the role of private actors in dealing with coordination...

ECPR Standing Group on Regulatory Governance Barcelona 25-27th June, 2014 - Hybrid Governance ��

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The Role of Private Actors in Dealing with Coordination Problems in Public Regulation: A

Comparative Analysis of Patent and Food Safety Governance

Alexia Herwig, University of Antwerp, Faculty of Law, Government & Law

Esther van Zimmeren, University of Antwerp, Faculty of Law, Government & Law

Working Paper; please do not cite the paper without the authors’ explicit authorization

Abstract

Public regulation in the areas of patent and food safety law is giving rise to the need for private

actors to coordinate their activities. This need for coordination originates from different types of

regulatory challenges but appears to result in similar private or hybrid coordinating mechanisms to

fill the regulatory gap. The paper analyses and compares the need for coordination in the two areas,

the history and functioning of the respective governance mechanisms and their contribution to filling

coordination gaps in public regulation. In this analysis particular problems in terms of good

governance are identified on the basis of studies of five examples of patent and food safety

coordination mechanism. Finally, some lessons regarding the operationalization of good governance

standards in private ordering mechanisms are drawn on the basis of the comparative analysis and

the evaluation.

1. Introduction

Public regulation in the areas of patent law and food safety law is giving rise to the need for private

actors to coordinate their activities. This need for coordination originates from different types of

regulatory challenges but appear to result in similar coordinating mechanisms to fill the regulatory

gap. In terms of the coordination problems, for patent governance in in the biomedical sector,1

experts widely recognize the risks related to (1) the potential emergence of so-called “patent

thickets”; (2) restrictive licensing schemes, and (3) limited research and development (R&D) in

neglected tropical diseases, malaria and tuberculosis. These risks may lead to hampered access to

essential medicines and diagnostics and may also result in high prices. Regarding food safety

governance, it is (1) essential for foreign food producers with different or lower food safety

standards to provide an assurance of food safety to buyers; (2) to spread costs and liabilities

differently in a transnational supply chain (3) to ensure mutual recognition of standards with

equivalent levels of safety and (4) to deal with the anti-competitive potential in standard-adoption

and their effects on developing countries.

Public regulators tend to provide insufficient incentive mechanisms to stimulate R&D and broad

patent licensing in crucial sectors, such as the biomedical sector, and to coordinate certification and

verification of (international) food safety standards inadequately. In some cases this gap is filled by

private governance mechanisms or hybrid public-private coordinating mechanisms. The paper

analyses and compares the need for coordination in the two areas, the history and functioning of

private/hybrid governance mechanisms and their contribution to filling coordination gaps in public

regulation. In this analysis particular problems in terms of good governance are identified for some of

these mechanisms. An evaluation is made in the light of good governance standards, such as the role

of stakeholders v. experts, transparency, impartiality, flexibility and access to dispute resolution

procedures. Finally, some lessons regarding the operationalization of good governance standards in

private ordering mechanisms are drawn on the basis of the comparative analysis and the evaluation.

1 But also in some other sectors, such as agriculture and green technology.


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In the following Section, we will first focus on patent governance, including the coordination

problems in the patent context (Section 2.1) followed by a descriptive analysis of one private and two

hybrid governance schemes, which have been employed to overcome the coordination problems

(Section 2.2) and a systematic ‘intra-comparative analysis’ of these three mechanisms (Section 2.3).

In Section 3, we adopt the same structure starting with an examination of the coordination problems

in food safety (Section 3.1), continuing with a description of two examples in food safety governance

(Section 3.2) and an intra-comparative analysis of these two models. Section 4 focuses on the core of

the current paper and provides an ‘inter-comparative analysis’ of the coordination problems in the

patent and food safety domains, an evaluation of the five coordination mechanisms from a good

governance perspective and insights in the different internal and external challenges encountered by

these governance mechanisms. Finally, in Section 5 we conclude with some closing remarks and

identify topics for further research.

2. Patent Governance

The last decade patent systems around the world have increasingly been criticized in terms of the

expansion of patent eligible subject-matter, the unsatisfactory quality of the examination by patent

offices and the number of granted patents.2 On a worldwide level in particular patent grants in the

biomedical sector have vigorously been opposed by patients, doctors, geneticists, scientists, Non-

Governmental Organizations (NGOs) and generic manufacturers (i.e. patents regarding human DNA

sequences, medical treatments and second generation medicines). Critical observers have identified

risks of three main coordination problems in this area: (1) the potential emergence of so-called

“patent thickets” (i.e. a considerable number of granted patents, which may impede users from

negotiating the necessary licenses in order to get access to patented technologies); (2) restrictive

licensing schemes (i.e. patent owners, which refuse to license out parts of their patent portfolio or

only license out under “restrictive” licensing schemes, e.g. exclusive licenses for a broad field of use,

high royalties, high upfront payments), and (3) insufficient research and development (R&D) in

neglected tropical diseases, malaria and tuberculosis and limited exchange of research results and

know-how by private and public actors.

2.1 The Need for Coordination

Regarding the first coordination problem, patent thickets, we observe that the risks for the

emergence of patent thickets especially arise in fields with complex products, production or research

processes or in areas where many organizations compete in R&D in the same area, resulting in

fragmented patent ownership.3 In such situations, the race on patents (by private and public entities)

may lead to a kind of “oversupply” of patents. Innovation is often cumulative: each invention builds

on many previous findings, which increases the risk of overlapping patents. Public and private

entities who want to exploit the patented technology and pursue further R&D must gain permission

of each person that previously contributed to the development of a certain product or process. If

there are many patents in the hands of different owners this may ultimately lead to difficulties in

bargaining licenses to the patented inventions successfully. Every licensor will require the payment of

royalties or upfront license fees, which may lead to so-called “royalty stacking”. In the biomedical

sector, legal and scientific experts especially feared the emergence of patent thickets in genetics,

vaccines, stem cell research, genetic diagnostic testing, synthetic biology and personalized medicine.4

2 G. Van Overwalle & E. van Zimmeren (2011), ‘Functions and Limits of Patent Law’, in: E. Claes, W. Devroe & B. Keirsbilck (eds.), Facing the

Limits of the Law, Heidelberg, Springer Verlag, 415-442. 3 S. Nagaoka, & Y. Nishimura (2006), An Empirical Assessment of the effects of patent thickets, SPRU 40th Anniversary Conference - The

Future of Science, Technology and Innovation Policy, September 11-13, 2006, University of Sussex, SPRU-Science & Technology Policy

Research, available at http://www.sussex.ac.uk/Units/spru/events/ocs/viewpaper.php?id=32, at p. 2. 4 For an overview of the abundant literature on patent thickets, see: E. van Zimmeren (2011), ‘Towards a New Patent Paradigm in the

Biomedical Sector? Facilitating Access, Open Innovation and Social Responsibility in Patent Law in the US, Europe and Japan, February

2011, Unpublished Manuscript PhD thesis, at pp. 110 and further.


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In practice, the daunting image of large-scale patent thickets once heralded by some authors did not

realize. However, in specific fields, such as HIV medicines or genetic diagnostic testing stakeholders

have expressed the need to coordinate access to the fragmented patent rights even though the

number of patents and the level of fragmentation may be lower than initially expected. According to

those stakeholders, access to medicines or genetic tests may be equally hampered by a relatively

smaller number of patents due to the royalty staking problem and due to the fact that some

(essential) patent owners impose considerable royalty rates.

The second coordination problem has especially been revealed by the renowned Myriad-case. In this

case the grant of patents regarding human DNA sequences were challenged before patent opposition

boards and courts in a variety of jurisdictions.5 Apart from the fundamental question as to whether

human DNA sequences should be patent eligible, an important discussion point in this case was the

restrictive licensing policy adopted by Myriad.6 In many countries this debate revived a discussion

regarding the potential use of so-called “compulsory licenses”, which enable a state to compel a

patent owner to license its patent(s) (under less restrictive licensing conditions). Even though

compulsory licensing may seem appropriate for dealing with urgent health crises, it does not appear

to be an adequate long-term access mechanism as its use may have a substantial impact on

incentives to innovate. Compulsory licensing arose even more vigorously with respect to access to

affordable HIV medicines in developing countries. Although patents are clearly only part of the

reason for limited access to HIV medicines, the production of low-cost versions of existing medicines

as well as the development of needed new formulations, such as “fixed-dose combinations” and

formulations suitable for children could be further facilitated by way of broader licensing schemes.

Whereas HIV/AIDS has attracted significant private and public research funding, other diseases,

which tend to occur mainly in the world’s least developed countries (LDCs) have been largely

neglected (third coordination problem). Partially this is due to a market imperfection in providing

equal access to research funding, but partially this can also be explained by limited access to research

data and shielding of know-how by biotechnology and pharmaceutical companies, public and private

research institutes and universities active in this field. In the past few years, several partnerships

between companies and non-profit and academic researchers have been established to pool the

limited resources into common R&D projects for neglected tropical diseases (e.g. Uniting to Combat

Neglected Tropical Diseases, Global Network for Neglected Tropical Diseases, Drugs for Neglected

Diseases initiative (DNDi). Yet, these partnerships tend to be fragmented and more researchers and

projects could benefit from the IP and know-how collected by biopharmaceutical companies,

research institutes, and universities if it would be more easily accessible.

In response to these three coordination problems, private and public actors have been pursuing new

models and incentive schemes in order to stimulate voluntary broad patent licensing and increased

access to research data, know-how and research facilities for neglected tropical diseases (NTDs).

Such voluntary commitments are regarded as a more sustainable approach than the one-off

compulsory models. Various scholars7 and policymakers8 as well as national and international

5 E. van Zimmeren, et al. (2014), ‘The BRCA Patent Controversies: An International Review of Patent Disputes’, in: S. Gibbon et al. (eds.),

Breast Cancer Gene Research and Medical Practices; Transnational Perspectives in the Time of BRCA, Routledge, 151-174. 6 For more information about the actual licensing policy, see van Zimmeren et al. (2014), at p. 153.

7 See e.g.: E. Noehrenberg (2010), ‘Implications of patent pools on innovation regarding antiretrovirals’, 4 Open AIDS J., 67-69; Van

Overwalle (2010); van Zimmeren (2009); Verbeure (2009); Verbeure, et al. (2006); Van Overwalle et al. (2006); Nicol & Hope (2006); T.J.

