WORLD TRADE WT/DS79/R

24 August 1998
ORGANIZATION
(98-3091)

Original: English

India - Patent Protection for Pharmaceutical

and Agricultural Chemical Products

Complaint by the European Communities and their member States

Report of the Panel

The report of the Panel on India Patent Protection for Pharmaceutical and Agricultural Chemical
Products is being circulated to all Members, pursuant to the DSU. The report is being circulated as an
unrestricted document from 24 August 1998 pursuant to the Procedures for the Circulation and
Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with
the DSU only parties to the dispute may appeal a panel report, an appeal shall be limited to issues of
law covered in the panel report and legal interpretations developed by the panel, and that there shall
be no ex parte communications with the panel or Appellate Body concerning matters under
consideration by the panel or Appellate Body.

Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date
of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the
Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of
the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.
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TABLE OF CONTENTS

Page

I. Introduction 1

II. Factual Aspects 2

Indian legal system and practice 2
The Patents (Amendment) Ordinance 1994 and the
Patents (Amendment) Bill 1995 4
Article 70.8 of the TRIPS Agreement 4
Article 70.9 of the TRIPS Agreement 6

III. Findings and Recommendations Requested by the Parties 6

IV. Arguments of the Parties 8

Articles 9.1 and 10.4 of the DSU 8
Article 70.8(a) of the TRIPS Agreement 19
Article 70.9 of the TRIPS Agreement 33

V. Arguments Presented by Third Party: United States 42

VI. Interim Review 46

A. Articles 9.1 and 10.4 of the DSU 46
B. Article 70.8(a) and 70.9 of the TRIPS Agreement 48
C. Article 70.8(a) of the TRIPS Agreement 49

VII. Findings 50
A. Claims of the Parties 50
- Introduction 50
- Claims of the Complainant 52
- Claims of the Respondant 52

B. Procedural Issues 52
- Introduction 52
- Article 9 of the DSU 53
- Article 10 of the DSU 54
- Conclusion 55

C. The Extent of the Binding Nature of Precedents 55

D. Article 70.8(a) of the TRIPS Agreement 58

- Introduction 58
- Nature of the Obligations 59
- Mechanism for Implementing the Obligations 60
- Conclusion 65

E. Article 70.9 of the TRIPS Agreement 65

- Introduction 65
- Textual Analysis 66
- Contextual Analysis 67
- Object and Purpose 67
- Conclusion 68
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Page

F. Nullification or Impairment 69

VIII. Concluding Remarks 69

IX. Conclusions 69

Annex 1 - Request for the Establishment of a Panel by

the European Communities (WT/DS79/2) 70

Annex 2 - Lok Sabha, Unstarred Question No. 2601 and

Answer by the Minister of Industry 72

Annex 3 - India, The Patents Act, 1970, No. 39 of 1970,

Sections 2(1)(j), 2(1)(l), 5-12 and 15 73

Annex 4 - Fax, dated 28 April 1998, from Dr. Alan Hesketh,

Manager, Global Intellectual Property, Glaxo Wellcome 79
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I. INTRODUCTION

111111111.2 On 28 April 1997, the European Communities and their member States requested India
to hold consultations pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU) and Article 64 of the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) regarding the absence in India of either patent protection for pharmaceutical
and agricultural chemical products or formal systems that permit the filing of patent applications for
pharmaceutical and agricultural chemical products and that provide for the grant of exclusive marketing
rights for such products (WT/DS79/1). No mutually satisfactory solution was reached in these
consultations, held on 14 May 1997. The European Communities and their member States requested the
Dispute Settlement Body (DSB), in a communication dated 9 September 1997, to establish a panel to
examine the matter (WT/DS79/2).1 At its meeting of 16 October 1997, the DSB agreed to establish a
panel with standard terms of reference in accordance with Article 6 of the DSU. The United States
reserved third party rights.

1.3 In document WT/DS79/3 of 27 November 1997, the DSB was informed of the terms of
reference and the composition of the Panel. Due to the absence of agreement between the parties to the
dispute on the composition of the Panel, the composition of the Panel was determined by the Director-
General pursuant to Article 8.7 of the DSU. Informing the parties to the dispute that he had determined
the composition of the Panel pursuant to Article 10.4 of the DSU, taking into account the fact that the
European Communities and their member States had been a third party to the panel proceeding on
"India - Patent Protection for Pharmaceutical and Agricultural Chemical Products" (WT/DS50 -
complaint by the United States) and the measures at issue in the present dispute had already been the
subject of the earlier proceeding, the Director-General appointed the same Panel members as in the
earlier dispute (with the exception of the chairman of the original panel who was no longer available).

Terms of reference

"To examine, in the light of the relevant provisions of the covered agreements cited by the
European Communities and their member States in document WT/DS79/2, the matter referred
to the DSB by the European Communities and their member States in that document and to
make such findings as will assist the DSB in making the recommendations or in giving the
rulings provided for in those agreements."

Composition

Chairman: Mr. Stuart Harbinson

Panelists: Mr. Douglas Chester
Mr. Yanyong Phuangrach

1.4 The Panel heard the parties to the dispute on 24 March and 29 April 1998. The interim report
was issued to the parties on 19 June 1998. Only India requested the Panel to review parts of the interim
report; no request was received to hold an additional meeting.

1 See Annex 1 to this report.

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II. FACTUAL ASPECTS

Indian legal system and practice

252222222.6 The following summarizes the key points of the information provided to the Panel on
the general principles in Indian law governing the impact of treaty obligations on domestic law and the
power of the executive to implement such obligations:

- Obligations arising under international agreements or treaties are not, by their own
force, binding in Indian domestic law. Appropriate legislative or executive action has
to be taken for bringing them into force. Although not self-executing under Indian law,
implementation of a treaty does not require fresh legislative or executive action if
existing administrative regulations or statutory or constitutional provisions permit the
implementation of the treaty in question. The Indian courts may construe, in this
context, statutory or constitutional provisions that pre-exist a treaty obligation in order
to render them consistent with such a treaty obligation.

- The Directive Principles of State Policy as enshrined in Article 51 of the Indian

Constitution enjoin upon the State to endeavour, inter alia, to foster respect for
international law and treaty obligations in the dealings of organized people with one
another. It is a fundamental principle of statutory interpretation in Indian domestic law
that, wherever possible, a statutory provision must be interpreted consistently with
India's international obligations, whether under customary international law or an
international treaty or convention. If the terms of the legislation are not clear and are
reasonably capable of more than one meaning, the treaty itself becomes relevant, for
there is a prima facie presumption that Parliament does not intend to act in breach of
international law, including therein a specific treaty obligation; and if one of the
meanings which can reasonably be ascribed to the legislation is consonant with the
treaty obligations and another or others are not, the meaning which is consonant is to be
preferred.

- A treaty may be implemented by the exercise of executive power. However, where

implementation of a treaty requires legislation, the legislative power belongs, under
Article 253 of the Indian Constitution, exclusively to Parliament. Where the
Constitution does not require action to be taken only by legislation or there is no
existing law to fetter the executive power of the Union (or a State, as the case may be),
the Government would not only be free to take such action by an executive order or to
lay down a policy for the making of such executive orders, but also to change such
orders or the policy itself, as often as the Government so requires. The executive power
of the Government of India to enter into, and implement, treaties is derived from the
legislative power of the Union of India incorporated in Articles 246 and 253 read with
Entry 14 of List I of the Seventh Schedule of the Indian Constitution. The Government
also has executive power over "patents, inventions and designs", which fall under
Entry 49 of List I.

- Article 123, clause 1 of the Indian Constitution enables the President to legislate when
Parliament (either House or both Houses) is not in session and the President "is
satisfied that circumstances exist which render it necessary for him to take immediate
action".

- Article 73 of the Indian Constitution confers upon the Government of India executive
power over all subjects in which Parliament has legislative competence. Article 73(1)
reads as follows:
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"Extent of executive power of the Union. (1) Subject to the provisions

of this Constitution, the executive power of the Union shall extend

(a) to the matters with respect to which Parliament has

power to make laws; and

(b) to the exercise of such rights, authority and

jurisdiction as are exercisable by the Government of
India by virtue of any treaty or agreement:

Provided that the executive power referred to in sub-clause (a) shall

not, save as expressly provided in this Constitution or in any law made
by Parliament, extend in any State to matters with respect to which the
Legislature of the State has also power to make laws."

The executive powers of the Union and State Governments are co-extensive with their
respective legislative powers (Articles 73 and 162 of the Indian Constitution). The
executive power of the Government extends to matters with regard to which Parliament
can make laws. The executive power of the Centre extends also to the exercise of such
rights, authority and jurisdiction as are exercisable by the Government of India by
virtue of a treaty or agreement (Article 73(1)(b) of the Indian Constitution). If the
statutory provisions are silent on a point, the executive can fill up the gaps or
supplement the rules or implement the policy by issuing administrative instructions not
inconsistent with the rules already framed.

- Under Article 226 of the Indian Constitution, the High Court2 has the power of "judicial
legislative and administrative action", which includes the power to review
administrative regulations or instructions on the ground that they violate statutory
provisions. In exercising this authority, the main principles guiding the High Court are:

- According to a well-established principle of Indian administrative law,

administrative instructions cannot be issued on any matter which is the subject
of legislation. Wherever there is no statutory provision or where there are gaps
in any enactment, the same can be provided or bridged by issue of necessary
administrative instructions. The only rider on the authority to issue such
administrative instructions is that there should be no statutory provision either
expressly or by necessary implications to the contrary.

- Administrative acts done in the purported exercise of a statutory power can be

invalidated by the Court, if constitutional limits or statutory powers have been
transgressed. However, where an administrative act is done, not in the
purported exercise of a statutory power, but in the exercise of the executive
power of a State, the doctrine of ultra vires is inapplicable to it, and courts have
no supervision and control over such instructions, though they may be binding
on the subordinate officials departmentally.

- Judicial review in respect of administrative acts not done in the purported

exercise of a statutory power, but in the exercise of the executive power, is
directed towards its manner and mode, and not the administrative decision

2 The High Court is the highest court in each State and is the intermediate appellate court in India's unified system of courts.
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taken on merits. The standard for this review is whether the exercise of the
discretionary power has been "unfair", "arbitrary" or "malafide".

- Neither will the Supreme Court or High Courts interfere or adjudicate upon
government policy matters, unless fundamental principles of law have been
violated.

The Patents (Amendment) Ordinance 1994 and the Patents (Amendment) Bill 1995

2.7 On 31 December 1994, the President of India promulgated the Patents (Amendment)
Ordinance, 1994, to amend the Patents Act of 1970 to provide a means in the Act for the filing and
handling of patent applications for pharmaceutical or agricultural chemical products (as required by
subparagraph (a) of Article 70.8 of the TRIPS Agreement) and for the grant of exclusive marketing
rights with respect to the products that are the subject of such patent applications (as required by
Article 70.9 of the Agreement).3 This Ordinance was issued in exercise of the powers conferred upon
the President by clause (1) of Article 123 of the Indian Constitution. The Ordinance became effective
on 1 January 1995 and lapsed on 26 March 1995, since legislation of this kind ceases to apply at the
expiration of six weeks from the re-assembly of Parliament. During this period, 125 applications had
been received and filed.

2.8 At the time of the promulgation of the Patents (Amendment) Ordinance 1994, a Press Note was
issued providing an explanation of its background and purposes. According to paragraph 4 of this Press
Note, the Indian Government had set up an Expert Group which had been entrusted with the task of
suggesting specific amendments necessary in Indian laws to comply with India's obligations under the
provisions of Article 70.8 and 70.9 of the TRIPS Agreement and also to safeguard India's interests in this
regard; this Expert Group had recommended a set of measures on which decisions had been taken by
the Government. The Ordinance was also notified by India to the Council for TRIPS under Article 63.2
of the TRIPS Agreement (which notification had been distributed as document IP/N/1/IND/1).

2.9 A Patents (Amendment) Bill 1995, which was intended to give permanent legislative effect to
the provisions of the Ordinance, was introduced in the Lok Sabha (Lower House) of the Indian
Parliament in March 1995. This Bill was passed by the Lok Sabha and was then introduced in the Rajya
Sabha (Upper House). In the Rajya Sabha, the Bill was referred to a Select Committee of the House for
examination and report. The Select Committee started its work but could not present its report before
the dissolution of the Lok Sabha on 10 May 1996. The Patents (Amendment) Bill 1995 lapsed with the
dissolution of the 10th Lok Sabha on that date.

Article 70.8 of the TRIPS Agreement

2.10 At the time that the period of validity of the Ordinance expired, the Patents (Amendment)
Bill 1995 was still being debated. India informed the Panel that, in the light of this situation, the Indian
executive authorities decided, in April 1995, following interdepartmental consultations, to instruct the
patent offices in India to continue, after the lapse of the Ordinance, to receive patent applications for
pharmaceutical and agricultural chemical products under the existing provisions of the Patents Act of
1970 and to store them separately for processing as and when the change in the Indian patent law to
make such subject-matter patentable would take effect. While India informed the Panel of the
provisions under which such applications were being received and stored under the Patents Act of 1970,

3 The Patents (Amendment) Ordinance 1994 stipulated, in essence, that applications claiming patent protection for
pharmaceutical and agricultural chemical product inventions could be made, although such inventions were not patentable, and
that their handling would be postponed until 1 January 2005 or until an application for the grant of an exclusive marketing right
for the product in question was made, if such would occur earlier; the Ordinance also laid down the procedures for applications
for the grant of exclusive marketing rights, the scope of these rights and their enforcement.
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no record of this decision or of any administrative guidelines issued to or within the patent offices of
India to this effect was made available to the Panel.

2.11 No public notice was given at that time of this administrative decision and no notification
concerning it was made to the Council for TRIPS. However, on 2 August 1996, the Indian Minister of
Industry responded to a question asked by a member of the Lok Sabha concerning whether applications
for product patents in the pharmaceutical, food and agricultural chemical areas had been received in
anticipation of changes in the Indian Patents Act of 1970 in accordance with the requirements of the
World Trade Organization; the Minister responded by stating that the patent offices had received
893 patent applications in the field of drug or medicine from Indian as well as foreign
companies/institutions up to 15 July 1996 and that applications for patents would be taken up for
examination after 1 January 2005 as per the WTO Agreement.4

2.12 Under Indian patent law, patent applications for pharmaceutical or agricultural chemical
products made by any person entitled to apply under Section 6 of the Patents Act of 1970 are subject to
the same fee as any other patent application being received and allotted a filing date and advertised, on a
weekly basis, in the Gazette of India with serial number, filing date, name of applicant and title of
invention. Under the administrative arrangements of the Indian patent offices pursuant to the decision
taken in April 1995, such applications5 are, however, unlike other patent applications, being allotted a
special identification number internally, stored separately and not referred by the Controller to an
examiner as specified in Section 12 of the Act. The notification in the Gazette does not distinguish
between applications that are the subject of these administrative arrangements and other patent
applications.

2.13 The legal authority for these administrative arrangements that has been cited by India is
Article 73(1)(a) of the Indian Constitution in conjunction with the Indian Patents Act of 1970.

2.14 For the purposes of the case in hand, the main aspects of the provisions of the Patents Act of
1970 which are of relevance to the case in hand are as follows6:

- Chapter III (Sections 6 through 11) deals with applications for patents. These
provisions do not require that applications for patents must be limited to patentable
subject-matter. In respect of the subject-matter of the claims, they only require that
such applications should be for inventions.

- Inventions are defined in Section 2(1)(j) as, inter alia, any new and useful substance
produced by manufacture, including any new and useful improvement of such a
substance.

- Section 5 makes it clear that inventions claiming substances intended for use, or
capable of being used, as a food, medicine or drug or relating to substances prepared or
produced by chemical processes are not in themselves patentable, but methods or
processes for their manufacture are. Under Section 2(1)(l)(iv) the term "medicine or
drug" includes insecticides, germicides, fungicides, weedicides and all other substances
intended to be used for the protection or preservation of plants.

4 The full text of the question and answer is reflected in Annex 2 of this report.
5 Applications which contain both product and process claims in respect of inventions in the pharmaceutical or agricultural
chemical area are subject to the same administrative arrangements as applications with only product claims.
6 The full text of the provisions of the Patents Act of relevance to the case in hand can be found at Annex 3 of this report.
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- Chapter IV of the Patents Act concerns the examination of applications. Section 12

requires that, when the complete specification has been filed7 in respect of an
application for a patent, the application shall be referred by the Controller General of
Patents, Designs and Trademarks to an examiner. The examiner shall ordinarily report
to the Controller within a period of 18 months on, inter alia, whether the application
and the specification are in accordance with the requirements of the Act and whether
there is any lawful ground for objecting to the grant of the patent under the Act.

- Paragraph 2 of Section 15 states that, if it appears to the Controller that the invention
claimed in the specification is not patentable under the Act, he shall refuse the
application.

2.15 India informed the Panel that, between 1 January 1995 and 31 January 1998, a total of
2,212 patent applications for pharmaceutical and agricultural chemical products had been received and
published in the Gazette of India. None of these applications, nor the mechanism for receiving and
storing them, has been the subject of a legal challenge in court as to their validity under Indian law.
About one half of these applications had been made by EC companies.8

Article 70.9 of the TRIPS Agreement

2.16 The Indian executive authorities do not have the legal powers under present Indian law to
accord exclusive marketing rights in accordance with the provisions of Article 70.9. No request for the
grant of exclusive marketing rights has so far been submitted to the Indian authorities.

III. FINDINGS AND RECOMMENDATIONS REQUESTED BY THE PARTIES

3173333333.18 The European Communities and their member States requested the Panel, given the
particular circumstances of this case, in which the measures at issue had already been examined by this
Panel and by the Appellate Body in an earlier dispute (WT/DS50) to which the European Communities
and their member States had been a third party, to extend its findings in the earlier dispute, as modified
by the Appellate Body, to the European Communities and their member States as the complainant in the
present proceeding and, on this basis, to make the following rulings, findings and recommendations:

Article 70.8 of the TRIPS Agreement

(a) That India had not complied with its obligations under Article 70.8(a) of the TRIPS
Agreement to establish "a means" that adequately preserved novelty and priority in
respect of applications for product patents in respect of pharmaceutical and agricultural
chemical inventions during the transitional period provided for in Article 65 of the
TRIPS Agreement.

Article 70.9 of the TRIPS Agreement

(b) That India had not complied with its obligations under Article 70.9 of the TRIPS
Agreement.

Article 70.8 and 70.9 of the TRIPS Agreement

7 Pursuant to Section 9, the complete specification must normally be filed within 12 months of the date of the filing of the
application, which can be extended to 15 months, failing which the application is deemed abandoned.
8 India informed the Panel that, between 1 January 1995 and 31 January 1998, of these 2,212 applications, 55 were received in
the month of January 1998. By 31 January 1998, EC companies had submitted 1,056 of these applications, of which 32 in the
month of January 1998.
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(c) That the DSB request India to bring its legal rgime for patent protection of
pharmaceutical and agricultural chemical products into conformity with India's
obligations under Article 70.8 and 70.9 of the TRIPS Agreement.

3.19 India requested the Panel to reject the complaints of the European Communities and their
member States on the basis of the following findings:

I. That the complaints are not admissible

Articles 9.1 and 10.4 of the DSU

(a) The complaints of the European Communities and their member States are inconsistent
with the rules of the DSU on multiple complainants, in particular Articles 9.1 and 10.4,
according to which multiple complaints should be submitted to a single panel
"whenever feasible" or "whenever possible", because the same matter has already been
the subject of a panel procedure (WT/DS50) and there were neither legal, procedural
nor factual reasons that had prevented the European Communities and their member
States from bringing their complaint jointly with the earlier case initiated by the United
States, or at least at the same time as the United States.

II. That, if the Panel were to find the complaints admissible

Article 70.8 of the TRIPS Agreement

(a) The evidence adduced in the present proceeding does not demonstrate that "mailbox"
applications can be challenged in India's courts and that India's "mailbox" system 9 fails
to provide a sound legal basis to preserve the novelty of the inventions and the priority
of the date of the applications.

Article 70.9 of the TRIPS Agreement

(b) Article 70.9, interpreted in accordance with Article 31 of the Vienna Convention on the
Law of Treaties and the principles of interpretation enunciated by the Appellate Body in
the earlier case (WT/DS50), does not require the establishment of a mechanism to
provide for the grant of exclusive marketing rights before such rights are due.

Article 70.8 and 70.9 of the TRIPS Agreement

(c) India has not acted inconsistently with Article 70.8(a) and 70.9.

9 The term "mailbox system" is used in this Panel report as shorthand for the means to be put in place which allow for the filing
of patent applications for pharmaceutical and agricultural chemical products as required by Article 70.8.
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IV. ARGUMENTS OF THE PARTIES

Articles 9.1 and 10.4 of the DSU

4204444444.21 The European Communities and their member States argued that, given the
particular circumstances of this case, in which the measures at issue had already been examined by this
Panel and by the Appellate Body in an earlier dispute (WT/DS50), to which the European Communities
and their member States had been a third party, the Panel should extend its findings in the earlier
dispute, as modified by the Appellate Body, to the European Communities and their member States as
the complainant in the present proceeding. The following points were advanced in support of this
argument:

- Since the DSB had adopted the Panel report and the Appellate Body report in the earlier
dispute10 dealing with the same measures at its meeting of 16 January 1998 no change in factual
circumstances had occurred. The domestic legal situation in India had not changed and, in
particular, no amendment to the Patents Act of 1970 had been enacted in India in order to
provide for an appropriate means to file applications for patents for inventions of
pharmaceutical and agricultural chemical products pursuant to Article 70.8 of the TRIPS
Agreement; nor had the same Act been amended in order to provide for the possibility to grant
exclusive marketing rights pursuant to Article 70.9 of the TRIPS Agreement.

- It was neither necessary nor appropriate to repeat all the legal arguments that had
already been put before this Panel when it dealt with the United States' complaint. Article 10.4
of the DSU specifically provided that a third party considering that a measure already the
subject of a panel proceeding nullified or impaired benefits accruing to it under a covered
agreement was entitled to bring its complaint on that measure before the original panel. This
provision was designed to serve continuity, consistency and procedural economy in the WTO
dispute settlement system. Therefore, a re-examination of the elements of the complaint in all
legal detail would go against the very purpose of Article 10.4 of the DSU.

- The present complaint was in all aspects identical, from a legal point of view, with the
earlier complaint submitted by the United States. It would entail a repetitive exercise of
formalistic exchanges of views, which would be entirely futile given that the legal situation had
already been clarified by the adoption of the earlier Panel and Appellate Body reports. It would
also amount to a re-hearing of the case and would thus give the parties to the dispute the
opportunity of having the equivalent of a further appeal not foreseen in any provision of the
DSU.

- In view of the fact that the Panel and the Appellate Body had already found in the
earlier dispute that the present Indian domestic rgime concerning the patent protection of
pharmaceutical and agricultural chemical products was inconsistent with India's obligations
under Article 70.8 and 70.9 of the TRIPS Agreement, it followed pursuant to Article 3.8 of the
DSU that there was a presumption according to which this breach of the relevant WTO rules by
India had an adverse affect on the European Communities and their member States as the other
party to this dispute. In these circumstances, the burden was on India to rebut the presumption
according to which Indias present domestic rgime for the patent protection of pharmaceutical
and agricultural chemical products nullified or impaired benefits accruing to the European
Communities and their member States under Article 70.8 and 70.9 of the TRIPS Agreement.

10 Documents WT/DS50/R and WT/DS50/AB/R, respectively

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4.22 India, in response, requested the Panel to dismiss the complaint of the European Communities
and their member States as inconsistent with the rules of the DSU on multiple complainants, in
particular Articles 9.1 and 10.4. It advanced the following points in support of this view:

Successive complaints based on the same facts and legal claims were unprecedented

- It had been the consistent practice of both the Contracting Parties to GATT 1947 and
the Members of the WTO to bring complaints based on the same facts, claims and arguments
either jointly before the same panel or at least concurrently for examination by panels composed
of the same persons. About one third of the panels established to date by the DSB had
examined complaints submitted by two or more WTO Members jointly or concurrently. Seven
WTO panels had examined joint or concurrent complaints, altogether representing
22 complaints. If each of these 22 complaints had instead been examined individually, the
amount of resources spent by the WTO and its Members on settling these disputes would have
tripled.

- The United States and the EC had reacted in the past with hostility to attempts by other
Contracting Parties to GATT 1947 or Members of the WTO to re-litigate a matter, even when
the subsequent complaint was justified. The United States had thus objected at the March 1991
meeting of the GATT 1947 Council to the establishment of a panel on Denial of
Most-favoured-nation Treatment as to Imports of Non-rubber Footwear from Brazil because
"this matter had already been adjudicated" by a panel established under the Tokyo Round
Subsidies Agreement, even though Brazil had made legal claims in the second proceeding under
the GATT that it could not have made under the Subsidies Agreement. 11 Equally hostile had
been the ECs reaction to the request for consultations on its rgime for the importation, sale and
distribution of bananas by Panama in October 1997. The EC had described Panama's initiation
of the dispute settlement procedures on a matter on which a panel had already ruled as an abuse
of the dispute settlement procedures, even though Panama had not been a WTO Member when
the original panel had been established and could therefore not have joined the earlier
complaint.12

An unmitigated right to bring successive complaints by different parties based on the same facts
and legal claims would entail serious risks for the multilateral trade order

- In the WTO, the danger of unnecessary re-litigation of the same matter arose mainly
from the multilateral nature of the obligations at issue. In principle, each Member had the same
obligations towards each of the other Members. The WTO presently had 132 Members. In
theory, an allegation of non-compliance against one Member could therefore give rise to 131
different complaints by all the other Members. If multiple complaints were submitted to the
same panel few problems arose; if they were brought successively before different panels, the
confusion and waste of resources were great.

- The objective of the proceedings under the DSU, just as those of any other system of
legal adjudication, was to settle disputes by giving panels and the Appellate Body the authority
to determine facts, to find the applicable law and to apply the law to the facts. Legal
proceedings were troublesome and costly, not only for the parties to the dispute but to society in
general. Henry M. Herman had written in 1886:

11 Document C/M/248, pages 9-16

12 Document WT/DS105/1. Panama became a Member of the WTO on 6 September 1997. The panel which examined the
Bananas case was established on 8 May 1996 (WT/DS27/7).
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"Interest republicae ut sit finis litium, is an old maxim deeply fixed in the law
of fundamentals; that it concerns the state that there be an end to litigation.
This maxim has wide application; it . . . is obviously based on common sense
and sound policy. For if matters which have been solemnly decided are to be
drawn again into controversy; if facts, once solemnly affirmed, are to be again
denied whenever the affirmant sees his opportunity, there can never be an end
to litigation and confusion."

