PATENT POOLING AS A SOLUTION TO COVID 19 – THE WAY FORWARD

Written By: Dr. R Haritha Devi And Mrs. R Aarthirathna[1]

COVID 19 pandemic has brought in a change to the pattern of living as well as the way the laws may be interpreted. The standstill situation that has arisen due to the pandemic has made us think about various ways and means to come out of the situation. One of the very important researches that are going around the globe today is the vaccine or medicines that may cure or resist the virus. One of the very important question that arise along with inventing medicine or vaccine is whether it will be available to all countries and all sectors of people at a  reasonable price. Access to medicines is a fundamental point to implement right to health. The true meaning of right to health comes to a reality only when the medicines are available to all at affordable prices. This is more important especially in the case of chronic illness and most common diseases like diabetes, cancer blood pressure, etc. The biggest hurdle in achieving right to health is access to medicines at a reasonable price. One of the solutions in such a situation to achieve access to COVID drugs after invention to all is patent pooling.

Patent Pooling

There is no legal definition in any of the Indian legislations about patent pooling. In general terms it is an agreement entered into between two or more patent holders to achieve mutual benefits. When two or more patent holders enter into an agreement to license their patents to each other or jointly to third parties it is called patent pooling. This will give an opportunity to third parties to acquire the necessary intellectual property rights needed to develop products. Patent pooling is applied in situations where the inventor of a product which involves complex technology that can be efficiently used only with the help of a complementary patent which belongs to another patent holder[2]. So in such situation the patent holder enters into an agreement with the complementary patent holder which we call as patent pooling. This is something similar to joint venture with a special object of sharing the intellectual property rights. Patent pools when used in public health can achieve a special partnership where privately held intellectual property rights can be used for public interest.

 Evolution of Patent Pools

Patent pools are in practice for a long time. The first reported patent pool was made by the Albany Agreement in October 24, 1856[3]. This was the result of patent war for sewing machine considered to be an important invention at that point of time. The sewing machine invented then was the combination of different parts patented by different people. So when the final product was sold in the market there were numerous litigations among the patent holders often. To bring the law suits into a conclusion the Albany agreement was entered into which became the first case of patent pooling[4]. 

Another instance of successful patent pooling was in the year 1917, when the US government merged Wright Company and the Curtiss Company, the major patent holders in airplane industry, as there was an increase in the demand for airplanes during First World War[5] Now in the modern times the concept of patent pooling is seen to be used in many fields the most common being electronic technology, wireless equipment, biotechnological applications and more recently in the case of affordable medicines.

Advantages of patent Pooling[6]

Patent pooling when implemented in a proper format has many advantages. One of the biggest advantage is it reduces transaction costs. Each patent holder separately trying to implement cost him huge due to which we see many patents not being used by the patent holder to their fullest extent. Next is it brings down the number of litigations that may arise due to infringement of the rights granted to the patent holder. When each patent holder fights for his rights each one gives rise to a case while if it is pooled the litigation becomes a single case as in the case of the first sewing machine case itself. This is the most important benefit from the legal point of view for both participants of the pooling agreement as well as the outsiders or third parties who need not fight out the case individually against each patent holder. Moreover, patent pools try to bring about proper standards of an industry due to reduction in the transaction costs which are beneficial to both parties to the patent pool and the outsiders in the same way. Hence by patent pooling the risks and benefits of the technology that is involved in the pooled product can be beneficial to the maximum number of people as said by Bentham “greatest happiness to the greatest number.”

Disadvantages of Patent Pooling

The benefits that are attached with patent pooling are so many but at the same time the disadvantages are also worth discussing. Very often patent pooling leads to anti competitive effects attracting section 3 and 4 of competition Act. Hence whenever patent pooling is suggested the anti competitive effects also need to be looked into. Otherwise the benefits itself may lead to disastrous effects. The important disadvantage is the anticompetitive effect that may arise because of the pooled patent. 