Ebersole, M.C. Guthrie & J.A. Goldstein (2005), ‘Patent pools and standard setting in diagnostic genetics’, 23 Nat. Biotechnol., 937-938;

J.A. Goldstein et al. (2005), ‘Patent pools as a solution to the licensing problems of diagnostic genetics, United States and European

Perspectives’, Drug Discovery World, 87-91; A.F. Krattiger (2004), ‘Financing the Bioindustry and Facilitating Biotechnology Transfer’, IP

Strategy Today, No. 8-2004; D.B. Resnik (2003), ‘A Biotechnology Patent Pool: An Idea Whose Time Has Come?’, 3 J. Phil. Sc. & L.,

available at http://www6.miami.edu/ethics/jpsl/archives/papers/biotechPatent.html and F. Grassler & M.A. Capria (2003), ‘Patent

pooling: Uncorking a technology transfer bottleneck and creating value in the biomedical research field’, 9 J. Comm. Biotechnol., 111-

118. 8 See e.g.: Australian Senate-Community Affairs References Committee (2010a); WHO-Expert Working Group on Research and Development


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advisory organs 9 have recognized the potential role of patent pools and other collaborative licensing

efforts in dealing with fragmented patent rights in the biomedical sector, notably in genetic

diagnostic testing,10 stem cell research11 and vaccines12. Stakeholders have been exploring the

strengths and weaknesses of different models, such as patent pools and clearinghouses, that have

been used more commonly in other sectors to facilitate access to intellectual property (IP).13 For

instance, in consumer electronics and telecommunication private (and public) actors have been

collaborating closely by pooling their patents through multiparty agreements and licensing out

collectively under standardized licensing conditions since the 90s (e.g. DVD-pools). Another, more

flexible model facilitating access to patented technology are private clearinghouses that act as

neutral intermediaries, match-makers or “IP supermarkets”, where technology users can shop for

licenses providing access to IP/know-how/technologies/materials that enable further R&D. Similar

mechanisms exist in the area of copyright, where copyright collection societies have enabled many

authors and artists to benefit from the economies of scale offered by such societies. Patent pools and

clearinghouses are increasingly considered as useful tools to safeguard the interests of both IP

owners and users, while maintaining incentives to innovate.

2.2 Examples

In this Section, we will describe the particular characteristics of three governance experiments with

collaborative licensing models in the biomedical sector: Librassay (Section 2.1.1), the Medicines

Patent Pool (Section 2.2.2) and WIPO Re:Search (Section 2.2.3). In this description we focus on the

following characteristics: nature, initiative, administration, budget, membership, inclusion

stakeholders/experts, decision-making process, dispute resolution mechanism, transparency,

impartiality, dependency/flexibility. These key words have been highlighted in the text for the

comfort of the reader and in order to facilitate the intra- and inter-comparative analyses in the later

sections of this paper.

2.2.1 Librassay

In September 2012, MPEG Licensing Authority (LA) LLC, a private company and pioneer in

administering patent pools in various technology areas14 launched Librassay. Librassay is a

clearinghouse (“patent licensing supermarket”) for genetic diagnostics. Its aim is to aggregate

diagnostic and research tool patent rights for tests and assays, kits, tools and instruments and to

license them non-exclusively for biomarker detection and analysis, diagnostics and research.

Librassay is one of the licensing programs managed by MPEG LA, but different from the licensing

programs in consumer electronics and information technologies, it has its own Executive Director

(Kirsten Neuman) with extensive expertise and experience in patent litigation, patent prosecution

and licensing transactions in the biomedical sector. Therefore, the program can benefit from the

Financing (2010) and WHO-Intergovernmental Working Group on Public Health, Innovation, and Intellectual Property (2008a).

9 OECD (2006) and OECD (2002). USSACGHS (2010). HUGO (2003). ALRC (2004), Genes and Ingenuity: Gene Patenting and Human Health,

Sydney, Australian Law Reform Commission, Final Report ALRC 99, available at

http://www.austlii.edu.au/au/other/alrc/publications/reports/99/. Aymé et al. (2008). 10

Respondents to a survey on collaborative licensing models (van Zimmeren, Vanneste & Van Overwalle (2011)) perceive pools as a

valuable solution in an even broader variety of fields, including drug discovery, pharmaceuticals, diagnostics and genetic testing,

especially for patents on gene sequences, processes and methods. 11

Bahadur & Morrison (2010), at p. 19 and K. Bergman & G.D. Graff (2007), ‘The global stem cell patent landscape: implications for efficient

technology transfer and commercial development’, 25 Nat. Biotechnol., 419-4224. 12

See e.g.: H. Greene (2010), ‘Patent Pooling Behind the Veil of Uncertainty: Antitrust, Competition Policy, and the Vaccine Industry’, 90

Bost. U. L. Rev., 1397–456. 13

B. Verbeure, et al. (2006), ‘Patent pools and diagnostic testing’, 24 Trends in Biotechnol., 115-120; E. van Zimmeren (2009),

‘Clearinghouse mechanisms in genetic diagnostics: conceptual framework’, in: G. Van Overwalle (ed.), Gene Patents and Collaborative

Licensing Models: Patent Pools, Clearing Houses, Open Source Models and Liability Regimes, Cambridge University Press, 63-119 and E.

van Zimmeren, et al. (2006), ‘A clearing house for diagnostic testing: the solution to ensure access to and use of patented genetic

inventions?’, 84 Bulletin of the WHO, 352-359. 14

For more information, see http://www.mpegla.com/.


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Director’s specific expertise, while being integrated into a sustainable, trusted private sector model

with ample experience in patent aggregation, patent evaluation and collaborative licensing.

However, as Librassay is basically a licensing program operated by and dependent on MPEG LA, if it

would be unsuccessful it could relatively easily be disentangled without interference with vested

interests in maintaining a separate infrastructure, employees, etc. This feature renders the model

quite flexible.

As MPEG LA is a private company that offers licensing services, patent owners (licensors) and

licensees are not regarded as members, but as customers who pay in exchange for specific services.

MPEG LA’s business model does not really leave any space for an equal inclusion of stakeholders

within the governance structure. New patent pool initiatives generally start with an open call for

patent owners, who would like to join. Librassay is also open to patent owners willing to license

through the clearinghouse mechanism and licensees that express an interest. The licensing process is

based on negotiations between all the essential patent owners and the respective manager of the

pool and between individual patent owners and the clearinghouse. As such, this “decision-making”

process is confidential, but this lack of transparency is partially overcome as the licensing conditions

for licensees of the pools or the Librassay licensing supermarket can be acquired by a simple request

to MPEG LA/Librassay. On the website a brief summary of the licensing conditions is available. 15

According to the Librassay patent portfolio license summary, licensees pay both an annual fee

(between $2,500 and $12,500) and royalties. The royalty rate is based on the patent count for a given

royalty-bearing product or use. The license also contains a royalty anti-stacking clause and, hence,

the effective royalty rate per licensed patent decreases as the number of licensed patents increases

for a given royalty-bearing product or use.16

At present, Librassay is only licensing out patents owned by public research institutions.17

Apparently, research institutions regard Librassay as an interesting opportunity for wider adoption of

their technologies and reasonable compensation for investments, while maintaining incentives for

further innovation. On the other hand, Librassay’s one-stop-shop model offering a single license to

an extensive fragmented patent portfolio of many research institutions seems also appropriate for

dealing with a growing market need for licenses in support of emerging gene panel tests, in particular

for small companies.18 By enabling easy access patent rights in a single transaction, licensees could

quickly secure a license saving valuable resources for delivering to physicians and patients.

Nonetheless, until now only one licensee, Diagnovus, has actually licensed in from Librassay.19

Even though within the model, there is no special structure that safeguards the inclusion of the

different stakeholders, the impartiality of the MPEG licensing models is safeguarded by the key role

of independent experts within MPEG LA’s business model in the evaluation of patents. Actually,

competition law rules for patent pools20 impose an evaluation of the patents by independent patent

experts in order to prevent the occurrence of anti-competitive effects. These independent experts

15

See for instance: MPEG LA LLC (2013), ‘Librassay® patent portfolio license summary’, September, 12th

, 2013, available at

https://www.librassay.com/RequestLicense.aspx. 16

Ibid. 17

The program currently includes about 400 patents owned by Johns Hopkins University; Ludwig Institute for Cancer Research; Memorial

Sloan-Kettering Cancer Center; National Institutes of Health (NIH); Partners HealthCare; The Board of Trustees of the Leland Stanford

Junior University; The Trustees of the University of Pennsylvania; University of California, San Francisco; and Wisconsin Alumni Research

Foundation (WARF). 18

Cf. Statement by James Stover, Ph.D., Vice President of Business Development at Diagnovus, ‘Diagnovus Becomes First Licensee to MPEG

LA’s Librassay® Licensing Program, Press Release, October 12th

, 2013, available at https://www.librassay.com/media.aspx. 19

Ibid. 20

See for instance: US Department of Justice (USDoJ) Business Review Letters regarding patent pools, available at

http://www.justice.gov/atr/public/busreview/letters.html#page=page-1; US Federal Trade Commission and USDoJ Business Review

Letters (1995), Antitrust Guidelines for the Licensing of Intellectual Property, April 6th

, 1995, available at

http://www.justice.gov/atr/public/guidelines/0558.pdf and European Commission (2014), Commission Notice - Guidelines on the

application of Article 81 of the EC Treaty to technology transfer agreements, [2014] OJEU C 101, 27.04.2004, p. 2-42


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are part of MPEG LA’s staff or could be external patent attorneys, which contributes to the impartial

operation of the coordination mechanism.

In case a dispute arises between a patent owner and a licensee or a patent owner and an infringer,

MPEG LA will invite the patent owner to start litigation and will provide the necessary support. To

our knowledge there is no special internal dispute resolution mechanism available.

2.2.2 Medicines Patent Pool (MPP)

The initiative for the establishment of an “HIV/AIDS patent pool” was taken up in 2008 by UNITAID.21

The objective of the MPP is to pool patents to enable the manufacturing of more fixed-dose

combinations and more child-specific formulations, and to have more affordable second-line

treatments for people who have developed resistance to conventional therapies.22

The MPP has been strongly supported by the WHO. The pool is, however, not hosted by the WHO or

UNITAID, but administered by a separate, independent, non-profit, private foundation based in

Geneva.23 One can thus regard the MPP as a type of hybrid coordination mechanism operated by a

private entity but strongly supported by a mix of public and private organizations. The MPP has a

Governance Board and an Executive Team.24 The Governance Board is the supreme governing body

of the Foundation. Each Governance Board member serves in his or her personal capacity and does

not represent a certain stakeholder group.25 Decision-making by the Governance Board is taking

place by a simple majority vote of all Governance Board members. In any case, in order to be valid, a

vote must be taken by a minimum of two thirds of the Governance Board members.26 The Executive

Team is responsible for the day-to-day operation of the Foundation, including the licensing

negotiations with licensors, subject to policy guidance and directives provided by the Governance

Board.27 In 2011, the MPP “Expert Advisory Group” was added to the governance structure. The

group consists of experts with a variety of expertise and experience (i.e. regulatory policy, IP

licensing, public health in developing countries, economics, industry) and evaluates draft license

agreements for the MPP. In this respect, it provides suggestions for improvements and

recommendations whether the MPP should accept a license agreement as a significant improvement

on the status quo in the direction of greater access to medicines for people living with HIV.

