Australia: The curious case of IP and the TPPA-11

Last Updated: 15 September 2017
Article by Gareth Dixon

The "TPPA-11" is what remains of the Trans-Pacific Partnership ("TPP") Free Trade Agreement following the withdrawal of the United States. Because the TPP was never ratified prior to US withdrawal, some have termed it the "zombie" TPP. Despite the absence of the US, there remains a strong resolve amongst the TPPA-11 to realise economic benefits from a deal that took more than a decade to negotiate. Unsurprisingly, IP has emerged as a potential kingmaker in any future agreement – and signatories essentially now have three options: pack up and go home, start again from scratch, or ratify the previous agreement and proceed without the US. All three are somewhat imperfect.

Brief history of the TPP

Following more than 25 rounds of negotiations spanning over a decade, the text of the TPP was finally agreed on 5 October 2015. Involving 12 countries and affecting up to 40% of the world's population, the TPP stood to be the largest free trade agreement in history.

However, the TPP was never ratified. Rather, it suffered by way of unfortunate timing. During the 2016 United States Presidential election campaign, the Republican Party nominee Donald Trump vowed to withdraw the US from the TPP if elected; his position was that the agreement would undermine the US economy and its independence. True to his word, President Trump then formally withdrew the US from the TPP on 23 January 2017.

And then there were eleven: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The so-called "TPPA-11" essentially now has three options: pull stumps on the entire agreement, start over, or ratify the previous agreement and proceed without the US. As we will see throughout this article, all three options have drawbacks and uncertainties in the absence of the US.

Pack up and go home

Under this option, the TPP is abandoned and consigned to history. More than a decade of negotiations, literally millions of work hours and billions of dollars in expenditure are all cast aside. Proponents of this option note that the text of the TPP was agreed with United States participation firmly in mind – and that absent the US, the text of the deal makes little sense. On the other hand, those against this option note that the TPP text represents the best multilateral compromise possible between the original twelve signatories (bearing in mind their geographical, cultural, socio-economic profiles, etc.) at a single point in time – in other words, there has been far too much work done to simply pack up and go home now.

Further factions suggest that the TPP text could be used as basis for bi-, tri- or smaller multilateral FTAs between member states – and as such, the pack up and go home option isn't necessarily a zero-result. Notwithstanding, enormous sums of time, effort and expense stand to be written off should the pack up and go home option (or any variant thereof) turn out to be preferred amongst the TPPA-11.

Start again from scratch

Perhaps unsurprisingly, this option doesn't appear to have too many takers. The prospect of another decade (or more) slugging out a multilateral FTA, only to then risk it never coming to fruition doesn't appear overly-appetising based on the previous decade's experience. And what if, for whatever reason, the US decides to rejoin the agreement – the TPPA-11 are never going to say "no" even though it is conceivable that the agreement would need to revert to the original text (or close to it) in order to placate the world's largest economy and most influential administration. The net effect is that starting again from scratch risks vast amounts of time, labour and money for no guaranteed end result. Past iterations of the draft TPP text also provide little guidance as the US had been active in, and indeed highly influential throughout all stages of the negotiation process.

Proceed without the United States

At the time of writing, this option is looking increasingly likely. Indeed, Japan (which has previously dismissed a US-absent TPP as "meaningless") is now leading the charge, with clear support and assistance from both Australia and New Zealand.

However, proceeding without the US represents a genuine "Catch-22" situation. On the one hand, leaving the text unamended over the original agreement makes it easier for the US to return, should it wish to in the future. Of course, this represents a considerable gamble on the part of the TPPA-11. On the other hand, leaving the text unamended imports several US-specific requirements (relating to, for example IP, as detailed below) into an agreement in which the US will not be participating; this is surely less than ideal in a TPPA-11 context – why abide by US requirements when the US isn't even part of the deal?

Within the context of this article, IP actually throws up the best example of a US-influenced feature of the agreed text that the TPPA-11 may be perfectly happy to proceed without: clinical data exclusivity for biologic drugs. When they register products for sale with regulatory authorities in each jurisdiction, generic manufacturers rely on clinical data provided by innovators to the regulator (indeed this is part and parcel of the generic manufacturers' business model i.e. they do not bear the expense of collecting the data, and can therefore offer the drugs at significantly lower price margins than the innovator company.) Pre-TPP, both Australia and New Zealand provided 5-year data exclusivity periods for all pharmaceuticals during which generic manufacturers could not rely on the innovator's clinical data. During negotiations, the United States sought a 12-year exclusivity period for biologics under the TPP (originally, US "Big Pharma" had actually sought 14 years exclusivity). In the end, an effective 8-year period (inclusive of a 3-year "safety monitoring" period) was agreed. Accordingly, under the TPPA-11, if ratified in its present form, signatories will provide an 8-year data exclusivity period when it appears each individual country (excepting the US, which will not be part of the deal) may be happy to operate within a 5-year window.

The balance of inconvenience

As an all-encompassing FTA binding countries of significant political, socio-economic and cultural diversity, negotiations toward the TPP were always destined to something of a political powderkeg. All twelve original signatories each have their own politics, their own legislatures and their own powerful lobbies. As such, a multilateral agreement of the scope afforded by the TPP was never going to be straightforward.

A legitimate question arises though as to whether proceeding with the original text of the agreement, but without the United States, is based more upon offering the US a route back into the agreement, or an admission that starting over is too much like hard work. The answer is probably "a bit of both".

The TPP is not dead (yet)

It appears that rumours of the TPP's demise have been greatly exaggerated. When the US withdrew some 8 months ago, many felt that this sounded the death knell of the agreement. Instead, what we presently have is a "zombie" (undead) TPP that can be neither destroyed nor satiated.

Patent-wise, what does the TPP/no TPP mean for Australia and New Zealand?

Increased trade, as would have occurred under the TPP, brings with it increased incentives for foreign patent applicants to file in their destination markets such as Australia and New Zealand. By corollary, if trade doesn't increase, then neither does the incentive to file. In this respect, failure to ratify the TPP throughout the eleven remaining signatories may effectively amount to a case of "opportunity lost" for the region.

Summary

All things considered – and purely in respect of IP, the TPP is arguably a good thing as far as Australia and New Zealand are concerned. Anything that provides foreigners with an increased incentive to file within this region has to be viewed as a positive (so long as it is not necessary to cede too much ground in return). On the other hand, if the TPP (original or amended) does not end up being ratified, we don't necessarily lose anything – it's simply a case of status quo.

Shelston IP has been following the TPP negotiations for the best part of a decade. We will continue to keep readers apprised of developments as they relate to IP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Shelston IP ranked one of Australia's leading Intellectual Property firms in 2015.

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