Anti– Competitive Effects:

Assessment of competitive effects of a patent pool is usually done by considering several factors and one of such factors accepted internationally is the ‘complementary’ or ‘essentiality’[7] criterion, according to which a patent pool would be regarded as pro competitive if it includes only complementary or essential patents whereas it would cause anticompetitive risks otherwise[8]. This has been done by many jurisdictions on the basis of applying the rule of reason[9] which means the facts of each case is analyzed to find out the anti competitive effects of agreements. One of initial case in United States which decided on the issue of whether patent pooling violated antitrust laws was E. Bement & Sons v. National Harrow Co.[10] in this case, Bement was a licensee of a pooled patent of twenty two firms which accounted for nearly 90 percent of manufacturing and sales of float spring tooth harrows in the United States. According to the poling arrangements there were fixed prices for licensed products, allowing the licensee to make or sell only the licensed products and also provided that the licensee to challenge the patents and to defend the patents if challenged by courts. Although it appears at the outset that it was anticompetitive the court held that the pool was legal with three justifications: a. the general rule is absolute freedom in the use or sale of rights under the patent laws of the United States. b. if the conditions imposed by the patentee are not illegal and accepted by the licensee then it can be upheld by the courts. c. the conditions which fix prices may not be held illegal always.[11]

  But ten years later there was a change in the interpretation given by the court in the case of Standard Sanitary Manufacturing v. United States[12]. The licensing arrangements established a standard royalty for the licensed patents, fixed discounts for product prices and prohibited the marketing of inferior seconds. In this case the Court was of the opinion that there was a violation of Anti Trust laws. But the Court did not examine the details of anti competitive effects of the pooling arrangement. There was only a mention about two among the three patents infringed the third patent.

Two decades later, the Supreme Court specifically addressed the issue of blocking patents in its review of Standard Oil Co. v. United States[13]. In this case the Court reversed a district court finding that Standard Oil of Indiana and others had created an illegal patent pool to combine patents related to gasoline cracking, a key process in the refining of crude oil into gasoline. The focus of this analysis was on whether the cross licensing of blocking patents violated the antitrust laws. It was explained by the Court that the terms in the agreements did not violate antitrust laws. It was mentioned specifically that the rights of the defendants in this case individually to issue licenses for the patents which they had and there were no restrictions as to the quantity of gasoline produced or price at which it may be sold or the territory in which it may be sold. The advantages of cross licensing of blocking and complimentary patents were discussed by the Court but there was no detailed evaluation about whether all the patents involved in this case were actually blocking or complimentary. The Court placed its conclusion based on the point of whether there was fixation of prices and limit of use of non licensed technologies. Furthermore, the observation by the Court was that cracked gasoline accounted for only fifty five percent of the total gasoline sold in US. Based on this percentage the Court concluded that there was no antitrust violation.  But the fact was that the market share of the pool collectively was large enough to have a market power in the market. “ Patent pooling cases that courts have concluded violate the antitrust laws tend to have had extensive downstream restraints[14].”  The question of antitrust violations need to begin with a study of competitive relationships between the patents which are pooled. Unfortunately, this is not a simple task. In India the Competition Commission Of India in the case of Department of Agriculture, Cooperation & Farmer’s Welfare v. M/s Mahyco Monsanto Biotech India Ltd.[15], held that the agreements entered into by Mahyco Monsanto Biotech India Ltd. with its sub-licensees, with regards to its Bt Cotton Technology, was considered to have appreciable adverse effect on competition of ‘Bt Cotton technology market’ on the basis of unreasonable conditions leading to abuse of dominant position in the market. The criteria applied by the courts in analyzing whether there was anti competitive effects were Dominant position of parties and the intention of the parties[16].

Patent Pooling in Public Health

In spite of patent pooling being in existence in many other fields for a very long time relatively it is lower in public health. It was only in 2010 UNITIAD[17] established the first patent in the field of public health by way of Medicines Patent Pool[18] for the purpose of improving the access to antiretroviral treatment in low and middle income countries[19]. They have entered into agreements with various stakeholders to prioritize and make available essential medicines. Till date they have entered into agreements with ten patent holders for thirteen HIV antiretroviral, one HIV technology platform, three hepatitis C direct-acting antivirals and a tuberculosis treatment.