The Board as a whole needs to fulfill the following characteristics: it should be knowledgeable,

efficient, effective, credible and accountable. To maintain credibility with the diverse and disparate

stakeholder groups, Governance Board members must be trusted by the various constituencies.28

Each major stakeholder group must feel that there is at least one Governance Board member whom

they trust and feel confident in. It is, however, unclear how this credibility is safeguarded in practice,

as new Board members are appointed by the old board members and the appointment procedure is

run by the Executive Team. The members of the Board and the Team have extensive experience in

access to medicines and the interface with IP in their former capacities at national health

21

International facility for the purchase of drugs against HIV/AIDS, malaria and tuberculosis for the populations of developing countries,

hosted by the WHO and largely financed by a solidarity levy on airline tickets. 22

UNITAID (2008), UNITAID moves towards a patent pool for medicines, Press Release Geneva, July 9, 2008, available at

http://www.unitaid.eu/index.php/en/NEWS/UNITAID-moves-towards-a-patent-pool-for-medicines.html. 23

UNITAID Executive Board (2010a). Provisional Minutes, Executive Board Meeting, 11th Session, Special Session on Patent Pool, 5

February 2010, WHO, Geneva, Resolution No. 5, available at http://www.unitaid.eu/images/EB11/UNITAID-EB11-SSPP-provisional-

record_Final.pdf. 24

Medicines Patent Pool Foundation (2011), By-Laws of 8 December 2011, available at http://www.medicinespatentpool.org/wp-

content/uploads/MPPF+By-Laws+8+Dec+2011.pdf. 25

Medicines Patent Pool Foundation (2010), Statutes of 1st

of June 2010, available at http://www.medicinespatentpool.org/wp-

content/uploads/STATUTES-ENG-FR-Medicines-Patent-Pool.pdf 26

Ibid. 27

Ibid. 28

Ibid.


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departments, NGOs, generic manufacturers, the World Intellectual Property Organization (WIPO) and

UNITAID. However, neither of these two organs includes representatives from pharmaceutical

companies (patent owners/licensors), a major stakeholder group for the MPP, which is an important

observation in view of the relevance of equal stakeholder inclusion from a governance perspective.

The MPP does not formally have any “membership”. Patent owners/licensors license their selected

patents to the pool and the pool grants sublicenses on a non-exclusive and non-discriminatory basis

to the sub-licensees, but formally patent owners nor sub-licensees are members of the pool.

The UNITAID Executive Board has approved the establishment of the MPP Foundation and has

committed a significant budget for the start-up of the pool.29 According to the MPP Statutes, the

majority of the Foundation’ s funding from third party donors shall come from sources of public

and/or non-profit nature. Funding or any other contributions from third party donors are subject to

the approval of the Governance Board. In no case may the Governance Board accept funding or any

other contributions which would cause conflicts of interest or appearance of conflict and would

affect the impartiality of the MPP. In terms of the budget, the MPP is dependent on funding

provided by the founders. For the first five years of the operation of the pool, the budget was

covered by UNITAID. It remains to be seen how this issue will be resolved in the future. Anyway, the

relatively heavy governance structure including the extensive Executive Team and the establishment

of a separate legal entity mean that the MPP is less flexible than Librassay (and WIPO Re:Search, see

Section 2.2.3). If the MPP model turns out to be less successful than expected in serving the HIV

community then it will not be obvious to dissolve this independent foundation with its newly

established vested interests.

The MPP has adopted a strong commitment to transparency.30 Information on ongoing negotiations

and on the conditions of the licenses and sub-licenses is easily available on the website. This

transparency policy is noteworthy, as – typically – licensing transactions and licensing conditions are

regarded as highly confidential and are almost never available.

In September 2010, the US National Institutes of Health (NIH) set an important precedent by

announcing that it would be licensing patents and patent applications to the pool.31 In July 2011,

Gilead Sciences was the first private patent owner signing a license agreement with the MPP. Later

Gilead was followed by ViiV Healthcare (a joint venture between GlaxoSmithKline (GSK), Pfizer, and

Shionogi) (February 2013 and April 2014), Roche (August 2013), and Bristol-Meyers Squibb

(December 2013).32 Boehringer-Ingelheim is still in negotiations. Johnson & Johnson and Merck &

Co., two other major patent owners in the field, have decided not to enter into negotiations with the

pool. At present, seven sub-licensing agreements have been delivered to Aurobindo Pharma Limited,

Emcure Pharmaceuticals, Hetero Labs, Laurus Labs, Shasun Pharma Solutions and Shilpa Medicare.33

These data show that it took quite some time to convince patent owners to join the MPP and to

agree on specific licenses. This may be partially attributed to the transparency policy, which opens up

the licensing transaction to public engagement and criticism. In fact, the first license between the

MPP and Gilead was strongly criticized by NGOs and patient groups.34

29

UNITAID Executive Board (2009) Patent Pool Implementation Plan, Executive Board Meeting, 11th Session, 14-15 December 2009,

Geneva, Resolution No. 5, UNITAID/EB211/2009/R5, available at

http://www.unitaid.eu/images/EB11/05%20_eb11%20res.5%20implementation%20of%20patent%20pool.pdf. 30

Medicines Patent Pool Governance Board (2011), Medicines Patent Pool Transparency Policy, January 24, 2014, available at

http://www.medicinespatentpool.org/wp-content/uploads/MEDICINES+PATENT+POOL+TRANSPARENCY+POLICY-1.pdf 31

UNITAID (2010), US National Institutes of Health (NIH) First to Share Patents with Medicines Patent Pool As it Opens for Business –

Companies Invited to Join the Pool –, Press Release, Geneva, UNITAID, September 30, 2010. 32

http://www.medicinespatentpool.org/current-licences/. 33

Ibid. 34

See for instance: B.K. Baker (2011), ‘Inside Views: Corporate Self-Interest And Strategic Choices: Gilead Licenses To Medicines Patent

Pool’, IP Watch 21 July 2011, available at http://www.ip-watch.org/2011/07/21/corporate-self-interest-and-strategic-choices-gilead-

licenses-to-medicines-patent-pool/.


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The MPP itself does not offer a platform for dispute resolution. However, the statutes of the MPP

Foundation require that the license agreements contain provisions that specify an alternative dispute

resolution (ADR) mechanism. It is also indicated that the MPP will assist in dispute resolution

procedures between licensors and sub-licensees.

2.2.3 WIPO Re:Search

WIPO Re:Search provides access to IP for pharmaceutical compounds and technologies, including not

only patents and patent applications, but also know-how and data available for R&D for NTDs,

tuberculosis, and malaria. WIPO Re:Search initially started off as a private initiative by GSK, which

had set out an ambitious “Open Innovation” agenda for improving global public health.35 GSK’s CEO

Witty had proposed a more flexible approach to IP for the LDCs in order to overcome the lack of R&D

in NTDs. GSK, thus, decided to put about 800 patents/applications and relevant know-how in a pool

entitled the “Pool for Open Innovation against Neglected Tropical Diseases”. However, as the pool

was never meant to become an exclusive “GSK pool”, the administration of the pool was first taken

over by the non-profit organization BIO Ventures for Global Health (BVGH). Later the pool was

converted into the current clearinghouse model called “WIPO Re:Search”, a consortium sponsored

by WIPO in collaboration with BVGH, which turned the model into another hybrid coordination

mechanism. The consortium has three main components: (1) a database hosted by WIPO providing

details on IP available for licensing and other accessible technology/services/materials; (2) a

partnership hub (BVGH) where members and other interested parties can learn about available

licensing and collaboration opportunities, and (3) a range of supporting activities. As part of the

supporting services offered by WIPO, in case of a conflict, dispute resolution services will be

provided by the independent WIPO Arbitration and Mediation Center.

The governance structure of the consortium comprises a Membership, a Secretariat and a

Governance Committee (GC). Membership includes “providers”, “users” and “supporters”. Providers

are members that contribute IP, materials or services to WIPO Re:Search for license or use (e.g.

Alnylam Pharmaceuticals, GSK, DNDi, International Vaccine Institute, iThemba, MIT, McGill

University, NIH, Novartis). Users are members that have entered into a license agreement with

providers to use the IP/materials/services made available through WIPO Re:Search (i.e. Emory

University, DNDi, Sabine Vaccine Institute, University of Calgary). Supporters are members that

encourage the facilitation of R&D in NTDs (e.g. BIO, European Commission, US Patent and Trademark

Office). The GC is comprised of the members. The principal duties and responsibilities of the GC

relate to guidance on the activities and operations of WIPO Re:Search, including its effectiveness, but

it has no powers regarding the financing of WIPO Re:Search. The Secretariat is administered by

WIPO, which also provides the necessary budget for its operation. This key role of WIPO in

combination with the partnership hub administration by BVGH provides a certain safeguard

regarding the impartiality of the model. Moreover, the reliance of the operation of WIPO Re:Search

on these two stable organizations offer a degree of flexibility as well, because the creation of the

mechanism did not require the establishment of a separate legal entity and infrastructure. The

evolution from a private GSK pool into a mechanism coordinated by WIPO and administered by

BVGH reflects clearly this flexible nature.

The primary objective of WIPO Re:Search is to catalyze new R&D for NTDs with a particular focus on

the needs of patients in LDCs by making IP available on concessionary terms to researchers around

the world. Members commit to sharing IP for research use and to licensing IP. Decision-making

regarding the licensing agreements takes, however, place on a bilateral level. This approach differs

35

A; Witty (2010), Open Labs, Open Minds Breaking Down Barriers to Innovation and Access to medicines and Vaccines in the Developing

World, January 20th

, 2010, available at http://www.ip-watch.org/weblog/wp-content/uploads/2010/01/cfr-speech-final-15-january-

2010.pdf.


9

significantly from most “traditional” IP coordination mechanisms, such as Librassay and the MPP,

where typically patent owners license their patents to the pool/clearinghouse administrator, which

subsequently grants sub-licenses to third parties on pre-established, non-exclusive, non-

discriminatory licensing conditions.