For these reasons, all legal systems had developed principles to ensure that the same matter was
not unnecessarily re-litigated, among which the principles of res judicata and stare decisis.

- However, since the principle of res judicata did not apply if the parties to the dispute
were different and the principle of stare decisis did not apply in the WTO to the interpretations
of a panel or the Appellate Body, if successive multiple complaints by different Members on the
same matter were to be admitted and examined as separate new cases, it would engender the
danger of contradictory decisions and the waste of resources would be tremendous. 13 If a panel
ruled in one case in favour of the defendant, other complainants could bring the same case again
and again before different panels with a different composition until a complainant "scored a
hit".

(i) The principle of res judicata applied only when the parties to the dispute were
the same14 and could therefore not prevent repeated disputes between different WTO
Members on the same matter. In fact, the DSU explicitly recognized in Articles 9 and
10 the right of each Member to assert its rights individually. The principle of stare
decisis also did not prevent multiple complaints on the same matter because this
principle had not been applied in GATT/WTO jurisprudence. Thus, the 1989 GATT
panel on EEC - Restrictions on Imports of Dessert Apples (Complaint by Chile) had
noted that a previous panel, in 1980, had reported on a complaint involving a similar set
of GATT issues but that it "did not feel it was legally bound by all the details and legal
reasoning of the 1980 Panel report".15

(ii) The issue of the binding nature of panel decisions had arisen in the WTO for
the first time in the complaint on Japan - Taxes on Alcoholic Beverages. The panel had
decided this issue in the light of Article 31.3(b) of the Vienna Convention on the Law of
Treaties, according to which there shall be taken into account in the interpretation of a
treaty "any subsequent practice in the application of the treaty which establishes the
agreement of the parties regarding its interpretation". The panel had concluded that "...
panel reports adopted by the GATT CONTRACTING PARTIES and the WTO Dispute
Settlement Body constitute subsequent practice in a specific case by virtue of the
decision to adopt them". The Appellate Body had reversed this finding and pointed out
that "an isolated act is generally not sufficient to establish subsequent practice; it is a
sequence of acts establishing the agreement of the practice that is relevant". It had
further noted that "the generally-accepted view under GATT 1947 was that the
conclusions and recommendations in an adopted panel report bound the parties in that

13 The WTO currently does not levy any fees on complainants that might induce them not to engage in re-litigation. The
Member which fails to bring its complaint jointly or concurrently with another Member can therefore now impose the financial
consequences of its inaction on the WTO and its membership.

14 See, for example, Robert C. Casad, Res Judicata, West Publishing Co., St. Paul, Minn.,1976, page 2.

15 BISD 36S/123-124
 WT/DS79/R
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particular case, but subsequent panels did not feel legally bound by the details and
reasoning of a previous panel report". The Appellate Body had further pointed out that
Article IX:2 of the WTO Agreement provided that "The Ministerial Conference and the
General Council shall have the exclusive authority to adopt interpretations of this
Agreement and of the Multilateral Trade Agreements". In the view of the Appellate
Body, this clause provided the only possibility to adopt definitive interpretations.
According to the Appellate Body, "The fact that such an 'exclusive authority' in
interpreting the treaty has been established so specifically in the WTO Agreement is
reason enough to conclude that such authority does not exist by implication or by
inadvertence elsewhere".16

Articles 9 and 10 of the DSU required multiple complainants to submit their case to the same
panel whenever feasible

- The drafters of the DSU had addressed the problem of multiple complaints on the same
matter in Article 9.1 of the DSU, which provided:

"Where more than one Member requests the establishment of a panel related to
the same matter, a single panel may be established to examine these complaints
taking into account the rights of all Members concerned. A single panel should
be established to examine such complaints whenever feasible."

The issue was also addressed in Article 10.4, which stated:

"If a third party considers that a measure already the subject of a panel
proceeding nullifies or impairs benefits accruing to it under any covered
agreement, that Member may have recourse to normal dispute settlement
procedures under this Understanding. Such a dispute shall be referred to the
original panel wherever possible."

These provisions made clear that another Member's complaint, by itself, did not foreclose a new
complaint. Both joint and successive complaints by different Members, before the same panel
or different panels, were therefore in principle allowed. However, Articles 9 and 10 also
attached an important condition to the right to resubmit the same matter to a panel, by
stipulating that "a single panel shall be established whenever feasible". The same proviso was
contained in Article 10.4, according to which a dispute on a measure already under litigation
must be referred to the same panel "wherever possible". Articles 9 and 10 therefore balance two
conflicting objectives: on the one hand, each complainant must have the right to bring its own
case, make its own claims and develop its own arguments; on the other hand, each defendant
and the WTO must be protected against completely unnecessary re-litigation. The compromise
the drafters had found was logical and based on common sense: when complaints could be
joined, they must be joined; when a third party could submit its complaint about a measure to a
panel that examined the same measure, it must do so.

- The obligations under Articles 9.1 and 10.4 were expressed in the passive voice ("A
single panel shall be established ..."; "Such a dispute shall be referred to ..."). The Articles
therefore did not make clear to whom they were addressed: were the obligations established for
the organs and officers of the WTO - in particular, the DSB and the Director-General - or for
the Members of the WTO, or for both? This interpretative issue must be resolved in the light of
the purpose of these provisions, which was to avoid unnecessary re-litigation. This purpose

16 Appellate Body report on Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R,
Section E
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could not be achieved if the responsibility to ensure the joint or concurrent examination of
multiple complaints fell exclusively on the organs and officers of the WTO. The DSB must
establish a panel "if the complaining party so requests" whether or not that request was justified,
and the DSB could therefore not effectively prevent unnecessary re-litigation. Equally, the
Director-General was obliged under Article 8.7 to determine the composition of a panel "at the
request of either party" irrespective of the nature of the complaint.

- The Panel had the responsability to determine the admissability of the EC complaints in
the light of the provisions of Articles 9.1 and 10.4 of the DSU. In this regard, it should be
recalled that the WTO panel on European Communities - Regime for the Importation, Sale and
Distribution of Bananas had examined whether the authority to determine whether a request for
the establishment of a panel met the requirements of Article 6.2 of the DSU rested with the DSB
or with the panel. The panel had ruled that it had the authority:

"Because of the application of the 'reverse' consensus decision-making

applicable in the case of panel establishment in the DSB, the DSB is not likely
to be an effective body for resolving disputes over whether a request for the
establishment of a panel meets the requirements of Article 6.2 of the DSU.
Therefore, as a practical matter only the panel established on the basis of the
request (and thereafter the Appellate Body) can perform that function."17

The reasoning of that panel applied equally to the question of whether a complaint met the
requirements of Articles 9.1 and 10.4 of the DSU.

- It might therefore be concluded that Articles 9.1 and 10.4 could achieve their purpose
only if the duty to submit multiple complaints to a single panel whenever possible was
interpreted as a duty falling on both the WTO and its membership, and panels declared
complaints that did not meet the requirements of these provisions as inadmissible. The present
Panel was the first to address this issue and therefore had the important task of resolving it in
the light of its broad systemic implications.

- It should be noted that India was not arguing against the submission of successive
complaints on the same matter by different WTO Members in all cases. Successive complaints
might be unavoidable and therefore legitimate for a variety of reasons. There might be legal
reasons. For instance, the complainant might wish to make claims that went further than those
made in the earlier proceeding. There might be procedural reasons. Thus, the complainant
might not have been a WTO Member when the original complaint had been brought, as noted
above for Panama in the Bananas case. There might be factual reasons. For instance, the
parties to the earlier dispute might have reached a settlement. The interpretation of Articles 9
and 10 suggested above would not curtail the legitimate exercise of the fundamental right of a
WTO Member to a new and separate examination of its complaint when the need arose but
would prevent only the needless, and therefore abusive, delay in the exercise of this right.

- The EC's exercise of the right to bring a new complaint on the same matter that had
already been the subject of an earlier proceeding was abusive. As the EC itself admitted, its
complaint was "in all aspects identical, from a legal point of view, with the earlier complaint
submitted by the United States". Not a single new fact, claim or argument was presented by the
EC. India had obligations under Article 70.8 and Article 70.9 not only with respect to the
United States but with respect to all Members of the WTO, including the EC. Moreover, Article
4 of the TRIPS Agreement obliged India to implement its obligations under these provisions on

17 Report of the panel on European Communities - Regime for the Importation, Sale and Distribution of Bananas,
WT/DS27/R/ECU, paragraph 7.26
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a most-favoured-nation basis. India could therefore have only one "mailbox" system and only
one mechanism for the granting of exclusive marketing rights, and these must be equally
applicable to all Members of the WTO. Any change that India might make to implement the
recommendations of the Panel in the earlier dispute, as modified by the Appellate Body, would
therefore necessarily benefit not only the United States but also the European Communities and
their member States. The only purpose of the EC's complaint was thus to obtain rights under
Article 22.2 of the DSU, which the EC could easily have obtained by submitting its complaint
jointly or concurrently with the United States. The EC had presented no reasons of a legal,
procedural or factual nature that justified its decision to seek these rights belatedly in a separate
proceeding.

- The question before the Panel was essentially the following: do complainants have an
unlimited right to delay the initiation of proceedings or do defendants and the WTO have the
right to be protected against unnecessary re-litigation? The EC's complaints amounted to
unwarranted harassment, entailing a waste of the WTO's limited human and financial resources,
as well as those of India. If the EC's approach to re-litigation were sanctioned by this Panel, and
if Articles 9 and 10 of the DSU provided no point at which judicial proceedings in the WTO
must stop, the WTO could easily become one vast scene of litigation, disturbance and ill will.

- The Appellate Body had stated in another context that "The WTO rules are not so rigid
or so inflexible as not to leave room for reasoned judgements in confronting the endless and
ever-changing ebb and flow of real facts in real cases in the real world". 18 India invited the
Panel to approach the novel and important interpretative issue before it in that spirit.

4.23 The European Communities and their member States disagreed with India on the
interpretation of Articles 9 and 10 of the DSU and advanced the following arguments in this regard:

- Article 9 addressed a situation where there was more than one complainant in a dispute
settlement procedure. It did not, however, contain any obligation on WTO Members to make a
complaint at a given point in time. Nor did it address the situation of a WTO Member that had
requested to be a third party in a given dispute settlement procedure. This situation was
addressed exclusively in Article 10. Article 10.4, which was relevant for the present case,
specifically provided that a third party might become a complainant on the measure already the
subject of a panel proceeding. It was obvious from this language that Article 10.4 addressed a
situation with successive panel proceedings, like in the present case, since a WTO Member
could not possibly be a complainant and a third party in one and the same procedure. Moreover,
there was no provision in Article 10.4, neither explicit nor implied, which would prevent a third
party from requesting the establishment of a panel after the conclusion of the earlier panel
proceeding.

- There might be good reasons why a WTO Member wished to become a complainant
with regard to a measure already the subject of a panel proceeding after having been a third
party to that earlier panel.19 The procedural rights of third parties were much more limited than

18 Appellate Body Report on Japan - Taxes on Alcoholic Beverages, (WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R)

19 In response to a question from the Panel, the EC explained that, in 1996 and at the beginning of 1997, the European
Communities and their member States were engaged in intensive discussions with India with a view to convince the Indian
authorities to take the necessary steps for a correct implementation of its obligations under Article 70.8 and 70.9 of the TRIPS
Agreement. Until that time, the EC was confident that India was preparing the necessary steps concerning the implementation
of its obligations under these provisions without awaiting the end of the ongoing dispute settlement procedure (WT/DS50).
When it became clear that India was not in fact taking the necessary steps to implement the above provisions expeditiously, the
EC requested consultations under the DSU. The request for these consultations was submitted to India on 28 April 1997 and
was circulated to WTO Members on 6 May 1997 (document WT/DS79/1). Consultations were held on 14 May 1997. While
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those of complainants. In particular, pursuant to Article 10.3 of the DSU, third parties shall
receive the submissions of the (other) parties to the dispute to the first meeting of the panel.
This implied that third parties did not have access to any other submission of the parties to the
dispute. Pursuant to paragraphs 6 and 12(b) of Appendix 3 to the DSU, third parties were heard
in a separate session, but did not participate otherwise in the meetings of the panel with the
parties to the dispute. Pursuant to Article 17.4 of the DSU, only parties to the dispute, not third
parties, may appeal a panel report. Finally, pursuant to Article 22.2 of the DSU, under the
conditions set out in that provision, "any party having invoked the dispute settlement procedures
may request authorization from the DSB to suspend the application to the Member concerned of
concessions or other obligations under the covered agreements". As was apparent from this
provision, the DSB could not grant such authorization to a third party, since it had not "invoked
the dispute settlement procedures". If a third party wished to be released from these limitations,
its only option was to become a complainant in its own right.

- Moreover, contrary to India's position in the present dispute, the DSU did not contain
any obligation for a WTO Member to request dispute settlement procedures at a given point in
time, at least as long as the measures at issue giving rise to the dispute continued to apply.
Article 3.7 of the DSU specifically provided that "[b]efore bringing a case, Members shall
exercise their judgement as to whether action under these procedures would be fruitful". On the
basis of this provision, the Appellate Body had found in European Communities - Regime for
the Importation, Sale and Distribution of Bananas20 that WTO Members enjoyed broad
discretion whether to bring a case against another Member under the DSU. This discretion
necessarily also included the choice of the appropriate timing of a complaint. Launching a
dispute settlement procedure was an important policy decision that was influenced by a large
number of factors. The WTO was a Members-driven organization where Members enjoyed
discretion whether or not to resort to a particular form of action under the covered agreements.
Members might follow different strategies concerning the appropriate action in case of
violations of WTO obligations by other Members. On this basis, a Member might choose a
different timing of a complaint under the DSU for a measure already the subject of an earlier
panel proceeding. This possibility was specifically addressed and recognized in Article 10.4 of
the DSU, which would be stripped of any useful meaning if India's approach, according to
which Members had an obligation to join a complaint under Article 9 if they wanted to bring a
dispute on measures on which another Member was already complaining, were correct. As the
Appellate Body had found in United States - Standards for Reformulated and Conventional
Gasoline21, one of the corollaries of the "general rule of interpretation" contained in Article 31

these consultations failed to lead to a mutually acceptable solution, it was felt that the EC's position had been sufficiently
clarified so that India could have no doubt that the EC were willing to pursue the dispute settlement procedure further if
necessary. Again, it was the impression of the EC that by means of additional informal contacts it would be possible to avoid
further steps in the formal dispute settlement procedure. This was based also on the EC's experience, particularly in the TRIPS
context, that satisfactory solutions are very often found on the basis of informal contacts before resorting to a formal panel
process. In addition, at the time of the EC's formal consultations with India in May 1997, the panel process in the dispute
between the United States and India (WT/DS50) was well advanced and it would have been difficult for the EC to join this
ongoing dispute as a complainant, since the EC had chosen earlier on to act as a third party in that dispute. The EC does not
believe that a party can be a complainant and a third party in the same panel procedure. This reading of the relevant DSU
provisions is reinforced by the wording of Article 10.4 which in the view of the EC envisages successive procedures. As
becomes clear from the above, the EC did not make the same policy choice as the United States, namely to resort to early
dispute settlement procedures once the problem had been identified. Rather, the EC used all available channels in order to come
to a mutually satisfactory solution without submitting the matter to WTO dispute settlement. Unfortunately, these efforts failed
and the EC was left with no other option than to request the establishment of a panel as a complainant in order to be able to
protect its interests in the context of the enforcement provisions of the DSU (Articles 21 and 22), since these provisions require
the party seeking implementation of a panel report to have resorted to dispute settlement procedures as a complainant rather than
a third party (Article 22.2 DSU).
20 Report of 9 September 1997 (document WT/DS27/AB/R, paragraph 135)

21 Report of 29 April 1996 (document WT/DS2/AB/R, page 23)

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of the Vienna Convention on the Law of Treaties was that "interpretation must give meaning
and effect to all terms of a treaty. An interpreter was not free to adopt a reading that would
result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility".

- Contrary to India's allegations, the present case could not be compared with cases in
which other WTO Members had been acting as multiple complainants rather than third parties.
Moreover, by contrast to the situation in the Bananas dispute, where Panama had attempted to
get involved in the implementation of the DSB recommendations and rulings of a dispute
settlement procedure in which it had not participated, the EC did not claim to be entitled to a
particular role with regard to the implementation of the recommendations and rulings of the
DSB in the earlier dispute launched by the United States in which they were a third party
(WT/DS50). The present case was in fact as yet without precedent in WTO practice. However,
this situation was specifically addressed and resolved in Article 10.4 of the DSU.

4.24 India, in response, recalled that it had explicitly recognized that Members had the right to
decide whether and when to bring a complaint, including Members that had been a third party in a
previous proceeding. However, India's argument had been that the purpose of the second sentences of
Articles 9.1 and 10.4 of the DSU was to ensure that different Members with similar complaints submit
them concurrently to the same panel and that this purpose could not be achieved if these provisions were
interpreted as addressing only the situation in which such Members had already decided to submit their
complaints concurrently. The EC did not respond to this point at all. It also did not explain why it could
not bring its complaint jointly with the United States. It merely stated that it had made different
procedural choices. Implicit in the EC's contention was the claim that Articles 9.1 and 10.4,
notwithstanding the explicit wording of their second sentences, were no bar to the institution of a
successive complaint in respect of a measure which had been the subject-matter of an earlier proceeding.
However, it was India's contention that this claim of the EC in respect of Articles 9.1 and 10.4 would
encourage unnecessary and avoidable litigation, which the present complaint of the EC clearly did. The
EC attempted to distinguish the case of the successive complaint by Panama on the EC's banana rgime
from the present case by claiming that Panama "had attempted to get involved in the implementation of
the DSB recommendations and rulings of a dispute settlement procedure in which it had not
participated". However, was this not precisely what the EC was trying to do in the present case? The
EC's attempt to distinguish Panama's course of action from its own could not hide the fact that in this
case the EC was submitting India to a legal harassment to which the EC would not wish to be submitted
itself.

4.25 India further made the following points in relation to Article 9.1 of the DSU:

- The first sentence of Article 9.1 of the DSU authorized the DSB to establish a single
panel to examine multiple complaints. As far as the present case was concerned, this sentence
made clear that the DSB would have had the authority to establish a single panel if the United
States and the EC had submitted their requests for the establishment of a panel
contemporaneously. The second sentence of Article 9.1 went further and stipulated the referral
of multiple complaints to a single panel whenever feasible. Since the DSB could establish a
single panel to examine multiple complaints related to the same matter only when these were
submitted contemporaneously, the second sentence implied the duty to bring such complaints
contemporaneously whenever feasible.
WT/DS79/R
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- Articles 9 and 10 balanced two conflicting objectives: on the one hand, each
complainant must have the right to bring its own case, make its own claims and develop its own
arguments; on the other hand, each defendant and the WTO must be protected against
completely unnecessary re-litigation. The compromise the drafters had found was logical and
based on common sense: when complaints could be joined, they must be joined; when a third
party could submit its complaint about a measure to a panel that examined the same measure, it
must do so.

4.26 Addressing the points that India had made with regard to Articles 9.1 and 10.4 of the DSU, the
European Communities and their member States stated the following:

- India claimed that Article 9.1, second sentence, of the DSU created a duty to submit
disputes regarding the same matter by different WTO Members simultaneously to the same
panel. This reading of Article 9.1 of the DSU was clearly wrong. Article 9 dealt, in accordance
with its title, with a situation in which more than one complainant requested the establishment
of a panel on the same matter. Paragraph 1 of that provision was concerned with situations in
which such requests were made simultaneously by several complainants. The first sentence of
that paragraph allowed several WTO Members to request a single panel in such situations, while
the second sentence encouraged the DSB to resort to the establishment of a single panel
whenever feasible. Paragraph 3 dealt with a situation in which requests for the establishment of
a panel on the same matter were made successively, but at a time when the first panel had not
yet completed its work. In such situations, more than one panel would have to be established.
This provision clearly demonstrated that there could be no obligation for WTO Members to
request the establishment of a single panel on the same matter, since otherwise Article 9.3
would be superfluous. In WTO practice, Article 9.3 had already been used on several
occasions, specifically in two disputes concerning the EC. 22 These disputes demonstrated that
there was no obligation for several Members to submit their requests for the establishment of a
panel on the same matter simultaneously.

- In any case, the present dispute was governed by the procedural rule laid down in
Article 10.4 of the DSU. That provision explicitly dealt with the situation at hand and required
the dispute to be referred to the original panel. The term "original panel" was a term of art used
elsewhere in the DSU, namely in Articles 21.5 and 22.6, where it clearly dealt with procedures
which by their very nature could not be simultaneous with the procedure which the "original
panel" had been handling in the first place. The procedures referred to in these latter provisions
only occurred at the implementation stage of a dispute in which the "original panel" by
necessity had already circulated its report on the substance of the case. In other words, the term
"original panel" was used where the DSU referred to a panel having already dealt with the same
issue in an earlier procedure in which it had already completed its work. India submitted that its
interpretation of Article 9.1, which created a duty on WTO Members to submit disputes
simultaneously to the same panel, applied mutatis mutandis to Article 10.4. The EC did not
agree with India's interpretation of Article 9.1. To seek to apply this interpretation in addition to
Article 10.4, which had a different purpose, was obviously far-fetched.

22 Cf. the requests for the establishment of a panel by Canada on the one hand and by Chile and Peru on the other hand in the
dispute on European Communities - Trade Description of Scallops (WT/DS7/7 and WT/DS12/7 and WT/DS14/6) and the
requests by the United States on the one hand and Canada on the other hand in the dispute on European Communities -
Measures concerning Meat and Meat Products (Hormones) (WT/DS26/6 and WT/DS48/5).
 WT/DS79/R
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- The EC was, for these reasons, of the view that India's reading of Articles 9.1, second
sentence, and 10.4, second sentence, of the DSU was wrong and should be rejected by the
Panel. In this context, the EC had already drawn the attention of the Panel to the first sentence
of Article 3.7 of the DSU which - as had been confirmed by the Appellate Body in the Bananas
case23 - gave Members broad discretion whether to launch a dispute settlement case, which
necessarily included the discretion to decide on the timing of a dispute settlement procedure.

Normal dispute settlement procedures

4.27 India took the view that, in the alternative, if the Panel were to consider that Article 10.4 of the
DSU entitled the European Communities and their member States to bring their complaints, the Panel
would be obliged to apply the "normal dispute settlement procedures", as stipulated in Article 10.4, and
make an objective assessment of the facts and arguments presented in the present proceedings, as
required under Article 11 of the DSU. To support its view that it would have to be given the benefit of
the normal dispute settlement procedures, if the EC complaints were found to be consistent with rules of
the DSU on multiple complainants, India advanced the following arguments:

- The EC based its right to re-litigation on the first sentence of Article 10.4 of the DSU,
which provided:

"If a third party considers that a measure already the subject of a panel
proceeding nullifies or impairs benefits accruing to it under any covered
agreement, that Member may have recourse to normal dispute settlement
procedures under this Understanding."

The EC was thus requesting this Panel to go through the "normal dispute settlement procedures"
under the DSU for a purpose for which these procedures had obviously not been designed. The
role of a panel was to determine facts, to find the applicable law and to apply the law to the
facts. But the EC was not requesting this Panel to perform these functions. It was merely
requesting the Panel to perform the mechanical function of formally extending a ruling made in
an earlier panel proceeding to the present complaint.

- The EC had conceded that a re-litigation of the case would have systemic and practical
problems, when stating that "... a re-examination of the elements of the complaint in all legal
detail would go against the very purpose of Article 10.4 of the DSU. It would entail a repetitive
exercise of formalistic exchanges of views which would be entirely futile given that the legal
situation has already been clarified by the adoption of the earlier panel and Appellate Body
reports. It would also amount to a re-hearing of the case and would thus give the parties to the
dispute the opportunity of having the equivalent of a further appeal not foreseen in any
provision of the DSU ..." This statement was contradictory. The EC first claimed that it had the
right to resort to the "normal dispute settlement procedures" referred to in Article 10.4,
notwithstanding the fact that its complaint was "in all respects identical, from a legal point of
view, with the earlier complaint submitted by the United States"; however, it then claimed that
the application of the normal dispute settlement procedures "would be entirely futile", "amount
to a re-hearing of the case" and create the opportunity of "having the equivalent of a further
appeal". The EC thus interpreted Article 10.4 as conferring upon it a right whose exercise was
futile and dangerous for the multilateral trading system.

- The implication of the EC's argumentation was that Article 10.4 should be interpreted
as giving the EC the right to bring a new complaint and as barring India from submitting new

23 Cf. Appellate Body report on European Communities - Rgime for the Importation, Sale and Distribution of Bananas
(WT/DS27/AB/R), paragraph 135
WT/DS79/R
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arguments or new facts. This could not possibly be so. The Panel must either dismiss the
complaint "as entirely futile" or re-examine the matter as a new case in accordance with the
"normal dispute settlement procedures"; it could not first permit the complaint and then deny
the defendant the application of the normal dispute settlement procedures on the ground that this
would be entirely futile. The reasons that the EC advanced to deny India the right to normal
dispute settlement procedures were the very reasons that called for a dismissal of its complaint.
How could the EC reasonably expect any Member of the WTO to cooperate in one-sided
procedures violating the most basic principles of procedural justice?

4.28 The European Communities and their member States said that they recognized that normal
dispute settlement procedures were applicable in the present case. They remained, however, of the view
that points dealt with in the earlier dispute on the same subject should not be re-litigated in the present
dispute. The referral of this dispute to the original panel served the purpose of ensuring consistency and
procedural economy. Why would the parties have to repeat all the factual allegations and legal
arguments already submitted in the earlier dispute? The Panel was familiar with them and had already
made its findings on them, as much as the Appellate Body in the context of India's appeal in the earlier
dispute. The purpose of referring the dispute back to the original panel must be to limit the debate to
any new or unknown facts or new arguments on which the Panel had not yet had an opportunity to make
any findings, i.e the Panel should concentrate on any new or so far unknown factual allegations and
legal arguments. If it were otherwise, the danger of lack of consistency and of a wasting of resources
would be inevitable. In any case, panels should recognize earlier panel and Appellate Body reports as
relevant for the solution of a subsequent dispute in accordance with the Appellate Body report in Japan
- Taxation of Alcoholic Beverages.24

4.29 As regards the approach the Panel should take when applying the normal dispute settlement
procedures under Article 10.4 in the present case, India made the following points:

- The ruling in the previous case on Article 70.8 was based on the findings that the
evidence submitted by India had not been sufficient to rebut the presumption created by the
evidence adduced by the United States that the Indian mailbox system was inconsistent with
Indian law. In the present case, India had submitted evidence on the domestic situation that it
had not submitted in the previous case and had requested the Panel to engage in further
fact-finding. The facts before this Panel were therefore different. It was irrelevant whether or
not India had changed in patent rgime; relevant was only whether the evidence adduced by
India in the present proceeding was sufficient to rebut whatever presumption the evidence
submitted by the EC had created. As confirmed by the Appellate Body, a panel could not
interpret domestic law but must examine the applications of the domestic law. In such an
examination an important new element to be considered was the fact that since the initiation of
the United States' complaint (WT/DS50) about two years ago not even one attempt had been
made to challenge any of the mailbox applications while a total number of over
2,000 applications had been submitted.

