Patents vs Covid19: combat of the year

The spiral of solidarity has been shaking up companies all over the world for weeks, which have been devoting increasing resources to the common cause of fighting the pandemic that is gripping us in phase VI declared by the WHO. To the prominence of the sanitary equipment a phenomenon is added, whose lesser media impact does not diminish the importance of its social and economic projection, such as the release of patents – especially through compulsory licenses – given the challenge of obtaining the vaccine against the Covid-19 that a multitude of pharmaceutical companies, laboratories and scientific entities now face.

1.- Content and scope of the compulsory licenses

Ownership of the patent implies recognition by the Administration of an exclusive right to exploit the product and/or process constituting its object, for a period of 20 years while it is validly registered, in order to encourage investment and resources for innovation and socio-economic development. The owner of the patent – a natural person or legal entity, acting directly or through third parties to whom it grants license contracts – is obliged to exploit the patented invention “in a manner sufficient to meet the demand in the Spanish market”, as stated in Article 90.1 of the current Patent Act 24/2015 (hereinafter “SPA”- Spanish Patent Act).

In any case, this legitimate monopoly may be limited for reasons of public interest, so that its owners may be compelled to share the rights of use and exploitation with third parties, beyond the archetypal contractual will. The social function of patent law has crystallized in the exceptional and restrictive regime of compulsory licenses, which to date has never been applied in our country, for reasons of public interest, among others legally established.

In exceptional circumstances – as can undoubtedly be considered the current pandemic – a compulsory license entails a suspension of the exclusive right held by the patent holder, since the Administration may temporarily grant third parties the right to exploit – in whole or in part – the patented invention to satisfy the public interest, in exchange for adequate compensation in favor of the holder, who may challenge it in court.

The legal framework currently set out in Articles 90 to 101 SPA slightly modified the wording contained in Law 11/1986, which was in force until 1 April 2017, configuring compulsory licenses with the following basic characteristics:

– are temporary and not exclusive;
– subject to “adequate remuneration in the circumstances of each case, having regard to the economic importance of the invention”, which is also fair, reasonable and non-discriminatory in terms that the doctrine calls “FRAND conditions”; and
oblige the owner to cooperate in good faith, and to provide the licensee with the know-how and, where appropriate, the technical assistance related to the invention.

In this sense, the European Commission and the courts of the European Union have been reiterating, in the case of “standard-essential patents” (SEP) which make up a standard agreed upon in an industrial sector, that the absence of an offer or negotiation of licenses in FRAND terms represents an abuse of a dominant position in the market sanctioned by the rules of competition law (articles 102 of the Treaty on the Functioning of the EU as well as 2 of the Law on the Defense of Competition). In the case of diagnostic equipment and methods, the emergence of essential patents is frequent.

2.- Legal assumptions

From the outset, the protection of the public interest in SPA legitimizes the intervention of the Administration in cases of “compulsory licenses to put an end to anti-competitive practices” (art. 94) through the National Commission of Markets and Competition (CNMC) protecting operators and consumers in the market; or when it requires the intervention of the Ministry of Defense in the preservation of the secrecy applicable to “patents of interest for the national defense” (arts. 111 to 115).

The general clause is laid down in Article 95 of the SPA, according to which “for reasons of public interest the Government may, at any time, submit a patent application or a patent already granted to the system of compulsory licenses”.

The concurrence of “public interest” that justifies a compulsory license requires approval by Royal Decree at the proposal of the Ministry of Industry, Energy and Tourism, jointly with the Ministry of Health in cases linked to public health needs. The Royal Decree providing for the subjection of the patent to the system of compulsory licenses “may directly establish, in whole or in part, the scope, conditions and license fee (…), or refer the fixing of such conditions to the appropriate procedure before the Spanish Patent and Trademark Office” (Article 95.4 SPA), under the conditions regulated by the SPA and the procedures developed in its implementing regulations approved by Royal Decree 316/2017 of March 31.

In our country the current SPA allows promoting the granting of compulsory licenses, as a power of the Government whose discretion exacerbates in relation to the previous Law 11/1986. In this sense, the current article 95.2 introduces a new section c), so that to the assumptions in which “it will be considered in any case that there are reasons of public interest” it adds when “the needs of national supply so require”.

