Trips and Bits: An Essay on Compulsory Licenses, Expropriation, and International Arbitration

By Peter B. Rutledge *

* Professor of Law, University of Georgia School of Law.

Excerpt from Trips and Bits: An Essay on Compulsory Licenses, Expropriation, and International Arbitration, 13 N.C. J.L. & Tech. On. 149 (June, 2012)

In the early 1980s, the World Bank forecast that more than 1.2 million people in Brazil would contract the HIV virus by 2000. 1 That catastrophe did not come to pass, due largely to an aggressive anti-AIDS campaign launched by the Brazilian government. 2 Brazil's strategy contained a variety of elements, including public education, aggressive promotion of contraceptive, needle-exchange programs, and, most relevant for this article, the low-cost or free provision of antiretroviral drugs to affected populations. 3 A key element to this strategy was aggressive negotiation over the price of medication used to treat patients suffering from HIV and AIDS. 4

When the Brazilian government was unable to reach consensus with Merck over the price for Efavirenz, a patented-HIV treatment drug, it issued a compulsory license. 5 The license allowed Brazil to manufacture or import a generic version of the drug. 6 Brazil's strategy put it at loggerheads with Merck and other private companies whose products were essential to treating the Brazilian populace. It also sparked controversy in its diplomatic relations with the United States. Merck responded by accusing Brazil of engaging in an "expropriation of intellectual property." 7 The United States Trade Representative placed Brazil on its "priority watch list." 8

Through an agreement later negotiated between the parties, Merck was supposed to receive a 1.5% royalty fee as remuneration. When Brazil ordered Merck to transfer all technical documents necessary for the production process, the company provided only the corresponding patent. 9 Farmanguinhos, a ...

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