Sharing national experiences in use of compulsory licences

An October meeting of the WTO’s intellectual property body heard calls for balancing IP protection with the public interest, including through recourse to compulsory licensing of patents.

by Kanaga Raja

GENEVA: Highlighting the use of compulsory licences by countries such as the United States, Germany and most recently Malaysia in order to gain access to, amongst others, affordable essential medicines, several major developing countries have stressed the importance of a balanced intellectual property (IP) system with built-in flexibilities.

India, Brazil and South Africa, along with other major developing countries, stressed this view at a 19-20 October meeting of the WTO’s Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS).

When the TRIPS Council met in June, Brazil, China, Fiji, India and South Africa had circulated a document on intellectual property and the public interest in which they invited WTO members to share their experiences on the use of compulsory licences for accessing health and other technologies.

The co-sponsors of the document highlighted a growing concern about an imbalance between intellectual property rights and the public interest. With regard to health technologies, for example, patents and related monopoly rights in test data, without sufficient use of balancing exceptions and limitations to protect the public interest, permit companies to maintain high prices and exacerbate crises of access around the world, where many patients cannot afford medicines and governments with finite health budgets are forced to ration care.

Increased copyright protections create similar problems of access to knowledge goods, limiting the ability of many people around the world to access print, audio or visual works of education or entertainment. These are only a few examples of the problem, the co-sponsors pointed out.

They underlined the need to pursue a development-oriented approach towards formulating IP laws and policies rather than pursuing an iconoclastic approach of IP for development. More than 20 years after the adoption of the TRIPS Agreement, they said, there is a need for discussion in the TRIPS Council on the relationship between IP and the public interest and to broaden the understanding of how the IP system can be more responsive to public interest considerations. (See TWE No. 641 for a report on the June TRIPS Council meeting.)

During the latest discussions on intellectual property and the public interest at the TRIPS Council in October, South Africa highlighted several recent noteworthy developments (since the June meeting) that had occurred in the area of compulsory licensing, namely in the US, Germany and Malaysia.

India also pointed to the fact that since the last meeting of the TRIPS Council, compulsory licences had been issued by Germany and Malaysia. It further noted that Brazil, Thailand, South Africa and others had previously used flexibilities under the TRIPS Agreement, including compulsory licences to bring down the prices of antiretroviral medicines by increasing the supply of generic versions.

India also gave some brief details of the compulsory licensing provisions in the US, while Brazil highlighted the recent case in Germany concerning the grant of a compulsory licence for an antiretroviral ingredient.

Public policy objectives

According to trade officials, South Africa, Brazil, India, China, the European Union, the United States, Japan and the Holy See took the floor on the agenda item of IP and the public interest at the TRIPS Council meeting on 20 October.

In a statement delivered on behalf of Brazil, China, India and South Africa, South Africa said the TRIPS Agreement clearly recognizes that the principles of IP protection are based on underlying public policy objectives.

Article 8 of the TRIPS Agreement, entitled “Principles”, states that WTO members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of the Agreement.

Article 8.2 further states that appropriate measures may be needed to prevent the abuse of IP rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

The 2013 Trilateral Study of the World Health Organization (WHO), the World Intellectual Property Organization (WIPO) and the WTO points out that price is a critical determinant of access to medicines, especially in countries where the public sector is weak and poor people purchase their treatment on the private market. It posits that in some developing countries, up to 80-90% of medicines are purchased out of pocket, as opposed to being paid for by national health insurance schemes or private insurance schemes.

South Africa noted that in the last session of the TRIPS Council in June, some delegations indicated that the use of compulsory licences can assist countries to uphold the delicate balance achieved in the TRIPS Agreement, and noted that even though the use of compulsory licences is commonly referenced in respect of health issues, compulsory licences can be used in a variety of other situations as well.

According to South Africa, the right to health is a fundamental part of human rights and of our understanding of a life of dignity. As such, the achievement of the highest attainable standard of health is the right of every human being, without distinction of race, religion, political belief, or economic or social condition. This is codified in the 1948 Universal Declaration of Human Rights.

In the same vein, Goal 3, Target 3.b of the Sustainable Development Goals (SDGs), which relates to support for research and development of vaccines and medicines for the communicable and non-communicable diseases that primarily affect developing countries, promotes access to affordable essential medicines and vaccines, in accordance with the WTO’s 2001 Doha Declaration on the TRIPS Agreement and Public Health. The Declaration affirms the right of developing countries to use to the full the provisions in the TRIPS Agreement regarding flexibilities to protect public health and, in particular, provide access to medicines for all.