The terms of the agreements need to comply with the “principles and objectives” listed in the WIPO

Re:Search “Guiding Principles”.36 The core principles relate to (1) an obligation for providers to grant

users worldwide, royalty-free licenses for R&D for the sole purpose of addressing public health needs

for NTDs in LDCs; (2) an obligation on providers to grant users worldwide, royalty-free licenses to

make new products for NTDs and to import and export for the sole purpose to sell these products in

LDCs, and (3) an obligation for providers for products resulting from licenses through the consortium

to deliver licenses for these products on a royalty-free basis for use and sale in all LDCs and to

consider in good faith granting licenses on a case-by-case basis for developing countries that do not

qualify as LDCs. The main achievement of these principles is the commitment to worldwide, royalty-

free licenses, both for R&D and for manufacturing purposes.

The WIPO Re:search database is an easy accessible tool, which clearly lists all available

IP/technologies/know-how/materials.37 The transparency regarding the actual licenses and

collaboration agreements is, however, much more limited, in particular in comparison to the MPP.

On the WIPO Re:Search website, a list is provided with sixty collaboration agreements and five

hosting agreements, but without specification of the actual agreement and licensing conditions.

Furthermore, there is no supervision by an independent expert committee (see Expert Advisory

Group MPP) to verify the compatibility with the “principles and objectives”. One would assume that

BVGH and the WIPO Secretariat would check the compatibility of the agreements, but there is no

supervision provision in the Guiding Principles. Actually, the Guiding Principles clarify that “[a]ll

decisions on individual collaborative and supporting activities will be made solely by the parties

involved in the transactional activity and any resulting agreements are the sole responsibility of the

licensing partners”. Moreover, Annex 3 specifies that “[s]ubject to considerations of business

confidentiality, providers and users agree to inform WIPO and BVGH of concluded agreements and to

provide regular and simple reports on the progress of collaborations made pursuant to the licenses”.

This “soft” reporting requirement seems to be included primarily for internal monitoring and for

tracking the use and impact of the consortium. Moreover, it is restricted to the public disclosure of

“general aspects” of the collaborations.

2.3 Intra-Comparative Analysis

All three examples can be regarded as private/hybrid mechanisms that have been set up in response

to coordination problems related to IP rights (patents, know-how, materials) in the biomedical

sector. Even though they have been initiated in parallel in terms of time and have been inspired by

similar collaborative licensing models in other sectors, in the end their governance structure is quite

diverse (see Table 1) and considerable differences exist in terms of transparency, impartiality and

dependence/flexibility.

[Include Table 1. Description Governance Models – Patent Governance (see below)]

3. Food Safety Governance

3.1 The Need for Coordination

36

WIPO Re:Search (2011), Guiding Principles, June 8, 2011, available at

http://www.wipo.int/export/sites/www/research/en/docs/guiding_principles.pdf. 37

http://www.wipo.int/research/en/search/.


10

In the food safety area, public and private regulatory governance have always co-existed. When

public regulators specify maximum exposure levels or set safety targets through process standards,

there is a need for firms to verify sources of hazards in their internal operations and take risk

mitigation strategies in order to minimize legal and financial liabilities.38 What pattern of hybridity in

regulation emerges depends on the content and form of public regulation and on the processing,

management and organizational structure of firms and their supply chain.39 Transnational market

liberalization affects both parameters; public regulation and corporate form and management.

Because of the need to prevent protectionism of the domestic food industry, both the EU and the

World Trade Organization (WTO) rely on scientific evidence and on the use of international standards

to verify that safety regulations by their Member States do not constitute unreasonable barriers to

trade.40 This requires adaptation of national food safety regulation and is bound to render supply

chains more transnational and diversified.

The possibility of market access abroad creates new coordination problems. The possibility for

cutting costs encourages food retailers to source transnationally in order to compete more

effectively, but food safety regulation in supplying countries might be weak or enforced in a weak

manner. This might create new risks in the supply chain and might make retailers reluctant to source

transnationally.41 Suppliers and upstream buyers consequently have an interest in ensuring and

communicating adequate safety to each other through alternative means (information &

coordination of action problem). In countries with better food safety governance, individual

operators may have incentives to evade costly food safety management and free-ride on the good

reputation of suppliers from that country (free-riding problem). This exposes retailers to liabilities

and risks of having to sue dispersed operators.

In response to these coordination problems, firms in the food production and retail supply chain

create private mechanisms to gather information, mitigate risks, ensure compliance, communicate to

buyers, and to reallocate their consequent costs in the supply chain. Private standards become an

attractive choice because they offer standard schemes that include substantive standards and

certification,42 that is, they set risk management requirements and verify their observance. They are

generally developed by consortia of food retailers and suppliers and become implemented in the

supply chain through supplier certification and as contractual specifications. Successful certification

entitles a supplier to use the trademark protected label corresponding to the substantive, underlying

standard. These labels can be business-to-business or business-to-consumer labels. Independent

third party certification offers the advantage of a more distanced and rigorous assessment of

compliance over first party self-certification by suppliers and the further advantage of shifting the

cost onto the supplier compared to verification by the retailers.43 Private standards enshrined in

contractual specifications concentrate liability for dispersed food safety risks in the supply chain in

wholesalers, rather than leaving residual risks with retailers.44 As contractual specifications, they also

offer the advantage for choice of applicable law and the possibility of commercial arbitration with

quasi-automatic enforcement.45 Protection of the scheme against misuse by non-certified firms is

38

For an example of how strict liability of food operators in the UK triggered private governance mechanisms, see S. Henson & J. Humphrey

(2012), ‘Private Standards in Global Agri-Food Chains’, in: A. Marx et. al. (eds.), Private Standards and Global Governance: Legal and

Economic Perspectives, Edward Elgar, 98-113, at p. 105. 39

F. Cafaggi (2012), ‘Transnational Governance by Contract: Private Regulation and Contractual Networks in Food Safety’, in: A. Marx et. al.

(eds.), Private Standards and Global Governance: Legal and Economic Perspectives, Edward Elgar, 195-234, at p. 199. 40

A. Herwig & C. Joerges (2012), ‘The Precautionary Principle in Conflicts-Law Perspectives’, in: G. Van Calster & D. Prévost, Research

Handbook on Environment, Health and the WTO, Edward Elgar, 3-40, at pp. 12-17. 41

Cafaggi (2012), at p. 199; Henson & Humphrey (2012), at p. 102; C.-F. Lin (2014), ‘Public-Private Interaction in Global Food Safety

Governance’, 69 Food & Drug Law Journal, 143-160, at p. 148. 42

Henson & Humphrey (2012), p. 108. 43

Henson & Humphrey (2012), at p. 100, 107. 44 Burrell suggests that the primary motive of private food standards is the reduction of transaction costs and reallocation of liabilities in

the supply chain. A. Burrell (2011), ‘”Good Agricultural Practices” in the Agri-Food Supply Chain’, 13 Environmental Law Review, 251-270,

at p. 251. 45

New York Convention on the Enforcement of Arbitral Awards.


11

achieved through internal procedures of the standard-setter but also by giving trademark protection

to the label underlying the standard. Trademarks in turn have to be protected by other WTO

members against use by unauthorized third parties.46

Less laudably, proliferation of private standards can lead to the anti-competitive closure of the

market (oversupply problem).47

Private standards raise the rivals’ costs (via the creation of mitigation,

management and certification requirements that is particularly burdensome for small suppliers),

ensure rents to first movers through lock-in effects and can set unnecessarily high standards that

exclude competitors.48

Schepel suggests that such effects can be mitigated by the application of

competition law and are less present in horizontal (rather than vertical, retailer-driven) private

standard-setting.49

In Europe, the retail level is dominated by a limited number of big national and

transnational supermarket chains, which have been amongst the drivers for private food standards.50

Due to the absence of a global competition code, the internal procedures of standard-setters

become of paramount importance to prevent abuse.

The proliferation of standards leads to another coordination problem: substantively equal safety

under a different scheme is not recognized (information and coordination problem 2). The Global

Food Safety Initiative caters to this demand for meta-coordination by benchmarking public and

private food safety standards against each other. Finally, an oversupply of food standards may also

fragment markets in exporting developing countries. Wholesalers prefer sourcing from fewer but

larger buyers rather than smallholders, because risks and hence costs tend to be more limited.51

It

has been argued that high compliance costs may exclude smallholder farms in developing

countries.52

This is because the per-unit cost of certification is comparatively larger because of the

smaller output. Reliance on different standards could also become a problematic source of hazard in

case of crises and pandemics where common principles must be complied with.53

3.2 Examples

In this Section, we describe the features of two private food safety coordination mechanisms: the

Food Safety System Certification 22000 (FSSC 22000) (Section 3.2.1) and GLOBALG.A.P. (Section

3.2.2).

3.2.1 FSSC 22000

The FSSC 22000 is a management certification scheme at the systemic level on the basis of ISO

standards. It does not set substantive food safety standards for producers. The goal of the FSSC

22000 is to “harmonize the certification requirements and methods for food safety systems in the

food chain and to ensure that trustworthy food safety certificates are comparable as regards content

and scope”.54

The Board reviews the operation of the scheme three times a year and carries out a full

review every three years.55

46

WTO, TRIPS Agreements, Art. 16. 47

Cafaggi (2012), at p. 202; H. Schepel (2005), The Constitution of Private Governance: Product Standards in the Regulation of Integrating

Markets, Oxford, Hart. 48 It has been pointed out that the costs linked to required annual certification are tantamount to an additional fee to access the market.

See Burrell, n. 44, at p. 263. 49

Schepel (2005), at p. [ ]. 50

Henson & Humphrey (2012), at p. 100. 51

Henson & Humphrey (2012), at pp. 109-110; M. Maertens & J. Swinnen (2012), ‘Private Standards, Global Food Supply Chains and the

Implications for Developing Countries’, in A. Marx et. al. (eds.), Private Standards and Global Governance: Legal and Economic

Perspectives, Edward Elgar, 153-171. 52

Lin, n. 41, at p. 154. 53

Cafaggi (2012), at p. 201. 54

See http://www.FSSC22000.com. 55

FSSC 22000 Rules & Regulations, available at http://wwwFSSC22000.com.


