407. The United States welcomes the opportunity to participate in this discussion and share our views on intellectual property, competition, and the importance of prudently applying competition law in appropriate circumstances.
408. The United States has long held that IP protection is very much consistent with furthering the public interest and that international cooperation to strengthen and provide confidence in domestic IP systems can help maximize these benefits. We are concerned, based upon the cosponsors' concept paper and some interventions, that this agenda item could discuss "public interest" in a way that fails to account fully for the benefits of protecting IP.
409. One potential negative consequence of an insufficiently nuanced discussion could be to discourage Members from striving towards and upholding robust domestic IP regimes, harming incentives for critical future innovations that would greatly benefit the public.
410. The United States fully believes that "the intellectual property laws and the antitrust laws share the common purpose of promoting innovation and enhancing consumer welfare." We also recognize that intellectual property and competition are distinct disciplines implemented and overseen by different administrative authorities. The TRIPS Council is not the ideal venue to have detailed discussions of competition law and policy concepts.
411. As we will describe in more detail below, the misapplication of competition law is particularly concerning in IP disciplines because it runs the risk of forestalling future innovation. As such, antitrust enforcers should strive to eliminate as much as possible the unnecessary uncertainties for innovators and creators in their ability to exploit their intellectual property rights, as those uncertainties can also reduce incentives for innovation. Innovative firms pay close attention to both IP and competition laws in foreign markets when determining where to invest and partner. If competition law is misapplied in the IP context it runs the risk of discouraging the high-value R&D and manufacturing that many Members seek to attract and promote.
Co-sponsor references to outside research
412. The belief that intellectual property and competition laws can coexist and share common purpose is not unique to the United States, and, in fact, can be found in the trilateral WTO, WIPO, and WHO study on IP and Public Health cited by the cosponsors.
413. I would like to draw your attention to two points in the Trilateral Study that are not included in the cosponsors' submission:
"Openness to international trade generally promotes competition, and offers improved affordability and access. By enabling a wider range of suppliers to serve the population, it can also enhance security of supply."
"In the area of innovation, the aims and effects of IP protection and competition policy can be complementary: both are aimed at fostering innovation by creating incentives to develop new products as an advantage over competitors. IP protection for novel medical technologies is generally considered to be an important means of promoting investment in R&D of new medical technology. This leads to competition between different originator companies with regard to the development of valuable new medical technologies, and therefore with regard to their earlier production and availability. This form of competition is generally not hindered by IPRs, rather it is enhanced by them."
414. The cosponsors also invoke the 2030 Agenda for Sustainable Development, in particular Sustainable Development Goal 3. It is important to note that nowhere in the 2030 Agenda is competition law or policy prescribed as a way to achieve the SDG targets. In fact, misapplication of competition law to IP cases could make it more difficult to achieve certain goals, such as ending communicable diseases, promoting newborn and infant health, and supporting the research and development of vaccines and medicines, as we do not currently have all of the health technologies needed to fully address these challenges.
415. With respect to the UNSG High-Level Panel Report (HLP) on Access to Medicines, as the United States explained in previous statements, we were deeply disappointed by the Report, which detracts from, rather than advances, the critical objectives of identifying practical ways both to increase access to safe effective, affordable, and lifesaving medicines around the world and to support policies that drive the development of new medicines. I remind the Council that the HLP Report lacked consensus among panelists and note that the Report included the following statement from one panelist that is relevant to today's discussion: "without innovation, there will be no new tools for public health needs, new pandemics, and AMR. There are already precious few diagnostics, vaccines, and medicines that can address these menaces and limited sources to support research into basic biology that underpins them. It would be unwise to set into motion activities or policies that further choke innovation, placing large populations at risk and contradicting the core principles under which the HLP was convened."
416. As the United States and many other Members have explained during past TRIPS Council interventions, the vast majority of medicines on the WHO's Essential Medicines List are not patented, yet remain out of reach for many patients.
417. By focusing on IP-related competition issues, China, South Africa, India, and Brazil have asked the TRIPS Council to focus on governmental tools that, if misapplied, could threaten innovation, while ignoring the barriers that affect medicines that are without patent protection.
US policy on IP and competition
418. The United States believes innovation is key to sustained economic growth. It benefits consumers through the development of new products, processes, and services that improve lives and address unmet needs. At the same time, innovation is complex and risky. Intellectual property rights are necessary to promote innovation in the face of that risk. Likewise, competition drives firms to create new or better products in these complex environments. As a result, the US believes in strong intellectual property rights and market-based competition to promote economic development.