- There was a significant difference between being guided "by the Appellate Bodys
decision", as the United States suggested in its third party submission in the present dispute, and
being guided by the Appellate Body's reasoning in the previous and other cases. If this Panel
were to declare that the Appellate Body had already decided the matter and that an independent
examination of the facts and arguments in the present case was therefore not necessary, it would
effectively declare the matter res judicata and deny India its procedural rights under the normal
dispute settlement procedures. The Panel could not logically first admit the complaint and then
declare the matter before it to have been decided by the Appellate Body.

24 Report of 4 October 1996 (WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, at page 14)

 WT/DS79/R
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- If the Panel were to be guided by the reasoning of the Appellate Body in the previous
and other cases, it would proceed as all panels under the normal dispute settlement procedures
did, using the reasoning in the previous case as a precedent. India was in fact urging the Panel
to use the Appellate Body's reasoning in the previous case as a precedent, in particular as
regards the inappropriateness of: (a) using the principle of predictability of conditions of
competition as a basis for expanding the scope of Article 70.8 and 70.9; (b) basing a finding of
inconsistency with the TRIPS Agreement on an interpretation of Indian law rather than an
examination of the application of Indian law; and (c) expanding the obligations under
Article 70.9 beyond the terms of this provision.

Article 70.8(a) of the TRIPS Agreement

4.30 The European Communities and their member States argued that, in view of the fact that the
Panel and the Appellate Body had already found in the earlier dispute that the present Indian domestic
rgime concerning the patent protection of pharmaceutical and agricultural chemical products was
inconsistent with India's obligations under Article 70.8 of the TRIPS Agreement, it followed pursuant to
Article 3.8 of the DSU that there was a presumption according to which this breach of the relevant WTO
rules by India had an adverse affect on the European Communities and their member States as the other
party to this dispute. In these circumstances, the burden was on India to rebut the presumption
according to which India's present domestic rgime for the patent protection of pharmaceutical and
agricultural chemical products nullified or impaired benefits accruing to the European Communities and
their member States under Article 70.8 of the TRIPS Agreement.

4.31 India argued that the Panel was not called upon to determine whether the mailbox system that
India had established was consistent with Indian law but whether India, in applying that law, was acting
in conformity with Article 70.8(a) of the TRIPS Agreement.

- The EC was relying on the municipal law of India to prove its claim that a competitor
could obtain a judicial order to force the Patent Office to examine and reject a mailbox
application and thereby make it ineligible for future patent protection. It was recognized that
"'municipal law' has to be proved by the party relying on such a law in an international
proceeding".25 It was thus for the EC to demonstrate that the domestic law of India was such as
to entail a violation of the obligations under Article 70.8(a). It was also recognized that an
international tribunal could not interpret municipal law; it must treat it as a fact to be
established by the party relying on it.26

- On this issue the Appellate Body had noted in its report on the previous case27:

"In public international law, an international tribunal may treat municipal law
in several ways.28 Municipal law may serve as evidence of facts and may
provide evidence of state practice. However, municipal law may also
constitute evidence of compliance or non-compliance with international
obligations. For example, in Certain German Interests in Polish Upper Silesia,
the Permanent Court of International Justice observed:

25 Mojtaba Kazazi, Burden of Proof and Related Issues: A Study on Evidence Before International Tribunals, Kluwer Law
International, 1996, page 368

26 Id.

27 Document WT/DS50/AB/R, paragraph 65

28 See, for example, I. Brownlie, Principles of Public International Law, 4th ed. (Clarendon Press, 1990), pages 40-42.
WT/DS79/R
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"It might be asked whether a difficulty does not arise from the fact that the
Court would have to deal with the Polish law of July 14th, 1920. This,
however, does not appear to be the case. From the standpoint of International
Law and of the Court which is its organ, municipal laws are merely facts which
express the will and constitute the activities of States, in the same manner as do
legal decisions and administrative measures. The Court is certainly not called
upon to interpret the Polish law as such; but there is nothing to prevent the
Court's giving judgment on the question whether or not, in applying that law,
Poland is acting in conformity with its obligations towards Germany under the
Geneva Convention."29 (emphasis by the Appellate Body)

- General international law, GATT 1947 precedents and the above ruling of the Appellate
Body all pointed in the same direction: the Panel was not called upon to interpret Indian law; it
was to give judgement on the question of whether India, in applying that law, had acted in
accordance with Article 70.8(a) of the TRIPS Agreement. India submitted that a distinction
must be made between: (i) evaluating the application of an Indian statute or regulations to
determine whether it violated WTO provisions; and (ii) deciding the purely municipal law issue
of whether a measure applied by India was valid under its domestic law. The first was clearly
necessary for the WTO to function effectively; the second was the responsibility of the
Government of India, namely, upholding India's Constitution and its laws as a sovereign
government. In India's view, in its report the Appellate Body had overlooked this central
distinction.

4.32 According to India, the EC bore the burden of proving that India had failed to establish a
mailbox system meeting the requirements of Article 70.8(a) of the TRIPS Agreement and not merely
that there were reasonable doubts that it had failed to do so.

- In the previous case, the United States and India had advanced conflicting views on
whether a competitor could obtain a judicial order to force the Patent Office to examine and
reject a mailbox application. The United States had claimed that this was possible, while India
had pointed out that it was not. Faced with these conflicting claims, the Panel had ruled that
"the current administrative practice creates a certain degree of legal insecurity in that it requires
Indian officials to ignore certain mandatory provisions of the Patents Act". 30 The Panel had also
ruled that:

"... even if the Patent Office officials do not examine and reject mailbox
applications, a competitor might seek a judicial order to force them to do so in
order to obtain rejection of a patent claim. If the competitor successfully
establishes the illegality of the separate storage and non-examination of
mailbox applications before a court, the filing of those applications could be
rendered meaningless."31

- The Panel had found that the Indian Supreme Court decisions which India had provided
to it only established that India's "reliance on an administrative practice regarding the handling
of pharmaceutical and chemical product applications is not unconstitutional". However,
according to the Panel, this evidence adduced by India did not demonstrate that "a court will

29 [1926], PCIJ Rep., Series A, No. 7, page 19

30 Document WT/DS50/R, paragraph 7.35

31 Document WT/DS50/R, paragraph 7.37

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uphold the validity of administrative actions which apparently contradict mandatory

legislation".32 It had concluded for these reasons that, notwithstanding India's commitment to
adapt its legislation on pharmaceutical and agricultural chemical products by the end of the
transitional period, "there would remain doubt during the transitional period regarding the
eligibility of these products for future patent protection".33

- The Panel thus had not found that the evidence submitted to it demonstrated that
mailbox applications would be invalidated under Indian law. However, on the basis of its
interpretation of that law, it had found that there was "a certain degree of legal insecurity" and
"doubt" because of an "apparent" contradiction with mandatory law. These doubts were in the
view of the Panel sufficient to find the Indian mailbox system to be contrary to Article 70.8(a)
because that provision required India to "eliminate any reasonable doubts" that the mailbox
applications and the patents based on them would not be invalidated. The Panel had thus
interpreted into the TRIPS Agreement the requirement that a Member must eliminate any
reasonable doubts that it had met the requirements set out in that Agreement.

- By ruling that India - the party subject to Article 70.8(a) - must remove any reasonable
doubts regarding its mailbox system, the Panel effectively had relieved the United States - the
party claiming a violation of Article 70.8(a) - of the burden of adducing evidence that the
violation had occurred. This shift of the burden of proof on to India would imply that the party
claiming a violation of Article 70.8(a) must merely prove that there were reasonable doubts
suggesting such a violation. It was then for the defending party to dispel those doubts. By
proceeding in this manner, the Panel had applied a standard of proof to the evidence to be
adduced by the defending party that no State with courts entitled to review administrative
actions could meet. India considered for these reasons that the Panel's interpretation of
Article 70.8(a) was not only substantively incorrect but also violated established principles
governing the burden and standard of proof. India had appealed therefore both from the
substantive finding and from its implications for the distribution of the burden of proof and the
standard of proof.

- While the Appellate Body had first ruled that Article 70.8(a) did not comprise the
obligation to eliminate "reasonable doubts" that mailbox applications would be invalidated, it
nonetheless subsequently declared it sufficient for the Panel to have concluded from the
evidence that it - the Panel - had "reasonable doubts" that such invalidation could occur.

- The Appellate Body had reversed the substantive finding of the Panel by
ruling:

"However, we do not agree with the Panel that Article 70.8(a)

requires a Member to establish a means 'so as to eliminate any
reasonable doubts regarding whether mailbox applications and
eventual patents based on them could be rejected or
invalidated because, at the filing or priority date, the matter for
which protection was sought was unpatentable in the country
in question'.34 India is entitled, by the 'transitional
arrangements' in paragraphs 1, 2 and 4 of Article 65, to delay
application of Article 27 for patents for pharmaceutical and

32 Document WT/DS50/R, paragraph 7.37

33 Document WT/DS50/R, paragraph 7.38

34 Id.
WT/DS79/R
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agricultural chemical products until 1 January 2005. In our

view, India is obliged, by Article 70.8(a), to provide a legal
mechanism for the filing of mailbox applications that provides
a sound legal basis to preserve both the novelty of the
inventions and the priority of the applications as of the
relevant filing and priority dates. No more."35

To India's great surprise, however, the Appellate Body had upheld the Panel's ruling on
the distribution of the burden of proof. It had found:

"... the United States put forward evidence and arguments that
India's 'administrative instructions' pertaining to mailbox
applications were legally insufficient to prevail over the
application of certain mandatory provisions of the Patents Act.
India put forward rebuttal evidence and arguments. India
misinterprets what the Panel said about 'reasonable doubts'.
The Panel did not require the United States merely to raise
'reasonable doubts' before the burden shifted to India. Rather,
after properly requiring the United States to establish a prima
facie case and after hearing India's rebuttal evidence and
arguments, the Panel concluded that it had 'reasonable doubts'
that the 'administrative instructions' would prevail over the
mandatory provisions of the Patents Act if a challenge were
brought in an Indian court."36

It was difficult to reconcile the two statements in the underlined portions of the above
extracts from the Appellate Body report. The Appellate Body first ruled that
Article 70.8(a) did not comprise the obligation to eliminate "reasonable doubts" that
mailbox applications would be invalidated. However, the Appellate Body subsequently
declared it sufficient for the Panel to have concluded from the evidence that it - the
Panel - had "reasonable doubts" that such invalidation could occur. The findings of the
Panel were consistent: it had interpreted Article 70.8(a) to require India to eliminate
any reasonable doubts as to the validity of mailbox applications and it had consequently
considered a demonstration that there were such doubts to be sufficient. The Appellate
Body had ruled that India did not have to eliminate any reasonable doubts but then
effectively reversed that ruling by considering a demonstration of doubts to be
sufficient.

4.33 India further advanced that Members should be given the benefit of the doubt on their own
interpretations of their municipal law and that the Panel and the Appellate Body had failed to apply the
principle that the conformity of the internal law of each State with its treaty obligations must be
presumed.

35 Document WT/DS50/AB/R, paragraph 58

36 Document WT/DS50/AB/R, paragraph 74

 WT/DS79/R
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Whether interpretations of municipal law were correct was to be determined by domestic courts

- India's arguments before the Panel in the present case amounted to the following. The
implementation of the TRIPS Agreement would require administrative, regulatory, and
legislative actions - or choices amongst them - based on interpretations by the executive
authorities of Members of their regulations, statutes and constitution. Whether such
interpretations were correct could only be determined by domestic courts. India's position was
that panels and the Apellate Body should give a Member the benefit of the doubt on its
interpretation of its own law unless there was evidence - such as a court decision - that the
Member's interpretation of its own law was manifestly incorrect. Members had the legitimate
expectation that the interpretation of their municipal law would be left to their domestic courts.

- As a matter of policy also, this was a wise approach for panels to follow. Panels had
special expertise in the area of WTO/GATT law which they did not have in the area of a
Members domestic law. Accordingly, they should give Members the benefit of the doubt on
their determinations under their domestic law. This was not the same as deferring to a
Members interpretations of WTO provisions or deferring to a Member's determination on
whether a particular factual situation met the WTO standard for imposing anti-dumping duties
or for imposing quantitative restrictions under Article 6 of the Agreement on Textiles and
Clothing. Thus, the view of the Panel in United States - Restrictions on Imports of Cotton and
Man-Made Fibre Underwear37 - that a "policy of total deference to the findings of national
authorities could not ensure an objective assessment as foreseen by Article 11" of the Dispute
Settlement Understanding - was clearly distinguishable from the present case. India was not
advocating a policy of deference: India recommended merely that not only should the burden
of showing that a measure taken by a Member to comply with its WTO obligations was invalid
under its domestic law be placed firmly on the Member challenging the validity of such a
measure, but Members should also be given the benefit of the doubt on their own interpretations
of their municipal law, as previous GATT panels had ruled.

- Otherwise, if panels resorted too quickly to adjudicating upon the validity of a

Member's actions under its domestic law, an anomalous situation could result where a particular
action of a Member stood invalidated on a panel's interpretation of the Member's domestic law
but was upheld by the Member's domestic courts. Also, panels should not permit the WTO to
be turned into a forum for adjudicating upon the validity of Members' measures under their
domestic law.

The Panel and the Appellate Body had failed to apply the principle that the conformity of the
internal law of each State with its treaty obligations must be presumed

- The Appellate Body had found in the previous case that the evidence adduced by the
United States had established the "presumption" that Indias "mailbox system" was inconsistent
with its Patents Act and that India had not submitted evidence rebutting that presumption. This
use of a "presumption" was contrary to established principles of international law.38

37 Document WT/DS24/R, paragraph 7.10

38 See Mojtaba Kazazi, Burden of Proof and Related Issues: A Study on Evidence Before International Tribunals, Kluwer Law
International, 1996, page 242. According to Kazazi this principle is reflected in Article 27 of the Vienna Convention on the Law
of Treaties, according to which a party to a treaty may not "invoke the provisions of its internal law as justification for its failure
to perform the treaty". For a summary of the current state of WTO case law on the issue of the burden of proof and on
presumptions, see the panel report on Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items,
WT/DS56/R, paragraphs 6.34-6.40.
WT/DS79/R
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- The practice of GATT 1947 panels had been consistent with the principle for the
settlement of disputes by international tribunals according to which the conformity of the
internal law of each state with its treaty obligations must be presumed and a party whose
internal law was claimed to be inconsistent with its treaty obligations must therefore be given
the benefit of the doubt regarding the interpretation of its internal law.39

- In the previous case, these principles had not been observed. Before the previous
Panel, the United States had pointed to certain provisions of the Patents Act that were capable of
different interpretations. The Panel and the Appellate Body had considered that the United
States had, by adducing this evidence, created a "presumption" that India's mailbox system was
inconsistent with its Patents Act. After an "examination" of the Patents Act, the Appellate Body
had concluded that India's "explanations" had not persuaded it that mailbox applications would
survive legal challenge under the Patents Act.

- It was an established principle of law, confirmed repeatedly by the Appellate Body, that
a party claiming a violation of a provision of the WTO Agreement by another Member must
assert and prove its claim and that the defendant enjoyed the benefit of the doubt when the
interpretation of its domestic law was at issue. The task of the EC was consequently to prove
that India's mailbox system was inconsistent with Indian law and that a mailbox application
could therefore be successfully challenged in an Indian court. It was not sufficient for it to
submit evidence merely casting doubt on that consistency in the minds of the Panelists. The
Appellate Body had failed to apply that principle of law in the previous case. India suggested
that the Panel be guided by the principles enunciated by the Appellate Body and not by the
failure to apply them in a single instance.

4.34 According to India, the Panel and the Appellate Body, in examining the complaint by the United
States in the earlier case, had improperly based their conclusions on their interpretation of Indian law.
- In the previous case, the Panel had ruled, on the basis of its own interpretation of the
provisions of the Patents Act, that the mailbox system was inconsistent with mandatory
requirements of the Patents Act40 or "apparently" inconsistent.41 It did not examine whether
India, in applying its Patents Act, had established a mailbox system, but whether the Patents Act
permitted it to do so. And the Panel did not determine whether a competitor had, in fact,
obtained a judicial order to reject a mailbox application but concluded on the basis of its own
assessment of Indian law that an Indian court hypothetically might do so, assuming that a
competitor mounted a legal challenge to Indias mailbox in a competent Indian court. However,
the Panel failed to note that basic principles of standing and ripeness 42 applicable in Indian law
stood in the way of such a court order.43

- The Appellate Body had not acted in accordance with the principle it had itself
enunciated. Rather than examining how India had applied its law on the basis of the
interpretation of that law by the Indian authorities, the Appellate Body had based its conclusions
on its own interpretation of municipal law. It had ruled as follows:
39 See, for example, report of the panel on United States - Measures Affecting Alcoholic and Malt Beverages, adopted on 19
June 1992, BISD 39S/206, 284-287, 296-297; and the report of the panel on United States - Measures Affecting the
Importation, Internal Sale and Use of Tobacco, adopted on 12 August 1994, DS44/R, paragraph 75; see also document L/5863
concerning an unadopted GATT panel report, dated 17 September 1985, paragraphs 58 and 59 ("gold coins").
40 Document WT/DS50/R, paragraph 7.35

41 Document WT/DS50/R, paragraph 7.37

42 See further under paragraph 4.17 below.

43 Document WT/DS50/R, paragraph 7.37
 WT/DS79/R
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"Section 5(a) of the Patents Act provides that substances 'intended for use, or
capable of being used, as food or as medicine or drug' are not patentable.
'When the complete specification has been led in respect of an application for a
patent', section 12(1) requires the Controller to refer that application and that
specification to an examiner. Moreover, section 15(2) of the Patents Act states
that the Controller 'shall refuse' an application in respect of a substance that is
not patentable. We agree with the Panel that these provisions of the Patents Act
are mandatory.44 And, like the Panel, we are not persuaded that India's
'administrative instructions' would prevail over the contradictory mandatory
provisions of the Patents Act.45 We note also that, in issuing these
'administrative instructions', the Government of India did not avail itself of the
provisions of section 159 of the Patents Act, which allows the Central
Government 'to make rules for carrying out the provisions of [the] Act' or
section 160 of the Patents Act, which requires that such rules be laid before
each House of the Indian Parliament. We are told by India that such rule
making was not required for the 'administrative instructions' at issue here. But
this, too, seems to be inconsistent with the mandatory provisions of the Patents
Act.

"We are not persuaded by India's explanation of these seeming contradictions.

Accordingly, we are not persuaded that India's 'administrative instructions'
would survive a legal challenge under the Patents Act. And, consequently, we
are not persuaded that India's 'administrative instructions' provide a sound legal
basis to preserve novelty of inventions and priority of applications as of the
relevant filing and priority dates."46

- The rulings of the Appellate Body were contradictory. It first confirmed that an
international tribunal could not interpret domestic law but could only examine the application of
that law. This should have led the Appellate Body to examine such questions as: has India
established a mailbox system; have mailbox applications been challenged in Indian courts; has
any Indian court declared a mailbox application invalid? The fact that India had received 1924
mailbox applications between 1 January 1995 and 15 October 1997, not one of which had been
rejected or invalidated, should have been central to the Appellate Body's considerations.
Instead, the Appellate Body had interpreted Indian law and examined the questions: is the
mailbox system consistent with India's Patents Act; can mailbox applications be challenged
under Indian law in Indian courts; can mailbox applications be declared invalid under Indian
law? The central finding of the Appellate Body on which it based its conclusion was: "we are
not persuaded that India's "administrative instructions" would survive a legal challenge under
the Patents Act". It was thus on the basis of its own interpretation of the Patents Act, rather than
an assessment of the application of that Act, that the Appellate Body had ruled against India.

- The Appellate Body had justified this seeming contradiction as follows:

"It is clear that an examination of the relevant aspects of Indian municipal law
and, in particular, the relevant provisions of the Patents Act as they relate to the

44 Document WT/DS50/R, paragraph 7.35

45 Document WT/DS50/R, paragraph 7.37

46 Document WT/DS50/AB/R, paragraphs 69-70

WT/DS79/R
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'administrative instructions', is essential to determining whether India has

complied with its obligations under Article 70.8(a). ... To say that the Panel
should have done otherwise would be to say that only India can assess whether
Indian law is consistent with India's obligations under the WTO Agreement.
This, clearly, cannot be so."47

These formulations disguised the Appellate Body's approach to the municipal law of India and
misrepresented the issue that had been before the Appellate Body. India had not claimed or
implied that only India "can assess whether Indian law is consistent with India's obligations
under the WTO Agreement". India did assert, however, that only its courts could determine
whether the application of the Patents Act by the Government of India was consistent with
Indian law and that the role of WTO panels and the Appellate Body was to judge whether
India's application of its law was consistent with its WTO obligations. This did not mean that
Members wishing to challenge the implementation of WTO obligations under domestic law
were defenseless. It merely meant that it was not sufficient for them to base their claims merely
on one possible interpretation of the domestic law, as the EC was doing in this case. If the
parties to a dispute advanced different interpretations of domestic law and the interpretation of
that law had not been settled by the domestic courts, the party whose law was at issue should be
given the benefit of the doubt. It was in the interest of all Members of the WTO that this
principle be applied. Each Member's economic interests were adequately protected if panels,
whenever the interpretation of the domestic law had not yet been settled by municipal courts,
examined how the defendant's domestic authorities actually applied the defendant's domestic
law to products, services and service suppliers or holders of intellectual property rights from the
complainant. No Member would wish to be told by a panel or the Appellate Body, as India had
been told in the previous case, that it was violating its own domestic law.

4.35 India also argued that the interpretation by the Panel and Appellate Body of Indian law in the
earlier case had been incorrect.

- The Patents Act required the Controller to refer patent applications to an examiner; it
did not, however, specify the time-frame within which the Controller must do so. The Indian
authorities were of the view that, given their broad powers under the Indian Constitution in the
field of intellectual property and in the implementation of international treaties, they could use
the resulting discretion to postpone the referral of applications for pharmaceutical and
agricultural chemical products until 2005 because such products would in any case be
patentable only then.

- The Indian authorities were further of the view that the principle of ripeness
consistently applied by Indian courts prevented any legal challenge to mailbox applications
because these conferred only a potential, future right. 48 The Appellate Body, in an incomplete
assessment of that legal situation, concluded that it was not convinced that the Indian authorities
were acting in accordance with Indian law. The Appellate Body conducted what it called "an
examination of the relevant aspects of Indian municipal law" and declared that it was not
persuaded by the "explanations" given by India. In fact, the "examination" of Indian law had
been an interpretation of that law and the "explanations" rejected had been the interpretations of
that law by the Indian authorities.

4.36 India further advanced that the mailbox system it had established was consistent with
Indian law.

47 Document WT/DS50/AB/R, paragraph 66

48 See further under paragraph 4.17 below.

 WT/DS79/R
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- Section 6 of the Patents Act permitted the receipt of any application for a patent that
related to an "invention". Section 2(1)(j) of the Patents Act defined an invention to include "any
new and useful substance produced by manufacture" and "any new and useful improvement of
them". This definition was broad enough to include new pharmaceutical and agricultural
chemical products.

- Section 3 of the Patents Act set forth certain categories of inventions or alleged
inventions which were not considered inventions within the meaning of the Act. Since
pharmaceutical and agricultural chemical products per se were not excluded under Section 3,
they were "inventions" in respect of which applications might be received under Section 6 of the
Act.

- Section 5 of the Act recognized that there might be an invention in relation to a

pharmaceutical or agricultural chemical product, but provided that such an invention was
patentable only with respect to the process by which it was made and not with respect to the
product itself. Therefore, Section 5 of the Patents Act only prohibited the grant of a patent for
such a product, not the receipt of an application for a patent for such a product.

- Accordingly, Section 6 of the Patents Act as interpreted and applied administratively

did provide a "means" for the receipt of applications for product patents for pharmaceuticals and
agricultural chemicals. These applications were being identified and placed in a separate
category by the Patent Offices and were not being examined. They were also being allotted a
filing date, a serial number and a title, which would entitle them to priority when
pharmaceutical and agricultural chemical product patents were finally granted. Further, they
were not being rejected because they were not being referred by the Controller of Patents to
examiners for examination under Section 12(1) of the Patents Act. This was because, following
interdepartmental consultations, the Indian executive authorities had issued administrative
instructions to the Controller of Patents not to refer mailbox applications for examination by an
examiner until the Patents Act was amended to provide for product patents for pharmaceutical
and agricultural chemical products.

- Contrary to the assertions of the Panel and the Appellate Body in the previous case,
there was no conflict between the above exercise of executive power under Article 73 of India's
Constitution and Section 12(1) of the Patents Act. Although Section 12(1) mandated that the
Controller must refer all applications to an examiner, it did not specify any time for doing so. In
light of this statutory silence, the executive power of the Government of India extended to
specifying a reasonable time for referring applications for examination in order to fulfil India's
obligations under Article 70.8(a). Therefore, there was no conflict between the administrative
instructions in question and Section 12(1) of the Patents Act. This followed from the
fundamental principle of statutory interpretation in Indian domestic law that a statutory
provision must be interpreted consistently with Indias international obligations, whether under
customary international law or an international treaty or convention. In this context, Justice
G.P. Singh, one of the leading authorities on the principles of statutory interpretation in India
and a former Chief Justice of the High Court of the State of Madhya Pradesh, had stated as
follows49:

"If the terms of the legislation are not clear ... and are reasonably capable of
more than one meaning, the treaty itself becomes relevant, for there is a prima
facie presumption that Parliament does not intend to act in breach of
international law, including therein a specific treaty obligation; and if one of the

49 Justice G. P. Singh, Principles of Statutory Interpretation, Wadhwa & Co., Nagpur, 6th ed., 1996, pages 380-81
WT/DS79/R
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meanings which can reasonably be ascribed to the legislation is consonant with

the treaty obligations and another or others are not, the meaning which is
consonant is to be preferred.50 Article 19 of the Universal Declaration of
Human Rights which declares that everyone has a right to freedom of opinion
and expression 'regardless of frontiers' was referred to in holding that the right
of freedom of speech and expression guaranteed by Article 19(1)(a) of the
Constitution is not restricted to the territory of India. 51 And, Article 11 of the
International Covenant on Civil and Political Rights, which provides that no
one shall be imprisoned merely on the ground of inability to fulfil a contractual
obligation has greatly influenced the court in giving a limited meaning to
section 51 and order 21 Rule 37 of the Code of Civil Procedure. 52 If States are
parties to a convention which permits a foreigner when sentenced to
imprisonment for a crime to be transferred to the State of which he is the
citizen for serving out the sentence on humanitarian grounds, it may not be
proper to detain him under a preventive detention law instead of prosecuting
him for a criminal offence as that will deprive him of the beneficial provisions
of the convention of being transferred to his home State."53

This principle of statutory interpretation held good even if the statute in question pre-existed the
treaty obligation.54

- Under Indian law, there was also another independent principle of statutory
interpretation, namely that, even where a statutory provision specified a time for performing a
statutory duty, the time specified was only directory and not mandatory. Thus, Justice Singh
noted that:

"... [W]here a public officer is directed by a statute to perform a duty within a

specified time, the cases establish that provisions as to time are only
directory ... A provision fixing a time, within which a public officer or
authority has to act in performance of a duty, generally means that the statute
considers it reasonable for the officer or authority to act within the said
period."55

Therefore, India submitted that the time within which the Controller of Patents had been
instructed to refer the mailbox applications to an examiner - i.e., only after amendment of the
Patents Act to provide for product patents for pharmaceutical and agricultural chemicals - was
reasonable in light of India's obligation under Article 70.8(a) to establish a mailbox pending the
introduction of patent protection for these products.

