Compulsory licensing in a (post) covid-19 world

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Intellectual property under fire during the pandemic

Medical science’s battle against SARS CoV-2, the virus that causes covid-19, has been impressive. It took a few days to find the virus’s gene sequence, a few weeks to develop testing kits and less than a year to issue the marketing authorisation of the first vaccine.

Pandemic-related patents were sometimes lauded as the solution that will ‘save the world’ (see G van Overwalle, “Will Covid Patents Save the World?”, in GRUR International, 2020, p. 883). But those same patents were also demonised as the barrier preventing access to medicine and vaccines. On 2 October 2020, India and South Africa submitted a joint communication to the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPs Council) of the World Trade Organisation (WTO). The communication proposed that the obligations of WTO member states to implement, apply or enforce several essential sections of the TRIPs Agreement be waived in relation to prevention, containment or treatment of covid-19.

At the time of writing, it appears unlikely that the TRIPs Council will reach a decision effectively suspending essential parts of what is without doubt the most important IP-related international agreement. Nonetheless, many previously unthinkable decisions have been made since early 2020. Irrespective of the TRIPs Council’s decision, the pandemic has put the topic of broad availability of medicinal products versus patent protection into the spotlight and this discussion is unlikely to go away, even once the pandemic is over.

The objective of this chapter is to examine compulsory licensing of patents, with a particular focus on how the existing rules play out in a pandemic, in light of selected recent case law developments.

Using other people’s intellectual property in extraordinary circumstances

All modern patent systems seek to strike a balance between rights and obligations between the promotion and the dissemination of innovation, as well as between the advantage of producers and users of technological knowledge, as prompted by Article 7 of the TRIPs Agreement. Exceptions to patent rights are generally allowed under the three-step test foreseen in Article 30 of the TRIPs Agreement, if the exceptions:

  • do not unreasonably conflict with a normal exploitation of the patent;
  • do not unreasonably prejudice the legitimate interests of the patent owner; and
  • do take into account the legitimate interests of third parties.

More specific restrictions are set out in Article 31 and 31bis of the TRIPs Agreement, which clarify the member states’ right to grant compulsory licences.

In addition, depending on the jurisdiction, owners of intellectual property enjoy some or all constitutional or customary protections afforded to owners of civil property (such as Article 1 of Protocol 1 to the European Convention on Human Rights (ECHR); Anheuser-Busch v Portugal, ECHR judgment (Grand Chamber), 11 January 2007, 73049/01, paragraph 72). In addition to IP-specific rules set out in the TRIPs Agreement, any limitation of IP rights must also comply with the applicable rules on the restrictions of fundamental rights or civil liberties.

Compulsory licensing

Implementing Articles 31 and 31bis of the TRIPs Agreement, the Swiss Patent Act provides for compulsory licences in the public interest and for the export of pharmaceutical products (Articles 40 and 40(d) of the act), which both allow for restricting the exercise of exclusive rights under the patent in the interest of public health.

Required in the interest of public health

Pursuant to Article 40 of the Patent Act (which is itself based on Article 31 of the TRIPs Agreement), a compulsory licence may be granted by the Federal Patent Court in the public interest. What the public interest entails must be decided on a case-by-case basis. No published cases of compulsory licences are known in Switzerland so far. It is therefore not known how the courts will interpret this provision. According to legal scholars, the grant of a compulsory licence may be justified on particular on medical grounds, such as providing adequate medical care for the Swiss population during a pandemic.

Further, Switzerland has translated Article 31bis of the TRIPs Agreement into Article 40(d) of the Patent Act, which foresees the availability of a compulsory licence for the manufacture of patented pharmaceutical products for export to a country that has no or insufficient capacity to manufacture and that requires these products to combat public health issues, such as epidemics.

In principle, these two mechanisms may be relied on to address public health needs in light of the covid-19 pandemic.

Efforts to obtain a licence

Compulsory licences in the interest of the public or for the export of pharmaceutical products will be granted only if the party seeking the compulsory licence has first requested a voluntary licence on appropriate market terms within a reasonable period. In the case of a compulsory licence for the export of pharmaceutical products to combat public health problems in foreign countries, a period of 30 working days is considered reasonable (Article 40(e)(1), first sentence, of the Patent Act, implementing Article 30(b), first sentence, of the TRIPs Agreement).

Efforts to obtain a contractual licence on appropriate market terms within a reasonable period are not required in situations of national emergency, other circumstances of extreme urgency or in cases of public non-commercial use. Especially at the beginning of the pandemic, these requirements may have been fulfilled had there been a known and patented covid-19 cure or vaccine at the time (Article 40(e)(1), second sentence, of the Patent Act, implementing Article 30(b) second sentence, of the TRIPs Agreement).

Scope of a compulsory licence

The scope of the compulsory licences in the interest of the public and for the export of pharmaceutical products is primarily regulated in Article 40(e)(2) and following of the Patent Act, implementing Article 30(c) and following of the TRIPs Agreement.

The scope of the compulsory licence is limited to the purpose for which it has been granted. The licence is not transferrable, except on transfer of the whole business that makes use of the licence. This also applies to sub-licences. What is more, the patentee is entitled to appropriate remuneration for the compulsory licence. In assessing the remuneration, the circumstances of the individual case and the economic value of the licence must be considered. In the case of a compulsory licence for the export of pharmaceutical products, the remuneration is determined by taking into account:

  • the economic value of the licence in the importing country;
  • its level of development; and
  • the urgency in public health and humanitarian terms.