12

The FSSC 22000 is legally owned by the Foundation for Food Safety Certification under Dutch law.56

As a foundation it is prevented from making profit.57

The scheme is governed by a Board of

Stakeholders, whose task is to develop the substantive requirements but not to certify individual

certification bodies against those requirements. Membership of the Board includes 16

representatives of industry associations of food manufacturers, distributors, restaurants,

Eurocommerce, certification bodies, the BSI, and observers from the ISO and the International

Accreditation Forum.58

Experts can be appointed as members, advisors or temporary advisors to the

Board.59

Consumer interest organizations are currently not members of the Board of Stakeholders,

nor are individual companies. Parties with an interest in international food safety systems can

participate in the development of the certification scheme.60

This includes in principle

representatives of consumer interest organizations. The Board of Stakeholders is entitled to reject

nominees if it is in the interest of the Board or of the functioning of the scheme and provided reasons

are given.61

The Foundation has an active interest in including representatives of consumer

organizations in its Board of Stakeholders and considers that the reason local consumer organizations

have not joined is related to the fact that they have been invited to participate in many private food

safety or quality schemes and therefore they are unable to join all of them.62

The Foundation’s self-described aim is a high level of impartiality in its core activities. According to

its Articles of Association, “where the Foundation develops, manages and owns a food safety systems

certification scheme which is or is meant to be recognized or accepted by the so called Global Food

safety Initiative, the governance, maintenance and management of such scheme lies under the full

and exclusive authority of the Board of Stakeholders, which Board shall not be under the

management or governance of certification bodies or a group of certification bodies”.63

The

chairperson of the Board is appointed in his/her individual capacity and is not acting as a

representative of one of the stakeholder organizations.64

(Re-) appointment of the Board members

takes place every five years.65

The Board aims at decision-making by consensus which should include also the participants without

voting rights.66

However, a recommendation can also be adopted by a simple majority provided 2/3

of all members entitled to vote are present.67

Representatives of certification bodies are not entitled

to vote.68

In addition to being adopted by consensus or the relevant majority, any changes to the

scheme also have to meet substantive checks of feasibility, effectiveness and compliance with the

underlying standards.69

The Foundation is also aimed at safeguarding transparency. All amendments

to the FSSC 22000 are made public immediately and relevant documents are available free of

charge.70

The names of the members of the Board of Stakeholders and of licensed certification

bodies are available on the website. However, the appeals procedure remains generally confidential.

Under certain circumstances, the Appeals Committee may allow third parties to be present.71

56

http://www.FSSC22000.com. 57

Ibid. 58

Ibid. 59

FSSC 22000 Rules & Regulations. 60

Ibid. 61

Ibid. 62

Interview with the FSSC 22000 General-Secretary. 63



Ibid. 66

Ibid. 67

Ibid. 68

Ibid. 69

Ibid. 70


Complaints procedure, version 1, 2013.


13

The Foundation also has mechanisms to deal with disagreement. If there is a split vote and the

nature of the issue does not require certification bodies to integrate the recommendation in its

entirety, a split recommendation can be made.72

Once a recommendation has been adopted,

certification bodies may only deviate from the recommendation in its entirety and upon provision of

a statement of reasons. In such a case, the Board reconsiders the appealed recommendation and

may amend the recommendation. If it maintains the pre-existing recommendation and the

certification body continues to maintain its objection, it will be excluded from the FSSC 22000.73

Finally, issues of interpretation of a recommendation or complaints addressed against the

Foundation or the operation of the FSSC 22000 can be brought before an Appeals Committee, which

provides a form of third party adjudication.74

The three-member Committee is similar to commercial

arbitration panels in that each disputing party may appoint one member, with a non-party chair

which may not be directly involved in the scheme.75

Only persons or organizations directly affected

by the activities of the scheme have standing to lodge a complaint.76

A complaint is resolved in first

instance by the Board of Stakeholders but if it fails to resolve the issue, an appeal to the Appeals

Committee is available. The Appeals Committee conducts hearings and has independent investigative

powers.77

The Committee decides on a fair division of the cost of the procedure, it being recognised

that parties bear in principle the cost of the experts or witnesses they wish to call.78

The Committee

can issue many different types of sanctions and can make these sanctions public while maintaining

the anonymity of the entity which is sanctioned.79

3.2.2 GLOBALG.A.P.

GLOBALG.A.P. sets business-to-business farm gate standards on food safety, environmental

protection, animal welfare, occupational health and safety and labor standards, called Integrated

Farm Assurance (IFA), and a narrower produce standard focused on food safety and traceability only,

called Harmonised Produce Safety Standard (HPSS).80

As a farm gate standard, GLOBALG.A.P. covers

issues up to the moment where produce, animals or fish leave the farm gate.81

Processing and retail

issues are not dealt with by GLOBALG.A.P.82

The day-to-day management is performed by a

Secretariat taking the legal form of the German FoodPlus GmbH owned by a subsidiary of the EHI

Retail Institute.83

.84

GLOBALG.A.P. emerged out of EUREPGAP, an initiative by British and continental

European food retailers to develop a harmonised standard of good agricultural practice.85

GLOBALG.A.P. standards are revised every four years.86

GLOBALG.A.P.’s membership is composed of food producers, suppliers, retailers and certification

bodies, primarily of Western countries.87

It is governed by an elected Board, responsible for long-

term strategic planning and the adoption of terms of reference for new standardization projects.88

72


Ibid. 74

Complaints procedure, version 1, 2013. 75

Ibid. 76

Ibid. 77

Ibid. 78

Ibid. 79

Ibid. 80

On IFA, see http://www.globalgap.org/uk_en/what-we-do/GLOBALG.A.P.-certification/GLOBALG.A.P./; on HPSS see

http://www.globalgap.org/uk_en/what-we-do/GLOBALG.A.P.-certification/harmonized-produce-safety/. 81

See IFA, n. 41. 82

Ibid. 83

http://www.globalgap.org/uk_en/who-we-are/governance/. 84

The EHI Retail Institute is a scientific research institute and German eingetragener Verein (registered association) with 700 members

consisting of retailers, their industry associations, manufacturers and service suppliers from all sectors http://www.ehi.org/en/about-

us/members/list-of-members.html. 85

http://www.globalgap.org/uk_en/who-we-are/history/. 86

Ibid. 87

Ibid. 88

Ibid.


14

There are ten members whose ratio is fixed at a 50:50 division of retailers and suppliers

respectively.89

The term is four years and can be renewed twice. Members are elected in their

individual capacity.90

The standards are elaborated by three Technical Committees, formerly called

Sector Committees, on crop, livestock and aquaculture respectively.91

Their members are elected

amongst suppliers and retailers in a 50:50 proportion and include companies such as Migros,

Sainsburys, ASDA, ALDI and various food producers and suppliers.92

The certification body committee

harmonizes the interpretation of the standards.93

National technical working groups adapt

GLOBALG.A.P. to specific local challenges and are an important source of information on local

conditions.94

Stakeholder input is organized in the form of stakeholder committees whose membership consists of

a broader range of producers, suppliers, retailers, NGOs and researchers.95

Members of

GLOBALG.A.P. may propose the inclusion of participants and the establishment of Stakeholder

Committees after approval of the Board.96

Currently, there are nine committees on microbiological

contamination, crop protection, sustainability crops, animal welfare, social practices, responsible

water use, flowers, producer group certification and chain of custody with a total of 247 members

from the food industry, NGOs and experts.97

There is a representative of the Office International des

Epizooties but none of the other key international standard-setters (Codex Alimentarius Comission,

ISO, FAO, WHO).98

The WWF participates in one Stakeholder committee but not several other well-

known NGOs, such as Consumers International, Greenpeace, the European Consumer Organization

or Oxfam. GLOBALG.A.P. has made efforts to include smallholders in its standard-setting process

through a smallholder ambassador and a smallholder observer who participate in Technical

Committee meetings.99

A smallholder working group has also been established.100

GLOBALG.A.P. also

offers capacity-building workshops.101

The decision-making process of standard development is initiated at the request of producers,

suppliers or retailers by the Board after stakeholder consultation and a feasibility and necessity

study.102

The Board generally decides by consensus but majority voting is possible with a quorum of

at least two retailer and two supplier members.103

The actual drafting occurs in the Technical

Committees and includes two phases in which stakeholder comments are sought.104

The Technical

Committees normally decide by consensus but voting is also possible.105

The Stakeholder Committees

decide by consensus but majority voting is also possible, however, only the retailer, supplier and

producer members enjoy voting rights.106

Once the draft standard is accepted by the Technical

89

GLOBALG.A.P. Board Terms of Reference, available at

http://www.globalgap.org/export/sites/default/.content/.galleries/documents/130128-GLOBALGAP_Board-ToR.pdf. 90

Ibid., Appendix 1. 91

http://www.globalgap.org/uk_en/who-we-are/governance/technical-committees/. 92

Ibid. 93

Ibid. 94

http://www.globalgap.org/uk_en/who-we-are/ntwgs/. 95

www.globalgap.org/cms/front_content.php?idcat=17. 96

Ibid. 97

Ibid. 98 The reason for why the OIE participates but not the Codex seems to lie in the fact that OIE members and Codex members have a

different attitude towards cooperation with private standard setters. While OIE members adopted a resolution asking the OIE to work with

private standard-setters, the Codex members refused to allow private standard setters as observers. See Lin, n. 41, at p. 157. 99

N. Hachez & J. Wouters (2011), ‘A Glimpse at the Democratic Legitimacy of Private Standards. Assessing the Public Accountability Gap of

GLOBALG.A.P.’, 14 Journal of International Economic Law, 677-710, at pp . 699-700. 100

Ibid. 101

http://www.globalgap.org/uk_en/. 102

www.globalgap.org/cms/front_content.php?idcat=79 103

GLOBALG.A.P. Board Terms of Reference, Article 4. 104

Ibid. 105

Ibid. 106

www.globalgap.org/cms/front_content.php?idcat=17


15

Committee and Board it is sent out again for technical adjustments to the stakeholders, after which

the standard becomes final.107

Certification occurs through several on-site visits and has to be renewed each year.108

In order to

obtain certification, a supplier has to comply with all major points and at least 95% of all minor

points.109

Complaints and appeals against certification have to be directed to the certification body

concerned. If the certification body does not respond adequately, the complaint can also be

addressed to GLOBALG.A.P.110

In case of non-compliance by a farm, the GLOBALG.A.P. General

Regulations require certifiers to put in place differentiated enforcement measures depending on the

severity of the infringement that can range from warnings, suspension of a product from the right to

use the trademark and cancellation resulting in a total prohibition of use of the trademark for a 12-

month period.111

The appeals procedure of certification bodies is not further regulated by

GLOBALG.A.P.112

Producer groups are also required to implement their own internal compliance and

sanctioning mechanism, along the general GLOBALG.A.P. guidelines.113

GLOBALG.A.P. conducts

integrity reviews of approved certification bodies and any anomalies are brought before the Integrity

Surveillance Committee, consisting of 5 members appointed by the Board but working

independently, which can decide on appropriate sanctions, including fines and re-training

requirements for minor infringements to 6-month public suspension or withdrawal of the license to

use the trademark.114

Any appeals against decisions by the Secretariat or the Integrity Surveillance

Committee should first be addressed to these organs but a re-appeal in the form of an arbitration

proceeding is possible.115

3.3 Intra-Comparative Analysis

Table 2 highlights the main differences in governance structure and compliance with good

governance principles between the FSSC 22000 and GLOBALG.A.P.

