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V. LEGAL MECHANISMS TO CONTROL ABUSE PATENTS

Thailand's patent policy is the same as those of many other countries, as it requires local working of patents. Although no provision explicitly states that the patented invention must be put to effective use within the country, the patentee has to do so within a specified time in order to preserve his exclusive rights. The Patent Act contains provisions to ensure local working of patents. Under the Act, there are three measures relating to local working requirements : compulsory licensing, revecation, and the monitoring of the prices of patented medicine. This section is intended to examine the implication of these legal mechanisms.

A. Compulsory licensing

A compulsory licensing system under the Thai law is a remedy for an abuse of monopoly rights. Non-working of the patent within the national economy is regarded as an abuse, The law considers a patent not being worked in two particular circumstances.

First, the Thai patent law explicitly states that the failure to work arises when a patented product has not been produced or the patented process has not been applied for manufacture in Thailand. It means from this provision that the law does not regard importation as equivalent to "working" of a patent. The patentee must utilise the patented invention in the country himself or through another person by authorisation.

Secondly, a compulsory license can also be granted when the demand on the Thai market is not fulfilled. This refers to the situations when the patentee refuses to sell the products protected by the patent, in the Thai market, in sufficient quantity, or when such products are sold at an excessive price. It follows from this provision that a patentee has an obligation not only to work the invention within the country, but also to work it at a level, or a substantial amount, sufficient to fulfil the Thai demand for the patented articles.

In the above cases, anybody can apply for a compulsory license from the Department of Intellectual Property Rights to work the invention, but he has to pay a royalty to the patentee, when a compulsory license is granted to him.65 The person seeking a compulsory license must submit an application to the Director General claiming that a request for authorisation to use the invention on reasonable terms and an appropriate amount of royalty had been made by him to the patentee, but no agreement was concluded with the patentee within a reasonable period of time.66

In addition, the applicant has to show that, within the specified time, the patented product has not been produced, or the patented process has not been applied, in the country without any legitimate reason, or no product produced under the patent is sold in any domestic market, or that such a product is sold but at an unreasonably high price, or does not meet the public demand without any legitimate reason.67

It can be seen from the above that the law requires the applicant for a compulsory license to show that there has been an abuse of the patent rights. The law also requires that applicant to prove that the patentee does not fulfil his obligation without any legitimate reason. This implies that the burden of proof of non-working without any legitimate reason rests with the applicant rather than the patent holder. This provision constitutes a reversal of a patent principle. As generally recognised, an obligation to work the invention in the granting country is placed on the patent holder. If there is no working, he should have a duty to present evidence to justify his inaction.68 This reversal makes the Thai compulsory licensing system impractical, as the applicant has almost no chance of determining whether the patentee has a legitimate reason or not is not working the invention.

The Thai law does not provide a clear definition of the term "legitimate reason" for not working a patent. This may cause a problem in the granting procedure of the compulsory license. The solution to this problem seems to depend largely on the free will of the authorities concerned with its application. The notion of "force majeur", which is generally accepted in international legal transactions, may be introduced in order to give more adequate and procise means of protecting the public interest.69 For instance, in order to preserve his exclusive rights, a holder of a pharmaceutical patent may justify his failure to work on the ground that he has been waiting for an official approval from the relevant authority to allow him to sell the newly patented drug.

The old s.46 contains a three-year period from the date of grant for a patentee to work his invention in the national economy. In order to be in line with the international position, the term has been amended by the Patent Act B.E. 2535. The new provision, by using (but not identical) the contents of Art.5A(4) of the Paris Convention, provides that any interested person may apply for a compulsory license after the expiration of three years from the date the patent is issued, or four years from the filing date, whichever period expires last.

However, in practice the period of time to obtain a compulsory licence by a third party is likely to be much longer than the time stipulated, as the necessarily prior examination with respect to the requirements of patentability may take a long time,70 especially in a country like Thailand which lacks staffs any a systematic arrangement. Since the compulsory licensing is not possible during this period including another three year from the date of the grant of the patent, it is possible that the compulsory licensing procedure may be able to commence only after six or seven years from the time of filing the patent.71

The procedure involved in obtaining a compulsory license in Thailand seems to be cumbersome. The relatively complex procedural rule helps to explain the non-utilisation of the method in compelling diffusion of patented technology. An examination at the Department of Intellectual Property Rights in 1992 shows that no application for a license has been filed and no compulsory licensing has been granted since the Patent Act entered into force.

Apart from this, there are two other possible reasons why the use of this system is so minimal. One is the lack of necessary know-how essential for the commercial working of the patented invention. The other reason may be the long period which a third party has to wait to apply for a compulsory license. In view of the dynamism of modern technology, the three more years from the filing date) is too long. After this period, the technology relating to the patented invention, particularly those in rapidly evolving sectors, might have been considerably improved upon, and may become obsolete and irrelevant.