- Further, Article 73 of India's Constitution conferred upon the Government of India

executive power of the widest latitude over all subjects in which Parliament had legislative
competence. This power extended to filling lacuna administratively in statutes, rules or
regulations.56 The executive power of the Government of India to enter into, and implement
treaties, was derived from the legislative power of the Union of India incorporated in

50 Salamon v. Commr. of Customs and Excise, (1996) All ER 871 (CA), page 875, etc.
51 Maneka Gandhi v. Union of India, (1978) 1 SCC 248
52 Jolly George Verghese v. Bank of Cochin, (1980) 2 SCC 360
53 Kubic Dariusz v. Union of India, AIR 1990 SC 470
54 Peoples Union for Civil Liberties v. Union of India, (1997) 1 SCC 301
55 Justice G. P. Singh, supra note 49, pages 244-245
56 Union of India vs. H. R. Patankar and Others, (1984) Supp. SCC 359; and J. R. Raghupathy vs. State of A.P., (1988) 4 SCC
364
 WT/DS79/R
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Articles 246 and 253 read with Entry 14 of List I of the Seventh Schedule of the Indian
Constitution.57 The Government of India also had executive power over "patents, inventions
and designs", which fell under Entry 49 of List I. Based on these powers, the Government of
India had decided to store applications for pharmaceutical and agricultural chemical products
separately for future action under Article 70.8 and 70.9 of the TRIPS Agreement and to instruct
the Controller of Patents not to refer them to an examiner until 2005.

- In addition, the Government of India had also bound itself to observe its obligations
under Article 70.8 by virtue of a statement in Parliament. On 2 August 1996, the Government
had stated in Parliament as follows:

"The Patent Offices have received 893 patent applications in the field of drug
or medicine from Indian or foreign companies/institutions until 15 July 1996.
The applications for patents will be taken up for examination after
1 January 2005, as per the World Trade Organization (WTO) Agreement which
came into force on 1 January 1995."

Such statements were considered binding upon the Government under the Indian Constitution.

4.37 Further, according to India, mailbox applications could not be challenged in Indian courts and
invalidated under the Patents Act.58

- Contrary to what the Panel had found in the earlier dispute (WT/DS50) on the basis of
the limited evidence submitted to it, an Indian court would never examine a request by a
competitor to force the Controller of Patents to refer a mailbox application to an examiner for
examination. In fact, such a request could not be entertained because basic principles of
standing and ripeness dictated the rejection of challenges to contingent, future rights such as
those of mailbox applicants to receive patents in the year 2005. 59 A mailbox application gave an

57 Maganbhai v. Union of India, (1970) 3 SCC 401

58 In response to a question from the Panel as to whether general Indian law allowed for the possibility of administrative
decisions (including decisions not to act in particular circumstances) to be challenged in an administrative tribunal or other
judicial body, in particular on grounds of inconsistency with a statutory provision, India informed the Panel that Article 226 of
the Indian Constitution has been interpreted as giving the High Court the power of judicial legislative and administrative action.
This includes the power to review administrative regulations or instructions on the ground that they violate statutory provisions.
The High Court is the highest court in each State and is the intermediate appellate court in India's unified system of courts. In
response to a follow-up question from the Panel, India provided more detailed information to the Panel on this review
possibility. In exercising this authority, the main principles guiding the High Court are:

-According to a well-established principle of Indian administrative law, administrative instructions cannot be issued on any
matter which is the subject of legislation. Wherever there is no statutory provision or where there are gaps in any
enactment, the same can be provided or bridged by issue of necessary administrative instructions. The only rider on
the authority to issue such administrative instructions is that there should be no statutory provision either expressly or
by necessary implications to the contrary.

- Administrative acts done in the purported exercise of a statutory power can be invalidated by the Court, if
constitutional limits or statutory powers have been transgressed.

- Judicial review in respect of administrative acts not done in the purported exercise of a statutory power, but in the
exercise of the executive power, is directed towards its manner and mode, and not the administrative decision taken on
merits. The standard for this review is whether the exercise of the discretionary power has been "unfair", "arbitrary"
or "malafide".

- Neither will the Supreme Court or High Courts interfere or adjudicate upon government policy matters, unless
fundamental principles of law have been violated.
59 In response to a question from the Panel, India informed the Panel that, to demonstrate a proper "cause of action" in a legal
challenge to the validity of India's mailbox under Article 226 of the Constitution, a competitor of a mailbox applicant must
demonstrate not only that his legal right has been violated as a result of the establishment of the mailbox but also must make a
WT/DS79/R
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applicant only a right to receive a patent for a pharmaceutical or agricultural chemical product
in the future when India would provide for the grant of such patents under its Patents Act.
Further, the applicant must satisfy the Patent Office that the applicable criteria for the grant of a
patent under the Patents Act were met. Thus, a mailbox application gave an applicant at best a
contingent, future right, which - under the principles of standing and ripeness applied in India as
in other common law countries - could never be successfully challenged in court. This was
confirmed by the fact that none of the mailbox applications which India had received and
published in the Gazette of India had been challenged in court.

- The EC had not demonstrated that mailbox applications would not survive legal
challenge under the Patents Act.

- Interpretation of domestic laws would inevitably be uncertain until a competent court

had spoken. How could a Member in the meantime demonstrate that its authorities were acting
on the basis of the correct interpretation? Since mailbox applications could not be challenged in
Indian courts, how could India under these circumstances ever rebut a presumption that mailbox
applications would not survive challenge in Indian courts?

4.38 Finally, India argued that applications had been received, and continued to be received, by the
Patent Office and stored for future action. They were recorded and published in the Gazette of India;
therefore, the necessary facts were there to determine the novelty and priority of the inventions in
question in accordance with the dates of these applications and to decide on the grant of patents on them
when their patentability would be due in accordance with Article 70.8(b) and (c).

- Between 1 January 1995 and 31 January 1998, India had received 2,212 mailbox
applications, not one of which had been rejected or invalidated. All mailbox applications -
including their serial numbers, dates, name of applicant and the titles - were advertised in the
Gazette of India. This advertisement was made irrespective of whether the product for which
the patent was sought was patentable. There was nothing in Indian law that prevented the
Patent Office from receiving and storing the applications for future action under Article 70.8 of
the TRIPS Agreement, and the record of the applications advertised in the Gazette of India
could obviously not be erased. The registration, dating, storage and publication of these
applications could therefore not be litigated out of existence. There was consequently nothing
that could possibly prevent India, when patents were due in accordance with subparagraphs (b)
and (c) of Article 70.8, from deciding to grant such patents on the basis of the applications
currently submitted and determine the novelty and priority of the inventions in accordance with
the date of these applications.

4.39 The European Communities and their member States were of the view that India had not
advanced any new elements that had not yet been considered in the earlier dispute or that were
otherwise relevant for the resolution of the present dispute.

- India basically claimed that Section 5 of its Patents Act prohibited the grant of a patent
for pharmaceutical or agricultural chemical products without however prohibiting the filing of
an application for such products. India furthermore claimed that, therefore, the filing of an
application for such products was possible under Section 6 and, thus, constituted a sufficient

showing of actual damage suffered as a result of the mailbox. A mailbox application would result in the grant of a patent or
exclusive marketing right ("EMR") only if and when: (i) India amended the Patents Act to provide for the grant of product
patents for pharmaceutical and agricultural chemical products under its Patents Act; and (ii) the mailbox application satisfied
any relevant criteria for the grant of a patent or EMR, as the case may be, under the amended Patents Act. Until these conditions
were satisfied, no competitor of a mailbox applicant will be able to demonstrate this merely because a mailbox application for a
competing product has been received for the grant of a patent or an EMR in the future. Accordingly, an Indian court would
reject his legal challenge to India's mailbox on the ground that he cannot demonstrate that he has suffered actual damage.
 WT/DS79/R
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"means" for the filing of an application under Article 70.8(a) of the TRIPS Agreement. These
arguments were not new, since these provisions of the Indian Patents Act had been submitted to
the Panel in the earlier dispute and had not been amended since. They were not relevant,
because Section 15(2) of the Indian Patents Act, which was of mandatory nature, instructed the
Controller to refuse an application for an invention that was not patentable under the Act. The
possibility of the filing of an application that must be refused under a mandatory provision of
the domestic legislation of a WTO Member did not constitute an adequate "means" for the filing
of an application under Article 70.8(a) of the TRIPS Agreement.

- India moreover claimed that under Section 12(1) of the Indian Patents Act, no time was
specified for the referral of an application to an examiner. Therefore, in India's view, there was
no conflict between the administrative instructions of the Indian executive authorities to the
Controller of Patents and Section 12(1) of the Patents Act. This question had been extensively
discussed in the earlier dispute, in particular in paragraph 7.35 of the Panel report in the earlier
dispute and in paragraph 69 of the Appellate Body report in that dispute. The EC believed that
everything necessary had already been said with regard to this question. Given this discussion,
the EC could not agree with India that the terms of its Patents Act were unclear as to the action
to be taken by the Controller once an application had been filed or with regard to the timing of
such action. Under these circumstances, the EC could not see the relevance of the statement of
Justice G.P. Singh quoted by India in the context of the present dispute. The same went with
regard to the argument that statutory time-limits were not mandatory since it was in apparent
contradiction with the terms of the Indian Patents Act, which did not allow any delay in the
referral of an application to an examiner. In other words, Section 12(1) of the Indian Patents
Act simply did not contain a time-limit, since it provided for immediate action; the section
started with the word "when", which did not provide for any delay. Again, the EC failed to see
a lacuna that could be filled in by administrative instructions.

- The statement made by the Indian Government before the Indian Parliament on
2 August 1996 had already been mentioned in the earlier dispute. Whatever declarations the
Indian Government might have made before the Parliament or elsewhere, they did not change
the fact that the Indian Patents Act contained in Section 12(1) a mandatory provision requiring
the Controller to refer any application to an examiner "[w]hen the complete specification has
been filed in respect of an application for a patent". Moreover, as already stated before,
Section 15(2) of the Indian Patents Act required the Controller to refuse an application if it
appeared to him that the invention claimed in the specification was not patentable under the Act.
Both provisions contained the auxiliary "shall", which did not allow the exercise of any
discretion by the Controller.

- It was obvious that the Indian authorities themselves had come to the conclusion that
the existing Patents Act of 1970 did not suffice to bring India's domestic legislation into
conformity with its obligations under Article 70.8(a) of the TRIPS Agreement when they had
decided at the end of 1994 to promulgate the Patents (Amendment) Ordinance, 1994, in order to
remedy the apparent shortcomings of the existing Patents Act of 1970. For the same reason,
India had submitted a Bill to its Parliament aiming at an amendment of the Patents Act of 1970.
Indias assertion in the present dispute that the Patents Act of 1970 was in compliance with its
obligations under Article 70.8 of the TRIPS Agreement, although the proposed amendment had
never been enacted, was simply not credible.

- India had also referred to the principles of standing and ripeness which would prevent a
challenge in India's courts with a view to force the Controller of Patents to refer a mailbox
application to an examiner for examination. Even if this were correct, this did not exclude the
possibility of other forms of private disputes concerning the novelty and the priority of a
mailbox filing. In particular, the EC could not see any reason why litigation between two or
WT/DS79/R
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more applicants about the time or the formalities of a filing under Article 70.8(a) of the TRIPS
Agreement could not lead to litigation before an Indian court at any time before the year 2005.
A dispute on the relevant filing date could, in particular, arise before the year 2005 as a
preliminary issue in the context of a court procedure regarding the granting of an exclusive
marketing right under Article 70.9 of the TRIPS Agreement. In such court procedures, the fact
that there was presently no legal basis in India for the filing of a mailbox application made it
impossible, or at least unnecessarily difficult, for an applicant to defend his position in the
Indian courts. The fact that so far no mailbox application had been challenged in the Indian
courts was in this context irrelevant, since it might be based precisely on the fragile status of
such applications in India. Moreover, India did not even contest that such disputes could arise
after the year 2005 and would then have to be judged under the law applicable at the time of
filing. In other words, the legal uncertainty created by the present Indian legal situation would
be carried forward into the future.

4.40 India replied that, by arguing that India's interpretation of its own laws was incorrect and
inviting the Panel to adopt another interpretation of India's Patents Act, the EC again failed to address
the basic issue before the Panel.

- According to the consistent jurisprudence of international tribunals, including the

Appellate Body, Indian law could not be interpreted by this Panel, but must be treated as a fact.
It was therefore not relevant for this Panel whether India had acted consistently with its own
laws. The Panel was bound to presume that this was so because only Indian courts could decide
that question. What was relevant for this Panel was whether the measures which India had
taken were consistent with the TRIPS Agreement, i.e. whether India had applied its laws in such
a manner as to provide a means of filing mailbox applications.

- The EC did not contest that India received, published and stored mailbox applications
and that all such applications had remained unchallenged. Moreover, the EC confirmed that
about one thousand EC companies had made use of India's mailbox system. The EC thus did
not deny that India had in fact provided a means of filing patent applications for pharmaceutical
and agricultural chemical products.

- The EC's only claim was that this means of filing was inconsistent with Indian law and
that, because of the resulting legal uncertainty, the means of filing was also inconsistent with
India's obligation under Article 70.8 of the TRIPS Agreement. It was thus perfectly clear from
the EC's argumentation that the Panel could make the requested ruling on the alleged
inconsistency with the TRIPS Agreement only if it first found the mailbox system to be
inconsistent with Indian law. That finding, however, this Panel was not authorized to make.

Article 70.9 of the TRIPS Agreement

4.41 The European Communities and their member States argued that, in view of the fact that the
Panel and the Appellate Body had already found in the earlier dispute that the present Indian domestic
rgime concerning the patent protection of pharmaceutical and agricultural chemical products was
inconsistent with India's obligations under Article 70.9 of the TRIPS Agreement, it followed pursuant to
Article 3.8 of the DSU that there was a presumption according to which this breach of the relevant WTO
rules by India had an adverse affect on the European Communities and their member States as the other
party to this dispute. In these circumstances, the burden was on India to rebut the presumption
according to which India's present domestic rgime for the patent protection of pharmaceutical and
agricultural chemical products nullified or impaired benefits accruing to the European Communities and
their member States under Article 70.9 of the TRIPS Agreement.
 WT/DS79/R
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4.42 India argued that the interpretation of Article 70.9 of the TRIPS Agreement by the Panel in the
earlier case had not been based on Article 31 of the Vienna Convention on the Law of Treaties and the
Panel had incorrectly interpreted Article 70.9 as requiring implementation of its provisions before
specified events had occurred.

The terms of Article 70.9

- According to Article 70.9, exclusive marketing rights must be granted by India to a

pharmaceutical or agricultural chemical product for which a patent application had been made
in accordance with Article 70.8(a) only after the following events had occurred:

(a) a patent application had been filed in respect of that product in another Member
of the WTO after 1 January 1995;

(b) the other Member of the WTO had granted the patent;

(c) the other Member had approved the marketing of the product;

(d) India had approved the marketing of the product.

- There was nothing in the text of Article 70.9 that set out the obligation to make a
"system" for the grant of exclusive marketing rights generally available in the domestic law
before the events listed in this provision had occurred. The terms of Article 70.9 stipulated that
exclusive marketing rights "shall be granted" to specified products. The Panel, however, had
interpreted this provision as if it read: "the competent authorities of the Members shall have the
authority to grant exclusive marketing rights", i.e. whether or not such rights had to be granted.

- India had not denied the grant of exclusive marketing rights to any product meeting the
above conditions. The Panel had faced the same fact in the earlier dispute but had nevertheless
concluded that India did not comply with its obligations under Article 70.9 of the TRIPS
Agreement because it had failed to establish under its domestic law "a system" that enabled the
executive branch of India to grant exclusive marketing rights as of the entry into force of the
WTO Agreement.60

Context

- That the previous panel had expanded the meaning of Article 70.9 beyond its terms
became obvious when the text of Article 70.9 was read in its context. There were many
provisions in the TRIPS Agreement which explicitly obliged Members to change their domestic
law to permit their authorities to take certain action in favour of interested parties. Thus,
according to Articles 42-48 of the TRIPS Agreement, the judicial authorities of Members "shall
have the authority" to grant certain rights. Article 51 obliged Members to "adopt procedures" to
enable right holders to prevent the release of counterfeited or pirated products from customs.
Article 39.2 required Members to give natural and legal persons "the possibility of preventing"
the disclosure of information. According to Article 25.1, "Members shall provide for the
protection" of certain industrial designs and Article 22.2 obliged Members to "provide the legal
means for interested parties to prevent" certain misuses of geographical indications. The terms
of all these provisions of the TRIPS Agreement clearly created an obligation to empower the
executive authorities to take specified actions before the need to take such actions actually
arose. The question for the Panel therefore was: if the drafters had intended Article 70.9 to
entail the obligation to create in the domestic law the legal authority for the grant of exclusive

60 Document WT/DS50/R, paragraph 8.1

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marketing rights, why had they not repeated the wording used in one of the numerous
provisions that explicitly provided for the creation of the authority to grant rights to interested
parties?

- A comparison of the terms of Article 70.9 with those of Article 27 according to which
"patents shall be available" for inventions was also revealing. The ordinary meaning of
"available" was "obtainable". Article 27 thus clearly created the obligation to make patents
obtainable under domestic law before any application for a patent must be accepted.
Article 70.9, by contrast, merely stipulated that "exclusive marketing rights shall be granted" to
specific products after the occurrence of specified events. There was nothing in these terms that
suggested that such rights must be obtainable in the domestic law.

- The Panel had examined Article 70.9 only in the context of Article 27, not any of the
other provisions cited above. The relevance of the distinction between "shall be available" and
"shall be granted" in the wording of these related provisions was tersely dismissed by the Panel
as follows: "The implementation of Article 70.9 requires a system under which applications for
exclusive marketing rights can be made"61 because "an exclusive marketing right cannot be
'granted' in a specific case unless it is 'available' in the first place".62

- The Panel was of course factually correct when pointing out that, after the events set
out in Article 70.9 had occurred with respect to a particular product, the distinction between
"shall be available" and "shall be granted" lost its practical relevance because a change in
domestic law might then in any case be required. However, this begged the question that was
before the Panel, namely: does a Member have to make exclusive marketing rights available in
its domestic legislation before these events have occurred? It was simply not logical to conclude
that exclusive marketing rights must be made available in the domestic legislation before these
events because such availability was in any case necessary once the events had occurred.

- There were numerous transitional provisions throughout the various WTO agreements
that required action at some point in the future, either when a date had arrived or an event had
occurred. Tariff concessions must be reduced in stages.63 Import restrictions on textiles must be
removed after a ten-year transitional period.64 Developing countries must phase out export
subsidies for any product that had reached a certain share of world trade. 65 These were all
obligations that were, just like those under Article 70.8 and 70.9 of the TRIPS Agreement,
contingent upon a date or event. If the logic applied by the Panel to Article 70.9 was correct,
then all the transitional provisions under the WTO Agreement imposing an obligation as from a
future date or event would have to be interpreted to comprise the additional obligation to change
the domestic law in anticipation of the future date or event. This was, however, obviously not
intended by any of these transitional provisions.

- The Panel, though repeatedly urged to do so by India, had not examined the context of
Article 70.9 fully. No reference was made in the Panel's findings to, for instance, Articles 42-48
of the TRIPS Agreement, according to which the judicial authorities of Members "shall have the
authority" to grant certain rights and which thus clearly expressed the notion that the Panel had
discovered in Article 70.9. The Panel's failure to examine this central interpretative issue was
impermissible. The question therefore remained: if the drafters had intended Article 70.9 to
entail the obligation to create in the domestic law the legal authority for the grant of exclusive

61 Document WT/DS50/R, paragraph 7.56

62 Document WT/DS50/R, footnote 112
63 Paragraph 2 of the Marrakesh Protocol to the GATT 1994
64 Article 9 of the Agreement on Textiles and Clothing
65 Article 27.5 and 27.6 of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement")
 WT/DS79/R
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marketing rights, why had they not repeated the wording used in one of the numerous
provisions that explicitly provided for the creation of authority to grant rights?

Object and Purpose

- The Panel was of the view that the purpose of Article 70.9 was to oblige the developing
countries concerned to establish as of the entry into force of the WTO Agreement in their
domestic law the authority to grant exclusive marketing rights. However, this had not been, and
could not possibly have been, the intention of the drafters. The products covered by Article 70.9
of the TRIPS Agreement were mainly pharmaceutical and agricultural chemical products. It
took considerable time - often more than ten years - to obtain a patent for such products and the
necessary marketing approvals, first in the country of origin and then in the country in which an
exclusive marketing right was sought. There was therefore no need to require immediate
legislative action and there could therefore not have been cause for urgency in the minds of the
developed countries.

- Moreover, Article 70.9 was part of the transitional arrangements of the TRIPS
Agreement whose very function was to enable developing countries to postpone legislative
changes. Patent protection for pharmaceutical and agricultural chemical products was the most
sensitive TRIPS issue in many developing countries. The Panel's interpretation of Article 70.9
had the absurd consequence that the transitional arrangements would allow developing
countries to postpone legislative changes in all fields of technology except in the most sensitive
ones. Neither developed countries nor developing countries could, therefore, realistically be
presumed to have sought an immediate change of domestic law to provide for exclusive
marketing rights when negotiating the text of Article 70.9. When the drafters had agreed to
stipulate that exclusive marketing rights "shall be granted" after certain events had occurred
rather than stipulating that they "shall be made available" immediately, they had clearly meant
that legal action ensuring the grant of such rights would be required only in respect of products
that had completed the five time-consuming procedural steps listed in Article 70.9.

4.43 India further argued that the Panel had, in the previous case, interpreted Article 70.9 on the basis
of the concept of the predictability of conditions of competition and, although it had rejected this
concept as a basis for interpreting the TRIPS Agreement, the Appellate Body had failed to reverse the
Panel's interpretation.

The concept of predictability of conditions of competition did not justify an interpretation of

Article 70.9 according to which there must be a mechanism in place to provide for the grant of
exclusive marketing rights before such rights were due

- The Panel claimed that it had interpreted the TRIPS Agreement in accordance with the
customary rules of treaty interpretation.66 In fact, however, the Panel had neither based its
interpretation on the terms of Article 70.9, nor had it taken into account the context and the
transitional nature and purpose of this provision. Instead, it had based its expansive approach
essentially on the idea that the function of Article 70.9 was to create predictability as to the
future conditions of competition. The Panel had expressed this idea as follows:

"The protection of legitimate expectations is central to creating security and

predictability in the multilateral trading system ... When interpreting the TRIPS
Agreement, the legitimate expectations of WTO Members concerning the
TRIPS Agreement must be taken into account, as well as standards of
interpretation developed in past panel reports in the GATT framework ... laying

66 Document WT/DS50/R, paragraph 7.60

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down the principle of the protection of conditions of competition from

multilateral trade agreements."67

- In justifying its broad interpretation of Article 70.9, the Panel had referred to its
findings on Article 70.8(a) where it had found that the achievement of "security and
predictability ... is one of the central goals of the dispute settlement mechanism" and that the
function of the TRIPS Agreement was to create "the predictability needed to plan future trade".
If a system for the grant of exclusive marketing rights was non-existent, so the Panel had
argued, there was a lack of legal security that was likely to discourage applications for exclusive
marketing rights.68 The notion of predictability of conditions of competition had thus been the
logical foundation of the Panel's decision to turn an obligation which, by its terms, only required
actions after certain events had occurred into an obligation to take action immediately.

- In examining India's appeal from the report of the Panel, the Appellate Body had
rejected the Panel's reliance on the notion of conditions of competition as a means to expand the
obligations under the TRIPS Agreement.69 It had ruled:

"In the context of violation complaints made under Article XXIII:1(a), it is true
that panels examining claims under Articles III and XI of the GATT have
frequently stated that the purpose of these articles is to protect the expectations
of Members concerning the competitive relationship between imported and
domestic products, as opposed to expectations concerning trade volumes.
However, this statement is often made after a panel has found a violation of,
for example, Article III or Article XI that establishes a prima facie case of
nullification or impairment.70 At that point in its reasoning, the panel is
examining whether the defending party has been able to rebut the charge of
nullification or impairment. It is in this context that panels have referred to the
expectations of Members concerning the conditions of competition.

[...]

"In addition to relying on the GATT acquis, the Panel relies also on the
customary rules of interpretation of public international law as a basis for the
interpretative principle it offers for the TRIPS Agreement. Specifically, the
Panel relies on Article 31 of the Vienna Convention, which provides in part:

""1. A treaty shall be interpreted in good faith in accordance with

the ordinary meaning to be given to the terms of the treaty in their
context and in the light of its object and purpose."

