123. The representative of Brazil said that, at the last General Council meeting, his delegation together with India had raised the issue of seizure of goods in transit on grounds that they might be violating intellectual property rights registered in the country of transit, which they believed to be a serious violation of WTO disciplines. More specifically, the issue concerned the seizure by the Netherlands' authorities of a consignment of the generic drug losartan potassium. His delegation was raising this matter also in the TRIPS Council because this was the forum where the intellectual property aspects of the matter could be more fully appreciated and because his delegation had since better analyzed the factual circumstances and the legal implications of that episode. While the seizure of any goods in transit, be they medicines or not, on grounds that they may be violating intellectual property rights registered in the country of transit was in itself a violation of GATT Article V and other GATT obligations, his delegation would confine its statement in the TRIPS Council to the intellectual property aspects and the public health dimension of the matter.
124. He said that, on 4 December 2008, Dutch authorities had seized a cargo of generic medicines en route from India to Brazil. The cargo had consisted of 570 kilos of losartan potassium, an active pharmaceutical ingredient used in the production of medicines for arterial hypertension that were being sold by the Indian exporter Dr. Reddy's to the Brazilian importer EMS. The cargo was held back by Dutch authorities for 36 days. After this period, the cargo had been released and, instead of continuing to Brazil, was directed back to India. Losartan potassium did not enjoy intellectual property rights in India, the country of origin, nor was it protected in Brazil, the country of destination.
125. At the time of the General Council meeting, his delegation had assumed that the seizure of the cargo had been motivated by a request lodged by the owner of patent rights on losartan potassium in the Netherlands on grounds that such rights were being violated. Since that meeting, new evidence collected indicated that the Dutch authorities had acted and had regularly been acting ex officio, following procedures required or authorized by EC Council Regulation 1383 of 22 July 2003, which referred to customs actions regarding goods suspected of infringing intellectual property rights. While the EC delegation had provided clarifications in the General Council meeting suggesting that this had been a minor, exceptional and inconsequential incident, his delegation was now in the position to assert that such incident was neither minor, nor exceptional, nor without consequences.
126. At the General Council, the European Communities had pointed out that the cargo had been "a small shipment of drugs worth 55,000 Euros". In this regard, he noted that the size of the shipment was in no way relevant to ascertaining the egregious nature of the Dutch action vis-à-vis WTO disciplines. Furthermore, despite its low monetary value, that shipment of 570 kg would have been enough to treat 300,000 Brazilian patients for a full month suffering from hypertension, a deadly disease if not treated properly. One of the benefits of generic medicines was precisely the fact that they were less costly than those that enjoyed patent protection. Therefore, lower monetary values should in fact be expected when dealing with shipments of this kind and did in no way mitigate or justify the action of the customs authorities.
127. Furthermore, he said that the incident in question had not been exceptional but occurred rather frequently. In letters addressed to the Director-General of the WTO, Pascal Lamy, and of the WHO, Dr. Margaret Chan, 16 NGOs had expressed their grave concern with public health implications of the episode and had mentioned three additional cases of drugs seizure by the Dutch authorities. Two of them had involved medicines headed for Peru and one for Colombia. His delegations' own inquiries had led to the identification of more than 12 other instances regarding consignments of generic drugs in transit through Dutch territory in 2008 alone. These consignments had been heading for at least seven different developing countries in South America and Africa.
128. Regarding the argument that the losartan incident had had no serious consequences because the parcel had subsequently been released, he said that his delegations' inquiries had led to more disturbing findings. First, the shipment had not followed its original course to Brazil due to an autonomous decision of the exporter to bring it back to India. Such action by the exporter had been a result of negotiations with the patent holder in the Netherlands, who had threatened to request the destruction of the apprehended goods. Secondly, his delegation had evidence indicating that around half of last year's Dutch seizures had resulted in the destruction of the goods in transit.
129. He said that the consequences of these individual acts were not limited to that specific transaction. In letters to the European Commissioners for Trade and for Taxation and Customs Union, the humanitarian organization Médecins Sans Frontières had voiced concerns that their activities of medicine distribution to needy populations in the developing world could be severely hampered "if on key transit routes the risk exists that supplies can be regularly subjected to interception based on assertion of patent infringement in the transit country". The exact same concern had been articulated by the William J. Clinton Foundation, on behalf of UNITAID, regarding the seizure of generic drugs used in AIDS fighting humanitarian programmes in Africa. These were the most disquieting systemic consequences of the behaviour of the Dutch authorities under the umbrella of EC Council Regulation 1383/2003.
130. Regarding the substantive implications of the Dutch customs' actions in implementing EC Council Regulation 1383, he said that even a merely perfunctory examination of the WTO disciplines led to the conclusion that the Dutch authorities had no right to do what they did. They should not have detained the consignment, obstructed or delayed its transit, nor prevented its arrival in Brazil based on a claim of violation of patent rights. He said that the medicines seized did not enjoy patent protection either in the country of exportation or in the country of importation. Whether or not the medicines were protected by patent rights in the country of transit was utterly irrelevant as they had not been not heading for the Dutch market.
131. Trade in generic medicines was not only perfectly legal under international intellectual property law, it was also desirable from a development and public health perspective. The transit of generic medicines could not possibly be construed as a violation of patent rights in the country of transit. The TRIPS Agreement did not allow such interpretation. Its Article 28 gave a patent owner the exclusive rights of "making, using, offering for sale, selling or importing" in/to/from the market where those rights existed, but the transit of goods neither affected, nor diminished any of the exclusive rights conferred by a patent. The Dutch authorities' decision to prevent the losartan consignment from reaching Brazil was a clear case of extraterritorial application of Dutch patent rights. That principle of territoriality was familiar to all Members and was a keystone of the international IP system.
132. Such excessive and inappropriate interpretation of IP rights, granting extraterritorial effects, ran counter to the objectives and purposes of the TRIPS Agreement and effectively gutted the provisions granting TRIPS flexibilities to developing countries. Article 7 stated that the "enforcement of intellectual property rights" must be done "in a manner conducive to social and economic welfare". Article 8 upheld Members' rights to "protect public health and nutrition". He said that TRIPS flexibilities were so vital that the WTO Ministerial Conference had decided to strengthen them by adopting the Doha Declaration on the TRIPS Agreement and Public Health which had also paved the way to the Paragraph 6 System, a much needed and long awaited response to the specific situation of countries with insufficient or no manufacturing capacity in the pharmaceutical sector.
133. It was obvious that the actions of the Dutch authorities were not in conformity with WTO disciplines in general, nor with the flexibilities under the TRIPS Agreement. These disciplines and flexibilities were also under threat in other international forums, where some developed countries were attempting to adopt TRIPS-plus resolutions. The SECURE Working Group in the World Customs Organization and the IMPACT initiative in the World Health Organization were examples of this concerted effort. If such attempts succeeded, the Dutch authorities' actions could then take place with the blessing of those organizations. The losartan episode and the other incidents caused great concern to developing countries because they essentially imperilled the public health dimension of the TRIPS Agreement.
134. Since its first statement at the General Council meeting in February 2009, his delegation's apprehensions had increased considerably due to the preliminary results of its ongoing inquiries. It would therefore like to seek guidance and clarifications from the European Communities on the following questions: how could the Dutch authorities' actions be reconciled with WTO disciplines; whether the EC Council Regulation 1383/2003 required or justified such actions by the customs authorities of the Communities; and, above all, how the Communities would ensure that such actions would not reoccur.