The number of applications and compulsory licenses that have been issued, however, does not indicate whether the working of the system is successful or not. The economic and social objectives for imposing the compulsory license are ; (I) to compel the patentee to work his invention ; (ii) to enhance free trade within the territory ; and (iii) to eliminate the abuse of monopoly powers by the right holder. Because of the threat posed by this provision, the patentee may decide to grant a voluntary license to another person to work the patented invention in order to avoid compulsory licensing. If patentees are pressurised to fulfil their obligations, there can be no doubt that the system of compelling effective working of patents has achieved its goal.

Even though compulsory licensing in most countries has been rarely used,72. This system may be particularly useful in curtailing the abuse of patents, particularly drug patents. Compulsory licensing will enable the production of medicines when they are needed in the country. Canada's success in using compulsory licensing to guarantee the availability of essential drugs in the country is a good example.

The need to enhance the diffusion of pharmaceutical technology in Canada necessitated the introduction of compulsory licensing. This was even so in view of the domination of Canadian pharmaceutical industry by US companies. In order to promote manufacture of pharmaceuticals under their generic names and to pursue a policy of lowering drug prices, Canada went ahead, in spite of pressure by the US, to pass a legislation authorising compulsory licensing of pharmaceuticals. The statistics of the use of compulsory licensing in Canada are very impressive. Between 1935 and 1970, 192 applications were filed; 17 were refused ; 72 were abandoned ; and 79 were granted.73 The Canadian law amendment in 1969, which authorised the grant of compulsory licenses for medicines, was the main catalyst of the sharp increase in the number of the application and grant of the license.74

B. Revocation of patents

The Patent Act provides for forfeiture of patents under certain conditions. When patent protection is revoked, the exclusive rights on the patented invention pass on to the Government.

Under the old s.55, the Board of Patents could cancel a patent if it was found that the patented invention was not being worked in the national economy within six years from the grant of the patent. The legislation has been revised by the Patent Act B.C. 2535. The amended s.55, authorises the Board of Patents to revoke the patent when certain conditions are met. Where it appears that a compulsory license has already been issued to a third party but it is unsuccessful to compel local working of the patent, the patent shall be revoked after the expiration of two years from the grant of the compulsory licensing.75 This means in effect that the forfeiture has now become a secondary instrument. The forfeiture will be applied only when the use of the compulsory licensing is ineffective. Since the revocation of patents under new s.55 of Thailand's Patent Act is essentially dependent on the grant of a compulsory license, the absence of the license means the amended provision is unworkable.

Again, the revision of this provision reflects the desire of the Thai legislature to relate the forfeiture system of the Thai patent law to Art.5A (3) of the paris Convention. Curiously, this ambition has gone in the opposite direction from the attempts of a number of developing countries to force some changes in their national patent rules through an amendment of the Paris Convention. The Thai patent law has been altered to be in line with the international treaty and continues its adoption of the main principles of the Paris convention, despite the facts that Thailand has no obligation to do so, and that it is widely recognised that these principles generate no merits to developing economies.76

It may be observed that the mechanisms for imposing local working under the old law were well balanced. The law provided a three- year period for the patentee to work the invention. If he did not do so, a compulsory license may be granted. After the expiration of six years from the grant of the patent, if the patentee still did not use the invention for public benefit, the sanction of revocation may be applied, regardless of whether a compulsory license had been granted or not.

C. Patented Medicine Prices Review Board

Apart from the compulsory licensing and the revocation of patents, the Patent Act B.E. 2522 also provided another legal measure to control the abusive practices of patent holders. This was known as "parallel importation". The Thai law on paralell importation was unique, as it did not appear in any other countries laws. The old s.77 provided that at any time before the patented product was manufactured or a patented process was applied, any person may import the patented products made in a foreign country into Thailand for commercial purposes.

This provision authorised another party wishing to sell goods covered by a patent to import the products available in another country into Thailand without liability to the patentee, as long as the patentee had failed to respect his legal obligation. This provision, however, was cancelled by the Patent Act B.E. 2535. The reason for discarding the paralell importation was that this provision had not been a very effective mechanism, and had never been put to much use in the country. In addition, the system of parallel importation was not in conformity with the international norms and standards.77

The argument against this system seems to be inaccurate. The Thai Government has been wrong to try, to accept the approach that has not yet been established. Up to date, there has been no international norms and standards in the field of patent, other than those laid down in the Paris Govention.78 Obviously, Thailand, not being a contracting State, has by no means violated those norms.

The merit of the parallel import was that it was the most effective and flexible method of enhancing competition and curtailing the serious restrictions of non-working on the national economy. Unlike the compulsory licensing system, the importation right of the third party was automatic and was notsubject to a length of time and complex granting procedures. The parallel import could pressurise patentees to perform their duty by carrying the patented invention into effect.