419. It is important to keep in mind what patents can do and what they cannot. The granting of a patent does not confer automatic commercial success or market share—in fact the vast majority of patents in the United States are either never commercialized or fail to achieve a profit for the patentee. A patent may exclude others from making or selling the same invention, but does not prevent others from finding novel ways to achieve innovative solutions to common problems. It is for this reason that there are not one, but several, patented medicines on the market to cure or treat certain illnesses, such as heart disease or arthritis.
420. Furthermore, one of the important benefits of the patent system is the disclosure of a written description of the invention and manner and process of making and using it, so as to enable any person skilled in the technological area to which the invention pertains to make and use the same. This disclosure helps to ensure that upon expiry of a patent, others have the means to quickly enter the market, which, in turn, provides consumers with more, and often cheaper, products.
421. Given these and other benefits of the patent system, of particular concern to the United States is the possibility that competition laws could be used as a means to gain access to desirable intellectual property rights or regulate royalties in order to advance broad social or political goals that could undermine free market competition. When a competition authority favours one competitor over another through the forced sharing of IP rights, or the regulation of royalty payments, it can diminish or remove crucial incentives to innovate because exclusive property rights or the benefits of being first-to-market are eroded. This innovation disincentive can hurt consumers, who will no longer benefit from newer and higher quality products or services. We believe that reliance on market-based pricing and unilateral freedom to choose whether to license IP, and if so, to whom one will license, leads firms to efficient investment in R&D because they know there is a chance of recoupment. Therefore, we disagree with the cosponsors' submission as to where it suggests that excessive pricing provisions of competition laws should be used to gain access to medicine.
422. The competition issues raised in the submission, such as liability for excessive pricing and the use of compulsory licensing remedies, have been debated in more competition-focused international organizations such as the OECD and the International Competition Network (ICN). As these raise competition, not IP issues, those are more appropriate venues than the TRIPS Council to address such issues.
423. The United States does not regulate "excessive pricing" under US antitrust law and we have encouraged jurisdictions that have excessive pricing laws to refrain from applying them to IP rights, which are designed to promote innovation through, among other things, investment in R&D. Antitrust enforcers who impose liability for pricing "too high" may deter R&D investment because they supplant market-based forces with an artificial cap.
424. We believe it is also important to consider that it is not illegal merely to have market power or a monopoly; many monopolists obtained their position by creating better, cheaper, more attractive products. This system promotes innovation because it incentivizes first-entrants to develop the best product. It also creates incentives for rivals or new entrants drawn by the lure of large rewards.
425. A related point is that the US Antitrust Agencies do not rely on a presumption that an IP asset conveys market power. The exercise of an IP right does not necessarily create market power or a monopoly. There will often be sufficient actual or potential close substitutes for a product, process, or work to prevent the IP owner from obtaining market power. This point has been recognized by the US Supreme Court. Many jurisdictions recognize this fact and have adopted this principle that IP ownership does not necessarily create market power in their own IP-competition guidance (including China).
426. As China, South Africa, India, and Brazil point out, TRIPS acknowledges the application of competition law in Article 40. The US Antitrust Agencies' focus is on evaluating whether specific conduct harms competition. Firms might, for example, engage in anticompetitive exclusion through collusive agreements that unlawfully limit entry into a market, which may result in higher prices than would have been the case in a competitive market. The focus is not on whether a drug's price is too high or particular royalties for a pharmaceutical patent are unreasonable, but rather on evaluating the effect of conduct. This keeps the focus of competition enforcers where it should be—on protecting the competitive process.
427. In addition, the US Antitrust Agencies have also urged caution in the reliance on compulsory licensing remedies. We recognize that the core right to exclude (as discussed in Article. 28) promotes innovation. Indeed, choosing not to share an intellectual property right is a form of exercising that exclusive right. Thus, the US Antitrust Agencies ordinarily will not require the owner of intellectual property to create competition in its own technology. And we believe the "antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors, in part because doing so may undermine incentives for investment and innovation."
428. As we have demonstrated in the United States, IP and competition polices can and should coexist and complement one another. The United States is committed to achieving public health goals in a way that upholds IP rights and promotes competition. For example, by accelerating Food and Drug Administration (FDA) reviews of generic drugs, the United States approved over 1,000 generic drugs in 2017, which is the most in FDA's history in a calendar year by over 200 drugs.
429. We urge China, South Africa, India, and Brazil, as well as other WTO Members, to find responsible ways to carry out domestic IP and competition laws, so as to contribute to the innovative ecosystem that is made possible by IP incentives.