The World Health organization (WHO) has established a model list of essential medicines comprises medicines which are considered to take care of the health needs of the population and it is seen that these essential medicines are available to all at all times irrespective of the country to which they belong. This list is updated every two years based on public health relevance and the need of cost effectiveness. 

But generally in health sector only recently the need for patent pooling is gaining significance especially in terms of pandemics. In the international level the need for patent pooling in health sector came to the forefront when after long negotiations between different companies and organizations led to WHO’s adoption of the Framework for Pandemic Influenza Preparedness (PIP)[20]. This is an agreement between all member states and representatives of pharmaceutical companies and it was adopted by the World Health Assembly on 24th May 2011.

The PIP tries to bring about a balance between public health needs and commercialization of medicines. The guiding principles of PIP states that, public health needs to be given priority and intellectual property should not act as a barrier and ‘that intellectual property rights are an important incentive in the development of new health care products.’ Intellectual property rights …,“obtained on inventions derived from the use of Materials, the holder/[provider] of such rights should grant to WHO a non-exclusive, royalty-free license, which WHO will sub-license to interested developing countries, for the purpose of maximizing availability of critical benefits on a non-profit basis, such as vaccines and anti-virals, for pandemic influenza preparedness purposes.”

The above initiatives by the World Health Organization is one of the far reaching steps for dealing with medicines to the general public of developing countries especially during pandemics. 

Patent Pooling as a solution to COVID 19 

Presently the world is facing the worst pandemic of this century. The countries around the globe are trying to get out of this danger and bring back the situation. Research is going in very serious fashion so that a vaccine is invented at the earliest. But the important issue that may arise along with the invention  is if a particular company or individual or institution finds a medicine then whether it will be affordable to all at affordable prices especially to developing and under developed countries. The problem lies in the exclusivity that is created by the patent rights. If patent rights are granted either to one country or one institution then the reach of the vaccine or medicine that is patented will give an exclusive right to the holder and thereby create a situation of it being prohibited from reaching the other country. So access to medicine or healthcare becomes available to only those who can afford it. Under the TRIPS regime there are provisions such as compulsory licensing that provide for making access to medicine to all. 

One important method that makes distribution and availability of innovative products is by creating a patent pool. It is to be noted that once a vaccine is found it should be manufactured by all countries quickly. But for that the patent holders must be free enough to license their patent rights to all country manufacturers. This will make all country companies big or small to participate in the manufacturing process making it available to larger population. 

Intellectual property sharing has always proved to be effective in case of medicines especially to reduce the cost of medicines. For example, in South Africa, the price of a leukaemia medicine on WHO’s model list has decreased by 98.5% since 2012, to US$ 400 per patient per year in 2019, following generic market entry. This price of essential medicine is an important factor for a vaccine that is invented for a pandemic that has affected the entire human population.

A proactive step is seen to be taken by some countries in this regard. The leaders of countries like Ghana, Pakistan, Senegal and South Africa joined more than 100 former heads of government, senior officials and leading researchers in an open letter urging that scientific research and intellectual property on coronavirus vaccines be shared freely and the vaccines to be distributed fairly to all countries to help the poorest countries[21]. 

But as always the developed nations has not accepted such steps where they prefer the usual method of licensing the patent obtained by them. But at this juncture it is essential that patents be shared as a pool which will be a better solution. Pooling of patents is not something new but it is already a part of Doha Declaration on public health which s again a part of TRIPS Agreement. This declaration affirms public health and urges countries to take all measures to see that access to public health is a reality[22]. If patent pool is created then individual organizations need not wait for further permission from individual patent holders to start manufacturing the vaccine. The better way would be to create a common pool applicable to all countries and entrusted with a trustworthy organization who can manage the pooled patents. There can be even provisions in the poling agreement to pay royalties to the actual patent holder. Even if royalties are paid at a very less percentage it would reach millions in case of corona vaccine as it the need for all countries of the world presently. As a result the vaccines or medicines will be available at one stroke easily without waiting for provisions like compulsory licensing[23]. 