Instead, the amended Patent Act establishes a pharmaceutical patent board consisting of eight government officials and three representatives of drug companies.79 The major role and duty of the board are to monitor the availability of newly-developed medicines in the market. The Board is also charged with the responsibility of maintaining reasonable drug prices in Thailand.80

The Board is given an extensive authority to make the medicine available to the public at reasonable prices. Where it determines that no patented pharmaceutical product is sold in any domestic market or that such a product is sold but at an unreasonably high price or does not meet public demand without and legitimate reason, the Board may inform either the Central Commission on Prices and Prevention of Monopoly to enforce the anti-monopoly legislation or the Director-General to grant a compulsory license to an interested person to produce such medicines.81

In order to enable the Board to exercise control over the prices of patented drugs, the Act makes it obligatory for every pharmaceutical patentee to provide the Board with information as to drug prices, costs of invesments in R&D and marketing relating to medicines, and details of voluntarily patented licensees (if any).82 The Powers of the new pharmaceutical patent committee are considerable and final as the parties cannot appeal any of its decisions.

Although an attempt has been made by the Thai Government to establish a mechanism to combat possible abusive practices, particularly when the monopoly rights have been extended to products as vital as pharmaceuticals, the efficacy of this system is still doubtful. Since the Patented Medicine Prices Review Board comprises Government officials and some representatives of foreign interests, it is likely that the price control system may not be an effective measure of consumer protection in the pharmaceutical market.

The US Government considers the measures for the control of patent abuses as a trade barrier and requires Thailand to abolish these measures or to increase the conditions for the grant of a non-voluntary license. Since Thailand has declined to provide further amendments to conform with the US requirements, the US Trade Representative is still keeping Thailand on the list of nations it deemed to be among the worst violators of US innovations.83

There is no doubt that the compulsory licensing and revocation systems appear in the Paris Convention and many patent laws of both developed and developing countries. The establishment of the Patented Medicine Prices Review Board under the Thai law cannot claim origi- nality. Some countries such as Canada also constitute this sort of committee under their patent laws, in order to safeguard the national public interest.84

The demand of the US Government for the elimination of the local working requirement and the drug price control mechanism raises many arguments as to why a State should grant exclusive rights where the patentee does not make use of his invention for the benefit ofsociety. This demand seems to be contrary to the function of the patent system aimed at encouraging industrial exploitation of inventions. A second argument is based on the ground of public benefit. If a patentee decides not to distribute patented articles to fulfil domestic demand, is not there justification for the State to prevent the patent holder from ignoring such a public need?

CONCLUSION

To the extent that a patent law is needed to protect a property right in an inventor's idea, it illustrates in very clear terms the extent of the relationship of law to other socio-economic factors. For a patent system to succeed in stimulating the development of the country's competitive edge in the world economy, it must align itself to conditions of social, and the evolution of progressive national technological and industrial policies.

Although the major rules and procedures relating to patent protection in Thailand are not much different from those established under the patent laws of advanced developed countries, the implication of those rules in the former can generate opposite results. Looking at the reform of Thailand's patent law, there is no doubt that Thailand has now offered as a high degree of patent protection as advanced developed countries. While the current rapid development of new technologies is beyond the reach of the country's infrastructures, it is doubtful whether this type of patent regime is appropriate for Thailand in encouraging domestic inventions, innovations and adaptation.

If Thailand is to achieve the goal of industrial and economic development, it should be prepared to offset negative impact that may result from the abusive practices of foreign patent holders. At the same time, it must also initiate an inward-looking strategy to increase the country's competitive edge in the world economy, by utilising the patent system as an economic tool to procure technological modernisation and to expand industrial capabilities.

65 Patent Act B.E. 2522, s.48.
66 Patent Act B.E. 2522, amended by Patent Act B.E. 2535, s.46 para.3.
67 Ministerial Regulations No.6 (B.E.2524), clause 14(1) . The Royal Gazette. Special Issue, Vol.98 Part 196,17 November 1981.
68 Art.5A(4) of the Paris Convention states that "…it should be refused if the patentee justifies is inaction by legitimate reason."
69 UNCTAC, The International Patent System : The Revision of the Paris Convention for the protection of Industrial Property, para.32; and Yankey, op.cit ., at p.73.
70 See UNCTAD, The Role of Patent System in the Transfer of Technology to Developing Countries, para.339.
71 ibid.
72. See Yankey, op.cit, at p.74
73 UNCTAD, The Role of the Paten System in the Transfer of Technology to Developing Countries, p.50.
74 Ibid.
75 Patent Act B.E. 2522, amended by Patent Act B.E.2535.s.55(1)
76 See Vaitsos, op.cit; and Yankey, op.cit.
77 Unpublished Parliamentary Document, op.cit., at p.11.
78 In fact, apart from some basic standards, the Paris Convention does require its member parties to adopt any obligations.
79 Patent Act B.E. 2522, amended by Patent Act B.E. 2535. S.55 B.
80 Ibid, s.55 c.
81 Ibid, s.55 d.
82 Ibid, s.55 A.
83 "Thai-US Takls Turn to Pharmaceuticals", Bangkok Post Weekly, 14 May 1993, pp.18-19.
84 See Chromecek, M., The Amended Canadian Patent Law: General Amendments and Pharmaceutical Patents Compulsory Licensing Provisions, Fordham International Law Journal, Vol.11,1988, p.537; and Oyen, op.cit., pp.237-262.