Op EdsOP. ED.

   

Unperturbed by the relentless growth, the latest Ministerial Conference (12th MC) under the aegis of WTO organised in Geneva went ahead with the extension of a moratorium on the customs duty levied upon electronic commerce (e-commerce)1. In 1998 during the 2nd MC, all the members of the WTO under the General Council agreed not to impose customs duties on electronic transmissions (Declaration on Global Electronic Commerce or Declaration)2. It is pertinent to note that the Declaration is not perpetual i.e. after every two years, members agree to extend the moratorium at the biennial WTO MC, and it applies only to electronic transmissions (ET) of digitised products.

With the exponential growth of internet usage and partially due to the absence of physical imports during the surge of COVID-19, e-commerce has flourished unabatedly. This could be authenticated by the proliferation of digitisation of previously physical goods and their transmission through the internet leading to losses in Customs revenue. In her working paper, Senior Economic Affairs Officer Rashmi Banga argues that “Developing countries can generate 40 times more tariff revenue than developed countries by imposing customs duties on ET”3. Also, the asymmetrical development of digitalisation (often quoted as the digital divide) does carry severe implications for the domestic industry, which may be too naïve to face such competition. In this context, it is essential to highlight the role of traditional tariffs in supporting nascent domestic digital industries. Not only are these developing countries losing out on fiscal space, but the Declaration has jolted its regulatory space as they are unable to regulate growing imports of digitisable products.

Although it might seem axiomatic as it just takes a lack of consensus amongst the member States to discontinue this moratorium, the real challenge lies in defining the scope of electronic transmission. Currently, there are only 49 products that qualify as digitisable products capable of being transmitted digitally4, but this list is not exhaustive, which means that intensification in the loss of revenue would then be an inevitable corollary. It is no gainsaying that the impact of the 4th Industrial Revolution through automation has already inhibited the developing country's ability to collect customs duties, and 3D printing technologies substantiated this concern. In posterity, with the advent of 3D printing technology, physical goods will be digitised even more rapidly, thereby circumventing the previously negotiated General Agreement on Tariffs and Trade (GATT) bound rates on physical goods. Now on unravelling these intricacies, one could quickly figure out that developing countries have legitimate concerns, but their proposed solution is misguided. Unilateral imposition of customs duties on ET will not only distort the growth of the digital economy but will also be cost-prohibitive and technologically unfeasible for those developing countries themselves.

The perplexity does not end here, as WTO also grapples with attributing ET as goods, services, or intellectual property. It is a most apposite inquiry upon the given issue, as the selection of a particular head will entail the application of a specific regime i.e. GATT, General Agreement on Trade in Services (GATS) or Trade-Related Aspects of Intellectual Property Rights (TRIPS), and to add to that, customs duties are solely applicable to the goods. The Working Committees had been constituted to undertake critical appreciations of these issues, but in the pursuance of the absence of any accord amongst the member States on this issue, it has been covered up with an agreement that the existing practice of no customs duties should continue. These factors cumulatively provide a much-needed impetus to the developing nations to oppose the prolongation of this moratorium jointly.

To address the concerns of revenue losses, developing countries are advised to consider imposing non-discriminatory internal taxes and international taxation. But it is too simplistic to agree with such suggestions as these measures do not gel well with the infant industry, which might anticipate certain assistance from their respective Governments, and substituting internal taxes as an alternative to customs duties does not serve that purpose. Viewed as a viable alternative, the exponents of this suggestion lose sight of the fact that the findings (Emram and Stiglitz, 2005) confirm that the large informal sector tends to remain out of the tax net.5 Regarding international taxation, various developing countries are at the forefront of spearheading the market-based taxation rights, which (amongst other things) aims to address tax challenges arising from the digitalisation of the economy and reallocate taxing rights for large businesses to market jurisdictions. Through its participation in the G20 and Organisation for Economic Cooperation and Development (OECD's) base erosion and profit shifting (BEPS) initiative, developing countries have committed themselves to a multilateral approach for securing a fairer, stable, and non-discriminatory tax policy, yet as of date, nothing substantial has been achieved through this consensus-based approach.

While vocal about these issues, developing countries, like India and South Africa, tried to espouse the cause of disintegrating ET from digitised goods and taxing such products, which are feasible due to technological development (India-South Africa Joint Communication, 2021).6 In other words, this narrative implies that a moratorium is imposed upon electronic transmission, i.e. bits and bytes, and not on the content or product to be transmitted. This would necessitate such countries expand their harmonised system (HS) codes to include goods that can be digitised. One of the most significant limitations of existing literature is that it has not been able to contemplate the list of such putative products which could be digitised, adding salt to the wound.

