Is compulsory licensing an obstacle towards innovation?

The Covid-19 pandemic brought to the spotlight the discussion about compulsory licensing in pharmaceutical patents. Is compulsory license a viable solution?

What is a patent?

A patent is the exclusive right to an invention, protecting both inventions and their inventors. However, not every invention can be object of a patent. In order to be patentable, an invention must comply with three requisites: firstly, it needs to be new (novelty) meaning that no one has ever disclosed it before worldwide; secondly, it needs to have an inventive step, which means that the invention was not obvious to an expert in that industrial field, taking into consideration the state-of-the-art. Thirdly, it needs to have industrial application, meaning that it must be used in some kind of industry (industrial application).

After conforming these three requisites, a patent is granted.

Patents are valid for an overall period of 20 years, starting from the application date. In some countries (e.g. Portugal) and in certain areas, such as for pharmaceutical patents, it is possible to request a supplementary protection certificate, mainly due to financial reasons.

What is compulsory licensing?

Compulsory licensing of a patent is the legal step by which governments allow someone else, other than the patent owner or licensee, to explore the patented product or process without the owners’ consent.

Compulsory licensing can only take place when specific conditions are met, put in place to protect the inventors, namely: the person or company applying for a compulsory licence must have first attempted, unsuccessfully, to obtain a voluntary licence from the rightsholder, meaning that they tried to directly contact the owner of the patent, among others (expressed under Article 31 TRIPS and Article 108 Portuguese IP Code).

Nonetheless, these conditions may be waived by any Member State of the TRIPS Agreement in the case of a national emergency or other circumstances of extreme urgency”, such in the case of the COVID-19 pandemic.

Compulsory licensing and COVID-19 pandemic:

The discussion on compulsory licensing of pharmaceutical patents became more during the Covid-19 pandemic outbreak due to the fact that not all countries could afford to purchase vaccines from pharmaceutical companies, and therefore, effectively fight the pandemic.

As the World Health Organisation (WHO) has stated in numerous occasions the best way to fight the pandemic is to vaccinate the world population. Nonetheless this is not happening, or it is not happening at the speed intended to, mainly because of three reasons: misinformation or political decisions, the price of vaccines, and the capacity to produce vaccines.

In terms of vaccine production, we must consider the following aspects. It is a common practice that patent applicants do not disclose in patent applications all the required know-how to produce vaccines and, even if they did so, not every country has the resources (human and financial) to quickly produce vaccines. Furthermore, we must bear in mind that the required regulatory steps to produce a pharma product is a complex and time-consuming process, which usually takes several years to be completed.

In this regard, compulsory licensing is thought to be one of the best tools to fight this problem, where governments could force pharmaceutical companies to give their patents away in exchange of some financial compensation.

Nonetheless, after almost two years compulsory licensing has not been used by governments. Why?

In order to produce vaccines to fight the virus, pharmaceutical companies invested millions in research to produce a vaccine capable to stop the virus. They did this because it was urgent and profitable (the logic is simple: since the demand is high the price for the sell can also be high,).

However, if governments intervein and obligate these companies to yield their vaccine patents, it may result in millions of investment lost, and, even more disturbingly, it may discourage pharmaceutical companies, in future pandemics, to invest in researching for solutions.

Moreover, the urgency of vaccination resulted in technological evolutions, as technologies like Artificial Intelligence contributed tremendously the process of developing the vaccines. That being said, technology innovation may be also hindered due to compulsory licensing.

Is there a solution?

After identifying the problem, a possible solution, should be pointed out: voluntary patent licensing, specifically pharmaceutical patents.

Voluntary licensing is the process in which companies let voluntarily others to explore their inventions (creations or processes), in exchange for some reward. Unlike compulsory licensing, these rewards tend to be more satisfactory for the inventors.

Conclusion:

In light of the above, it can be understood that that in emergency situations where compulsory licensing is contemplated, there is tension between two interests: the interest of public health and the economic/financial interest. Since patents grant exclusive protection to the inventor in exchange for their know-how, a possible breach of this mechanism of reciprocity may aggravate the companies’ interests in R&D and ultimately, affecting national economies status in pursuit for innovation.

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The opinions expressed within the article are solely the author’s and do not reflect in any way the opinions and beliefs of WhatNext.Law or of its affiliates. See our Terms of Use for more information.

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