Compulsory Licensing or Patent Pools – What is the Intellectual Property Answer to COVID-19?

By , June 3, 2020 June 5th, 2020 COVID-19, Patents

The COVID-19 health emergency has seen different reactions from states in an attempt to curb its devastating spread. This battle can only be considered won if an effective vaccine is developed and effectively administered to all. To facilitate equitable access to such vaccines, the 2017-amended TRIPS Agreement contains certain exceptions, such as ‘compulsory licensing,’ allowing governments to take away patent right exclusivity in furtherance of public health goals. Despite such provisions, alternative IP regimes, namely ‘patent pools,’ have been advocated to battle this pandemic. In this article, the authors aim at identifying the shortcomings of the compulsory license regime and exploring patent pooling as an alternative to balance the equitable access to vaccines with the incentive to continue innovating in the industry.

The framework for compulsory licenses emanates from Articles 8(1), 8(2), 31 and 32 of the TRIPS Agreement. These allow countries to take measures to protect public health and prevent the abuse of intellectual property rights by patent holders, in order to facilitate transfer of technology to developing countries. It allows governments to license an existing patentee’s rights to a third party, irrespective of former’s consent, in order to provide access to innovations to address public health emergencies. These exceptions have been invoked by a number of countries to gain access to medicines treating HIV at affordable rates from those offered by innovators, who generally charge markedly higher prices otherwise.

Despite initial successes in securing public health interests, imposing compulsory licenses has its pitfalls. Patent holders are arguably deterred from increasing investments and efforts towards a particular research or innovation, due to the fear of the future loss of exclusive rights in their invention. Moreover, developing countries have been shying away from utilizing the advantages of compulsory licensing, due to fear of political backlash from pro-patent rights, from developed countries.

On the other hand, a ‘patent pool’ is a voluntary arrangement between multiple patent owners, which involves the mutual exchange of potential rights, licenses and techniques. Simply put, two or more companies come together to collaborate over innovations and have common licenses over their work. Recently, the World Health Organization (WHO) endorsed a seven-page proposal by Chile and Costa Rica, in order to encourage global pooling of vaccine patents and provide developed COVID-19 vaccines as a public good to the global community. In contrast to compulsory licensing, which only looks at dissemination of vaccines, the pool can serve as a means to foster the production, as well as availability and accessibility, of medicines and vaccines across the globe at reduced costs.

A patent pool framework can also be used by governments and research centers to collaborate with one another to test the efficacy of a vaccine that would involve the conjunct use of two or more different patented products. In this patent pooling structure, by having the parties pool their patents together for research and development, there is a renewed scope toward third-party licensing, transparency, negotiations in equitable pricing and royalty-distribution avenues. Further, patent pools also ensure a certain degree of product homogeneity, resulting in a similar quality of vaccine being developed across the board. This might ensure that the same quality of vaccine is distributed to all the nations in an equitable fashion. Ordinarily, individually developed vaccines will require approvals for marketing and manufacture in different countries separately to ensure widespread administration of the vaccine, either by voluntary or compulsory licensing. These transaction costs are significantly lowered in a patent pool, which makes all of the required patent rights and information available on a non-exclusive, non-discriminatory basis to all countries and manufacturers alike.

Despite these advantages, patent holders are less enthusiastic about such pools in the biotechnology industry due to non-alignment of interests among diverse innovative entities. In the course of fostering innovative technology, companies with breakthrough innovations will most likely be be unwilling to share such breakthroughs with rivals. Encouraging profit-driven private entities to share their technology with one another is undeniably the biggest hurdle in the creation of a patent pool. However, private companies stand to gain from patent pools, where there is the possibility of issuing a greater number of licenses, thereby earning royalties on a greater number of developed units with the broader manufacturing and distribution base potentially available under a patent pool. This is in contrast with a compulsory licensing regime, where the royalties paid to these patentees are determined by a licensing authority/legislation in the respective countries, to ensure affordability of the vaccine, often at markedly reduced prices from those patent holders would charge for such vaccines.

While these reasons serve as incentives for private parties to collaborate with one another, there is also a threat of them working together to monopolize the market and indulge in price-fixing. In this case, since the public and private entities would be collaborating on patents of substitutive nature, the chances of violating competition laws or forming international cartels is rather high. Thus, it is important to emphasize the need for an independent, non-profit corporation for the management of the pool. Its rules and policies should be designed to encourage licensing and should determine a mechanism to license patents on a market value basis to prevent anti-competitive practices and to meet the desired objectives. Creating appropriate licenses and ensuring that the structure of the pool complies with competition law requirements will also be better achieved by an independent management body.

Until a vaccine is developed, options are rather limited because the virus has a head-start on us. This headstart can only be overcome by our collective efforts and resources. While it may seem like an insurmountable task to achieve collaboration between various rival players and governments across the world, in such unprecedented times, our collective attempts at fighting the COVID-19 are best addressed by a patent pool. It addresses the dichotomy between accessibility and IP protection in a more suitable fashion than compulsory licenses and remains our best chance at ensuring a speedy development of a vaccine and its widespread administration.

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