[Include Table 2. Description Governance Models – Food Safety Governance (see below)]

4. Discussion: Inter-Comparative Analysis

4.1 Comparison Coordination Problems

The coordination problems in patent governance and food safety have different origins, but have

some basic characteristics in common. Both result from an essential resource being concentrated in

the hands of certain actors with limited interest in sharing that resource under, for them, optimal

conditions, which can undermine the potential for sharing that particular resource effectively. In the

case of patent governance, patent owners own crucial IP required for further R&D and, although they

have an interest in collecting income through licensing, they also have an incentive to negotiate

restrictive licensing conditions, which may be beneficial for them but result in considerable societal

costs. The costs and red tape resulting from patent thickets can impede the successful negotiation of

licenses. In the case of food safety governance, large supermarkets hold the key to effective market

107

Ibid. 108

General Regulations, Part I, Article 6.7, available at

http://www.globalgap.org/export/sites/default/.content/.galleries/documents/130315_gg_gr_part_i_v4_0-2_en.pdf. 109

General Regulations, Part I, n. 103, Article 6.2, 110

Ibid, Article 6.3 in conjunction with Part III, Article 6.3. 111

Ibid, Article 6.4. 112

Ibid, Article 6.5. 113

General Regulations, Part II, Article 1.7, available at

http://www.globalgap.org/export/sites/default/.content/.galleries/documents/130315_gg_gr_part_ii_v4_0-2_en.pdf. 114

http://www.globalgap.org/uk_en/who-we-are/governance/integrity-surveillance-comm./ 115

General Regulations, Part III, Article 8.1(b).


16

access in the form of access to the consumer retail level. While they have a principal interest in

sourcing lower priced products from abroad, they also have to ensure food safety and preserve their

market reputation. These liabilities can make them reluctant to source products transnationally.

The problem of restrictive licensing conditions in patent governance is mirrored in the food safety

area by an absence of recognition of different but equivalent safety regimes and efforts undertaken

by individual food producers in other jurisdictions. In principle, a retailer or importer has an interest

in buying safe but less expensive foreign products just like a patent owner has an interest in revenue

through licensing. Both seek an optimal balance of safety risk and cost and licensing restrictions and

royalties respectively but they face an important informational problem. For retailers and importers

it is too costly to ascertain whether products produced with different safety standards offer

equivalent levels of safety. For patent owners, it is relatively hard to monitor the use of the patented

technology, which might result in restrictive conditions, including high royalty rates.

A third coordination problem in patent governance arises directly out of the underlying incentive

structure for patents, that is, the limited investment in research in diseases afflicting LDCs as a result

of an expectation of low economic return and the limited incentive to share research data, know-

how are research facilities for NTDs. In food safety governance, a similar problem can arise if food

producers with sufficient resources in developing countries adapt their products to the high safety

requirements in developed countries whose market promises higher economic returns, leaving only

small producers on the domestic market with insufficient resources to invest in making their

products and production processes safer. An important difference of private food safety mechanisms

in comparison to the patent context is that the food safety mechanisms engender other considerable

coordination problems. As described, the proliferation of private mechanisms can de facto fragment

the market due to non-recognition of alternative schemes, raising rivals’ costs and setting

unnecessarily high standards competitors cannot meet. Market fragmentation can also become

‘exported’ to developing countries if exporters exclude smallholder farms from their purchases.

4.2 Comparison Coordination Mechanisms

In terms of the goals or key focus of the coordination mechanisms in patent and food safety

governance, we observe again similarities in the proposed solutions to coordination problems but

quite some differences regarding transparency, impartiality and flexibility, as we show in this section

and the next.

A shared response to the coordination problems consists in mechanisms aimed at improving the level

of transparency without changing the underlying substantive interests and requirements. In patents,

transparency in licensing conditions is ascertained by the MPP. Librassay provides a summary of the

licensing conditions and WIPO Re:Search only reveals the licensing principles without giving details

on the actual agreements. In food safety, the FSSC 22000 enhances transparency and reliability

regarding certification, without introducing any substantive changes in levels of food safety

governance. A major difference between patents and food safety is that the relatively young FSSC

22000 has already attracted 7000 licensees while most of the patent coordination mechanisms

struggle to attract patent/IP owners. The difference may be explained by the fact that a strong

certification system is the essential backbone of strong food safety standards, whereas in patents,

patent owners prefer to control the licensing process as much as possible. Moreover, they have little

interest in making licensing terms, which they consider highly confidential, public.

Patent governance and food safety governance have also both evolved mechanisms to reduce

dispersed requirements preventing access to essential resources; for patents basically the three

models aim at facilitating access to essential IP assets (i.e. diagnostics, HIV-AIDS medicines, know-


17

how and research data on NTDs); for food safety GLOBALG.A.P. certification provides access to

multiple retailers in multiple markets. The difference is that in the food safety area, GLOBALG.A.P.

has already resulted in an upward change of safety and quality requirements, while the IP

coordination mechanisms are still in an early stage of development and have not yet resulted in a

substantially better quality of diagnostic services, HIV-AIDS medicines and medicines against NTDs.

However, GLOBALG.A.P. potentially excludes competitors from market access for whom compliance

with the new requirements may be costly or impossible to achieve. So far, private food safety

governance has not evolved any mechanism for addressing potential anti-competitive effects of such

standard-setting, suggesting a possible need for public intervention.

Lastly, in patent governance, we find that WIPO Re:Search directly addresses a market failure: that of

a lack of research and exchange of IP in NTDs affecting LDCs. In food safety, no such independent

mechanism exists to enable small producers to comply with stricter safety and quality standards, but

GLOBALG.A.P. pays some attention to this issue through the involvement of smallholders and its

capacity-building exercises.

4.3 Comparison Good Governance

In our comparative analysis of the quality of governance provided by the different coordination

mechanisms, we evaluate them against a set of criteria proposed in the literature on global

administrative law.116 This literature focuses on identifying norms and procedures that enhance

accountability of governance mechanisms ex ante and ex post in multilevel international or

transnational constellations. Broadly speaking, an increase in inclusion of more categories of

stakeholders both from industry and other societal interests is viewed as enhancing governance

quality.117 Similarly, an increase in transparency is viewed positively118 as is the provision of an

independent dispute resolution mechanisms, including an internal complaints mechanism and

independent third-party adjudication or ADR. To these propositions, we add several specific aspects

of our own. Thus, we consider that the quality of governance also depends on the external regulatory

context in which these mechanisms are situated and that this context can either challenge the quality

of governance or contribute to it. We also consider how the mechanisms are financed and whether

the coordination mechanism provided is the sole raison d’être of the mechanism as both elements

create a dependency on factors other than the quality and public acceptability of the scheme.119

Therefore they could result in cognitive closure of the mechanisms towards change or failure of the

mechanism.

As the coordination provided by the different mechanisms have an impact on stakeholder interests in

varying degrees, it is important to keep in mind that the legitimation needs of the mechanisms vary.

What is good governance for one mechanism may not necessarily be so for another one with more

profound effects on stakeholder interests. Against this backdrop, in the area of patent governance,

both MPP and WIPO Re:Search affect the interests of stakeholders (patent owners and individuals)

quite profoundly. In fact, transparency in licensing conditions (MPP) and royalty-free licensing (WIPO

Re:Search) go to the core of the interests of patent owners, that is, the extraction of maximum value

from their successful investment in R&D. They also affect core human interests in health and

biomedicine. Compared to this, Librassay’s bundling of patents leaves core economic interests of

116

D.C. Esty (2006), ‘Good Governance at the Supranational Scale: Globalizing Administrative Law’, 115 Yale Law Journal, 1490; B.

Kingsbury, N. Krisch, R.B. Stewart (2005), ‘The Emergence of Global Administrative Law’, 68 Law and Contemporary Problems, 15-61. 117

Esty (2006), at p. [ ]. ; Burrell, n. 44, at p. 262; Hachez & Wouters, n. 99, at pp. 682-695; Y. Naiki (2014), ‘The Dynamics of Private Food

Safety Standards: A Case Study on the Regulatory Diffusion of GLOBALG.A.P.’, 63 International and Comparative Law Quarterly, 137-166,

at 146-1478. 118 Hachez & Wouters, n. 99, at 694. 119

Cafaggi argues that public goods must correspond to access, both at the level of standard setting and as regards subsequent use of the

standard. Obviously, the price of using a private standard is a key determinant in access to it. F. Cafaggi (2012), ‘Transnational Private

Regulation and the Production of Global Public Goods and Private “Bads”’, 23 European Journal of International Law, 695-718, at 701.


18

patent owners untouched, if anything, it rather makes it potentially easier for patent owners to

license out. The effect on individuals of more/less research is also more dispersed for this

coordination mechanism and will only be achieved on a long-term basis.

Private food standards are manifold, ranging from small, independent labels to widely recognised

organic labels and standards developed by the key players in the food industry. They can improve

safety but also increase the food prices. For business-to-consumer private standards driven by

smaller food production businesses and without market power, transparency regarding the content

of the standard and a reasonable administration of certification with opportunities to be heard

should in principle be sufficient for accountability to business stakeholders and consumers. If the

content of the standard is clear, any increase in the food prices linked to the decision of producers to

undergo certification or of consumers to purchase the product bearing the label of the associated

standard should reflect their willingness to pay and is presumptively efficient.

Standards driven by key players in the food industry entail higher legitimation needs because if

adoption is widespread, such standards can become de facto mandatory.120 This will not occur with

respect to the described IP coordination mechanisms, as their essence is their voluntary nature. In

this light, GLOBALG.A.P. has to comply with high requirements in terms of legitimation, because its

standards are driven by key supermarket retailers and food distributors. As a result, compliance with

GLOBALG.A.P. standards can affect the price of food sold by many key retailers in a jurisdiction. They

also impact on market access of farmers in developing countries121 and have the potential to affect

food security in developing countries if local producers prefer to produce higher-end products for

export. The fact that compliance with the standard is not communicated to the consumer further

exacerbates the need for strong legitimation mechanisms at the level of standard setting because

consumers cannot choose against GLOBALG.A.P. compliant products. FSSC 22000 certification is not

communicated to consumers either because the standard is not a substantive food safety or quality

standard on products but rather designed to streamline the quality of certification bodies certifying

against various food safety or quality standards. FSSC 22000 primarily aims at rendering ISO-

standards more effective. As ISO standards are largely recognised as the reference standards

developed amongst international representatives of national public but mostly private

standardisation bodies, FSSC 22000 do not really go beyond the international default standard,

except in a marginal sense of improving certification even further. As such, and provided that the ISO

standards themselves enjoy sufficient legitimacy, FSSC 22000 standards can operate with fewer

additional legitimation tools than GLOBALG.A.P.

