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

Written by ABD & BCD [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 stand still 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. 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. 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. 

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 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 equipments, biotechnological applications and more recently in the case of affordable medicines.

Advantages of Patent Pooling

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’ 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. This has been done by many jurisdictions on the basis of applying the rule of reason which means the facts of each case is analysed 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. 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. The very object of these laws is monopoly, and the rule is, with few exceptions, that any conditions which are not in their very nature illegal with regard to this kind of property, imposed by the patentee and agreed to by the licensee for the right to manufacture or use or sell the article, will be upheld by the courts. c. The fact that the conditions in the contracts keep up the monopoly or fix prices does not render them illegal. 

  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. The licensing arrangements established a standard royalty for the licensed patents, fixed discounts for product prices and prohibited the marketing of inferior seconds. Court held that the Standard Sanitary pool violated the antitrust laws. Court did not explicitly consider whether the patents involved in the Standard Sanitary licensing arrangement were blocking, complementary, or substitutes for each other. Interestingly, the Court did report that two of the three key patents involved in the licensing arrangement 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. 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. The Court found that the licensing agreement in Standard Oil contained none of the terms held to violate the antitrust laws in Standard Sanitary. In particular, the licensing terms did not restrict the freedom of the defendants individually to issue licenses under their own patents and did not impose any restrictions upon the quantity of gasoline to be produced; upon the price, terms, or conditions of sale; or upon the territory in which sales might be made. The Supreme Court emphasized the benefits of cross-licensing of blocking and complementary patents in the Standard Oil pooling arrangement. Yet, the Court did not perform a detailed evaluation of whether all of the patents involved in the pool were actually blocking or complementary, or whether some might have been substitutes for each other. Instead, the Court took comfort in the observation that the pool did not fix product prices or limit the use of non-licensed technologies. Furthermore, the Court noted that cracked gasoline accounted for only twenty-six percent of all gasoline sold and that the pool members accounted for only fifty-five percent of all U.S. cracking capacity. The Court found that these numbers supported its conclusion that the pool was unlikely to harm competition, despite the fact that the collective market share of the pool participants was almost certainly large enough to permit the exercise of market power “ Patent pooling cases that courts have concluded violate the antitrust laws tend to have had extensive downstream restraints.” Antitrust evaluations should begin with a study of the competitive relationships of the patents involved in the pool. 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., 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 criterias applied by the courts in analyzing whether there was anti competitive effects were Dominant position of parties and  Intention of the parties.

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 established the first patent in the field of public health. To improve access to antiretroviral treatment in low- and middle-income countries, UNITAID established the Medicines Patent Pool in 2010 as the first public health patent pool. They have entered into agreements with various stakeholders to prioritise and make available essential medicines. Till date they have entered into agreements with ten patent holders for thirteen HIV antiretrovirals, one HIV technology platform, three hepatitis C direct-acting antivirals and a tuberculosis treatment. MPP was founded by Unitaid, which serves as sole funder for MPP’s activities in HIV, hepatitis C and tuberculosis.

The Wrld 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). 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, “’intellectual property rights do not and should not prevent Member States from taking measures to protect public health’ 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 Organisation is one of the far reaching steps for dealing with medicines to the general public of developing countries especially durng 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. 

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. 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. 

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] ABC University

[2]