"With this customary rule of interpretation in mind, the Panel stated that:
67 Document WT/DS50/R, paragraph 7.22
68 See the references to paragraphs 7.30 and 7.41 in paragraph 7.62 of document WT/DS50/R.
69 "The legitimate expectations of the parties to a treaty are reflected in the language of the treaty itself." (See document
WT/DS50/AB/R, paragraph 45.)
70 See, for example, the report of the Working Party on Brazilian Internal Taxes, adopted 30 June 1949, BISD II/181,
paragraph 16; Panel Report, United States - Taxes on Petroleum and Certain Imported Substances, adopted 17 June 1987,
BISD 34S/136, paragraph 5.1.9; Panel Report, Canada - Administration of the Foreign Investment Review Act, adopted 7
February 1984, BISD 30S/140, paragraph 6.6; Panel Report, Japanese Measures on Imports of Leather, adopted 15/16 May
1984, BISD 31S/94, paragraph 55; Panel Report, Japan - Customs Duties, Taxes and Labeling Practices on Imported Wines
and Alcoholic Beverages, adopted 10 November 1987, BISD 34S/83, paragraph 5.11; Panel Report, European Economic
Community - Restrictions on Imports of Apples, adopted 22 June 1989, BISD 36S/135, paragraph 5.25; and Panel Report,
United States - Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted 4 October 1994, DS44/R,
paragraph 99.
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""In our view, good faith interpretation requires the protection of

legitimate expectations derived from the protection of intellectual
property rights provided for in the Agreement."71

"The Panel misapplies Article 31 of the Vienna Convention. The Panel

misunderstands the concept of legitimate expectations in the context of the
customary rules of interpretation of public international law. The legitimate
expectations of the parties to a treaty are reflected in the language of the treaty
itself. The duty of a treaty interpreter is to examine the words of the treaty to
determine the intentions of the parties. This should be done in accordance with
the principles of treaty interpretation set out in Article 31 of the Vienna
Convention. But these principles of interpretation neither require nor condone
the imputation into a treaty of words that are not there or the importation into a
treaty of concepts that were not intended.

"In United States - Standards for Reformulated and Conventional Gasoline72,

we set out the proper approach to be applied in interpreting the WTO
Agreement in accordance with the rules in Article 31 of the Vienna Convention.
These rules must be respected and applied in interpreting the TRIPS Agreement
or any other covered agreement. The Panel in this case has created its own
interpretative principle, which is consistent with neither the customary rules of
interpretation of public international law nor established GATT/WTO practice.
Both panels and the Appellate Body must be guided by the rules of treaty
interpretation set out in the Vienna Convention, and must not add to or diminish
rights and obligations provided in the WTO Agreement."73

The Appellate Body had failed to reverse the interpretation of Article 70.9 by the Panel even
though that interpretation had been based on the notion of predictability of conditions of
competition which the Appellate Body had rejected as a basis for interpreting the TRIPS
Agreement

- As to Article 70.9 of the TRIPS Agreement, India had submitted the following legal
issues to the Appellate Body in accordance with Article 17.6 of the DSU:

"India respectfully requests the Appellate Body to address the following issues:

"- Is the interpretation of Article 70.9 made by the Panel

consistent with the ordinary meaning to be given to the terms of Article
70.9 in their context, in particular the context of other provisions which
- unlike Article 70.9 - explicitly provide for the creation of the
authority to grant rights, such as Articles 42-48?

"- If so, can it be reasonably assumed that the object and purpose
of Article 70.9 was the creation of an obligation to provide for the
availability of exclusive marketing rights in the domestic law as from
the date of entry into force of the WTO Agreement given the fact that it
can take ten years or more to complete the procedural steps required to
obtain an exclusive marketing right and that Article 70.9 forms part of

71 Document WT/DS50/R, paragraph 7.18

72 Document WT/DS2/AB/R, adopted 20 May 1996, pages 16-17
73 Document WT/DS50/AB/R, paragraphs 40 and 43
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a series of transitional provisions designed to enable developing

countries to postpone legislative actions?

"- If not, does the principle of predictability of competitive

relationships justify the Panels interpretation of Article 70.9?

"- If so, does the principle of predictability of competitive

relationships imply that all transitional obligations applicable as from a
future date or event entail the immediate obligation to empower the
executive authority to meet those obligations? If not, what justifies the
creation of this obligation only in respect of Article 70.9?"

- Article 17.12 of the DSU stipulated that "the Appellate Body shall address each of the
issues raised in accordance with paragraph 6 during the appellate proceeding". The Appellate
Body had carried out this task by making the following findings:

"India's arguments must be examined in the light of Article XVI:4 of the WTO
Agreement, which requires that:

""Each Member shall ensure the conformity of its laws, regulations

and administrative procedures with its obligations as provided in the
annexed Agreements."

"Moreover, India acknowledged before the Panel and in this appeal that, under
Indian law, it is necessary to enact legislation in order to grant exclusive
marketing rights in compliance with the provisions of Article 70.9.

"Given India's admissions that legislation is necessary in order to grant

exclusive marketing rights in compliance with Article 70.9 and that it does not
currently have such legislation, the issue for us to consider in this appeal is
whether a failure to have in place a mechanism ready for the grant of exclusive
marketing rights, effective as from the date of entry into force of the WTO
Agreement, constitutes a violation of India's obligations under Article 70.9 of
the TRIPS Agreement.

"By its terms, Article 70.9 applies only in situations where a product patent
application is filed under Article 70.8(a). Like Article 70.8(a), Article 70.9
applies 'notwithstanding the provisions of Part VI'. Article 70.9 specifically
refers to Article 70.8(a), and they operate in tandem to provide a package of
rights and obligations that apply during the transitional periods contemplated in
Article 65. It is obvious, therefore, that both Article 70.8(a) and Article 70.9
are intended to apply as from the date of entry into force of the WTO
Agreement.

"India has an obligation to implement the provisions of Article 70.9 of the

TRIPS Agreement effective as from the date of entry into force of the WTO
Agreement, that is, 1 January 1995. India concedes that legislation is needed to
implement this obligation. India has not enacted such legislation. To give
meaning and effect to the rights and obligations under Article 70.9 of the
TRIPS Agreement, such legislation should have been in effect since
1 January 1995."
 WT/DS79/R
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- The Appellate Body's ruling did not contain a single reference to India's extensive
argumentation based on the text, context and objective of Article 70.9. Having rejected the
notion of predictability of conditions of competition as a basis for expanding the obligations
under the TRIPS Agreement beyond its terms, it would have been logical for the Appellate
Body to reverse the Panel's ruling on Article 70.9 of the TRIPS Agreement in the previous case
because it was founded on that very notion. Instead, the Appellate Body had made findings that
were either unexplained or concerned matters which were not in dispute, thereby denying India
its procedural rights under Article 17.12 of the DSU.

- The Appellate Body did not explain how Article XVI:4 of the WTO Agreement could
determine the scope of the obligations under Article 70.9 of the TRIPS Agreement.
Article XVI:4 merely stated how the obligations under the WTO agreements were to be
implemented and was therefore relevant only once it had been determined that there was an
obligation under one of the WTO agreements that required implementation. The issue before
the Appellate Body had been whether there was such an obligation. India had pointed out that
there were numerous transitional provisions throughout the various WTO agreements that
required action at some point in the future, either when a date had arrived or an event had
occurred. If Article XVI:4 of the WTO Agreement was relevant for the interpretation of
Article 70.9 of the TRIPS Agreement, then all transitional provisions under the WTO
Agreement imposing an obligation as from a future date or event would have to be interpreted
to comprise the additional obligation to change the domestic law in anticipation of the future
date or event. This was however obviously not intended by any of these transitional provisions.
India had specifically requested the Appellate Body to address this issue but the Appellate Body
had failed to do so.

- Contrary to what the Appellate Body suggested, the parties to the previous dispute
agreed that Article 70.9 entered into effect on the date of entry into force of the WTO
Agreement. However, India had claimed that Article 70.9 set out an obligation to accord
exclusive marketing rights that was triggered by events which had not yet occurred. At issue
before the Appellate Body had thus been the content of Article 70.9, not the date of its entry into
force. When the Appellate Body wrote that "India has an obligation to implement the
provisions of Article 70.9 of the TRIPS Agreement effective as from the date of entry into force
of the WTO Agreement, that is, 1 January 1995" it turned the issue of content (on which the
parties disagreed) into a question of entry into force (on which they agreed).

- From the standpoint of developing country Members, it was distressing that the
Appellate Body had not considered it necessary to deal with India's argument that the Panel's
interpretation of Article 70.9 had the consequence that the transitional arrangements would
allow developing countries to postpone legislative changes in all fields of technology except in
the most sensitive ones. It was also regrettable that the Appellate Body had not taken into
account that the Panel's ruling ignored the implicit option available in the TRIPS Agreement to
developing countries to cut short the transitional period, if they so chose, and provide for
product patents even before the end of the transitional period instead of having to accept the
obligation of providing exclusive marketing rights.

4.44 According to India, the Panel faced conflicting signals from the Appellate Body. The Panel
could not follow in the present dispute the reasoning in the previous dispute and base its interpretation of
Article 70.9 on the notion of predictability of conditions of competition without risking that it would be
castigated for misapplying Article 31 of the Vienna Convention and failing to examine the words of the
treaty to determine the intention of the parties. However, if the Panel based its interpretation exclusively
on the language of Article 70.9 itself, it was bound to arrive at a conclusion that was different from the
one reached by the Appellate Body in the previous case. India requested the Panel to resolve this
dilemma in the light of the following two rulings of the Appellate Body. The first was:
WT/DS79/R
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"Both panels and the Appellate Body must be guided by the rules of treaty
interpretation set out in the Vienna Convention, and must not add to or diminish rights
and obligations provided in the WTO Agreement.

"This conclusion is dictated by two separate and very specific provisions of the DSU.
Article 3.2 of the DSU provides that the dispute settlement system of the WTO:

""... serves to preserve the rights and obligations of the Members under the
covered agreements, and to clarify the existing provisions of those agreements
in accordance with customary rules of interpretation of public international law.
Recommendations and rulings of the DSB cannot add to or diminish the rights
and obligations provided in the covered agreements."

"Furthermore, Article 19.2 of the DSU provides:

""In accordance with paragraph 2 of Article 3, in their findings and

recommendations, the panel and Appellate Body cannot add to or diminish the
rights and obligations provided in the covered agreements."

"These provisions speak for themselves. Unquestionably, both panels and the Appellate
Body are bound by them."74

The second ruling of the Appellate Body that the Panel should take into account was the following:

"We do not believe that the CONTRACTING PARTIES, in deciding to adopt a panel
report, intended that their decision would constitute a definitive interpretation of the
relevant provisions of the GATT 1947. Nor do we believe that this is contemplated
under GATT 1994. There is a specific cause for this conclusion in the WTO
Agreement. Article IX:2 of the WTO Agreement provides: "The Ministerial
Conference and the General Council shall have the exclusive authority to adopt
interpretations of this Agreement and of the Multilateral Trade Agreements"... . The
fact that such an "exclusive" authority in interpreting the treaty has been established so
specifically in the WTO Agreement is reason enough to conclude that such authority
does not exist by implication or by inadvertence elsewhere."75

It followed from the above that the Panel was strictly bound by the principles of interpretation referred
to in Article 3.2 of the DSU, but not by the rulings of panels and the Appellate Body in a single instance
and therefore had no option but to base its interpretation of Article 70.9 of the TRIPS Agreement
exclusively on Article 31 of the Vienna Convention.

4.45 The European Communities and their member States were of the view that India had not
advanced any new elements that had not yet been considered in the earlier dispute or that were
otherwise relevant for the resolution of the present dispute.

- India's debate on the implementation of Article 70.9 of the TRIPS Agreement was a
replica of its arguments before the Panel and the Appellate Body in the earlier dispute
(WT/DS50), as was apparent from the extensive quotations of portions of the Panel and
Appellate Body reports in that dispute. The EC was unable to discover any new arguments in

74 Document WT/DS50/AB/R, paragraph 47

75 Appellate Body Report on Japan - Taxes on Alcoholic Beverages, Section E (WT/DS8/AB/R, WT/DS10/AB/R,
WT/DS11/AB/R)
 WT/DS79/R
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Indias discussion and therefore referred the Panel to its report and that of the Appellate Body in
the earlier dispute. The EC did not believe that the arguments that India was submitting in this
context added anything to the debate that had already taken place in the earlier dispute which
was equally relevant for the present dispute. Furthermore, no reasonable doubt could exist that
the filing date and the validity of the filing could be fundamental issues in the context of
exclusive marketing rights granted under Article 70.9 of the TRIPS Agreement in a litigation
before an Indian court at any time prior to the year 2005.

- As regards EC companies which were ready to apply for exclusive marketing rights in
India, the EC provided to the Panel a copy of a fax, dated 28 April 1998, which it had received
from Dr. Alan Hesketh, Manager, Global Intellectual Property, Glaxo Wellcome.76

4.46 Commenting on the views expressed by the European Communities and their member States,
India noted that the EC had not claimed that India had denied any exclusive marketing rights to
European companies and had not refuted India's argument that the terms of Artice 70.9 did not require
the establishment of a system for the grant of exclusive marketing rights, but merely required the grant
of such rights to particular products meeting specified conditions. India further noted that the EC
refused to address the arguments presented by India.

V. ARGUMENTS PRESENTED BY THIRD PARTY

UNITED STATES

Procedural history of the related dispute

5.1 The United States argued in its third party submission that the precise measures and provisions
of the WTO Agreement at issue in this dispute had been the subject of a previous WTO dispute
settlement proceeding that had concluded very recently. This did not mean that the European
Communities and their member States did not have the right to bring this complaint; the DSU did not
deny the EC the right to do so. However, the Appellate Body had thoroughly analyzed the legal issues
in the case and it was neither necessary nor appropriate for the Panel to repeat that work. The Panel
should consider the arguments of the parties, but be guided by the Appellate Bodys recent interpretation
of the obligations at issue. In accordance with this approach, the Panel should find that India had failed
to comply with Article 70.8 and 70.9 of the TRIPS Agreement and recommend that India amend its law
to comply with these obligations.

5.2 The United States, describing the procedural history of the earlier dispute (WT/DS50 - United
States' complaint against India regarding patent protection for pharmaceuticals and agricultural
chemicals), said that the Panel in that dispute had been established by the DSB on 20 November 1996
and had issued its report on 5 September 1997.77 In its report, the Panel had found that India had failed
to comply with Articles 70.8, 70.9 and 63 of the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS Agreement). India had appealed these findings to the Appellate Body, which
had upheld the Panels conclusions with respect to Article 70.8 and 70.9.78 The Panel and the Appellate
Body had considered India's arguments with respect to the obligations in Article 70.8 and 70.9 of the
TRIPS Agreement and, after analysing the text, context, object and purpose of Article 70.8, concluded
that the provision required the establishment of a mailbox system that provided a "sound legal basis" for
filing product patent applications for pharmaceuticals and agricultural chemicals. 79 Both the Panel and

76 See Annex 4 below.

77 Document WT/DS50/R
78 Document WT/DS50/AB/R
79 Document WT/DS50/AB/R, paragraph 58; document WT/DS50/R, paragraph 7.28
WT/DS79/R
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the Appellate Body had examined the evidence presented regarding India's Patents Act (1970) 80 and then
concluded that India had failed to comply with Article 70.8 of the TRIPS Agreement. 81 With respect to
Article 70.9, the Panel and the Appellate Body had determined that this provision required the
establishment of a system for granting exclusive marketing rights as of 1 January 1995. By India's own
admission, it had not established such a system. Consequently, the Panel and the Appellate Body had
found that India had failed to comply with Article 70.9 of the TRIPS Agreement. 82 The DSB had
adopted the Panel and Appellate Body reports on 16 January 1998. On 13 February 1998, India had
indicated its intention to implement the DSB's recommendations and rulings. India and the United
States had not reached an agreement regarding the time in which India would implement these
recommendations and rulings; that issue might have to be decided by arbitration in accordance with
Article 21.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes
(DSU). India thus had not yet amended its law to comply with its obligations under Article 70.8 and
70.9 of the TRIPS Agreement and had not argued in this proceeding that the situation was otherwise.

Under Article 10.4 of the DSU, WTO Members were entitled to bring complaints regarding
matters that had been the subject of a previous panel proceeding

5.3 Commenting on India's argument that the Panel should dismiss the EC's complaint on the basis
of Articles 9.1 and 10.4 of the DSU, the United States said that these provisions did not support
dismissal of the EC's complaint, but rather indicated a pronounced concern for safeguarding the rights of
multiple complainants and third parties.

- The text of Article 10.4 did not support India's argument that third parties must join an
initial panel proceeding whenever possible. Article 10.4 specifically provided for the possibility
of a second panel being established to examine a complaint based on a measure already
examined by a previous panel. Article 10.4 referred to "third parties". By definition, a dispute
involving a complaint by a third party would be a successive dispute. Under this provision,
successive disputes should proceed in accordance with "normal dispute settlement procedures".
Nothing in Article 10.4 implied that recourse to normal dispute settlement procedures was
limited to third parties that had not been able to present their complaint jointly with the initial
complainant.

- As India acknowledged in its first written submission, there might be many reasons
why a WTO Member might not initially join a particular dispute settlement proceeding.
Regardless of the reason, however, Article 10.4 of the DSU did not deny such a Member the
right to resort to the dispute settlement process. In fact, the drafters of Article 10.4 had
anticipated situations such as this - where a violation of a WTO agreement had already been
established, but nullification or impairment of benefits accruing to a third party had not yet been
established - and Article 10.4 was intended to address them. This was the sole purpose of this
panel proceeding: to establish the nullification or impairment of benefits accruing to the EC.

- Article 9 of the DSU was entitled "Procedures for Multiple Complainants". Like
Article 10.4, the text of Article 9 did not support the mandatory joinder rule suggested by India.
Article 9 did not address potential complainants or whether there were any circumstances in
which Members must join a dispute as a complainant. It only assumed that there would be
situations with multiple complainants and provided procedures to govern such situations.

- There was no support in either the text or negotiating history of the DSU for India's
argument that the EC's complaint should be dismissed because it had not been brought at the

80 Document WT/DS50/AB/R, paragraph 69; document WT/DS50/R, paragraph 7.35

81 Document WT/DS50/AB/R, paragraph 97; document WT/DS50/R, paragraph 8.1
82 Document WT/DS50/AB/R, paragraph 97; document WT/DS50/R, paragraph 8.1
 WT/DS79/R
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same time as the United States' complaint. India's interpretation had far-reaching consequences
and could result in the denial to a WTO Member of its rights under Articles 10.4 and 22.2 of the
DSU. Such a result must be avoided, in accordance with Articles 3.2 and 19.2 of the DSU,
which provided that the recommendations or rulings of panels and the Appellate Body could not
diminish the rights of WTO Members.

- For the purpose of clarifying the status of the present dispute, the Panel should issue a
preliminary ruling rejecting India's request that the complaint of the European Communities and
their member States be dismissed as untimely. The Panel should examine the pending
complaint under normal dispute settlement procedures.

In examining the complaint brought by the EC, the Panel should apply the interpretation of
Article 70.8 and 70.9 of the TRIPS Agreement of the Panel and the Appellate Body in the earlier
case

5.4 The United States supported the view of the EC that it was not necessary or appropriate to
repeat all of the legal arguments made in the earlier dispute (WT/DS50) in the context of the present
proceedings. India had failed to comply with Article 70.8 and 70.9 of the TRIPS Agreement. The
Appellate Body had already analysed the obligations in Article 70.8 and 70.9 and determined that India
had failed to comply with those obligations. It was undisputed that India had not amended its Patents
Act since the Appellate Body had issued its ruling three months ago.

- Under Article 10.4 of the DSU, the Panel should proceed in accordance with "normal
dispute settlement procedures". Under normal procedures, it was not necessary for the Panel to
approach the legal issues in this case without reference to the work in the earlier dispute. WTO
panels could and should be guided by the legal interpretations developed in the context of
previous panel proceedings. This was particularly important in a case such as the present one,
in which precisely the same measures had recently been the subject of a separate panel
proceeding. The relevance of this fact was supported by Article 10.4 of the DSU, which
provided that a subsequent dispute regarding a measure should be referred to the "original
panel" that had examined the measure. If the original panel proceedings had been essentially
irrelevant to the subsequent panel proceedings, there would have been no reason to refer the
successive dispute back to the original panel.

- India appeared to seek an entirely redundant proceeding. Despite India's obligation

under Article 17.14 of the DSU to accept the Appellate Body's report in the earlier case
unconditionally, India's submission gratuitously disparaged the work of the Appellate Body,
calling the report "internally inconsistent", "contradictory", "distressing" and "regrettable". In
its first written submission, India proceeded to re-argue many of the same points which it had
made in the prior appellate proceeding and which the Appellate Body had rejected. India had
reiterated these arguments in its criticism of the Appellate Body's report during the DSB
meeting on 16 January 1998, when the report had been adopted. These same arguments had
now reappeared again.

- India represented in its first written submission that it was presenting "new arguments
and new facts" to the Panel and that it was not seeking "a further appeal" from the findings of
the Appellate Body or "a rehearing of the previous case". These statements were refuted by the
text of India's own submission. The basic arguments presented in the submission were not new
and, indeed, much of the submission reiterated in hac verba the arguments that India had
presented to the Appellate Body in the earlier case. For example, with respect to Article 70.8,
pages 23-24 and 28-29 of India's first written submission to this Panel repeated, word-for-word,
arguments set out in pages 10-12 and 13-14 of India's submission to the Appellate Body in the
earlier case. Regarding Article 70.9, pages 36-39 also appeared to have been copied verbatim
WT/DS79/R
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from India's appellate submission, pages 18-22. At the third party meeting, the United States
added that, moreover, India did not argue that it had modified its patent rgime since the
Appellate Body's ruling and that, in that situation, the Panel should be guided by the Appellate
Body's decision, not by allegedly new arguments about the same patent rgime.

- India should not be permitted to reopen legal issues that had been conclusively
determined by a panel and the Appellate Body. Such a result would invite repetitive litigation.
Defendants that prevailed on some or all of the issues in a case could find themselves compelled
to re-litigate those issues over and over again until they lost. Article 10.4 had been intended to
prevent this scenario and reflected the desire of the drafters for finality in dispute settlement
proceedings. The drafters had wanted to avoid giving complainants or defendants an incentive
to re-litigate disputes to see if different panels would produce different results. If such "panel
shopping" did produce different results, the effect on the dispute settlement system would be
profoundly destabilizing.

- An important function of the WTO dispute settlement system was "to clarify the
existing provisions of [covered] agreements in accordance with customary rules of
interpretation of public international law".83 The Appellate Body had recently clarified the
obligations of Article 70.8 and 70.9 of the TRIPS Agreement. It had not found India's
arguments convincing the first time and the Panel should be guided by its conclusions.

- The WTO dispute settlement system could not function effectively without consistent
panel judgments. The United States had a strong interest in ensuring that these panel
proceedings did not prejudice its rights as determined by the Appellate Body. Inconsistent
interpretations of India's TRIPS obligations would also prejudice the rights of other WTO
Members and make it impossible to apply the most-favoured-nation obligation in a meaningful
way. Without consistent judgments, WTO Members would find little guidance in the legal
interpretations developed by dispute settlement panels and the Appellate Body. The role of the
dispute settlement system was greatly diminished and the system could not fulfill its purpose:
to serve as a "central element in providing security and predictability to the multilateral trading
system".84

Article 3.8 of the DSU

5.5 Commenting on the approach that the Panel should take in the present dispute, the United States
expressed the view that the Panel should presume that India's non-compliance with Article 70.8 and 70.9
had had an adverse impact on right holders in the European Communities, but that India was entitled to
present evidence to rebut that presumption. Article 3.8 of the DSU provided that "In cases where there
is an infringement of the obligations assumed under a covered agreement, the action is considered prima
facie to constitute a case of nullification or impairment. This means that there is normally a presumption
that a breach of the rules has an adverse impact on other Members parties to that covered agreement,
and in such cases, it shall be up to the Member against whom the complaint has been brought to rebut
the charge". According to the analysis of the Appellate Body, India's legal regime did not comply with
Article 70.8 and 70.9 of the TRIPS Agreement. This Panel should therefore follow the Appellate Body's
analysis and reach the same conclusion. If the Panel reached this conclusion, under Article 3.8 of the
DSU, the EC was entitled to a presumption that India's breach of the TRIPS Agreement had had an
adverse impact on the nationals of its member States.85

83 DSU, Article 3.2

84 DSU, Article 3.2 (emphasis added)
85 In a scenario involving two successive disputes concerning the same matter and legal claims, such a presumption would not
necessarily exist in the later case if the earlier case concerned solely "non-violation" nullification or impairment.
 WT/DS79/R
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5.6 Of course, this presumption was a rebuttable one and the Panel should consider any evidence
presented by India that its failure to comply with Article 70.8 and 70.9 had not nullified or impaired
benefits to the European Communities and their member States.

I. VI. INTERIM REVIEW

6.1 On 1 July 1998, India requested the Panel to review, in accordance with Article 15.2 of the
DSU, certain precise aspects of the interim report that had been issued to the parties on 19 June 1998.
The European Communities and their member States did not request a review, but submitted, in a
letter dated 6 July 1997, comments on India's request for a review of the aspects in question
requesting the Panel to reject India's comments. Neither party requested the Panel to hold an
additional meeting. The Panel reviewed the entire range of arguments presented by India and
finalized its findings as in Section VII below, taking into account the specific aspects of those
arguments it considered to be relevant.

A. ARTICLES 9.1 AND 10.4 OF THE DSU

6.2 In its review request, India claimed that the Panel had not followed the principles of treaty
interpretation set out in Article 31(1) of the Vienna Convention on the Law of Treaties, i.e. the Panel
had failed to interpret the DSU in accordance with the ordinary meaning to the terms of the treaty in
their context and in the light of its object and purpose. This failure, according to India, significantly
affected the reasoning and conclusions of the Panel.

6.3 India noted that Article 3.10 of the DSU declared the guiding provision in that "[i]t is
understood that requests for conciliation and the use of dispute settlement procedures should not be
intended or considered as contentious acts and that, if a dispute arises, all Members will engage in
these procedures in good faith in an effort to resolve the dispute". It also noted that under the MFN
provisions of the TRIPS Agreement, any benefit or concession made to any country would be equally
extended to all the other Members. India considered that these two provisions read together in the
context of dispute settlement invested the Panel with the power to examine whether the EC complaint
should be taken up for examination or should be dismissed in limine. It was all the more important, in
India's view, for the Panel to exercise this power because the DSB did not have discretion to make a
summary examination of the complaint.

6.4 According to India, the first sentence of Article 11 of the DSU, which provided that "[t]he
function of the panels is to assist the DSB in discharging its responsibilities under this Understanding
and the covered agreements" would also suggest that the Panel should exercise such a power. In
doing so, "a panel should make an objective assessment of the matter before it, including an objective
assessment of the facts of the case ...". The objective assessment, in India's view, included an
examination whether a matter existed in substance or not. India argued that the power to make an
objective assessment of the facts might not be interpreted as overriding the power of objective
assessment of the matter.