As regards membership and stakeholder inclusion, the exclusion of patent owners from the MPP

governance structure appears to be an important deficiency of the model in view of the significance

of proper stakeholder inclusion from a governance perspective and the potential effects of MPP

activities on key stakeholder interests. On the other hand, inclusion of public stakeholders and NGOs

is rather high. The establishment of the Expert Advisory Group in 2011 seems an important step

towards more equal stakeholder inclusion and participation. WIPO Re:Search’s tripartite structure of

patent owners, users (licensees) and supporters of NTD research also seems broadly representative

of key relevant interests. GLOBALG.A.P.’s food safety and quality mechanism remains strongly

dominated by the food industry (retailers, suppliers) as they retain the decision-making power in the

scheme.122 Moreover, via ETI Retail, the owner of FoodPlus GmbH, retailers can exercise further

control from the top. GLOBALG.A.P’s shortcoming is somewhat compensated by the fact that it has

found ways of involving smallholders and stakeholders in the advisory Stakeholder Committees but

we agree with Hachez and Wouters that inclusion of affected interests from developing countries

120 Hachez & Wouters, n. 99, at p. 700 suggest this is increasingly becoming the case for GLOBALG.A.P. 121 Naiki, n. 117, at 147. 122 Hachez & Wouters, n. 99, at p. 703.


19

remains a major challenge.123 In comparison, FSSC 22000 offers more inclusion at the formal level as

no societal interests are excluded from membership a priori. De facto, however, the limited

involvement of consumer NGOs and interests from developing countries points to a public choice

problem: diffuse interests with low stakes for a single individual are more difficult to organise than

concentrated interests with high stakes for a single individual and if they do organise, they face

comparative resource constraints. In addition, certification bodies, retailers, distributors and food

producers can derive direct monetary gain from the standards and recoup some or all of the cost of

participating in a multitude of standard-setting initiatives while consumer organizations cannot. This

suggests that there is a need for some form of enabling mechanism to allow consumer organizations

to participate. As regards involvement of stakeholders from developing countries, GLOBALG.A.P. has

an advantage over FSSC 22000 through its stakeholder committee. Indeed, the fact that developing

country interests are largely excluded from the FSSC 22000 or at best remotely represented by the

ISO, is a serious shortcoming. If the effect of FSSC 22000 certification is that prices for developing

country food producers to obtain certification are driven up, they are significantly affected by FSSC

22000. A limit of GLOBALG.A.P.’s outreach to developing countries is that it does not include public

officials from developing countries. Given that the pursuit of GLOBALG.A.P. certification by their

operators is likely to produce effects on the supply of food in developing countries, its prices and the

level of safety, the general public interest in developing countries is affected by a scheme with a

relatively strong market penetration such as GLOBALG.A.P.

Consultation of a broad range of experts therefore remains desirable. Expertise in the food safety

coordination mechanisms is quite high and systematically provided for the Board of the FSSC 22000

and through the different Technical and National Technical Working Groups of GLOBALG.A.P.

However, most experts are industry specialists, only a few independent experts from research

laboratories are included and even less governmental safety inspectors are involved. There is thus an

imbalance in expert composition in the mechanism with the highest legitimation need. It might be

argued that the fact that GLOBALG.A.P. aims at a higher level of protection makes the consultation of

experts in national reference laboratories or safety inspectors unnecessary because representatives

of public institutions and the public itself would always prefer more safety. However, this is not

necessarily the case because increased safety in one respect may come at the price of less safety in

another respect (so-called risk-risk trade-offs).124

The three IP coordination mechanisms require a high level of expertise for the evaluation of patents

to be included in the mechanisms. As it is in the interest of both sides (licensors and licensees) of the

two-sided platforms to prevent “lemons” from entering these market spaces, all three models are

highly dependent on the role of independent experts. Librassay sources its expertise from MPEG LA

which has a broad and experienced staff base, the MPP has experienced executive team members

who collaborate closely with experts from other (international) organizations established in Geneva

(WIPO, UNCTAD) in evaluating essential patents. Finally, WIPO Re:Search can rely on the internal

WIPO expertise regarding IP and IP landscaping and in addition on the administration by BVGH.

Therefore, for the three coordination mechanisms the degree of actual independence of the experts

may vary considerably as they range from external to internal experts, from national experts to

experts from international organizations.

In terms of decision-making, the FSSC 22000 has a strongly consensus-geared decision rule in which

disagreements are dealt with head on. This enhances the procedural legitimacy of its decision in

comparison to GLOBALG.A.P. in which less attention is given to ironing out remaining disagreements.

However, due to GLOBALG.A.P.’s larger membership, heavier reliance on majority voting as a fall

123 Hachez & Wouters, n. 99, at pp. 70-703. 124

For instance, fungicides might make crops safer but could also damage the health and safety of workers or be dangerous to consumer at

high residue levels.


20

back seems necessary in order to preserve the effective decision-making ability. What is more, its

elaborate structure with Technical Working Groups and Stakeholder Committees seems capable of

enhancing the substantive rationality of decisions taken by GLOBALG.A.P. as a counterweight. An

important shortcoming of GLOBALG.A.P. is also that stakeholders, and thus NGOs, independent

experts and representatives of public institutions, are not entitled to decide on the standards nor to

sanction Board members with a vote of no-confidence.125 Actual decision-making processes in the IP

coordination mechanisms tend to be more ambiguous. The majority of the day-to-day decision

making practice regarding licensing will generally be a bilateral, negotiation process without

transparent decision points or procedures. Within the MPP, the Expert Advisory Group can provide

suggestions for improvements and recommendations, but ultimately it is up to the parties to decide

whether they accept the licensing conditions.

Transparency scores for the MPP are highest in the sample because it has an explicit transparency

policy which requires that the terms of the coordination achieved (the licensing conditions) are fully

made public. In comparison, Librassay, WIPO Re:Search, the FSSC 22000 and GLOBALG.A.P. are less

transparent. The FSSC22000 and GLOBALG.A.P. do not provide reasons for the decision on a

particular safety level or make committee minutes public. For WIPO Re:Search, its transparency gap

indicates the trade-off between broad stakeholder inclusion through membership (providers, users

and supporters), on the one hand, and transparency, on the other hand. WIPO Re:Search may be

more effective in establishing agreements between providers and users than the MPP and its

governance structure may offer a better representation of the relevant stakeholders, but

confidentiality considerations seem to preclude important transparency objectives.

The existence of a complaints and appeal procedure in GLOBALG.A.P. and the FSSC 22000 enhance

the legitimacy of their standard-setting operations but due to the secrecy of the proceedings and the

findings these effects tend to be largely restricted the stakeholders which are directly concerned. The

IP coordination mechanisms do not provide their own internal dispute resolution mechanisms, but

rely on pre-existing mechanism, such as the WIPO Arbitration and Mediation Centre, other types of

ADR and litigation.

While both food safety governance mechanisms value impartiality by stressing that their respective

Board members do not act under the direction of anyone, it seems doubtful that they act fully

independently of their employers. The impartiality of the IP coordination mechanisms lies primarily

in the source of the financing. Similar to the food safety governance mechanisms, the members of

the Governance Board of the MPP also acts in their “personal capacity”. However, it is unclear what

this exactly means in practice.

As regards the financing of the governance mechanisms, we consider that not-for-profit mechanisms

provide conditions in which the standard-setter can afford to remain more cognitively open towards

change of the standard. If the standard-owner can make profit on the standard through licensing, the

standard-owner may be tempted to set the pursuit of profit above the quality of the standard and

may be less inclined to revise standards drastically that enjoy a market reputation. The FSSC 22000,

the MPP and WIPO Re:Search operate on a non-profit basis. They therefore score better on good

governance criteria than GLOBALG.A.P., which requires higher legitimation, but which operates on a

for-profit basis. Librassay, which finances itself from the fees paid by licensees merely facilitates

effective multi-patent licensing and does not have to meet the same demanding standards of good

governance as other mechanisms that interfere more profoundly with the interests of stakeholders.

Nevertheless, the significant annual fee, may be a reason for small diagnostic service providers not to

approach Librassay to get a license.

125 Hachez & Wouters, n. 99, at pp. 704-706.


21

Output legitimacy of the coordination mechanisms can be affected by internal factors but also be

enhanced or challenged by external factors. Two patent governance mechanisms face important

internal challenges. Librassay only administers patents owned by a limited number of public research

institutions. Despite the fact that this group of institutions covers several core US research

institutions (i.e. NIH, Stanford University, University of California, SF, University of Wisconsin),

licensees will still need to get licenses from other patent owners. This challenge is typical for so-

called “two-sided platforms” – economic platforms having two distinct user groups that provide each

other with network benefits – such as credit cards, search engines and IP clearinghouses. Such

platforms may provide benefits to each user group (i.e. patent owners and licensees) but their utility

largely depends on economies of scale.126 127 The clearinghouse, hence, needs to provide particular

incentives, to one of the two user groups or both user groups in order to expand its market coverage.

Librassay seems to encounter difficulties in offering such incentives, which may, however, be

partially explained by the market uncertainty caused by the Myriad-case (see below) as well.

Similarly, one of the challenges for the MPP remains its “value proposition” for patent owners.

Different from Librassay, the MPP has not encountered significant problems in attracting licensees,

the generic producers. However, the added value of the MPP for innovator pharmaceutical

companies with essential HIV patents beyond compliance with corporate social responsibility may be

less obvious. In fact, an important discussion point is their preference to exclude countries, such as

Brazil, India, South Africa and China from coverage by the pool. These countries offer a huge market

potential and patent owners may be reluctant to grant licenses to the pool for these territories. On

the other hand, the majority of the population in Brazil, India, South Africa and China still lives in

poverty and needs access to cheaper HIV drugs and newer drug combinations, which could be

facilitated by the pool. Moreover, precisely in these countries the expertise and experience in

producing affordable generic drugs is available. Hence, it would be undesirable to exclude exactly

these countries from the MPP. Therefore, it is essential that the MPP continues to seek additional

incentives or include measures such as differential pricing128 in its deals with innovator companies in

order to optimize the coverage of the pool. The food safety coordination mechanisms are less

afflicted by the typical characteristics of two-sided platforms; the problem of attracting stakeholders

as clients and/or members. GLOBALG.A.P. has been particularly successful in attracting members (in

fact membership went up from 70 to over 200 in just two years) and certification to the

GLOBALG.A.P. standard has significantly increased worldwide, including in developing countries.

