The Fallacy of IP Waivers

Abolish patent rights. Grant IP waivers. Open Covid-19 intellectual property. The development of Covid-19 vaccines has elicited very real fears of unequal access—and with them, growing calls to waive intellectual property (IP) enforcement for these lifesaving drugs. However, while legal mechanisms like compulsory licensing hold some promise in addressing these concerns, the proposals oversimplify and ignore crucial non-IP challenges to the effective delivery of Covid-19 vaccines, such as infrastructure disparities and lack of a fully functioning public health system.

The United States conceptualizes patents as private property: government-sanctioned monopolies without any obligation to practice the invention. An inventor who secures a patent may commercialize, license, or do nothing at all with her patent. Even if she does nothing herself, she may still assert her rights to prevent others from commercializing it. These deadweight losses created by patents are justified on the basis that full public disclosure of the invention is sufficient as a public good. Ostensibly, a 20-year exclusivity period incentivizes innovation. In the pharmaceutical industry, monopoly profits ostensibly offset the high costs and risks of bringing a drug to market—between $314 million and $2.8 billion in research and development (R&D).

In the context of the Covid-19 pandemic—where vaccine patents are held by U.S. and European companies—many are concerned that IP barriers would render vaccines inaccessible and too expensive for developing countries. To address this concern, some people advocate waiving IP enforcement altogether. Under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), governments may allow compulsory licensing in emergency situations or temporary imports of a patented product from a third-party country that infringes the patent.

Currently, the World Trade Organization (WTO) is considering a proposal from India and South Africa—supported by more than 100 other, mostly developing countries—to temporarily suspend enforcement of Covid-19 vaccine patents and other global IP rules, including copyrights and trade secrets. Supporters highlight concerns about production rates and equitable access for struggling countries, noting that a small number of high-income nations account for the majority of Covid-19 vaccines.

Historically, there have been instances where the pharmaceutical/vaccine intervention for a significant public health challenge has been effectively donated to the public. The co-inventors of insulin sold the patent to a public university for a mere $1, hoping to keep the medication accessible to those who need it. The inventor of the original polio vaccine, Jonas Salk, freely released the vaccine formulation and production processes to the public, because—in his words—“There is no patent. Could you patent the sun?”

This “public good” donation of IP has also occurred outside the pharmaceutical industry. For example, Tesla Motors released all of its patents to the public, promising not to sue those using the technology in good faith. In a way, it was a smart strategy for Tesla, as its electric vehicles would become more valuable with the complementary technology of widespread charging stations.

But voluntarily public consignment is not always applicable. As former U.S. Patent and Trademark Office Director Andrei Iancu noted, “I think folks need to understand that suspending IP rights actually will make the [Covid-19] situation worse, not better.” The U.S. approach to the HIV/AIDS epidemic provides a salient example of IP waivers gone awry.

First, whether patent rights are enforced or waived is only one piece of the global health puzzle. Many developing countries lack the public health infrastructure and manufacturing capacity to effectively support Covid-19 vaccination manufacturing and distribution. In 2006, Roche announced its AIDS Technology Transfer Initiative to provide permission and technical assistance to manufacturers in sub-Saharan Africa to produce generic HIV medication based on its own patented processes. Yet for years, despite the waiver of IP enforcement, no implementation occurred. Local interest flourished, but local manufacturing was insufficient. In fact, U.S. companies without proper infrastructure also find it difficult to scale up production. Earlier this year, a Johnson & Johnson contractor plant contaminated 15 million doses of the Covid-19 vaccine with issues ranging from unsanitary conditions to poorly trained staff.

Without adequate infrastructure, skilled workers, technical expertise, and open trade secrets, IP waivers—as Moderna, for instance, has announced—are mere lip service. They do little to equalize vaccine access around the globe. Other pharmaceutical players argue that it would also undermine vaccine safety and quality control. Even when vaccines are manufactured in the West and delivered to developing countries—as Pfizer and Moderna vaccines are—safe and effective storage of the vaccines requires a cold room chain. In many developing countries, this crucial public health infrastructure is not readily available.

Second, the compulsory licensing exception has historically been discriminatorily applied. Article 31 of TRIPS permits the manufacturing and importing of patented products in narrow cases. Specifically, the drug must be “essential” in a “national emergency” or “other extreme urgency.” However, historically, what this definition encompasses depends on the say-so of developed countries.

In 1997, the U.S. government determined the HIV/AIDS epidemic in South Africa—afflicting 27.2 percent of the population of 42.7 million, i.e. nearly 12 million people, with over 3 million deaths from HIV/AIDs in the following 15 years—did not constitute a sufficient “medical emergency.” South Africa had passed a law allowing two “controversial” practices: one allowing importers to buy HIV/AIDS drugs from cheaper sources regardless of patent owner consent, another allowing compulsory licensing for South African firms to produce cheaper versions of HIV/AIDS drugs patented by foreign companies. The U.S. joined GlaxoSmithKline and 38 other pharmaceutical companies to sue Nelson Mandela over the law, arguing that the TRIPS medical emergency exception did not apply.

In contrast, the U.S. government determined that the 2001 anthrax attacks—which left five dead and 17 sick in the United States—did rise to the level of “medical emergency.” The United States threatened to institute compulsory licensing of the antiviral drug Cipro. As a result, the manufacturer Bayer acquiesced to significantly cutting the price so the government could stockpile the drug for Americans. So, while compulsory licensing could benefit developing countries, arbitrary enforcement of these exceptions may only entrench existing power dynamics.

Patent reform debate has long been ongoing. Developing countries are seeing devastating surges in Covid-19 cases. But unfortunately, despite potential benefits, mere IP waivers—without other structural reforms and safeguards—are unlikely to be a realistic solution to drastic inequalities in international access to pharmaceutical drugs. As Americans who remain exposed to the Covid-19 virus as long as it is endemic anywhere in the world, it is in all of our interests for the U.S. government to provide leadership in managing the pandemic and implementing realistic solutions to assist the developing world to access Covid-19 vaccines.

Osagie Imasogie has over 35 years of experience in the field of law, finance, business management, healthcare, and the pharmaceutical industry. Imasogie is a serial entrepreneur, investor, and trustee of the University of Pennsylvania and a member of the executive committee of the university, in addition to being the chairman of the board of the University of Pennsylvania Carey Law School, where he is an adjunct professor of intellectual property law.

Alicia Lai is a recent graduate of the University of Pennsylvania Law School, where she was a Cutler fellow and articles editor of the Law Review. She has published on intellectual property law, tech regulation, and innovation policy.

From: National Law Journal