Conclusion

Hence from the above discussion it is the view of the authors that patent pooling would be a better solution to deal with the research and invention of vaccines or medicines for the corona pandemic. But such a poling of patent needs the cooperation and understanding among countries irrespective of their political differences. It is important that common mans right to health is to be put to priority rather than profits to be made by individual companies. All the nations have to reach a consensus to deal with this situation and thereby come out of this situation at the earliest. 

References

[1] The Tamil Nadu Dr. Ambedkar Law University, Chennai

[2] WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO) PATENT POOLS AND ANTITRUST – A COMPARATIVE ANALYSIS Prepared by the Secretariat (March 2014)

[3] “The Sewing Machine Patent Wars” by Adam Mossoff (accessed on 6th August 2020) available at https://slate.com/technology/2013/12/sewing-machine-patent-wars-of-the-1850s-what-they-tell-us-about-the-patent-system.html

[4] https://slate.com/technology/2013/12/sewing-machine-patent-wars-of-the-1850s-what-they-tell-us-about-the-patent-system.html accessed on 7.08.2020

[5] “Patent Pooling and IP” (accessed on 7th August 2020) available at  https://www.globalpatentfiling.com/blog/patent-pooling-and-ip

[6]  Grassler, F., Capria, M. Patent pooling: Uncorking a technology transfer bottleneck and creating value in the biomedical research field. J Commer Biotechnol 9, 111–118 (2003). https://doi.org/10.1057/palgrave.jcb.3040016

[7]  Supra note 1.

[8] Hamanaka, Nobuyuki, Distinction between Complementary and Substitute Patents as a Matter of Competition Law – Observations from Comparative Perspective –MIPLC Master Thesis (2010/11)available at

http://www.miplc.de/research/ available at SSRN: http://ssrn.com/abstract= 2236097 accessed on 8.08.2020

[9] Harry D. Dingman, Antitrust Problems in Patent Pooling and Multiple License Agreements, 20 U. Pitt. L. Rev. 54 (1958).

[10] 186 U.S. 70, 91 (1902).

[11] Ibid 

[12] 226 U.S. 20 (1912)

[13] Ibid

[14] Richard J Gilbert, Antitrust for Patent Pools: A Century of Policy Evolution – April, 2004

[15] Department of Agriculture, Cooperation & Farmer’s Welfare v. M/s Mahyco Monsanto Biotech India Ltd., Order dated 10 February 2016 in Reference Case No 2 of 2015.  

[16] Patent Pooling and the Sherman Act, 50 Colum. L. Rev. 1113 (1950).

[17] UNITAID is an international organization that invests in innovations to prevent, diagnose and treat HIV/AIDS, tuberculosis and malaria more quickly, affordably and effectively. We also work to improve access to diagnostics and treatment for HIV co-infections such as hepatitis C and human papillomavirus (HPV). UNITAID is a hosted partnership of the World Health Organization (WHO). Details available in https://unitaid.org/about-us/#en 

[18] The Medicines Patent Pool (MPP) is a United Nations-backed public health organisation working to increase    access to, and facilitate the development of, life-saving medicines for low- and middle-income countries.

[19] Esteban Burrone,et.al., “Patent pooling to increase access to essential medicines” accessed on 10.08.2020 available at Bull World Health Organ 2019;97:575–577 | doi: http://dx.doi.org/10.2471/BLT.18.229179 575

[20]  Details available in https://www.who.int/influenza/pip/en/ accessed on 5.08.2020

[21] Nature 581, 240 (2020) doi: 10.1038/d41586-020-01441-2 https://www.nature.com/articles/d41586-020-01441-2 

[22] https://www.who.int/medicines/areas/policy/doha_declaration/en/ accessed on 12.08.2020

[23]  Section 84 Indian Patent Act 1970