South Africa said that a common theme that emerged from the discussions was how governments use compulsory licences to substantially reduce the price of essential medicines while striking a balance between the interests of right holders and users.

It is however noteworthy, said South Africa, that in specific areas such as access to antiretroviral therapy, where substantial progress has been made and where substantial price reductions for commonly used first-line antiretrovirals have been achieved, prices for second-line regimes remain much higher. The World Health Statistics point out that new health technologies, such as medicines, vaccines and diagnostics, are becoming increasingly expensive.

According to South Africa, a balanced IP system, through a combination of flexibilities, complementary policies and incentives, guarantees sustainable public health outcomes that harness innovation and promote access to medicines and health technologies.

It pointed out that since the last TRIPS Council meeting, several noteworthy developments have occurred in the area of compulsory licensing.

It said that on 6 June, Judge William Martin Conley, a US District Judge of the Western District of Wisconsin, issued a compulsory licence allowing Apple Computers to use a patent it had infringed, owned by the Wisconsin Alumni Research Foundation, in return for an ongoing royalty.

This case follows a long line of cases that seem to suggest that court decisions in the US have allegedly responded to instances of infringement of medical patents by denying injunctive relief, instead granting monetary damages, often in the form of royalty payments – what would in effect provide for compulsory licensing. Public interest is often at the heart of such decisions.

On 11 July, the German Federal Supreme Court announced that it had affirmed the 2016 decision of the Federal Patent Court to issue a compulsory licence allowing pharmaceutical company Merck to continue selling its HIV drug Isentress. The Federal Court shared the assessment of the Federal Patent Court that a public interest in the granting of a compulsory licence was credible.

On 20 September, the Malaysian Department of Health announced that the Cabinet had authorized a government-use compulsory licence in respect of generic versions of the hepatitis C medicine sofosbuvir. The decision was made after the Ministry of Health’s efforts to include the drug in the Medicine Patent Pool and price negotiations with the patent holder were unsuccessful.

Balance

In its statement, Brazil said it understands that the balance reached by the TRIPS Agreement allows for ways to address public health challenges while maintaining IP systems that incentivize the investment and research necessary to develop innovative new medicines. This is clearly provided in two of the pillars of the Agreement, namely, Articles 7 and 8, which contain the objectives and principles of IP protection under the treaty.

In Brazil’s view, a balanced IP system, with built-in flexibilities as well as complementary policies and incentives, is the best way to promote innovation in all fields of technology, including the health sciences. In short, it said, a balanced IP system is a much stronger IP system.

It said that the recent entry into force of the Protocol of Amendment to the TRIPS Agreement demonstrates the need to have mechanisms that ensure adequate remuneration to IP right holders while allowing governments to adopt measures necessary to protect the public interest.

The preamble of the TRIPS Agreement advocates this view, as it recognizes “the underlying public policy objectives of national systems for the protection of intellectual property, including developmental and technological objectives”.

Brazil recalled that it had previously described the process that led to the single compulsory licence issued by Brazil, as well as the results achieved by it. More recently, developments in countries from different regions have generated increased interest in the matter.

As an example, the Bundesgerichtshof, Germany’s highest civil court, last July decided to uphold the decision of a lower court to grant a provisional compulsory patent licence on raltegravir, an antiretroviral drug ingredient.

The producer of that medicine was facing legal threats from the owner of the raltegravir patent, in spite of distributing the drug in Europe for some years. In the course of judicial proceedings, it requested a compulsory licence based on Section 24(1) of the German Patent Act. Section 24(1) lists two conditions for the grant of a compulsory licence: (i) that the licence seeker has, within a reasonable period of time, unsuccessfully attempted to obtain permission from the owner of the patent; and (ii) that the public interest calls for the grant of a compulsory licence.

Based on this, it was decided to grant a provisional compulsory licence allowing the company to continue to distribute the medicine containing raltegravir in the country. The court understood that there was a concrete need among certain HIV patient groups for a treatment containing raltegravir. The use of alternative compounds would entail severe risks of adverse effects and a loss of therapy quality, in particular for infants and pregnant women.

This decision, in Brazil’s view, is a good example of how the IP system provides the basis for advancing the public interest without prejudicing the innovative efforts by companies. It also shows that this should not be a polarizing issue, as it is of interest to all WTO member states.

Brazil said during the June session of the TRIPS Council, comments were heard to the effect that access to medicines also depends on factors outside the IP system. While this is undoubtedly a complex phenomenon that requires a broad range of actions, it said, the mandate of the Council does not include tax systems or the physical infrastructure of countries, but intellectual property. “Let us focus on this issue and its concrete effects in a positive and constructive way, enabling a rich exchange of views and experiences that enhances the mutual understanding of the matter.”