6.5 India further noted that Article 3.2 of the DSU provided that "[t]he dispute settlement system
of the WTO is a central element in providing security and predictability to the multilateral trading
system". In India's view, an unmitigated right to bring successive complaints, particularly by parties
who had joined as a third party in earlier similar disputes, with nothing to add, would not provide any
security to the multilateral trading system and would go against its predictability.
WT/DS79/R
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6.6 According to India, the Panel's failure to so assess the EC complaint was inconsistent with the
panel rulings in the Bananas case86 made with reference to the power of panels to examine
compliance with Article 6.2 of the DSU.

6.7 India argued that the consultations factor relied upon by the Panel in what is now
paragraph 7.16 was not relevant as there was nothing to be added. India also noted that the EC had
requested the Panel to "extend its findings" and not to settle the dispute. India considered that there
was no possibility in the scheme of the DSU for a panel to extend the findings of an earlier dispute.

6.8 Noting the Panel's discussion in what is now paragraph 7.22, India observed that the Panel
had not found itself the appropriate forum for resolving certain issues raised by India. In India's view,
proper consideration of the context and the object and purpose of the DSU as mentioned in the
preceding paragraphs would have led to a different conclusion.

6.9 India argued that the security and predictability of the multilateral trading system envisaged
by Article 3.2 of the DSU bound the parties to the statements made by them in earlier disputes, unless
the context did not permit the same. According to India, India's argument in this regard at
paragraph 4.2 had not been dealt with by the Panel. The complainant's statement in earlier cases
before a panel should have been taken as an admission in the present case and the EC should not have
been allowed to make a volte face in the present procedures.

6.10 India considered that the acceptance by the Panel at what is now paragraph 7.15 of the
complainant's right to determine whether and when to pursue a complaint under the DSU was fraught
with danger and was not consistent with the spirit of Article 3.10 and 3.12 of the DSU. India also
considered that acceptance of such a right would be inconsistent with the principles of the DSU
relating to non-contentious acts, good faith and achievement of positive solutions to disputes and
would result in harassment of the defending Member. There would also be problems of
implementation of different DSU decisions given at different points in time. India felt that this should
have engaged the attention of the Panel.

6.11 In India's view, there was another inconsistency in the findings of the Panel. While the
trouble, expense and exposure of India to successive WTO proceedings had not influenced the Panel's
findings, in what is now paragraph 7.54 the Panel was relying on the mere possibility of the challenge
of India's mailbox system under the administrative instructions and the further possibility of its being
struck down by a court of law in India. The finding emphasized the guarantee that the public -
including interested nationals of WTO Members - be adequately informed, but denied a similar
guarantee to a harassed defending party.

6.12 According to India, the Panel's findings would lead to a vacuum in the scheme of the DSU.
India considered that it was an established rule of interpretation that where two views were possible,
the one which promoted the scheme should be favoured. Non-examination of India's arguments
caused prejudice to India's defence.

6.13 The Panel carefully examined these comments by India, but was not convinced that it should
modify its findings regarding Articles 9.1 and 10.4 of the DSU. The Panel noted that India's
arguments reflected in paragraphs 6.2 to 6.6 above were essentially a repetition of the arguments that
had been reflected in paragraph 4.2 of the report. The Panel's view in this regard was clearly stated in
what is now paragraph 7.23. In the Panel's view, India's criticism, as reflected in paragraphs 6.7 and
6.8 above, of what is now paragraph 7.16 was unwarranted because the Panel was not "relying on" the
consultations factor. The Panel's view remained unchanged: it was not feasible to establish a single

86 India referred to paragraph 7.26 of the panel reports on European Communities - Regime for the Importation, Sale and
Distribution of Bananas, WT/DS27/R, adopted on 25 September 1997. See paragraph 4.2 above.
 WT/DS79/R
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panel to hear the complaints of the United States and the EC in this instance. Nor did the Panel
simply "extend its findings" in the prior case. 87 Regarding India's argument about a volte face by the
EC (see paragraph 6.9 above), the Panel took the view that statements made by the EC in another
context that is to say, not the context of the present dispute including, in the present situation,
statements made in the context of dispute WT/DS50 - were outside the purview of its examination of
the matter referred to it; it did not consider the statements made by the EC in this case contradictory.
The Panel took note of India's comments reflected in paragraphs 6.8 and 6.10 above, but did not
consider it necessary to amend its reasoning in what are now paragraphs 7.15 and 7.22 below.
Regarding India's charge of inconsistency within the findings (see paragraph 6.11 above), the Panel
failed to understand the basis of comparison, as suggested by India, between the procedural aspects of
the DSU and the substantive obligations under the TRIPS Agreement. Finally, the Panel did not
consider that its findings in this particular case would lead to a vacuum in the scheme of the DSU.

6.14 Accordingly, the Panel did not introduce any changes to its findings regarding Articles 9.1
and 10.4 of the DSU.

B. ARTICLE 70.8(a) AND 70.9 OF THE TRIPS AGREEMENT

6.15 India noted that, in what is now paragraph 7.30, the Panel concluded that it was not legally
bound by the conclusions of the Panel in dispute WT/DS50 as modified by the Appellate Body report,
but that in what are now paragraphs 7.55 and 7.73 the Panel refused to review questions relating to the
manner in which the Appellate Body had reached its conclusions. In India's view, the two positions
were mutually inconsistent. India considered that once the Panel held that it was not legally bound by
the conclusions arrived at by an earlier panel or Appellate Body report, it followed that it was legally
competent to review their conclusions as well as reasons. The absence of power to review
conclusions reached earlier was different from the absence of material to review the process of
arriving at such conclusions. In India's view, the self-imposed limitation by the Panel in not
reviewing the manner in which the Panel or the Appellate Body in dispute WT/DS50 had reached
their conclusions was not warranted.

6.16 In the Panel's view, however, India's comments above failed to take account of the remainder
of what are now paragraph 7.30, where the Panel stated:

1 "However, in the course of "normal dispute settlement procedures" required under

Article 10.4 of the DSU, we will take into account the conclusions and reasoning in the Panel
and Appellate Body reports in WT/DS50. Moreover, in our examination, we believe that we
should give significant weight to both Article 3.2 of the DSU, which stresses the rle of the
WTO dispute settlement system in providing security and predictability to the multilateral
trading system, and to the need to avoid inconsistent rulings (which concern has been referred
to by both parties). In our view, these considerations form the basis of the requirement of the
referral to the 'original panel' wherever possible under Article 10.4 of the DSU.";

2 and paragraph 7.33, where the Panel stated:

3 "We note that India has not introduced any changes to its patent rgime since the
adoption of the Panel and Appellate Body reports in dispute WT/DS50. However, we also
note that the Appellate Body modified the reasoning in the Panel report in dispute WT/DS50
and that India has provided certain additional information regarding its mailbox system to us.
In the following analysis, we will take account of these new elements as necessary."

87 See also section B below.

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4 Moreover, the paragraphs to which India had referred, i.e. what are now paragraphs 7.55 and
7.73, not only stated that the Panel was of the view that it was not for it to review questions
regarding how the Appellate Body had arrived at its conclusions, but also that the Panel did
"not consider it necessary in the light of the foregoing".

C. ARTICLE 70.8(a) OF THE TRIPS AGREEMENT

6.17 India argued that the finding at what is now paragraph 7.51 was not substantiated by its
reasoning. According to India, the basis for the Panel's assumption was that, had the administrative
instructions been effective, there would have been no need to recommend the amendment of the
Indian Patents Act. In other words, India suggested that the Panel believed that statutory actions
could only "create" law. However, according to India, many statutory provisions were of a
declaratory or clarificatory nature: they declared in a statutory form what the law otherwise was.
Since the Panel had not examined whether the amendments to the Patents Act fell in the category of
clarification provisions, in India's view, what is now paragraph 7.51 should be deleted from the final
report.

6.18 The Panel examined the point made by India, but saw no reason to delete what is now
paragraph 7.51. The paragraph was stating a fact by reiterating the content of paragraph 2.3 above.
For clarification, it decided to add a footnote to paragraph 7.51 which refers back to the language of
paragraph 2.3.

6.19 In the interim report, the fourth sentence of the paragraph corresponding to what is now
paragraph 7.54 read as follows: "In any event, India itself admits that once an exclusive marketing
right is granted to a mailbox applicant, the competitor would be able to demonstrate actual damage,
which constitutes proper cause of action". India claimed that this sentence did not put India's
argument in the proper context. India's reply to the Panel cited in footnote 59 referred to the time
when a mailbox application would result in the grant of a patent or exclusive marketing right.
According to India, nowhere had India made the admission attributed to it.

6.20 The Panel had some difficulty in addressing the point raised by India because the sentence to
which India was referring was clearly limited to the situation when an exclusive marketing right had
been granted; there was no suggestion that India had made a statement in regard to any earlier date.
Nonetheless, given the need to avoid any risk of misrepresentation, the Panel decided to modify what
is now paragraph 7.54 as follows. In the sentence referred to in the previous paragraph, the phrase
"India itself admits that" was deleted and the word "would" was changed to "might". The Panel also
decided that it would be a helpful clarification to add two new sentences, reading: "As pointed out in
paragraph 7.67 and following below, since it is impossible to indicate the exact time on which a
product may meet the terms of Article 70.9, WTO Members concerned are required to reckon with the
possibility that this moment may arise at any time subsequent to the date of entry into force of the
WTO Agreement. By the same token, the possibility of a dispute over a relevant filing date in the
context of a court procedure regarding the grant of an exclusive marketing right must also be
reckoned with at any point in time after 1 January 1995."

6.21 India observed that the Panel noted that applications had been received by the Patent Office
and stored for future action (paragraph 7.56); that to date neither the system established by the
administrative instructions nor any individual mailbox applications had been challenged before a
court (paragraph 7.54); and that economic operators in this area were usually well informed about the
systems for the protection of their rights (paragraph 7.56). However, no inference had been drawn
that India had provided a "means" by which applications for patents of inventions could be filed. On
the contrary, the Panel had come to the conclusion that "there must be a guarantee that the public -
including interested nationals of other WTO Members - is adequately informed" (paragraph 7.56).
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6.22 In India's view, this added something more to the text of Article 70.8(a) than could be done
through interpretation. According to India, the drafters of the TRIPS Agreement had been consciously
silent on the nature, method or sweep of the "means". India considered that the Panel put an
additional obligation by reading a guarantee in the obligation under Article 70.8(a). The conclusion at
what is now paragraph 9.1 was, therefore, not in consonance with the provisions of Article 70.8(a).

6.23 The Panel did not agree with India and recalled that the relevance of the unwritten,
unpublished nature of the administrative instructions had already been discussed by the Panel in the
previous case and had also been addressed by the Appellate Body. In what are now paragraphs 7.56
to 7.58, the Panel reiterated the essence of the reasoning in question while adding its views on India's
argument that the present system ensured the retention of the necessary facts to determine novelty and
priority for the purposes of decisions on the future grant of patent rights pursuant to Article 70.8(b)
and (c). In any event, the Panel's reasoning which led to its conclusion at what is now paragraph 9.1
was not limited to paragraph 7.56. However, for clarification, the Panel decided to change the last
sentence of what is now paragraph 7.56, so that it would read: "While Article 70.8 does not explicitly
provide for a publication obligation, doubts have to remain as to whether an unwritten and
unpublished system for permitting the filing of applications by nationals of other WTO Members
could be construed as a 'means' which adequately responds to the requirements of Article 70.8."
However, the Panel did not feel it necessary to make a specific finding on the point.

II. VII. FINDINGS

A. CLAIMS OF THE PARTIES

Introduction

7.1 This dispute arises essentially from the following facts. Section 5 of the Indian Patents Act of
1970 does not permit product patents to be granted in respect of "substances intended for use, or
capable of being used, as food or as medicine or drug". 88 Only "claims for the methods or processes
of manufacture shall be patentable" in respect of those substances. 89 Thus, India currently does not
make available patent protection for pharmaceutical and agricultural chemical products commensurate
with the obligations of Article 27 of the Agreement on Trade-Related Aspects of Intellectual Property
Rights ("TRIPS Agreement"), which requires that "patents shall be available for any inventions,
whether products or processes, in all fields of technology ... ", subject to the transition provisions of
Articles 65.4 and 70.8 of the TRIPS Agreement and to certain exceptions not applicable in this case.

88 According to Section 2(1)(l) of the Patents Act, the term "medicine or drug" includes "insecticides, germicides,
fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants" (see Annex 3
of this report).

89 See paragraph 2.9 above and Annex 3 of this report.

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7.2 On 31 December 1994, while Parliament was in recess, the President of India promulgated
the Patents (Amendment) Ordinance 1994, with a view to meeting India's obligations under
Article 70.8 and 70.9 of the TRIPS Agreement, pursuant to the recommendation by a group of patent
experts. The Ordinance inserted a new Chapter IVA in the Patents Act to deal with "a claim for patent
of an invention for a substance itself intended for use, or capable of being used, as medicine or drug".
The Ordinance explicitly allowed the filing of patent applications in respect of those substances and
subsequent processing by the Patent Offices notwithstanding the provisions of Sections 5 and 12 of
the Patents Act.90 It also established a system for the grant of "exclusive marketing rights" with
respect to the products that are the subject of such patent applications, subject to certain conditions.

7.3 The Ordinance had been issued in exercise of the powers conferred upon the President by
Article 123 of the Indian Constitution, which enables the President to legislate when Parliament
(either House or both Houses) is not in session and the President "is satisfied that circumstances exist
which render it necessary for him to take immediate action". However, such Presidential actions
expire six weeks after the reassembly of Parliament. Thus, under the relevant provisions of the Indian
Constitution, the Patents Ordinance 1994 lapsed on 26 March 1995.91 In March 1995, the Indian
administration introduced the Patents (Amendment) Bill 1995 into Parliament to implement the
contents of the Ordinance on a permanent basis. However, the Bill lapsed because of the dissolution
of Parliament on 10 May 1996.

7.4 Since the lapse of the Patents Ordinance, India has continued receiving
patent applications for pharmaceutical or agricultural chemical products through
unpublished "administrative instructions". Between 1 January 1995 and
31 January 1998, a total of 2,212 applications for pharmaceutical and agricultural
chemical products have been received.92 All these applications are, according to
India, stored separately for future action under subparagraphs (b) and (c) of
Article 70.8 and under Article 70.9 of the TRIPS Agreement.

7.5 Under the current Indian legislation, there is no legal basis - procedurally or substantively -
for the grant of exclusive marketing rights when a product which is the subject of a patent application
under Article 70.8 (commonly called a "mailbox" application) becomes eligible for protection under
Article 70.9 of the TRIPS Agreement. So far, no request for the grant of exclusive marketing rights
has been submitted to the Government of India.93

7.6 On 20 November 1996, the Dispute Settlement Body (DSB) established a panel to examine
this matter at the request of the United States (WT/DS50). The European Communities and their
member States (hereinafter collectively referred to as the "EC") participated in the panel process as an
interested third party. The report of the Panel, which found that India violated the provisions of
Article 70.8(a) and Article 70.9 of the TRIPS Agreement, was circulated to WTO Members on
5 September 1997. India appealed from certain issues of law and legal interpretations in the Panel
report. The report of the Appellate Body, which modified the reasoning of the Panel but essentially
upheld the conclusions of the Panel report in respect of Article 70.8(a) and Article 70.9, was circulated
to WTO Members on 19 December 1997. The Appellate Body report and the Panel report, as
modified by the Appellate Body, were adopted by the DSB on 16 January 1998. At the DSB meeting
90 Section 12 sets out the procedure for the reference of patent applications by the Controller to examiners (see
Annex 3 of this report).

91 See paragraph 2.2 above.

92 See paragraph 2.10 above.

93 One EC pharmaceutical company has applied for marketing approval for a product regarding which a mailbox
application has been filed (see Annex 4 of this report).
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of 22 April 1998, the United States and India announced that they had agreed on an implementation
period of 15 months.

Claims of the Complainant

7.7 The EC claims - largely relying on the conclusions of the Panel and the Appellate Body in
dispute WT/DS50 that: (a) India has not complied with its obligations under Article 70.8 of the
TRIPS Agreement to establish "a means" that adequately preserves novelty and priority in respect of
applications for product patents in respect of pharmaceutical and agricultural chemical inventions
during the transitional period provided for in Article 65 of the TRIPS Agreement; (b) India has not
complied with it obligations under Article 70.9 of the TRIPS Agreement; and (c) India thereby
nullifies or impairs benefits accruing directly or indirectly to the EC under the TRIPS Agreement.

Claims of the Respondent

7.8 India claims that the EC's complaint in this case should be dismissed as inconsistent with the
rules of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) on
multiple complaints, in particular Articles 9.1 and 10.4, because the EC did not join the United States'
complaint in the previous case. In the alternative, India claims that: (i) the mailbox system currently
in force in India is consistent with Article 70.8(a) of the TRIPS Agreement; and (ii) India has not
acted inconsistently with Article 70.9 of the TRIPS Agreement because it is not obligated to establish
a system for the grant of exclusive marketing rights before all the conditions for the grant of the rights
have been met in respect of a specific product.

B. PROCEDURAL ISSUES

Introduction

7.9 India has requested the Panel to dismiss the EC's complaint as inadmissible on procedural
grounds. India argues that since it was "feasible" for the EC to have brought its complaint
simultaneously with the United States' complaint (WT/DS50), the EC was required to do so. In
India's view, the principle of stare decisis does not apply to the interpretations of a panel or the
Appellate Body.94 As a result, it argues that, in the absence of a specific rule to the contrary,
successive multiple complaints by different Members on the same matter would have to be examined
as separate new cases. The resulting danger of contradictory decisions and the waste of resources,
according to India, would be tremendous. Furthermore, India argues that such complaints amount to
unwarranted harassment. In India's view, these shortcomings can be avoided by strict interpretation of
Articles 9.1 and 10.4 of the DSU, which require multiple complainants to submit their case to the
same panel "whenever feasible" or "wherever possible".

7.10 The EC disagrees with India on the interpretation of Articles 9.1 and 10.4 of the DSU. The
EC argues that neither Article 9 nor Article 10 impose any obligation on WTO Members to make a
complaint at a given point in time. In support of its argument, the EC cites Article 3.7 of the DSU,
which provides that Members shall, before bringing a case, exercise their judgement as to whether
action under the DSU would be fruitful.

Article 9 of the DSU

7.11 Article 9 of the DSU, which sets out the procedure for multiple complaints, provides as
follows:

94 See also section C below.

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"1. Where more than one Member requests the establishment of a panel related to the
same matter, a single panel may be established to examine these complaints taking into
account the rights of all Members concerned. A single panel should be established to examine
such complaints whenever feasible.

"2. The single panel shall organize its examination and present its findings to the DSB in
such a manner that the rights which the parties to the dispute would have enjoyed had
separate panels examined the complaints are in no way impaired. If one of the parties to the
dispute so requests, the panel shall submit separate reports on the dispute concerned. The
written submissions by each of the complainants shall be made available to the other
complainants, and each complainant shall have the right to be present when any one of the
other complainants presents its views to the panel.

"3. If more than one panel is established to examine the complaints related to the same
matter, to the greatest extent possible the same persons shall serve as panelists on each of the
separate panels and the timetable for the panel process in such disputes shall be harmonized."

7.12 India argues that Article 9.1 does not make clear to whom it is addressed because of its use of
the passive voice. However, according to India, in view of its object and purpose, the duty to submit
multiple complaints to a single panel whenever feasible is a duty falling on both the WTO and its
membership. India claims that the EC's complaint should be dismissed because the EC did not
perform this duty.

7.13 In order to assess India's argument, we need to consider: (i) the nature of the requirement
contained in Article 9.1; (ii) the rights generally of Members under the DSU; and (iii) whether it was
feasible to establish a single panel in this particular case.

7.14 Given their ordinary meaning, the terms of Article 9.1 are directory or recommendatory, not
mandatory. They direct that a single panel should (not "shall") be established, and that direction is
limited to cases where it is feasible. We disagree with India that the addressee of Article 9.1 is not
clear. Article 9.1 is clearly a code of conduct for the DSB because its provisions pertain to the
establishment of a panel, the authority for which is exclusively reserved for the DSB. As such,
Article 9.1 should not affect substantive and procedural rights and obligations of individual Members
under the DSU.

7.15 Indeed, the text of Article 9.1, as well as the text of Article 9.2, which is part of the context of
Article 9.1, make it clear that Article 9 is not intended to limit the rights of WTO Members. In our
view, one of those rights is the freedom to determine whether and when to pursue a complaint under
the DSU. According to Article 3.7 of the DSU, "[t]he aim of dispute settlement mechanism is to
secure a positive solution to a dispute. A solution mutually acceptable to the parties to a dispute and
consistent with the covered agreements is clearly to be preferred". It would be inconsistent with this
aim of the dispute settlement mechanism to attempt to force Members to take decisions earlier than
they wish on whether to request a panel in a dispute, or to continue consultations aimed at securing a
mutually acceptable solution.

7.16 As to feasibility, it is not disputed by the parties that the complaints by the United States
(WT/DS50) and the EC (WT/DS79) relate to the same matter, i.e. India's compliance with Article 70.8
and 70.9 of the TRIPS Agreement. Was it then "feasible" for the DSB to establish a single panel at
the time of the United States' panel request in November 1996? The answer is no, because at that
time the EC had not requested the establishment of a panel. Indeed, the EC was not even entitled to
make such a request as it was not until 28 April 1997 that the EC requested consultations with India
on this matter.
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7.17 Accordingly, we find no violation of Article 9.1 of the DSU.

Article 10 of the DSU

7.18 We now turn to the examination of whether the EC's complaint in the present case is
permissible under Article 10 of the DSU, which provides:

"1. The interests of the parties to a dispute and those of other Members under a covered
agreement at issue in the dispute shall be fully taken into account during the panel process.

"2. Any Member having a substantial interest in a matter before a panel and having
notified its interest to the DSB (referred to in this Understanding as a "third party") shall have
an opportunity to be heard by the panel and to make written submissions to the panel. These
submissions shall also be given to the parties to the dispute and shall be reflected in the panel
report.

"3. Third parties shall receive the submissions of the parties to the dispute to the first
meeting of the panel.

"4. If a third party considers that a measure already the subject of a panel proceeding
nullifies or impairs benefits accruing to it under any covered agreement, that Member may
have recourse to normal dispute settlement procedures under this Understanding. Such a
dispute shall be referred to the original panel wherever possible."

7.19 India claims that since the EC was a third party in the previous case, and since it was
"possible" to do so, it was required to submit its complaint to the Panel which examined the United
States' claims on this matter (WT/DS50) under Article 10.4 of the DSU. As the EC did not meet this
requirement, India requests that the Panel declare the EC's complaint as inadmissible.

7.20 India's claim that the EC did not meet the requirement of Article 10.4 can only be understood
in the light of India's view that the term "original panel" is limited to a panel which has not yet issued
its final report. We do not see that this limitation flows from the ordinary meaning of the text. We also
note that, the phrase "original panel" is used elsewhere in the DSU (Article 21.5 and Article 22.6),
where it is clear that the reference is to a panel the final report of which has already been issued and
adopted. The text of Article 10.4, read in this context, does not support the Indian view.

7.21 Thus, in our view, the terms of Article 10.4 have been complied with in the present case. The
EC, which was a third party in the proceeding initiated by the United States in respect of the same
Indian measures, decided to have recourse to a panel under the DSU. This is precisely what
Article 10.4 permits. The two members of the Panel in WT/DS50 were reappointed, while the Panel
chairman, who was no longer available, was replaced. 95 We therefore find that India's claim regarding
a violation of Article 10.4 lacks both factual and legal basis.

95 See paragraph 1.2 above.

WT/DS79/R
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Conclusion

7.22 We note that India's rationale behind its restrictive reading of Articles 9.1 and 10.4 is that an
unmitigated right to bring successive complaints by different parties based on the same facts and legal
claims would entail serious risks for the multilateral trade order because of the possibility of
inconsistent rulings, as well as problems of waste of resources and unwarranted harassment. While
we recognize that these are serious concerns, this Panel is not an appropriate forum to address these
issues.

7.23 According to Article 11 of the DSU, the Panel's role is to "make an objective assessment of
the matter before it, including an objective assessment of the facts of the case and the applicability
and conformity with the relevant covered agreements". Furthermore, under Article 3.2 of the DSU,
the purpose of the panel process is to "clarify the existing provisions of [covered] agreements in
accordance with customary rules of interpretation of public international law". The same paragraph
goes on to state that "Recommendation and rulings of the DSB cannot add to or diminish the rights
and obligations provided in the covered agreements", and Article 19.2 also states that "... in their
findings and recommendations, the panel and the Appellate Body cannot add to or diminish the rights
and obligations provided in the covered agreements". 96 Thus, the Panel is required to base its findings
on the language of the DSU. We simply cannot make a ruling ex aequo et bono to address a systemic
concern divorced from explicit language of the DSU.

7.24 For the reasons stated above, the Panel rejects India's request for dismissal of the EC's
complaint.

C. THE EXTENT OF THE BINDING NATURE OF PRECEDENTS

7.25 Before we move on to the examination of substantive aspects of this dispute, however, we
need to address the question of whether, and if so, to what extent we are bound by the reports by the
Panel and the Appellate Body regarding the same subject-matter in the dispute between the United
States and India (WT/DS50). This question is relevant because the EC, on the one hand, is asking the
Panel to "extend" to it the findings in the earlier dispute and India, on the other hand, argues that it is
entitled to "normal dispute settlement procedures" under Article 10.4 of the DSU.

7.26 A number of GATT panels have examined complaints by different contracting parties
involving the same or similar measures of a responding party. For instance, both the 1983 panel
report on Spring Assemblies (complaint by Canada)97 and the 1989 panel report on Section 337
(complaint by the EC)98 concerned the application of Section 337 of the Tariff Act by the United
States. The 1980 panel report on Apples (complaint by Chile)99 and the 1989 panel reports on Dessert

96 The DSU is not included in the definition of the "covered agreements" under Article 1.1, first sentence.
However, the second sentence of Article 1.1 makes it clear that the rules and procedures of the DSU are applicable to
disputes concerning Member's rights and obligations under the DSU.

97 Panel report on United States - Imports of Certain Automotive Spring Assemblies, adopted on 26 May 1983,
BISD 30S/107. It should be noted that this report was adopted "on the understanding that this shall not foreclose future
examination of the use of Section 337 to deal with patent infringement cases from the point of view of consistency with
Articles III and XX of the General Agreement" (C/M/168).

98 Panel report on United States - Section 337 of the Tariff Act of 1930, adopted on 7 November 1989,
BISD 36S/345

99 Panel report on EEC - Restrictions on Imports of Apples from Chile, adopted on 10 November 1980,
BISD 27S/98
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Apples (complaints by Chile and the United States) 100 essentially dealt with the same measure taken
by the EEC.101 The 1988 panel report on Canadian Liquor Boards (complaint by the EC)102 and the
1992 panel report on the same subject-matter (complaint by the United States) 103 were indeed
examined by the same panelists. The unadopted panel reports on Tuna104 addressed the same
legislation - the Marine Mammal Protection Act - of the United States.