In light of the aforesaid analysis, it is befitting to use this opportunity to justify the title of this submission. The rationale for ascribing the current moratorium as an “uncanny impasse” lies in the fact that these are momentous challenges, and any suggestions to curb these effects are on the scale of pragmatism of not much avail. Developed countries are keen to keep this declaration alive and pegging too much hope on the continuance of this moratorium as they advocate the positive impacts of the digital economy which outweighs the potential forgone government revenues. These contentions fall short in critically examining the challenges faced by developing nations due to the infrastructural/technological divide, thereby causing huge losses in revenue and depleting policy space. So, the underlying question is “what did this moratorium reap for the developing countries.” Hence, the Declaration is labelled as an eternal conundrum for developing countries as they are still figuring out its potential benefits along with the way forward.


† Assistant Professor in Legal Research at Rajiv Gandhi National University of Law, Punjab. Author can be reached at <saurabh_faculty@rgnul.ac.in>.

1. WTO, Twelfth WTO Ministerial Conference (June 2022), <https://www.wto.org/english/thewto_e/minist_e/mc12_e/mc12_e.htm> last seen on 20-6-2022.

2. WTO Ministerial Conference, Declaration on Global Electronic Commerce, WT/MIN (98)/DEC/2 (1998), 1 (25-5-1998), <https://www.wto.org/english/tratop_e/ecom_e/mindec1_e.htm> last seen on 19-6-2022.

3. Rashmi Banga, “Growing Trade in Electronic Transmissions: Implications for the South”, (2019) UNCTAD Research Paper No. 29/2019, <www.wto.org/english/tratop_e/ecom_e/wkmoratorium29419_e/rashmi_banga.pdf> last seen on 20-6-2022.

4. India and South Africa, The E-Commerce Moratorium: Scope and Impact (WT/GC/W/798, 2020) Work Programme on Electronic Commerce, Para 2.15, <https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=264789%2C264692%2C263985%2C262610%2C262031%2C261632%2C261432%2C261434%2C259951%2C259601&CurrentCatalogueIdIndex=4&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True#> last seen on 18-6-2022.

5. M. Shahe Emran and Joseph E.Stiglitz, “On Selective Indirect Tax Reform in Developing Countries”, (2005) 89(4) Journal of Public Economics, <https://www.sciencedirect.com/science/article/abs/pii/S0047272704000933> last seen on 20-6-2022.

6. India and South Africa, The Moratorium on Customs Duties on Electronic Transmissions: Need for Clarity on its Scope and Impact (WT/GC/W/833, 2021) Work Programme on Electronic Commerce, Para 2.15. Also available at <https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/GC/W833.pdf&Open=True> last seen on 18-6-2022.

Op EdsOP. ED.

1. Intellectual Property Rights is an acronym that hardly needs to be expanded nowadays. Everyone, who matters in scientific circles, is talking about intellectual property rights, and the importance of protecting scientific discoveries, with commercial potential, in a tight maze of patents. Legitimacy of the global intellectual property right system is in question for its inability to generate symmetrical opportunities for traditional knowledge-holders vis-à-vis the inventors and innovators in the formal sector. The status accorded to traditional knowledge and folklore poses particularly profound moral, legal, social and political problems. Such knowledge is not limited to definable or articulate sets of knowable elements. Yet, inter-generational equities could be irreversibly impacted internationally depending on the way solutions to appropriate benefits are structured by vesting ownership or use rights in such knowledge because resource availability and resource use would both be impacted.

2. Liberalisation and globalisation have dramatically altered perceptions about science and its practice in India. The unabashed drive to patent and protect every conceivable scientific advance, no matter how incremental, has now reached a ridiculous level in the West. American and multinational companies, never known for moderation and thoughtfulness, when commercial interests are involved, have set out to fence vast areas of science under the guise of protecting intellectual property. Exponential growth of scientific knowledge, increasing demand for new forms of intellectual property protection as well as access to IP related information, increasing dominance of the new knowledge economy over the old ‘brick and mortar’ economy, complexities linked to IP in traditional knowledge, community knowledge and animate objects, will pose a challenge in setting the new 21st century IP agenda. In the context of trade and business, Trade Related Aspects of the Intellectual Property Rights (TRIPS) and the Convention on Bio-diversity (CBD), respectably, required the creation of new economic rights and obligations to complement the IPR system under World Intellectual Property Organisation (WIPO). Matters concerning traditional knowledge, hitherto pursued only in the form of cultural rights or heritage issues at the UN, UNESCO and WIPO are regarded relevant also for development rights for which the United Nations Conference on Trade and Development (UNCTAD) was created and economic rights for which earlier UN-ECOSOC and more recently, WTO have been mandated. Also, there are certain categories of traditional knowledge like traditional medicine which still are subserving the public health objectives under WHO’s Traditional Medicine Strategy for 2002-2005. Moreover, traditional knowledge is valued not because of antiquity but because more of it is transmitted orally, as part of knowledge necessary to sustain lives and livelihoods and it has an economic value which is variable.

