LDC graduation: Evaluating the implications of implementing the TRIPS agreement

Graduation from the Least Developed Country (LDC) category is a key milestone in the sustainable development progress of a country. Bangladesh has been recommended for graduation over the next five years, i.e. 2026, by the Committee for Development Policy (CDP), a subsidiary advisory body of the Economic and Social Council (ECOSOC). During this transition period, Bangladesh will be fully entitled to all benefits associated with the category.

After graduation, LDCs will lose all the flexibilities enjoyed under WTO Rules and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  However, if the flexibilities in implementing the provisions of the TRIPS agreement are revoked, the challenges that graduated LDCs may face are not so discussed in detail.

The LDCs currently enjoy benefits from two types of transition periods under the TRIPS Agreement which include– a general transition period and a special transition period for the pharmaceutical industry. The general transition period has been extended till July 1, 2034 and special transition period for the pharmaceutical industry shall remain valid until 1 January 2033. However, LDCs will lose benefits provided under the transition periods once they cease to have their LDC membership.

During the general transition period, LDCs have been exempted from implementing the TRIPS Agreement other than those containing the core non-discrimination principles. In addition, developed country WTO members were instructed to provide technical and financial assistance to enterprises and institutions of LDCs to enable them to create a sound and viable technological base.

With graduation on 2026, Bangladesh will have to ensure compliance with the TRIPS agreement as well as other international treaties related to IPR except protecting patents and undisclosed information for pharmaceutical products as waived under special transition period. The Government will be required to update the existing IP laws or enact new laws as envisaged under the TRIPS Agreement – which will be subject to review by the TRIPS Council annually. The adoption of new laws by LDCs shall include laws for protection of undisclosed information – known as trade secrets – and for Layout-Designs (Topographies) of Integrated Circuits – design of electronic circuits (chips).

Ensuring compliance with these requirements will require more engagement of workforce and technical experts which will undoubtedly involve huge financial budget of the government concerned. The government would no longer receive incentive from developed country to foster technology transfer and thus ensuring the compliance with TRIPS agreement would be expensive.

During the specific transition period, LDCs have been exempted from protecting patents and undisclosed information for pharmaceutical products. Thanks to the waiver, pharmaceutical manufacturers in LDCs may export patented drugs to other LDCs or countries where the patent of the drugs being exported has expired or is absent. The generic manufacturers of on-patent drugs do not have to pay royalty or operate in a level-playing ¬field along with innovators.

Among the LDCs, Bangladesh, utilising the patent waiver, has gained self-sufficiency in the pharmaceutical sector and now supplies almost 97% of medicines for the local market and exports to hundred countries including the United States.

After graduation, the pharmaceutical industry of the countries would stop enjoying patent waiver seven years before the expiry of the stipulated transition period which may negatively affect their ability to produce and import generic versions of patented medicines. Graduated LDCs will have to introduce provisions for patents to pharmaceutical products and processes.

In addition to the specific transition period for pharmaceutical products, LDCs were also exempted by the General Council from the application of – mailbox requirements and exclusive marketing rights – for the same time period (i.e. 2033). In accordance with the mailbox provisions, countries concerned had to establish a "mailbox" system for receiving and filing patent applications from the beginning of the transitional period.

The mailbox provision allows the patent application to remain fresh even if many years pass after the patent applications are put in the mailbox, waiting for the concerned patent office to start examining pending applications after graduation. The requirement of mailbox obligation may require considerable administrative efforts that would burden the country's health budget.

LDCs were also exempted from notification requirements for issuing compulsory licenses for exports of pharmaceutical products to LDCs or other countries with insufficient manufacturing capacities in the pharmaceutical sector. After graduation, LDCs pharmaceutical companies would have to notify the intention to use the system and, in their notifications concerning needed pharmaceuticals, they would need to address the existence of insufficient or no manufacturing capacity.

To mitigate these challenges, the government would need to map out which incentives have proven to be the most useful and need to give emphasis on effective bilateral and multilateral negotiation with the developed country members granting those incentives so that preferential market access can be explored. Graduating LDCs may also place proposals to TRIPS council for further extensions of the transition periods for implementation of the TRIPS Agreement even after their graduation until a reasonable period.

In today's knowledge-based economy, the importance of intellectual property is increasing day by day and knowledge-based resources are considered as a sustainable primary source. Therefore, to make the graduation sustainable, the graduating LDC governments should put in place appropriate regulatory and institutional forces to make the most effective and strategic use of the relevant TRIPS provisions that include increasing efficiency, transparency, improving service quality of intellectual property institutions, reorganisation and strengthening of IP offices.

The writer is a Corporate Legal Practitioner and works to promote IP rights.