Despite being a young initiative (from 2004), the FSSC 22000 has already resulted in more than 7000

certifications. However, with the increasing number of certified suppliers, returns in the investment

in certification are likely to decline, rendering GLOBALG.A.P. certification less attractive unless it can

successfully promote itself to more upstream buyers (thus keeping demand steady). What is more,

the proliferation of standard schemes can also create problems of inconsistency or non-recognition

limiting the ability to certified suppliers to access other wholesalers, processors or retailers. Lastly,

there is the at least a risk of undesirable distributive implications as some market players, especially

in developing countries, may not enjoy access to GLOBALG.A.P. certification.129

While internal challenges in food safety coordination mechanisms remain, for the time being, low,

important external challenges to their output legitimacy exist. The fact that many upstream buyers

now require GLOBALG.A.P. certification has created private regulatory barriers to market access and

126

Cf. J-C Rochet & J. Tirole (2003), ‘Platform Competition in Two-Sided Markets’, 1 Journal of the European Economic Association, 990-

1029 and B. Caillaud & B. Jullien (2003), ‘Chicken & Egg: Competing Matchmakers’, 34 Rand Journal of Economics, 309–328. 127

Consumers, for example, prefer credit cards honored by more merchants, while merchants prefer cards carried by more consumers, the

so-called “chicken-and-egg problem”. 128

See e.g.: C. Godt (2010), Differential Pricing of Pharmaceuticals inside Europe: Exploring Compulsory Licenses and Exhaustion for Access

to Patented Essential Medicines, Baden-Baden, Nomos Verlagsgesellschaft and P.M. Danzon & A. Towse (2003), ‘Differential Pricing for

Pharmaceuticals: Reconciling Access, R&D and Patents’, 3 Int'l J. Health Care Fin. & Ec., 183-205. 129 Cafaggi suggests these distribute effects are an important part of the legitimacy of private regulatory standards. See Cafaggi, n. 118, at

696.


22

has prompted WTO members to launch discussions on how existing WTO law disciplines apply to

private safety standards and whether they need to be strengthened to capture them.130 As an ISO-

based system certification standard, the FSSC 22000 is less subject to such a challenge because the

underlying ISO 22000 standard in turn incorporates the Codex Alimentarius Commission’s Hazard

Analysis and Critical Control Point Approach (HACCP) and the Codex is accepted as the recognized

food safety standard setter in the WTO’s Agreement on the Application of Sanitary and Phytosanitary

Measures.131 The move towards benchmarking of public and private food standards against each

other by the GFSI likely enhances the legitimacy of private standards. It establishes transparency

between standards, reduces market fragmentation and thereby lessens the need to obtain

certification to dominant standards in the market such as GLOBALG.A.P. While it might be argued

that more competition amongst standards improves health, environmental and other benefits of

standards, we consider that the two-sided nature of standards may not lead to optimization because

food producers are likely to prefer inferior standards required by more retailers. Librassay has also

encountered some challenges in attracting (private) patent owners and licensees. One of the

challenges is related to circumstances beyond Librassay’s control: the legal uncertainty in the US

market for genetic diagnostics in the light of the Myriad-case regarding the patentability of human

DNA sequences (decided on June 13th, 2013). As the full impact of the case on the market is still quite

uncertain (e.g. several infringement procedures between Myriad and service providers pending

before US courts) some patent owners and licensees may have been quite hesitant in engaging with

the Librassay licensing supermarket.

[Include Table 3. Comparative Evaluation Governance Models (see below)]

5. Concluding Remarks

The preceding analysis of various coordination problems in the domain of patents and food safety

and the response through an emergence of private and hybrid coordination mechanisms reveals how

different problems may lead to similar solutions. By providing both an intra- and an inter-

comparative analysis of the governance structures we have provided a broad array of options. We

have delineated the pros and cons related to a preference for a certain governance feature. An

obvious example is MPP’s transparency policy, which has been applauded widely as a good

governance asset, but which in practice appears to act as a barrier to the licensing negotiations.

Licensing negotiations are generally regarded as highly confidential and the resulting licensing

conditions are generally kept secret. Accepting a transparency policy, hence, required a culture

change amongst the stakeholders. Some of the other good governance issues, which have been

criticized may require similar cultural changes within these hybrid governance structures. Exploring

literature on drivers for culture changes and institutional change in hybrid governance structures

seems an interesting topic for further research.

We explained some of the problems as a reflection of the issue of two-sided platforms. The literature

on two-sided platforms in the private context (e.g. social media platforms, such as Facebook and

YouTube) has gradually been increasing. Some of the concepts developed in that line of research may

be applicable in the context of hybrid coordinating mechanisms and could deliver further insights

into the actual operation of such mechanisms.

Finally, some private regulatory mechanisms also become transformed into ownership rights through

trademarks. This phenomenon and the inclusion of standards in contractual terms offer new and

stronger forms of legal enforcement. The ‘ownership of regulation’ and new enforcement

130 For an analysis of the applicability of the SPS and TBT Agreement to private food standards, see J. Wouters & D. Geraets (2012), ‘Private

Food Standards and the World Trade Organization : Some Legal Considerations’, 11 World Trade Review, 479-489. On the debates in the

SPS Committee regarding private food standards, see Lin, n. 41, at p. 155-156. 131

SPS Agreement, Annex A(3).


23

mechanisms invite theoretical and conceptual reflections on the possibility of owning a standard, the

coercive effects of voluntary standards and the effects of ownership rights in deliberative governance

processes.132

In Section 4 we also highlighted the role of external challenges and enhancers apart from the

“internal” good governance issues. It seems appropriate, as a next step to examine the interaction

between these external and internal factors.

132 For the compatibility of ownership rights with the provision of global public goods, see Cafaggi, n. 118, at 698.


24

Mechanism Nature Initiative Administration Budget Membership Role of

Stakeholders/

experts

Decision-making Dispute

Resolution

Transparency Impartiality Dependence/

flexibility

Librassay Private MPEG LA Librassay Licensees

Librassay

Customers

instead of

members

Independent patent

experts MPEG LA for

evaluation patents

Bilateral

Negotiations

Librassay &

patent

owners/licensees

Support

patent

owners in

patent

litigation

Licensing

conditions

available in

request

Limited

transparency

(only

summary

available on

the website)

Independent

experts

Licensing Program

part of MPEG LA

Medicines

Patent

Pool (MPP)

Hybrid WHO

UNITAID

MPP

Foundation

UNITAID Licensors

and sub-

licensees

instead of

members

No representation

pharmaceutical

companies – major

patent owners

Expert Advisory

Committee

Governance

Board - qualified

majority

Bilateral

Negotiations

MPP & patent

owners/generic

manufacturers

No

separate

dispute

resolution

mechanism;

preference

for ADR

Transparency

Policy

Budget;

dependence

third parties

Selection

members

Governance

Board

Independent legal

entity

WIPO

Re:Search

Hybrid GSK

WIPO

BIO Ventures

for Global

Health (BVGH)

WIPO

Membership

consists of

providers,

users and

supporters

Members part of GC

WIPO/BVGH

expertise

Bilateral

Negotiations

WIPO

Arbitration

&

Mediation

Limited

transparency;

confidentiality

agreements

(only

objectives and

principles

shared)

Secretariat

WIPO/

administration

BVGH

WIPO budget

Initially GSK pool

Secretariat WIPO/

administration

BVGH

Table 1. Description Governance Models – Patent Governance


25

Mechanism Nature Initiative Administration Budget Membership Role of

Stakeholders/experts

Decision-

making

Dispute

Resolution

Transparency Impartiality Dependence/

flexibility

FSSC

22000

Private Dutch

Certification

Organizations

Foundation for

Food Safety

Certification

fees for

assignment

of license to

use TM

subject to

non-profit

requirement

Broad Board

membership

possible,

currently no

NGOs,

representatives

of IOs or

governments

Input via membership

of Board, experts can

be appointed as

Board members,

advisors or

temporary advisors

By consensus

of all

members,

fallback of

majority

voting,

elaborate

mechanism

to deal with

disagreement

Appeals

Committee

similar to

commercial

arbitration

Standards

are public,

free of

charge but

not the

preparatory

work nor the

appeals

procedure

Members

appointed

in their

individual

capacity

On standard

but

Foundation

also National

Technical

Working

Group for

GLOBALG.A.P.

GLOBAL

G.A.P.

Private EurepGAP

(British and

continental

European

retailers)

Food Safety

Plus GmbH

owned by the

ETI Retail

Consortium

Annual

membership

fee,

assignment

of license to

use TM

retailers &

suppliers

9 advisory

Stakeholder

Committees, limited

input from public

officials or

international

standard-setting

organizations,

independent experts,

and from several key

consumer NGOs;

involvement of

smallholders from

developing countries

via committee and

representative

by consensus

fallback of

majority

voting

First,

procedures of

certification

bodies,

subject to

GLOBALG.A.P.

min.

requirements;

Decisions of

Global G.A.P.

Secretariat or

Integrity

Surveillance

Committee:

arbitration

standards are

public & for

free but not

the

preparatory

work

Members

elected in

their

individual

capacity; a

50:50

balance

retailers &

suppliers,

conflicts of

interest

need to be

disclosed

by Board

members

principal

business

Table 2. Description Governance Models – Food Safety Governance


26

Mechanism External Challenges External Enhancers Governance Weaknesses Governance

Strengths

Librassay Market Uncertainty – Myriad-

case (pending cases)

Trust MPEG LA due to work on

other MPEG programs

Limited transparency

Attracting patent owners & licensees

(“Chicken-egg problem”)

Expertise

MPP Activities Competition

Authorities Pharma Sector

(tensions innovator

companies & generic

producers)

Support WHO

Starting Budget UNITAID

Stakeholder inclusion

Attracting patent owners

Transparency

WIPO

Re:Search

Limited Funding NTD

Support WIPO

Lack of transparency

Confidentiality

Safeguarding effective output

Expertise

Stakeholder Inclusion

FSSC22000 Proliferation of private

standards

Basis in ISO and BSI standards

GFSI recognition

De facto limited NGO participation

No full transparency

De facto non-consideration of development

issues

Openness of Board to all interests

Decision-making process

Dispute resolution

Non-profit nature

GlobalGAP WTO work on private trade

barriers

GFSI recognition

Partial basis in CAC, IPPC, OIE

standards

Dominance of retailers but also suppliers

No full transparency

Stakeholder input

Expertise industry experts

Involvement smallholders from developing

countries & capacity-building

Table 3. Comparative Evaluation Governance Models

the role of private actors in dealing with coordination...

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