HUMAN RIGHTS PROTECTION OF TRADITIONAL KNOWLEDGE

3. Two protective paradigms have been employed to protect traditional knowledge using intellectual property tools. The first protective paradigm seeks to prevent others from using or securing intellectual property rights over traditional knowledge. For example, some communities have created traditional knowledge databases to evidence their traditional knowledge as prior art in order to prevent perceived abuses such as biopiracy. Although traditional knowledge database may pre-empt some from securing rights over traditional knowledge, databases do disclose such traditional knowledge to the public. This becomes a problem since many communities would rather keep such traditional knowledge within their community. Many communities have their own traditional or customary laws that regulate the use of traditional knowledge that may differ substantially from their national system or the international system of intellectual property rights. Disclosure may violate these customs.

4. The second protective paradigm (often called “positive protection”) seeks to secure protective legal rights over traditional knowledge. This is achieved by either using the existing laws or using legislative means to enact new sui generis laws. Some have argued that some countries like the United States may face constitutional problems with granting perpetual rights to these communities. They also raise utilitarian concerns with granting legal rights to traditional knowledge. For instance, some forms of traditional knowledge (such as cures for disease) may be used to help others; and of exclusive rights were granted, some may go upheld. Other concerns deal with the equitable sharing of benefits and resources.

5. Indigenous and local communities have argued that they generally don’t use such incentives to innovate. Their use of knowledge is spiritually and culturally guided. Misappropriation and misuse of this knowledge may violate customary laws that are at the core of their collective and cultural identity. These beliefs are currently protected by a number of constitutional provisions and statutory laws, and are increasingly being recognised as a distinct human right within the United Nations.

Similarly, indigenous and local communities have argued that public claims in their knowledge without their consent amounts to a misappropriation of their identity and heritage, a violation of their fundamental, inalienable and collective human rights.

IPR AND TRADITIONAL MEDICINE

A. THE NEEM CASE

6. A controversy that can be tagged as a first for India and which rose doubts about strict patent system was the granting of patent to a company, namely, W.R. Grace. The company was granted a patent in the US and the European Union, for a formulation that held the active ingredient in the neem plant in the stable storage of azadirachtin, and the same was planned to be used for its pesticidal properties. It was admitted by the applicant regarding how the pesticidal uses of neem were known and he pointed out to the fact that storing azadirachtin for a longer duration is difficult without the use of neem. The US patent granted, covered a limited invention whereby the applicant was only given the exclusive right to use azadirachtin in the particular storage solution described in -the patent.

The grant of the said patent caused an uproar and it was challenged through re-examination and post-grant opposition proceedings before the United States Patent and Trade Mark Office (USPTO) and the European Patent Office (EPO), respectively. Though there was no success at the USPTO, the European Patent Office ruled in favour of the opposition stating the patent granted, lacked in novelty and inventive step.

B. THE ‘JEEVANI’ AND ‘KANI’ TRIBES

7. New experiments are beginning to emerge on benefit-sharing models for indigenous innovation. An example of India is worth sharing. It relates to a medicine which is developed from and based on active ingredients in a plant, Trichopus zeylanicus (Arogyapaacha), found in South-Western part of India. Scientists at the Tropical Botanic Garden and Research Institute (TBGRI) in Kerala learnt of the plant, which is claimed to bolster the immune system and provide the additional energy. The medicine is traditional knowledge used by Kani Tribe. These scientists isolated and tested the ingredient and incorporated it into a compound, which they christened ‘JEEVANI’, the giver of life. The tonic is being manufactured by a major Ayurvedic drug company in Kerala.

C. TURMERIC PATENT

8. Two US based Indians, Suman K. Das and Hari Har P. Cohly were granted a US Patent 5,40,504 on 28.03.1995 on use of turmeric in wound healing. The patent was assigned to University of Mississippi Medical Centre, USA. This patent claimed the administration of an effective amount of turmeric through local and oral route to enhance the wound healing process, a novel finding. Any patent, before it is granted, has to fulfil the basic requirements of novelty, non-obviousness and utility. Thus, if the claims have been covered by the relevant published art, then the patent becomes invalid. CSIR could locate 32 references (some of them being more than 100-year-old and in Sankrit, Urdu and Hindi), which showed that this finding was well-known in India prior to filing of this patent. The formal request for re-examination of the patent was filed by CSIR at USPTO on 28.10.1996. On 20.11.1997, the examiner rejected all the claims once again as being anticipated and obvious. The re-examination certificate was issued on this case on 21.04.1998 bringing the re-examination proceedings to a close.