7.27 The issue of whether adopted panel reports are stare decisis, i.e. binding precedents, has not
been directly addressed in any of these cases. The following passage from the second Tuna report is
the only instance where a discussion of stare decisis occurs in GATT panel reports:

"In the view of the EEC and the Netherlands, the United States interpretation of the term
'necessary' as meaning 'needed' amounted to a rejection of adopted panel reports, which
constituted agreed interpretations of the General Agreement. The EEC recognized that there
was no stare decisis in the GATT, if only because there was no hierarchy between courts or
arbitral bodies in the GATT. This was also the case for most international courts or tribunals.
Nevertheless, such international courts and tribunals were always very careful about
maintaining their own precedents and a certain coherence in their decisions. The GATT
required such coherence in panel interpretations in order to provide stability within the
international trading system".105

It should be noted that in the Tuna case, the EEC did not rely on the notion of stare decisis and rather
advocated a softer approach of "coherence". It should also be noted that this argument was about the
interpretation of Article XX in general and that the EEC did not ask the panel simply to extend the
findings of the earlier Tuna panel.

7.28 Turning to the issue of how adopted panel reports should be treated in the absence of stare
decisis, we note that the Appellate Body discussed the effect of adopted panel reports in its report on
the Japan - Liquor case as follows:

"Adopted panel reports are an important part of the GATT acquis. They are often considered
by subsequent panels. They create legitimate expectations among WTO Members, and,
therefore, should be taken into account where they are relevant to any dispute. However, they
are not binding, except with respect to resolving the particular dispute between the parties to
that dispute".106

100 Panel reports on EEC - Restrictions on Imports of Dessert Apples, Complaint by Chile, adopted on
22 June 1989, BISD 36S/93; EEC - Restrictions on Imports of Apples, Complaint by the United States, adopted on
22 June 1989, BISD 36S/135

101 There is another panel report dealing with the same subject-matter between the EEC and Chile. DS39/R,
circulated on 20 June 1994. This is a short report describing that the issue was settled bilaterally.

102 Panel report on Import, Distribution and Sale of Alcoholic Drinks by Canadian Provincial Marketing
Agencies, adopted on 22 March 1988, BISD 35S/37

103 Panel report on Canada - Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing
Agencies, adopted on 18 February 1992, BISD 39S/27

104 Panel reports on United States - Restrictions on Imports of Tuna, Complaint by Mexico, DS21/R, circulated
on 3 September 1991; United States - Restrictions on Imports of Tuna, Complaints by the EEC and the Netherlands, DS29/R,
circulated on 19 June 1994

105 Document DS29/R, op. cit., paragraph 3.74

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7.29 This approach follows GATT practice, as explained in the above-mentioned 1989 Apples
report, which stated:

"The Panel first examined the EEC's system of restrictive licensing applied to imports of
apples from April through August 1988 under Article XI, as consistency with this Article was
the primary determinant of the conformity of the EEC's system with the General Agreement,
before proceeding to consider the measures under Articles XIII and X and Part IV of the
Agreement. In considering the facts and arguments relating to Article XI in particular, the
Panel took note of the fact that a previous Panel, in 1980107, had reported on a complaint
involving the same product and the same parties as the present matter and a similar set of
GATT issues. The Panel noted carefully the arguments of the parties concerning the
precedent value of this Panel's and other previous panels' recommendations, and the
arguments on the legitimate expectations of contracting parties arising out of the adoption of
panel reports. The Panel construed its terms of reference to mean that it was authorized to
examine the matter referred to it by Chile in the light of all relevant provisions of the General
Agreement and those related to its interpretation and implementation. It would take into
account the 1980 Panel report and the legitimate expectations created by the adoption of this
report, but also other GATT practices and panel reports adopted by the CONTRACTING
PARTIES and the particular circumstances of this complaint. The Panel, therefore, did not
feel it was legally bound by all the details and legal reasoning of the 1980 Panel report. ..."108

7.30 It can thus be concluded that panels are not bound by previous decisions of panels or the
Appellate Body even if the subject-matter is the same. In examining dispute WT/DS79 we are not
legally bound by the conclusions of the Panel in dispute WT/DS50 as modified by the Appellate Body
report. However, in the course of "normal dispute settlement procedures" required under Article 10.4
of the DSU, we will take into account the conclusions and reasoning in the Panel and Appellate Body
reports in WT/DS50. Moreover, in our examination, we believe that we should give significant weight
to both Article 3.2 of the DSU, which stresses the role of the WTO dispute settlement system in
providing security and predictability to the multilateral trading system, and to the need to avoid
inconsistent rulings (which concern has been referred to by both parties). 109 In our view, these
considerations form the basis of the requirement of the referral to the "original panel" wherever
possible under Article 10.4 of the DSU.

D. ARTICLE 70.8(a) OF THE TRIPS AGREEMENT

Introduction

7.31 We now turn to the examination of the EC's claim on Article 70.8 of the TRIPS Agreement.
Article 70.8 provides as follows:

106 Ibid. (Appellate Body report), page 14. The footnote to the cited passage states: "It is worth noting that the
Statute of the International Court of Justice has an explicit provision, Article 59, to the same effect. This has not inhibited
the development by that Court (and its predecessor) of a body of case law in which considerable reliance on the value of
previous decisions is readily discernible."

107 The footnote to this sentence refers to BISD 27S/98-117.

108 Panel report on Dessert Apples (complaint by Chile), op. cit., paragraph 12.1. The parallel report addressing
the United States' complaint, op. cit., contains almost identical paragraphs at paragraph 5.1.

109 See paragraphs 4.2, fifth indent and 4.8 above.

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"Where a Member does not make available as of the date of entry into force of the WTO
Agreement patent protection for pharmaceutical and agricultural chemical products
commensurate with its obligations under Article 27, that Member shall:

(a) notwithstanding the provisions of Part VI, provide as from the date of entry
into force of the WTO Agreement a means by which applications for patents
for such inventions can be filed;

(b) apply to these applications, as of the date of application of this Agreement,

the criteria for patentability as laid down in this Agreement as if those criteria
were being applied on the date of filing in that Member or, where priority is
available and claimed, the priority date of the application; and

(c) provide patent protection in accordance with this Agreement as from the
grant of the patent and for the remainder of the patent term, counted from the
filing date in accordance with Article 33 of this Agreement, for those of these
applications that meet the criteria for protection referred to in
subparagraph (b)."

The EC claims, largely relying on the results of the previous case (dispute WT/DS50), that India has
failed to fulfil its obligation under this paragraph by not establishing a valid system for receiving
"mailbox" applications. In particular, it notes that there has been no legislative change in the Indian
patent system after the adoption of the Panel and the Appellate Body reports in dispute WT/DS50, in
which it was found that India had failed to fulfil such obligation.

7.32 Initially, we note that the only obligation India currently assumes under Article 70.8 is that of
subparagraph (a), the effective date of which is "the date of entry into force of the WTO Agreement",
i.e., 1 January 1995. Obligations under subparagraphs (b) and (c) will become binding on India only
"as of the date of application of this Agreement", which in this particular instance means no later than
1 January 2005 by virtue of the provisions of paragraphs 2 and 4 of Article 65 of the TRIPS
Agreement. Thus, the question before us is whether India has taken the action necessary to
implement its obligations under subparagraph (a) of Article 70.8.

7.33 In this regard, we recall that the Panel in dispute WT/DS50 reached the conclusion that India
had failed to take the action necessary to implement its obligations under Article 70.8(a), which had
been upheld by the Appellate Body. We note that India has not introduced any changes to its patent
regime since the adoption of the Panel and the Appellate Body reports in dispute WT/DS50.
However, we also note that the Appellate Body modified the reasoning in the Panel report in dispute
WT/DS50 and that India has provided certain additional information regarding its mailbox system to
us. In the following analysis, we will take account of these new elements as necessary.

Nature of the Obligations

7.34 We recall that the Panel report in dispute WT/DS50 first described the
nature of obligations at issue under Article 70.8(a). The EC, by requesting the
Panel to extend the finding in that report as modified by the Appellate Body,
implicitly accepts the analysis set out in the following six paragraphs. India does
not contest this part of the finding in the previous case, either.

7.35 Subparagraph (a) of Article 70.8, like all other provisions of the covered agreements, must be
interpreted in good faith in the light of: (i) the ordinary meaning of its terms; (ii) the context; and
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(iii) its object and purpose, following the rules set out in Article 31(1) of the 1969 Vienna Convention
on the Law of Treaties (hereinafter referred to as the "Vienna Convention").

7.36 Subparagraph (a) starts with the phrase "notwithstanding the provisions of Part VI". This
indicates that the transitional arrangements contained in Part VI of the TRIPS Agreement are not
applicable. Thus, a Member not making available as of 1 January 1995 patent protection for
pharmaceutical and agricultural chemical products commensurate with its obligations under Article 27
cannot avail itself of a transitional period under Article 65 regarding the operation of this
subparagraph. This is clear from the textual analysis and in any event is not in dispute between the
parties. The substantive obligation to be assumed by such a Member as from 1 January 1995 is to
provide "a means" by which applications for patents for inventions in respect of pharmaceutical and
agricultural chemical products "can be filed". The analysis of the ordinary meaning of these terms
alone does not lead to a definitive interpretation as to what sort of "means" is required by this
subparagraph.

7.37 We thus need to analyse the context of this subparagraph. The means for filing is necessary
because, under subparagraphs (b) and (c) of Article 70.8, a Member which does not make patents
available as of 1 January 1995 for pharmaceutical and agricultural chemical products must, after the
expiry of the transitional period, apply the criteria for patentability as laid down in the TRIPS
Agreement to the applications so filed and must accord patent protection for those products that meet
these criteria. In addition, the Member is obligated to grant exclusive marketing rights to those
products that meet the conditions set out in Article 70.9 even during the transitional period. The terms
of subparagraph (a) must be understood in this context.

7.38 Furthermore, the object and purpose of the TRIPS Agreement must be taken into account in
our analysis. Article 27 of the TRIPS Agreement requires that patents be made available in all fields
of technology, subject to certain narrow exceptions. Article 65 provides for transitional periods for
developing countries: in general five years from the entry into force of the WTO Agreement,
i.e. 1 January 2000, and an additional five years to provide for product patent protection in areas of
technology to which such protection would otherwise have to be extended in its territory on
1 January 2000 under the general transition rule. Thus, in such areas of technology, developing
countries meeting these conditions are not required to provide product patent protection until
1 January 2005. However, these transitional provisions are not applicable to Article 70.8, which
ensures that, if product patent protection commensurate with Article 27 is not already available for
pharmaceutical and agricultural chemical product inventions, a means must be in place as of
1 January 1995 which allows for the entitlement to file patent applications for such inventions and the
allocation of filing and priority dates to them so that the novelty of the inventions in question and the
priority of the applications claiming their protection can be preserved for the purposes of determining
their eligibility for protection by a patent at the time that product patent protection will be available
for these inventions, i.e. at the latest after the expiry of the transitional period.
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7.39 In order to achieve the object and purpose of the TRIPS Agreement, as expressed in
Article 70.8, there must be a mechanism to preserve the novelty of pharmaceutical and agricultural
chemical inventions which are currently outside the scope of product patent protection and the priority
of applications claiming their protection, for the purposes of determining their eligibility for
protection by patents after the expiry of the transitional period. Once these inventions can be
protected by product patents, Article 27 requires such patents to be available for those inventions that
are: (i) new; (ii) involve an inventive step; and (iii) are capable of industrial application. In
accordance with the normal meaning of these conditions, an invention is new and involves an
inventive step if, at the filing date or, if applicable, the priority date of the application in which patent
protection is claimed, the invention did not form part of the prior art and required an inventive step to
be deduced from that prior art by a person skilled in the art. Thus, in order to prevent the loss of the
novelty of an invention in this sense, filing and priority dates need to have a sound legal basis if the
provisions of Article 70.8 are to fulfil their purpose. Moreover, a filing must entitle the applicant to
claim priority, if available, on the basis of an earlier filing in respect of the claimed invention over
applications with subsequent filing or priority dates. Without legally sound filing and priority dates,
the mechanism to be established on the basis of Article 70.8 will be rendered inoperational. In our
view, preservation of novelty and priority in respect of applications for product patents in respect of
pharmaceutical and agricultural chemical inventions so as to provide for effective future patent
protection after examination of the applications as of, at the latest, 1 January 2005 is the central object
and purpose of Article 70.8(a). This is a special obligation imposed on those Members benefitting
from the transitional arrangements.

7.40 The findings above can be confirmed by the negotiating history of the TRIPS Agreement. 110
We note that in the negotiation of the TRIPS Agreement the question of patent protection for
pharmaceutical and agricultural chemical products was a key issue, which was negotiated as part of a
complex of related issues concerning the scope of the protection to be accorded to patents and some
related rights and the timing of the economic impact of such protection. A critical part of the deal
struck was that developing countries that did not provide product patent protection for
pharmaceuticals and agricultural chemicals were permitted to delay the introduction thereof for a
period of ten years from the entry into force of the WTO Agreement. However, if they chose to do so,
they were required to put in place a means by which patent applications for such inventions could be
filed so as to allow the preservation of their novelty and priority for the purposes of determining their
eligibility for protection by a patent after the expiry of the transitional period. In addition, they were
required to provide also for exclusive marketing rights in respect of the products in question if those
products obtained marketing approval during the transitional period, subject to a number of
conditions. It is our view that this means that Article 70.8(a) requires the developing countries in
question to establish "a means" for filing mailbox applications that provides a sound legal basis to
preserve both the novelty of the inventions and the priority of the applications as of the relevant filing
and priority dates.

Mechanism for Implementing the Obligations

7.41 As noted in the previous case, pursuant to Article 1.1 of the TRIPS Agreement, it is up to
India to decide how to implement its obligations under Article 70.8. 111 After examining the
consistency of the administrative instructions at issue with the Patents Act, the Panel in dispute
WT/DS50 reached the conclusion that the means chosen by India to implement its obligations under
Article 70.8(a), i.e. administrative instructions regarding the continued receipt of mailbox
110 We note that Article 32 of the Vienna Convention gives the negotiating history a status of "supplementary
means of interpretation" only. Here we use it only to confirm the meaning resulting from the application of the rules set out
in Article 31 of the Vienna Convention.

111 Document WT/DS50/R, paragraph 7.33

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applications, does not provide a sound legal basis for preserving the novelty and priority as required
under Article 70.8(a). The Appellate Body upheld this conclusion in stating that "we are not
persuaded that India's 'administrative instructions' provide a sound legal basis to preserve novelty of
inventions and priority of applications as of the relevant filing and priority dates". 112 However, on the
basis of additional information and arguments provided to us, India essentially requests us to reverse
the finding in the previous case and to find that there is a sound legal basis in the current system.

7.42 The Panel report in dispute WT/DS50 follows the approach to the burden of proof established
by the Appellate Body in the Shirts and Blouses case.113 India claims that this approach violates
established principles governing the burden and standard of proof. 114 We note, however, that the
correctness of this approach was affirmed by the Appellate Body. 115 We will follow the same
approach in the present case. It is our view that the EC has, on the basis of its reference to the finding
in the previous case - upheld by the Appellate Body - that India was in violation of its obligations,
established a prima facie case of violation with respect to Article 70.8(a). Now the onus shifts to
India to bring forward evidence and arguments to disprove the claim by the EC.

7.43 In dispute WT/DS50, the Panel found that India's current system based on administrative
instructions does not provide a sound legal basis to preserve both the novelty of the inventions and the
priority of the applications as of the relevant filing and priority dates, because it creates a certain
degree of legal insecurity in that it requires Indian officials to ignore certain mandatory provisions of
the Patents Act.116

7.44 The Panel noted that under Section 12(1) of the Patents Act, when the complete specification
has been filed in respect of a patent application, the Controller must refer the matter to an examiner
and that Section 12(2) obliges the examiner ordinarily to complete examination within 18 months of
the date of reference by the Controller. The Panel also noted that under Section 15(2) of the Patents
Act, any application for the grant of a patent on a pharmaceutical or agricultural chemical product
must be refused by the Controller for lack of patentability.

7.45 In its examination of the Panel's finding, the Appellate Body stated:

"[L]ike the Panel, we are not persuaded that India's 'administrative instructions' would prevail
over the contradictory mandatory provisions of the Patents Act. 117 We note also that, in
issuing these 'administrative instructions', the Government of India did not avail itself of the
provisions of section 159 of the Patents Act, which allows the Central Government 'to make
rules for carrying out the provisions of [the] Act' or section 160 of the Patents Act, which
requires that such rules be laid before each House of the Indian Parliament. We are told by
India that such rulemaking was not required for the 'administrative instructions' at issue here.
But this, too, seems to be inconsistent with the mandatory provisions of the Patents Act." 118
112 Document WT/DS50/AB/R, paragraph 70

113 Appellate Body report on Measure Affecting Imports of Woven Wool Shirts and Blouses from India, adopted
on 23 May 1997, WT/DS33/AB/R, page 16

114 See paragraph 4.12 above.

115 Document WT/DS50/AB/R, paragraph 74

116 Document WT/DS50/R, paragraph 7.35

117 Ibid., paragraph 7.37

118 Document WT/DS50/AB/R, paragraph 69

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7.46 India now argues that this reading of the Patents Act was incorrect. According to India, there is
no conflict between the administrative instructions giving effect to a "mailbox" mechanism and the
Patents Act; Article 73 of the Indian Constitution defining the extent of executive power provides a
sound legal basis for these instructions. India argues this on the basis that, while Section 12(1) of the
Patents Act requires the Controller to refer patent applications to an examiner, it does not specify the
time-frame within which the Controller must do so. Moreover, India draws attention to a principle of
statutory interpretation in Indian law to the effect that, even where a statutory provision specifies a time
for performing a statutory duty, the time specified is only directory and not mandatory. It also argues
that a principle of statutory interpretation in Indian domestic law that a statutory provision must be
interpreted consistently with India's existing international obligations further justifies the Controller
using discretion on matters of timing in order to give effect to mailbox obligations.

7.47 In this regard, we note that arguments relating generally to administrative discretion were
made by India also in dispute WT/DS50. Indeed, the arguments on such discretion and on
international law now made by India are not based on new developments in the Indian legal system.
However, we will examine India's claim in more detail in view of the additional information provided
by India and India's further elaboration of its arguments.

7.48 In regard to the time-frame under Section 12(1) of the Patents Act for the Controller to refer
applications to an examiner, we note that the relevant part of the text of Section 12(1) reads: "When
the complete specification has been filed in respect of an application for a patent, the application and
the specification relating thereto shall be referred by the Controller to an examiner ...". We are not
persuaded that this text gives complete discretion to the Controller regarding the timing of the referral.
Indeed, on its face it specifies a time for referral, i.e. "[w]hen the complete specification has been
filed".

7.49 In regard to the times specified for performing a statutory duty, while we accept that they may
be only directory and not mandatory in nature, we are not persuaded that such discretion would go
beyond what is necessary for administrative purposes and extend to actions that, on the face of it, would
defeat a basic feature of a statute, namely, in this case, the non-patentability of inventions of
pharmaceutical and agricultural chemical products (Section 5). The directory nature of a time-bound
provision does not necessarily provide a legal basis for positive actions not stipulated in a statute. 119
With regard to the principle of interpretation in accordance with international obligations, we note that
India makes it clear that this would only be possible where legislation is capable of more than one
meaning and one of those meanings is consonant with the treaty obligation in question. This does not
appear to be the case in this instance; the terms of Sections 12(1), 12(2) and 15(2) of the Patents Act do
not appear to be capable of more than one meaning. We also note in this connection that according to
India international treaty obligations are not self-executing in India's domestic legal order.120 For the
reasons indicated above we are not persuaded, notwithstanding the new arguments advanced by India,
that the administrative instructions at issue for giving effect to the obligations of Article 70.8(a) of the
TRIPS Agreement are not in conflict with provisions of the Patents Act.

119 Black's Law Dictionary (Sixth Edition) defines a directory provision as "[a] provision in a statute, rule of
procedure, or the like, which is a mere direction or instruction of no obligatory force, and involving no invalidating consequence
for its disregard, as opposed to an imperative or mandatory provision, which must be followed". It further states: "The general
rule is that the prescriptions of a statute relating to the performance of a public duty are so far directory that, though neglect of
them may be punishable, yet it does not affect the validity of acts done under them, as in the case of a statute requiring an officer
to prepare and deliver a document to another officer on or before a certain day". Even if Section 12(1) of the Patents Act can be
regarded as a directory provision, it does not follow that the Controller's positive actions are necessarily legal.

120 See paragraph 2.1 above.

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7.50 Given this, we are also not persuaded that Article 73 of the Indian Constitution provides a sound
legal basis for these administrative instructions. We note that India's argument that Article 73 of the
Constitution can provide a sound legal basis is predicated on the "statutory silence" of the Patents Act in
specifying the timing of referrals of applications for examination.121 However, for the reasons outlined
in paragraphs 7.44, 7.45, 7.48 and 7.49 above, we cannot see how the Act can be construed as silent on
this point. We also note that, according to a well-established principle of Indian administrative law,
administrative instructions "cannot be issued on any matter which is the subject of legislation" and that,
while the necessary administrative information can be issued "wherever there is no statutory provision
or where there are gaps in any enactment", "the only rider on the authority to issue such administrative
instructions is that there should be no statutory provision either expressly or by necessary implication to
the contrary".122 Since the Patents Act does contain statutory provisions regarding the examination and
rejection of patent applications for pharmaceutical and agricultural chemical products, we fail to see
how Article 73 of the Constitution could provide a legal basis for the administrative instructions at issue
in the present case.123

7.51 We further note that these arguments submitted by India to us reach a conclusion which is
different from that reached by patent experts when they recommended the amendment of the Patents
Act in late 1994, a course of action then attempted by India. 124

7.52 The possibility of a challenge was another issue noted in dispute WT/DS50. The Panel report
in that case points out that even if Patent Office officials do not examine and reject mailbox
applications, a competitor might seek a judicial order to force them to do so in order to obtain
rejection of a patent claim; if the competitor successfully establishes the illegality of the separate
storage and non-examination of mailbox applications before a court, the filing of those applications
could be rendered meaningless. 125 The Appellate Body reached the same conclusion: "[W]e are not
persuaded that India's 'administrative instructions' would survive a legal challenge under the Patents
Act."126

7.53 India now argues that an Indian court will never examine a request by a competitor to force
the Controller to refer a mailbox application to an examiner for examination because basic principles
of standing and ripeness dictate the rejection of challenges to contingent, future rights such as are
represented by mailbox applications.

7.54 We are not persuaded by this argument. India's argument is based on the assumption that a
competitor can never demonstrate actual damage caused by the existence of a mailbox application
prior to the grant of an exclusive marketing right or a patent. This would appear to assume that
investment decisions of a competitor in the production of the product in question cannot be influenced
by the prospect of the product being protected by an exclusive marketing right or a patent in the future.
In any event, once an exclusive marketing right is granted to a mailbox applicant, the competitor
121 See paragraph 4.16 above.

122 See paragraphs 2.1 and 4.17, footnote 58 above.

123 Moreover, if there were deemed to be such a gap, the Patents Act provides the means to fill it through its
Section 159. Yet, as noted by the Appellate Body, India did not avail itself of this provision (see paragraph 7.45 above).

124 See the text of paragraph 2.3 above.

125 Document WT/DS50/R, paragraph 7.37

126 Document WT/DS50/AB/R, paragraph 70

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might be able to demonstrate actual damage, which constitutes proper cause of action. 127 Moreover,
as the EC points out, a dispute over a relevant filing date could arise even during the transition period
in the context of a court procedure regarding the granting of an exclusive marketing right under
Article 70.9 of the TRIPS Agreement. 128 We note the point made by India that, to date, neither the
system established by the administrative instructions nor any individual mailbox application has been
challenged before a court, but do not consider that this is decisive in establishing whether they are
challengeable. As pointed out in paragraph 7.67 and following below, since it is impossible to
indicate the exact time on which a product may meet the terms of Article 70.9, WTO Members
concerned are required to reckon with the possibility that this moment may arise at any time
subsequent to the date of entry into force of the WTO Agreement. By the same token, the possibility
of a dispute over a relevant filing date in the context of a court procedure regarding the grant of an
exclusive marketing right must also be reckoned with at any point in time after 1 January 1995.

7.55 Finally, we take note of India's arguments concerning what it views as contradictory rulings
by the Appellate Body in respect of its examination of the findings of the Panel in dispute WT/DS50
in respect of Article 70.8(a), and, in particular, those relating to interpretation of municipal law,
reasonable doubt and burden of proof. In our view, it is not for us to review questions regarding how
the Appellate Body arrived at its conclusions nor do we consider it necessary in the light of the
foregoing. The ultimate conclusion of the Appellate Body in the previous case was quite clear: "[W]e
are not persuaded that India's 'administrative instructions' provide a sound legal basis to preserve
novelty of inventions and priority of applications as of the relevant filing and priority dates . [W]e
agree with the Panel's conclusion that India's 'administrative instructions' for receiving mailbox
applications are inconsistent with Article 70.8(a) of the TRIPS Agreement." 129

7.56 It is also recalled that the administrative instructions relied upon by India in the present case
are unwritten and unpublished.130 Moreover, as noted in the previous case, the mere existence of a
possibility for making mailbox applications is hardly sufficient as the legal basis, even if we take into
account the fact that economic operators in this area are usually well informed about systems for the
protection of their rights.131 This holds true even if some mailbox applications have been received by
the Patent Office and stored for future action. While Article 70.8 does not explicitly provide for a
publication obligation, doubts have to remain as to whether an unwritten and unpublished system for
permitting the filing of applications by nationals of other WTO Members could be construed as a
'means' which adequately responds to the requirements of Article 70.8.

7.57 India claims that the public was informed through unstarred question No. 2601 at Lok Sabha
(attached to this report as Annex 2). However, the Indian government's answer to this question in
Parliament only indicates that the Patent Offices had received a certain number of mailbox
applications and that they would be taken up for examination after 1 January 2005. There is no
mention of administrative instructions. Nor is there any explanation regarding how the novelty and
priority are going to be preserved. This answer alone hardly provides a sound legal basis for the
purposes of Article 70.8(a).

127 See footnote 59 above.

128 See paragraph 4.19 above.

129 Document WT/DS50/AB/R, paragraphs 70 and 71

130 It should be noted that we are not discussing the issue as part of India's transparency obligations under
Article 63 of the TRIPS Agreement, which is outside the terms of reference of this Panel.

