COVID-19: Automatic licensing as an economic lever?
1. The COVID-19 crisis has seen a resurgence of compulsory licensing, but it remains globally underutilised. Perhaps this position could evolve in light of this pandemic, following which compulsory licensing could be considered an economic lever in the face of falling economic growth.
2. Principles of office licensing. – Compulsory licensing in the public interest is supposed to be the exception to be invoked for an extreme health crisis emergency like COVID-19. However, the TRIPS Agreement subjects it to a large number of conditions: authorisation is examined on a case-by-case basis (Article 31(a)); prior negotiation with the right holder (except in cases of emergency) (Art. 31(b)); duration and scope of the licence limited to the purpose for which it was authorised (Article 31(c)); the licence must be non-exclusive, non-assignable (Article 31(d) and (e)), and mainly intended to supply the domestic market of the Member authorising it (Article 31(f)); authorisation may be terminated if and when the circumstances that prompted it cease to exist and are unlikely to recur (Article 31(g)); adequate remuneration (Article 31(h)) is subject to judicial or other independent review (Article 31(i)).
3. Limits of office licences. – This system has only been used on rare occasions and almost exclusively by developing countries (1). The COVID-19 crisis has led to largely the same conclusion (2). Even the exception in Article 31 bis, although it was the result of tough negotiations at the WTO, has only been applied once and its implementation was heavily criticised for its complexity (3) and slowness (4). In the face of COVID-19, some quickly noted that compulsory licensing was ineffective and concluded, following dualistic logic, that expropriation was the only solution in times of need (5). This reaction seemed natural, as, in fact, the system appears to have been practically never used in Europe – except in Germany (6) – and never in the United States (7) where all applications have been rejected. .
Beyond an illustration of the adage An exception is of the strictest interpretation., This ineffectiveness is seen as the result of an unclear and overly rigid mechanism. For example, the central notion of public interest is not defined. Furthermore, only one exception has been provided for in Article 31 bis, and high-income countries have opted not to apply this provision, even in cases of extreme urgency(8). These are precisely the countries that no longer have the capacity to manufacture active pharmaceutical ingredients within their territories, as these have been outsourced, primarily to China or India. Consequently, for a high-income country, a compulsory license would also need to be granted for the same medicine in the exporting country, which must already have been supplied. Moreover, such a waiver tends to segment markets, allowing for complete price freedom and thus authorising different prices according to region. The risk ultimately lies in setting prices that are not linked to manufacturing or development costs, but to the perceived value of a medicine in treating COVID-19. This type of situation has already occurred with the molecule sofosbuvir for the treatment of hepatitis C(9). From 2016 onwards, an increasing number of Americans suffering from hepatitis C travelled to India to purchase sofosbuvir, due to its high cost in the United States(10).
4. Misconceptions about the Office licence. – The relative ineffectiveness of compulsory licensing against COVID-19 has elicited few reactions (14). This is due to the unpopularity and demonisation of such licences, themselves inherited from the classic utilitarian model. The dualistic approach of the latter has given rise to certain myths (15), such as that of making compulsory licensing a form of expropriation. Although it is merely a limitation of the rights holder's prerogatives. Indeed, the patent holder remains free to use their invention.use), to receive royaltiesFruit), but is dispossessed of an attribute of its ownership, as it is forced to enter into an unwanted contract (loss of’Abuse). Another unfounded assumption is that the granting of compulsory licences would hinder innovation by depriving investment of its reward. In fact, the mechanism aims to compensate for either the failure to provide a market or the failure to provide it at a reasonable price (16), in cases where the patent holder would not have received any royalties. Furthermore, we avoid the costs of numerous bilateral negotiations with potential partners, as this task will be left to the state applying for the licence. A recent economic study also suggests that compulsory licences have increased national patent applications in the chemical sector by at least 20 % (17). Finally, it could serve as a lever for countries to encourage patent-holding manufacturers to relocate factories to their territory or to lower prices, particularly to provide access to healthcare during a pandemic and to revive their economies during and after such a pandemic.
5. Rebalancing Measures. – However, MEPs (18) and French MPs (19) have proposed adopting compulsory licences for the European Union and France respectively. To this end, it is nevertheless necessary to rebalance the system so that it becomes truly usable. Firstly, the status of importing country, under Article 31bis of the TRIPS Agreement, must be extended to high-income countries (20). It could also be specified that the licence covers patent applications, supplementary protection certificates, and all elements reasonably necessary for the commercialisation of the invention. In this regard, South Africa has recently proposed a more comprehensive approach to the use of TRIPS flexibilities for various forms of IP and various technologies necessary to prevent and cure COVID-19 (21). Similarly, a clarification of the rules appears crucial. The concept of public interest could in particular be characterised, for example, by providing, as in section 41(2) of the UK Patents Act 1949, that medicines shall be made available to the public «at a price which is calculated in accordance with the principle that the prices are such as will afford a just return to the patentees».
6. Ainsi, la licence d’office semble pouvoir servir de levier économique pour les États, plus particulièrement en les aidant à inciter les producteurs brevetés à délocaliser les fabrications sur leurs territoires et à baisser les prix. Ainsi, les développements au lendemain de la pandémie semblent susceptibles de renforcer les rôles géopolitiques et économiques du droit des brevets dans le monde post-COVID-19. Espérons que ce nouvel espoir n’est pas vain. Mais, pour citer Spinoza, « il ne peut y avoir d’espoir sans peur, et pas de peur sans espoir ».
This article was published on the European Patent Law blog (Link).