PROTECTION AND PROMOTION OF TRADITIONAL KNOWLEDGE

A. RE-EXAMINATION OF US PATENT ON BASMATI

9. Rice Tec Inc. had applied for registration of a mark ‘TEXMATI’ before the UK Trademark Registry. It was successfully opposed by Agricultural and Processed Food Exports Authority (APEDA). One of the documents relied upon by Rice Tec as evidence in support of the registration of the said mark was the US Patent 5,663,484 (hereafter referred to as ‘484 patent’) granted by US Patent Office to Rice Tec on 02.09.1997 and this is how this patent became an issue for contest. The said patent covered 20 claims covering not only a novel rice plant but also various rice lines; resulting plants and grains, seed deposit claims, method for selecting a rice plant for breeding and propagation.

10. In the wake of this controversy, the Government of India set up a Task Force under the Chairmanship of Secretary, Ministry of Industrial Development, to examine the possibilities of filing a re-examination request against the above-mentioned US patent. The Task Force, in turn, set up a technical committee comprising primarily the ICAR and CSIR scientists to examine the patent specification in detail and to collect necessary documentary evidence that may be required to file the re-examination request against the US patent. Evidence from IARI Bulletin was used against Claims 1517. Eventually, a request for re-examination of this patent was filed on 28.04.2000. Soon after filing the re-examination request, Rice Tec chose to withdraw 15 claims and the threat of infringement by the export of Basmati grains to US has been averted. Now, with the surrender of all the other broad claims, even the alleged threat to the export of grains of insensitive rice lines from India has been averted.

B. RULINGS RELAVENT TO YOGA

11. In this regard, the applicant registered his copyright interest in the book regarding sequence of asanas with the Copyright Office, and then, in 2002 he filed a supplemental registration i.e. a correction filed when the original registration is incorrect or incomplete. According to the said supplemental registration, the applicant was not only claiming rights in the book itself but also on the sequence of 26 asanas taught in the book. An organisation called Open Source Yoga Unity, which, according to its website, is a non-profit collective to ensure the continued natural unfettered development of Yoga, challenged this supplemental registration and asked the US District Court for the Northern District of California to issue a declaratory judgment saying that the applicant could not have exclusive rights over the sequence of asanas as mentioned in the book. However, the said argument was rejected by the Court in 2005, stating that the sequence might be protectable as a compilation. Later, when a question was put to the Copyright Office for its opinion on the said matter, the agency in June 2012 issued its Policy Statement, which concluded that sequences of yoga asanas or any sequence of exercises or movements, excluding choreography, could not be protected as compilations, as they were not compilations of literary works, musical works, or any of the other kinds of works protected by the copyright law.

Within six months, the Policy Statement formed the basis of another court’s decision, when in December 2012, the US District Court for the Central District of California was faced with another dispute over Bikram Yoga. The dispute started when two yoga instructors in Buffalo, New York completed the certification course from the applicant and were authorised by his organisation to teach the basic Yoga system. They formed their own educational enterprise, Evolation Yoga LLC, and opened a series of yoga schools. The applicant sued Evolation Yoga LLCa lleging copyright infringement, however the court granted summary judgment for Evolation, stating that as a matter of law a sequence of yoga asanas cannot be copyrighted.

C. TRADITIONAL KNOWLEDGE DIGITAL LIBRARY

12. These cases were an eye opener and they triggered the Government of India to create Traditional Knowledge Digital Library (TKDL) and also to include traditional knowledge in the International Patent Clarification System. TKDL is an initiative by India to digitise and document knowledge available in the public domain to facilitate systematic arrangements, dissemination and retrieval of information. While granting patents, authorities check invention to prior art in public domain. Documentation of knowledge will help them trace invention in public domain and help them to know whether it is eligible for patents, thus preventing misappropriation of traditional knowledge.


* Advocate and qualified Chartered Accountant. Author is currently Senior Associate in the Dispute Resolution Practice at L&L Partners Law Offices, New Delhi. Author’s views are personal.

Hot Off The PressNews

A Dispute Settlement Panel of WTO in its report issued to members on 31 October 2019 has ruled India’s export promotion schemes (e.g. Merchandise Exports from India Scheme, Export Oriented Units Scheme, Special Economic Zone Scheme, Export Promotion Capital Goods Scheme and Duty Free Imports for Exporters Scheme etc) to be export contingent and in the nature of prohibited subsidies under the Agreement on Subsidies and Countervailing Measures and thus inconsistent with WTO norms.

The Panel has given time-frame of 90-180 days for withdrawal of these schemes. However, India has appealed the Panel Report on 19 November, 2019 and due to non-functioning of Appellate Body, the appeal has been kept in suspension. Till the appeal is disposed of, India is under no obligation to implement the recommendations of Panel.

Though US has claimed that India is providing subsidies on above mentioned schemes, India has taken the stand in dispute that the subsidies are not export contingent and thus consistent with WTO  norms. India has filed appeal against the Panel ruling.


Ministry of Commerce & Industry

[Press Release dt. 18-03-2020]

[Source: PIB]