131 Document WT/DS50/R, paragraph 7.42

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7.58 We note the point made by India that the present system ensures the retention of the necessary
facts to determine novelty and priority for the purposes of decisions on the future grant of patent rights
pursuant to Article 70.8(b) and (c). Even if we were persuaded that this was the case despite the
unpublished nature of the system, we do not believe that this would alter our concerns regarding the
soundness of the legal basis for the system under the law as it presently stands.

Conclusion

7.59 For the reasons outlined above, we do not consider that India has successfully rebutted the
prima facie case of violation of Article 70.8(a) that has been established by the EC in the present case.
In conclusion, we find that India has failed to take the action necessary to implement its obligations
under subparagraph (a) of Article 70.8.

E. ARTICLE 70.9 OF THE TRIPS AGREEMENT

Introduction

7.60 We now turn to our examination of the EC's claim regarding exclusive marketing rights under
Article 70.9 of the TRIPS Agreement. Article 70.9 reads as follows:

"Where a product is the subject of a patent application in a Member in accordance with

paragraph 8(a), exclusive marketing rights shall be granted, notwithstanding the provisions of
Part VI, for a period of five years after obtaining marketing approval in that Member or until
a product patent is granted or rejected in that Member, whichever period is shorter, provided
that, subsequent to the entry into force of the WTO Agreement, a patent application has been
filed and a patent granted for that product in another Member and marketing approval
obtained in such other Member."

It is not contested that currently there is neither legislation nor administrative practice in place in India
regarding the grant of exclusive marketing rights on those products that satisfy the conditions of
Article 70.9. The situation has remained unchanged since the adoption of the Panel and Appellate
Body reports in dispute WT/DS50. India also admits that legislation is needed to effect a system of
granting exclusive marketing rights. As noted above, the Patents (Amendment) Ordinance 1994 had
provisions to establish such a system as of 1 January 1995, but the system lapsed with the expiry of
the Ordinance.

7.61 The EC claims that the obligation to establish an exclusive marketing rights system arose on
1 January 1995 and that, since India has failed to provide for an exclusive marketing rights system in
its legislation, it is currently not in compliance with Article 70.9. India claims that, since there has not
been any request for the grant of exclusive marketing rights in India so far, India has not failed to
implement its obligations under Article 70.9 and that India is not obligated to make exclusive
marketing rights generally available before all the events specified in Article 70.9 have occurred.
Thus, the central question before us is that of timing: as of when should there be a mechanism ready
for the grant of exclusive marketing rights?

7.62 We note that, in dispute WT/DS50, both the Panel and the Appellate Body found that India
has an obligation to implement the provisions of Article 70.9 effective as from the date of the entry
into force of the WTO Agreement, that is, 1 January 1995. Thus, the Appellate Body held that "we
agree with the Panel that India should have had a mechanism in place to provide for the grant of
exclusive marketing rights effective as from the date of entry into force of the WTO Agreement, and,
therefore, we agree with the Panel that India is in violation of Article 70.9 of the TRIPS Agreement".
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7.63 We further note that, regarding Article 70.9, India has not brought forward
any new factual information. It criticizes the Panel and the Appellate Body reports,
pointing out certain perceived logical inconsistencies.

Textual Analysis

7.64 Following the rules under Article 31 of the Vienna Convention, the starting point of our
analysis on the question of timing should be the wording of Article 70.9. We note that, as is also the
case with Article 70.8, Article 70.9 uses the term "notwithstanding the provisions of Part VI". The
ordinary meaning of this term clearly indicates that Members to which this provision applies cannot
avail themselves of the transitional arrangements under Part VI, including Article 65. Thus, the
effective date of this provision must be the date of entry into force of the WTO Agreement, which
means that a Member which is subject to the provisions of Article 70.9 must be ready to grant
exclusive marketing rights at any point in time subsequent to 1 January 1995.

7.65 India essentially repeats its arguments in the previous case that the obligations under
Article 70.9 should be distinguished from those under other provisions of the TRIPS Agreement
because it uses the term "exclusive marketing rights shall be granted ...". According to India, there is
a material difference between this expression and such other expressions as "patents shall be available
..." in Article 27.132 We disagree. The Panel report in dispute WT/DS50 points out that the term
"right" connotes an entitlement to which a person has a just claim and that, as such, it implies general,
non-discretionary availability in the case of those eligible to exercise it. It was held that an exclusive
marketing right could not be "granted" in a specific case unless it was "available" in the first place. 133
The Panel's view was upheld by the Appellate Body, and we do not see any reason to adopt a different
position in the present case. In this connection, we would also note that India considers that exclusive
marketing rights are to be granted in response to requests from those who are eligible. In our view, a
request-based system of rights cannot operate effectively unless there is a mechanism in place that
establishes general availability and enables such requests to be made.

Contextual Analysis

7.66 India argues that the Panel in dispute WT/DS50 did not examine the context of Article 70.9
fully. To support its argument, India cites provisions of Articles 42 to 48 of the TRIPS Agreement, for
instance, where the judicial authorities of Members "shall have authority" to order certain actions and
contrasts this wording with that of Article 70.9, which provides that marketing rights "shall be
granted" when certain conditions are met. We do not share India's view that it can be deduced from the
use of these words in those Articles that a system of general availability is not called for under
Article 70.9. To infer this, one would have to hold that the omission of the words "shall have the
authority" in Articles 42-48 (so that a court was required to act in a certain way when prescribed
conditions were met, rather than merely having the authority to do so) would mean that a Member
would not be expected to give its judicial authorities in advance the authority to act in this way, for
example to award an injunction, but could legislate to this effect when a specific occasion arose. Such
an inference would obviously be absurd. Rather the function of the words "shall have the authority" is
to address the issue of judicial discretion, not that of general availability.

132 See paragraph 4.22 above.

133 See footnote 112 to document WT/DS50/R.

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Object and Purpose

7.67 Based on textual and contextual analysis, the Panel report in dispute WT/DS50 reaches the
conclusion that under Article 70.9 there must be a mechanism ready for the grant of exclusive
marketing rights at any time subsequent to the date of entry into force of the WTO Agreement. This
conclusion was affirmed by the Appellate Body.

7.68 India suggests that this result ignores the fact that in reality it will take many years before
anyone will be in a position to apply for the grant of exclusive marketing rights under Article 70.9.
Under Article 70.9, exclusive marketing rights must be granted by India after a product meets the
following conditions:

(a) a mailbox application has been filed in India in respect of a pharmaceutical or

agricultural chemical product;

(b) a patent application has been filed in respect of that product in another WTO Member
after 1 January 1995;

(c) the other Member has granted the patent;

(d) the other Member has approved the marketing of the product; and

(e) India has approved the marketing of the product.

As pointed out in the previous case, what really matters is when it would be possible for one product
to meet the terms of Article 70.9. While one could generally argue that these events take some time to
materialize, one can never indicate exactly how long they will take. Indeed, according to the EC,
there is at least one pharmaceutical company based in the EC that has applied for marketing approval
in India for a product regarding which a mailbox application has been filed. 134

7.69 We also note that steps (a), (b), (c) and (d) in the previous paragraph are events that are
beyond the control of the authorities in India. In other words, they do not provide any definite basis
for the postponement of the obligations under Article 70.9. Step (e) is under the control of the Indian
authorities. However, if marketing approvals are denied purely for the purpose of delaying the grant
of exclusive marketing rights, it would give rise to questions regarding good faith application of the
TRIPS Agreement.135

7.70 Moreover, the range of products affected, i.e. pharmaceuticals and agricultural chemicals, is
large and differing marketing approval regimes will apply according to the products in question. For
these reasons, we are not convinced that India can establish any specific date later than
1 January 1995 as the date by which it should have in place the legal means necessary to give effect to
the exclusive marketing rights provisions of Article 70.9.

7.71 India argues that this interpretation entails the absurd consequence that the transitional
arrangements would allow developing countries to postpone legislative changes in all fields of
technology except in the most sensitive ones, i.e. pharmaceutical and agricultural chemical products.
India's view is that such a consequence cannot be justified in view of the object and purpose of the
transitional arrangements in the TRIPS Agreement. In this regard, we recall that we have analysed the

134 See paragraph 4.25 above and Annex 4 of this report.

135 Article 26 of the Vienna Convention states: "Every treaty in force is binding upon the parties to it and must be
performed by them in good faith".
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object and purpose of the transitional arrangements regarding pharmaceutical and agricultural
chemical products in paragraphs 7.38 and 7.39 above. Article 70.9 is, as was the case with
Article 70.8(a), a special obligation imposed on those Members benefitting from the transitional
arrangements. We note further that India did in fact implement this special obligation through
legislative action, when it promulgated in December 1994 the Patents (Amendment) Ordinance,
setting out details for the grant of exclusive marketing rights.

7.72 The observation above can be confirmed by the drafting history of the TRIPS Agreement.
Exclusive marketing rights were a quid pro quo for the delay of the availability of product patents for
pharmaceutical and agricultural chemical products until 1 January 2005, based on a careful balancing
of obligations between interested parties during the Uruguay Round negotiations. We therefore
disagree with India that the object and purpose of Article 70.9 would not support the conclusion
reached above.

7.73 Finally, we take note of India's arguments concerning what it views as contradictory rulings by
the Appellate Body in respect of its examination of the Panel's findings in the previous case in respect of
Article 70.9, in particular regarding the concept of legitimate expectations. As indicated in
paragraph 7.55 above, it is not, in our view, for us to review questions regarding how the Appellate
Body reached its conclusions, nor do we consider it necessary in the light of the foregoing. Rather, we
confine ourselves to noting that the Appellate Body did not question the legal reasoning and findings of
the Panel in the previous case in regard to Article 70.9 and came to a clear conclusion: " we agree
with the Panel that India should have had a mechanism in place to provide for the grant of exclusive
marketing rights effective as from the date of entry into force of the WTO Agreement, and, therefore, we
agree with the Panel that India is in violation of Article 70.9 of the TRIPS Agreement".

Conclusion

7.74 In conclusion, we find that India has failed to implement its obligations under Article 70.9 to
establish a system for the grant of exclusive marketing rights to be available at any time after entry
into force of the WTO Agreement.
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F. NULLIFICATION OR IMPAIRMENT

7.75 Pursuant to Article 3.8 of the DSU, the findings in sections D and E above also constitute a
case of prima facie nullification or impairment of benefits accruing to the EC under the TRIPS
Agreement, which India has not rebutted.

VIII. CONCLUDING REMARKS

8.1 Since the matter has been addressed by India in its arguments and caused some confusion in the
previous case, we would like to underline that the Panel's findings do not in any way foreshorten the
transition period of until, at the latest, 1 January 2005 that India has for meeting its obligations under
Articles 65.4 and 70.8(b) and (c). Rather the Panel's findings only relate to the legal basis required to
give effect to the provisions of Article 70.8(a) and 70.9, which concern action to be taken during the
transition period. As mentioned earlier, to come to any other conclusion would upset the delicate
balance found in the Uruguay Round negotiations between these two sets of provisions.

IX. CONCLUSIONS

9.1 On the basis of the findings set out above, the Panel concludes that India has not complied
with its obligations under Article 70.8(a) because it has failed to establish a sound legal basis for
adequately preserving novelty and priority in respect of applications for product patents in respect of
pharmaceutical and agricultural chemical inventions during the transitional period to which it is
entitled under Article 65 of the TRIPS Agreement; and that India has not complied with its
obligations under Article 70.9 of the TRIPS Agreement because it has failed to establish a system for
the grant of exclusive marketing rights.

9.2 The Panel recommends that the Dispute Settlement Body request India to bring its transitional
regime for patent protection of pharmaceutical and agricultural chemical products into conformity
with its obligations under the TRIPS Agreement.
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ANNEX 1

WORLD TRADE WT/DS79/2

15 September 1997

ORGANIZATION
(97-3734)

Original: English

INDIA - PATENT PROTECTION FOR PHARMACEUTICAL

AND AGRICULTURAL CHEMICAL PRODUCTS

Request for the Establishment of a Panel by the EC

The following communication, dated 9 September 1997, from the Permanent Delegation of the
European Commission to the Chairman of the Dispute Settlement Body is circulated at the request of
that delegation.
_______________

My authorities have asked me to submit the following request on behalf of the European
Communities and their Member States for consideration at the next meeting of the Dispute Settlement
Body.

The Agreement on Trade-Related Aspects of Intellectual Property Rights contained in Annex 1C

to the Agreement Establishing the World Trade Organization (hereafter the "TRIPS Agreement") obliges
all Members of the World Trade Organization (hereafter the "WTO") to grant patents for the subject
matter specified in Article 27 of the TRIPS Agreement. Article 70.8 of the TRIPS Agreement provides
that where a Member makes use of the transitional provisions contained in the TRIPS Agreement and
does not make patent protection available for pharmaceutical and agricultural chemical inventions as of
the date of entry into force of the WTO Agreement for it, that Member must implement measures to
permit parties to file patent applications concerning such inventions on or after that date (hereafter
referred to as the "interim filing procedure"). When product patent protection is established, these
applications must be examined according to the criteria for patentability set forth in the Agreement,
based on the earliest effective filing date claimed for the application. Patents granted on the basis of
such applications must enjoy the term and rights provided for under the TRIPS Agreement. Article 70.9
of the TRIPS Agreement further requires that Members subject to the obligations under Article 70.8 of
the TRIPS Agreement provide exclusive marketing rights to those parties that have filed an application
under the interim filing procedure, insofar as the product covered by the invention has been granted
marketing approval in the Member providing protection and another Member, and a patent has been
granted on the invention in another Member.

The legal regime currently in force in India does not make patent protection available for
inventions concerning pharmaceutical and agricultural chemical products as provided in Article 27 of
the TRIPS Agreement, nor does it provide rules that conform to obligations of the TRIPS Agreement
regarding the acceptance of applications and the grant of exclusive marketing rights. As a consequence,
WT/DS79/R
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India's legal regime appears to be inconsistent with its obligations under the TRIPS agreement, including
but not limited to Articles 27, 65 and 70 of the TRIPS Agreement.

In a communication dated 28 April 1997 (WT/DS79/1), the European Communities and their
Member States requested consultations with India pursuant to Article 4 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (hereafter the "DSU") contained in Annex 2 of the
WTO Agreement and Article 64 of the TRIPS Agreement in conjunction with Article XXII of the
General Agreement on Tariffs and Trade 1994. Consultations were held on 14 May 1997, but did not
result in a satisfactory solution of the dispute.

Accordingly, the European Communities and their Member States request the establishment of a
panel to examine the matter in the light of the relevant provisions of the TRIPS Agreement and to find
that India fails to conform to the obligations contained in Article 27, 65 and 70 of the TRIPS Agreement
and thereby nullifies or impairs benefits accruing directly or indirectly to the European Communities
and their Member States under the TRIPS Agreement.

The European Communities and their Member States ask that this request be placed on the
agenda of the meeting of the Dispute Settlement Body scheduled to be held on 25 September 1997, and
that the panel be established with standard terms of reference as provided for in Article 7 of the DSU.
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ANNEX 2

LOK SABHA

UNSTARRED QUESTION NO. 2601

To be answered on 2 August 1996

Amendment in Indian Patents Act, 1970

2601. SHRI ANAND RATNA MAURYA

Will the Minister of INDUSTRY be pleased to state:

(a) whether applications have been received from multinational companies for product, patents in
pharmaceuticals, food and agro-chemicals in anticipation of favourable changes in the Indian
Patents Act, 1970 in accordance with World Trade Organization guidelines;

(b) if so, the number of applications pending and the dates of their pendency; and

(c) the action taken or proposed to be taken thereon?

ANSWER

THE MINISTER OF INDUSTRY (SHRI MURASOLI MARAN)

(a) to (c) The Patent Offices have received 893 patent applications in the field of drug or
medicine from Indian as well as foreign companies/institutions up until 15 July 1996.
The applications for patents will be taken up for examination after 1 January 2005, as
per the World Trade Organization (WTO) Agreement which came into force on
1 January 1995.
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ANNEX 3

INDIA

The Patents Act, 1970136

(No. 39 of 1970)

Section 2

(1) In this Act, unless the context otherwise requires, -

.....

(j) "invention" means any new and useful -

(i) art, process, method or manner of manufacture;

(ii) machine, apparatus or other article;
(iii) substance produced by manufacture,

and includes any new and useful improvement of any of them, and an alleged
invention;
.....

(l) "medicine or drug" includes -

(i) all medicines for internal or external use of human beings or animals,
(ii) all substances intended to be used for or in the diagnosis, treatment, mitigation
or prevention of diseases in human beings or animals,
(iii) all substances intended to be used for or in the maintenance of public health, or
the prevention or control of any epidemic disease among human beings or
animals,
(iv) insecticides, germicides, fungicides, weedicides and all other substances
intended to be used for the protection or preservation of plants;
(v) all chemical substances which are ordinarily used as intermediates in the
preparation or manufacture of any of the medicines or substances above
referred to;
.....

Chapter II - Inventions not patentable

Section 5

In the case of inventions -

(a) claiming substances intended for use, or capable of being used, as food or as medicine
or drug, or

136 The short title

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(b) relating to substances prepared or produced by chemical processes (including alloys,

optical glass, semi-conductors and inter-metallic compounds),

no patent shall be granted in respect of claims for the substances themselves, but claims for the methods
or processes of manufacture shall be patentable.

Chapter III - Applications for patents

Section 6

(1) Subject to the provisions contained in section 134, an application for a patent for an invention
may be made by any of the following persons, that is to say, -

(a) by any person claiming to be the true and first inventor of the invention;

(b) by any person being the assignee of the person claiming to be the true and first inventor
in respect of the right to make such an application;

(c) by the legal representative of any deceased person who immediately before his death
was entitled to make such an application.

(2) An application under sub-section (1) may be made by any of the persons referred to therein
either alone or jointly with any other person.

Section 7

(1) Every application for a patent shall be for one invention only and shall be made in the
prescribed form and filed in the patent office.

(2) Where the application is made by virtue of an assignment of the right to apply for a patent for
the invention, there shall be furnished with the application, or within such period as may be prescribed
after the filing of the application, proof of the right to made the application.

(3) Every application under this section shall state that the applicant is in possession of the
invention and shall name the owner claiming to be the true and first inventor; and where the person so
claiming is not the applicant or one of the applicants, the application shall contain a declaration that the
applicant believes the person so named to be the true and first inventor.

(4) Every such application (not being a convention application) shall be accompanied by a
provisional or complete specification.

Section 8

(1) Where an applicant for a patent under this Act is prosecuting either alone or jointly with any
other person an application for a patent in any country outside India in respect of the same or
substantially the same invention, or where to his knowledge such an application is being prosecuted by
WT/DS79/R
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some person through whom he claims or by some person deriving title from him, he shall file along with
his application -

(a) a statement setting out the name of the country where the application is being
prosecuted, the serial number and date of filing of the application and such other
particulars as may be prescribed; and

(b) an undertaking that, up to the date of the acceptance of his complete specification filed
in India, he would keep the Controller informed in writing, from time to time, of details
of the nature referred to in clause (a) in respect of every other application relating to the
same or substantially the same invention, if any, filed in any country outside India
subsequently to the filing of the statement referred to in the aforesaid clause, within the
prescribed time.

(2) The Controller may also require the applicant to furnish, as far as may be available to the
applicant, details relating to the objections, if any, taken to any such application as is referred to in sub-
section (1) on the ground that the invention is lacking in novelty or patentability, the amendments
effected in the specifications, the claims allowed in respect thereof and such other particulars as he may
require.

Section 9

(1) Where an application for a patent (not being a convention application) is accompanied by a
provisional specification, a complete specification shall be filed within twelve months from the date of
filing of the application, and if the complete specification is not so filed the application shall be deemed
to be abandoned:

Provided that the complete specification may be filed at any time after twelve months but within
fifteen months from the date aforesaid, if a request to that effect is made to the Controller and the
prescribed fee is paid on or before the date on which the complete specification is filed.

(2) Where two or more applications in the name of the same applicant are accompanied by
provisional specifications in respect of inventions which are cognate or of which one is a modification
of another and the Controller is of opinion that the whole of such inventions are such as to constitute a
single invention and may properly be included in one patent, he may allow one complete specification to
be filed in respect of all such provisional specifications.

(3) Where an application for a patent (not being convention application) is accompanied by a
specification purporting to be a complete specification, the Controller may, if the applicant so requests at
any time before the acceptance of the specification, direct that such specification shall be treated for the
purposes of this Act as a provisional specification and proceed with the application accordingly.

(4) Where a complete specification has been filed in pursuance of an application for a patent
accompanied by a provisional specification or by a specification treated by virtue of a direction under
sub-section (3) as a provisional specification, the Controller may, if the applicant so requests at any time
before the acceptance of the complete specification, cancel the provisional specification and post-date
the application to the date of filing of the complete specification.
 WT/DS79/R
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Section 10

(1) Every specification, whether provisional or complete, shall describe the invention and shall
begin with a title sufficiently indicating the subject matter to which the invention relates.

(2) Subject to any rules that may be made in this behalf under this Act, drawings may, and shall, if
the Controller so requires, be supplied for the purposes of any specification whether complete or
provisional; and any drawings so supplied shall, unless the Controller otherwise directs, be deemed to
form part of the specification, and references in this Act to a specification shall be construed
accordingly.

(3) If, in any particular case, the Controller considers that an application should be further
supplemented by a model or sample of anything illustrating the invention or alleged to constitute an
invention, such model or sample as he may require shall be furnished before the acceptance of the
application, but such model or sample shall not be deemed to form part of the specification.

(4) Every complete specification shall -

(a) fully and particularly describe the invention and its operation or use and the method by
which it is to be performed;

(b) disclose the best method of performing the invention which is known to the applicant
and for which he is entitled to claim protection; and

(c) end with a claim or claims defining the scope of the invention for which protection is
claimed.

(5) The claim or claims of a complete specification shall relate to a single invention, shall be clear
and succinct and shall be fairly based on the matter disclosed in the specification and shall, in the case of
an invention such as is referred to in section 5, relate to a single method or process of manufacture.

(6) A declaration as to the inventorship of the invention shall, in such cases as may be prescribed,
be furnished in the prescribed form with the complete specification or within such period as may be
prescribed after the filing of that specification.

(7) Subject to the foregoing provisions of this section, a complete specification filed after a
provisional specification may include claims in respect of developments of, or additions to, the
invention which was described in the provisional specification, being developments or additions in
respect of which the applicant would be entitled under the provisions of section 6 to make a separate
application for a patent.

Section 11

(1) There shall be a priority date for each claim of a complete specification.

(2) Where a complete specification is filed in pursuance of a single application accompanied by

(a) a provisional specification; or

(b) a specification which is treated by virtue of a direction under sub-section (3) of

section 9 as a provisional specification,
WT/DS79/R
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and the claim is fairly based on the matter disclosed in the specification referred to in clause (a) or
clause (b), the priority date of that claim shall be the date of the filing of the relevant specification.

(3) Where the complete specification is filed or proceeded with in pursuance of two or more
applications accompanied by such specifications as are mentioned in sub-section (2) and the claim is
fairly based on the matter disclosed -

(a) in one of those specifications, the priority date of that claim shall be the date of the
filing of the application accompanied by that specification;

(b) partly in one and partly in another, the priority date of that claim shall be the date of the
filing of the application accompanied by the specification of the later date.

(4) Where the complete specification has been filed in pursuance of a further application made by
virtue of sub-section (1) of section 16 and the claim is fairly based on the matter disclosed in any of the
earlier specifications, provisional or complete, as the case may be, the priority date of that claim shall be
the date of the filing of that specification in which the matter was first disclosed.

(5) Where, under the foregoing provisions of this section, any claim of a complete specification
would, but for the provisions of this sub-section, have two or more priority dates, the priority date of that
claim shall be the earlier or earliest of those dates.

(6) In any case to which sub-sections (2), (3), (4) and (5) do not apply, the priority date of a claim
shall, subject to the provisions of section 137, be the date of filing of the complete specification.

(7) The reference to the date of the filing of the application or of the complete specification in this
section shall, in cases where there has been a post-dating under section 9 or section 17 or, as the case
may be, an ante-dating under section 16, be a reference to the date as so post-dated or ante-dated.

(8) A claim in a complete specification of a patent shall not be invalid by reason only of

(a) the publication or use of the invention so far as claimed in that claim on or after the
priority date of such claim; or

(b) the grant of another patent which claims the invention, so far as claimed in the first
mentioned claim, in a claim of the same or a later priority date.

Chapter IV - Examination of applications

Section 12

(1) When the complete specification has been filed in respect of an application for a patent, the
application and the specification relating thereto shall be referred by the Controller to an examiner for
making a report to him in respect of the following matters, namely: -

(a) whether the application and the specification relating thereto are in accordance with the
requirements of this Act and of any rules made thereunder;

(b) whether there is any lawful ground of objection to the grant of the patent under this Act
in pursuance of the application;
 WT/DS79/R
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(c) the result of investigations made under section 13; and

(d) any other matter which may be prescribed.

(2) The examiner to whom the application and the specification relating thereto are referred under
sub-section (1) shall ordinarily make the report to the Controller within a period of eighteen months
from the date of such reference.

Section 15

(1) Where the Controller is satisfied that the application or any specification filed in pursuance
thereof does not comply with the requirements of this Act or of any rules made thereunder, the
Controller may either -

(a) refuse to proceed with the application; or

(b) require the application, specification or drawings to be amended to his satisfaction

before he proceeds with the application.

(2) If it appears to the Controller that the invention claimed in the specification is not an invention
within the meaning of, or is not patentable under, this Act, he shall refuse the application.
WT/DS79/R
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ANNEX 4

GlaxoWellcome Fax
Global Intellectual Property

To: Mr. Bernhard Janssen Fax No. 00 41 22 734 22 36

European Commission

From: Dr. Alan Hesketh Date: 28 April 1998

Ref: AH/KEE

Direct tel: 0181 966 86 40 Total pages: 1 (incl. cover sheet)

Direct fax: 0181 966 57 37

Dear Mr. Janssen,

INDIA

Although I have not had replies from all companies, I can provide some positive information. There are
two companies that are likely to file applications for marketing exclusivity during 1999.

One is a Swiss Company which is likely to have two cases relating to formulations during 1999.

The second company is my own company, Glaxo Wellcome. We have a product called valaciclovir for
which we have patents on a tablet formulation and a crystalline form. These applications have been
filed in the mail box procedure. A marketing approval application has been filed in India and we expect
launch to occur in early 1999. We will therefore be making an application for marketing exclusivity
before that time.

This is certainly not a comprehensive list, but I hope it provides some evidence that the marketing
exclusivity provisions will need to be in place in India this year.

Regards.

Yours sincerely,

Dr. Alan Hesketh

Manager, Global Intellectual Property

Glaxo Wellcome plc

Glaxo Wellcome House

Berkeley Avenue
Greenford
Middlesex
UK

__________