.
• The May 3 text would explicitly allow eligible WTO Members to export COVID-19 vaccines produced under the waiver to other WTO Members that are likewise eligible to use the waiver. However, those importing WTO Members would be required to undertake “all reasonable efforts” to prevent the re-exportation of such vaccines.

Following circulation of the text on May 3, WTO Members convened to discuss the text at a meeting of the WTO TRIPS Council on May 6, with additional discussions held at a meeting of the WTO General Council on May 10. Many WTO Members have thus far reserved their comments on the proposal, as they continue to study the draft. Even members of the Quad negotiating group have been tight-lipped, with the EU being the only member of the Quad thus far to formally endorse the May 3 text as “the most promising path” toward an agreement among WTO Members.

The United States, for its part, has provided few substantive statements on the draft, with USTR instead noting that review and domestic consultations regarding the proposal are ongoing. Negotiations for a TRIPS waiver have been particularly controversial among U.S. domestic stakeholders and on Capitol Hill. Many congressional Republicans oppose any waiver, while Democrats have urged the Biden Administration to reach agreement on waiver text. Among other developed economies, some that opposed earlier waiver proposals — including the United Kingdom, Switzerland, and Japan — have reportedly raised concerns about being excluded from the Quad negotiations that led to the draft, but have stopped short of opposing the May 3 text outright. 

Some developing countries have raised concerns regarding the exclusion of therapeutics and diagnostics from the scope of the waiver, arguing that such products should be covered as part of any initial waiver for vaccines, rather than be eligible for possible coverage in the future. In addition, during the May 10 meeting of the WTO General Council, China specifically opposed the bracketed language in footnote 1 that would deny eligibility for developing countries that exported more than 10 percent of world vaccine exports in 2021. At the same time, China indicated that it would voluntarily opt out of using the waiver if its concerns regarding this provisions were addressed. While China’s offer was welcomed by some WTO Members, the United States has indicated it would be unwilling to accept text that did not explicitly exclude China from being able to utilize the waiver.

While not strictly required under WTO rules, prior WTO waivers have been adopted only with the unanimous support of all WTO Members (see our prior alert for additional detail on the process for adoption of WTO waivers). Because many WTO Members have yet to express a position on the text circulated on May 3, the prospects for approval remain uncertain. However, WTO Members are under pressure to reach an agreement ahead of the next WTO Ministerial Conference, scheduled to take place from June 12 to June 15 in Geneva. Negotiations over the draft are therefore expected to continue in the TRIPS Council this week, and intensify ahead of the Ministerial. These negotiating sessions are expected to provide additional clarity regarding WTO Members’ positions on the waiver, controversial provisions of the May 3 text, and the odds of agreement before the June Ministerial.

Companies will want to closely follow the negotiations on the waiver, keeping in mind its potential impact on their IP and ongoing efforts to bring technologies to market to help fight COVID-19. We will continue to carefully monitor these developments and provide guidance to clients seeking to evaluate the potential impact of any waiver.

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