Compulsory licensing experiences

In its statement at the Council, India expressed support for the statements made by South Africa and Brazil. It noted that during the last meeting of the Council, many members, including India, had shared their experiences on the use of compulsory licensing.

India said it had shared details of the one compulsory licence issued by India so far. In March 2012, Indian generic manufacturer Natco Pharma was granted a compulsory licence to manufacture Bayer’s drug sorafenib tosylate (Nexavar) used for the treatment of kidney and liver cancer.

India noted that since the last meeting of the TRIPS Council, compulsory licences had been issued by Germany and Malaysia.

According to India, the TRIPS Agreement attempts to strike an appropriate balance between the interests of right holders and users. The Agreement also recognizes that the principles of IP protection are based on underlying public policy objectives.

In furtherance of the objectives and principles of the Agreement enshrined in Articles 7 and 8, a number of safeguards or flexibilities have become an integral part of the TRIPS framework, said India. These flexibilities have been clarified and enhanced by the Doha Declaration on the TRIPS Agreement and Public Health, which states that WTO members have the flexibility to interpret and implement the TRIPS provisions in a manner supportive of their right to protect public health.

India said that Article 31 of the TRIPS Agreement provides members complete freedom to decide the grounds for issue of compulsory licences. The Doha Declaration has also duly confirmed this.

India noted that during the 1980s and 1990s the antiretroviral medicines used to treat HIV/AIDS were priced beyond the reach of most people who needed them in developing countries. Countries like Brazil, Thailand, South Africa and others used flexibilities under the TRIPS Agreement, including compulsory licences, to bring down the price by increasing the supply of generic antiretrovirals for a fraction of the price of the patented equivalents.

Indian generic companies, especially Cipla, played an important role by announcing in early 2001 that the triple therapy could be manufactured for less than a dollar a day, compared with the price of standard triple therapy of $10,000 per patient per year. Indian generic companies made antiretroviral medicines accessible to all those who needed the drugs but had previously not been able to afford them, said India.

India then went on to provide some brief details of the compulsory licensing provisions in a developed country, the US. It said that according to a 2014 US Congressional Research Service report titled “Compulsory licensing of patented inventions”, US law permits for the issuance of compulsory licences in a number of circumstances, and also allows for circumstances that are arguably akin to a compulsory licence.

The Atomic Energy Act, Clean Air Act, Federal Insecticide, Fungicide and Rodenticide Act and Plant Variety Protection Act in the US all provide for compulsory licensing.

The Atomic Energy Act allows for compulsory licensing if the invention or discovery covered by the patent is of primary importance in the production and utilization of special nuclear material or atomic energy. The Clean Air Act contains a similar provision relating to devices for reducing air pollution. The Plant Variety Protection Act provides for compulsory licensing of seed-bearing plants that are protected by a plant variety certificate, a patent-like instrument granted by the Department of Agriculture.

The Bayh-Dole Act offers the federal government “march-in rights”, and 28 USC Section 1498 provides the US government with broad ability to use inventions patented by others.

Compulsory licences have also been awarded as a remedy for antitrust violations and a court may decline to award an injunction in favour of a prevailing patent owner during infringement litigation, an outcome that some observers believe is akin to the grant of a compulsory licence.

India cited the September 2016 report of the UN Secretary-General’s High-Level Panel on Access to Medicines which states that many governments have not used the flexibilities available under the TRIPS Agreement, including compulsory licences, for various reasons, ranging from capacity constraints to undue political and economic pressure from states and corporations, both express and implied.

India said political and economic pressure placed on governments to forgo the use of TRIPS flexibilities violates the integrity and legitimacy of the system of legal duties and rights created by the TRIPS Agreement and reaffirmed by the Doha Declaration.

India quoted the recommendations on compulsory licences in the High-Level Panel’s report: “Governments should adopt and implement legislation that facilitates the issuance of compulsory licences. Such legislation must be designed to effectuate quick, fair, predictable and implementable compulsory licences for legitimate public health needs, and particularly with regards to essential medicines. The use of compulsory licensing must be based on the provisions found in the Doha Declaration and the grounds for the issuance of compulsory licences left to the discretion of governments.”

India requested the delegations of the EU and Malaysia to provide details on the compulsory licences issued by Germany and Malaysia respectively. It said it looked forward to listening from other delegations on their experiences on using this important TRIPS flexibility. (SUNS8567)                                            

The full statements of India, Brazil and South Africa have been posted on the website of Knowledge Ecology International (KEI) at www.keionline.org.

Third World Economics, Issue No. 650, 1-15 October 2017, pp11-13