The compulsory licence will be granted only on a non-exclusive basis and, in the case of a compulsory licence in the interest of the public, the licence is primarily granted for supplying the domestic market.

Regarding the term of the compulsory licence, if the circumstances that led to its issuance no longer apply and are not expected to arise again, the compulsory licence may be revoked.

Recent developments in and around Switzerland

According to public records, no compulsory licences have ever been imposed by a court in Switzerland. However, while the case did not concern a request for a compulsory licence, a 2019 decision of the Federal Patent Court is of interest here. The case involved a preliminary injunction requested by Abbott Laboratories against Edwards Lifesciences regarding the infringement of a patent related to heart-valve repair. The defendant argued that a preliminary injunction should not be granted if there is public interest keeping the infringing device on the market. The court disagreed and stated that public interest is exclusively dealt with by the system of compulsory licensing. The defendant cannot avoid a preliminary injunction on the basis of public interest; it must file a request for a compulsory licence if it considers the public interest to be at stake. The relevant consideration has not been reviewed by the Swiss Federal Supreme Court and it is therefore unclear whether the last word has already been spoken on the matter.

Public health considerations are sometimes invoked successfully to prevent injunctions in other European countries, but Switzerland has so far always had a system whereby the court has no discretion as to whether an injunction is granted when infringement is confirmed and the relief requested by the plaintiff is an injunction. Against this background, the judgment of the Federal Patent Court in Abbott seems a logical continuation of the tradition.

In the context of covid-19, this means that patented therapies or vaccines against covid-19 require a (free or compulsory) licence to be exploited by third parties in Switzerland, because third-party manufacturers and distributors will otherwise risk being injuncted regardless of the public health needs created by the pandemic. Against this background, compulsory licences may suddenly become an important instrument in Switzerland should patent owners not want or not be in a position to provide sufficient supplies to the Swiss market and at the same time refuse to grant licences, which, fortunately, has not been the case so far.

Looking across the border, there are a number of notable developments on compulsory licences pre-dating the current pandemic.

In 2017, the German Federal Patent Court (confirmed by the Federal Court of Justice) granted a compulsory licence to Merck for a patent owned by Shionogi and related to treatment of HIV patients. Merck’s application followed the breakdown of voluntary licence negotiations with Shionogi. The Federal Court of Justice stated that there was sufficiently important public interest to justify granting a compulsory licence if the relevant product treated a serious disease, which either could not be treated with a similar product or the alternative treatment cannot occur only with important side effects.

In 2019, the German Federal Court of Justice rejected an application for a compulsory licence by Sanofi and Regeneron regarding a patent related to an anti-cholesterol drug owned by Amgen. The court considered, in particular, that the applicants had not seriously attempted to obtain a voluntary licence. The applicants had sent an offer to the patentee only near the end of patent infringement proceedings initiated by the patentee, they offered a very low licence fee and they left the patentee’s reply unanswered, albeit the patentee had not rejected licence negotiations.

In 2019, the EU Community Plant Variety Office rejected a request by Pixley Berries for a compulsory licence for a plant variety right related to a variety of blackcurrant owned by Lucozade Ribena Suntory. In particular, it considered that the required public interest was missing. It ruled that while the relevant variety had some “desirable” characteristics that made it especially resistant to climate change and was associated with some health benefits, neither characteristic was unique to the relevant variety and there was therefore no need for the market to be supplied with it.

Has the pandemic transformed (compulsory) licensing?

In response to the covid-19 pandemic, during the course of 2020, several countries (ie, Canada, Germany, France, Ecuador and Chile) took steps to facilitate compulsory licensing or to encourage the use of compulsory licences. However, more than one year into the pandemic, it seems that while compulsory licensing has made many headlines, only a few cases have been made public where covid-related treatments or vaccines were actually made broadly available through this tool. The most prominent case may be Israel’s compulsory licence to import generic versions of lopinavir/ritonavir, the active ingredient of AbbVie’s Kaletra. Israel issued the compulsory licence to overcome shortages in drug supplies in March 2020, when covid-19 had just been declared a pandemic by the World Health Organisation. Covid-19-related compulsory licences were later also issued by Hungary and Russia, both for Gilead’s remdesivir. Worldwide information on the instances when authorities have invoked, planned to invoke or have been asked to invoke TRIPs flexibility for public health reasons, in particular to assure access to medicines, is available on the TRIPs Flexibilities Database

Ultimately, compulsory licensing has failed to get a lot of attention as an effective tool to secure access to essential treatments and vaccines related to covid-19. Rather, the pandemic has led to major advances in open innovation and innovative voluntary licensing schemes without state intervention.

A large group of researchers and private companies pledged to share their intellectual property in the fight against covid-19 in the ‘Open Covid Pledge’ ( Unrelated to the Open Covid Pledge, various pharmaceutical and medtech companies (ie, Moderna, Gilead, AbbVie and Medtronic, among others) are also reported to have pledged:

  • to grant voluntary licences to virtually anyone;
  • not to enforce their covid-related patents while the pandemic is raging; or
  • to grant royalty-free licences to patent pools with a view to sublicensing to generic manufacturers.

It is too soon to tell whether or how these initiatives will have accelerated the research for effective covid-19 vaccines and cures. Nonetheless, the pandemic has already highlighted that extraordinary situations can lead to private initiatives that were previously unthinkable on this scale. As patent protection is one of the main economic incentives to innovate, especially in the pharmaceutical field, voluntary licences will definitively be preferred over compulsory licences being imposed against the will of the patentee.

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