Therefore, the possibility of compulsory licenses is conditioned – under the criterion that the Government motivates according to the circumstances – to the justification of “public interest” that undoubtedly beats in the current health emergency, and additionally to the need to avoid a shortage and/or exorbitant prices in the market.

Another particularly relevant topic concerns compulsory licenses for the manufacture of medicines for countries with public health problems under Regulation (EC) No. 816/2006 of the European Parliament and of the Council of 17 May 2006. This regulation promotes access to essential medicines from disadvantaged countries, and in any case to those that justify a public health problem and the prior refusal of the license requested from the patent holder, in exchange for the remuneration required when the compulsory license is granted, only for a limited time and to manufacture the quantity of products required to meet specific needs. In this case, our Law provides that “the license may be revoked by the Spanish Patent and Trademark Office if the licensee does not comply with the conditions under which it was granted”, notwithstanding that “it will be considered an infringement of the patent on which the license falls” (art. 96(2) and (3) SPA).

In parallel to compulsory licenses, the SPA regulates expropriation and renunciation as possible cases in legal certainty but remotely foreseeable in practice:

• As a minority legal remedy in comparative law, the patent “may be expropriated for reasons of public utility or social interest, by means of fair compensation”, so that the State either declares it to be in the public domain or assumes its ownership and exclusive exploitation (art. 81 SPA), allowing patented medicines to be manufactured or purchased as much cheaper generics.
• In any case, the legitimate monopoly of the patent may be waived – totally or partially – by its owner, reverting to the public domain, under the limitations provided for in Article 110.4 SPA: “A patent on which there are real rights, purchase options, seizures or licenses registered in the Patent Registry shall not be waived without the consent of the owners of those rights. Nor shall waiver be admissible if a claim or invalidity action is pending on the patent and the consent of the plaintiff is not recorded”.

In the pharmaceutical field, the assumption that the monopoly of patents may condition the so-called “Bolar Clause”, a legal mechanism that “temporarily authorizes interested third parties to use a patented product under clear conditions:

• Use the patented product for experimental purposes;
• for use in studies required to obtain a health registration,
• to have the information available to comply with the requirements of the health registration, and
• so that once the patent expires, the third party will have its health registration processed and granted.”

This is the conclusion of the article recently published by H&A in Espacio & called “The relationship between Patents and Health Licenses”.

3.- Current implementation and projection of compulsory licenses

At the international level, compulsory licensing of medicines is increasingly applied. The pioneering initiative came from Canada when it exported an AIDS drug to Rwanda in 2007.

In Germany, Merck was also granted a temporary compulsory license for an HIV drug. Other precedents have been set in Brazil, India, Thailand, Indonesia and Malaysia.

We have already reiterated the exceptional and restrictive nature of this legal figure. In fact, in Spain only seven applications are included in the statistics for the period 1986/2015, which were unanimously rejected for reasons of form and/or substance.

But our current public health crisis is fueling debate and a tendency to “pave the way” for compulsory licensing, at a time when the world is racing against the clock to find remedies for the pandemic.

On a representative basis, Canada, Germany, Israel, Chile and Ecuador have already taken initiatives towards compulsory licensing – under limited terms and conditions – in order to maintain the country’s essential supplies and services, as well as to facilitate access to vaccines, medicines, diagnostics, devices, supplies and other technologies for the treatment of the current virus.

In this regard, MEDICINES WITHOUT BORDERS (MÉDICOS SIN FRONTERAS) has already urged governments “to prepare to suspend or revoke patents on medical tools for Covid-19 by issuing compulsory licenses”:

In this scenario, other forums already warn against those who do not exploit or have a serious purpose in exploiting patents, such as the so-called “patent trolls” (in the politically correct sense of “non-practicing entities”), which promote owners or managers who offer an open licensing program on patent packages that include part of the technology incorporated in a technical standard.

Thus, El Confidencial, in its March 30 article, World Truce in the ‘patent war’ to stop the advance of the coronavirus, denounced unethical practices of “patent trolls” in Italy and the United States.

“While some manufacturers and patent trolls are threatening lawsuits, others are choosing to release all their patents related to this health crisis.

In the midst of the health crisis, there is no company, group or person that has not shown its intention to do its bit to overcome the situation. We have already seen how large factories left their usual jobs to start making tools that will serve in this war against the virus or how thousands of volunteers volunteered to do whatever it took to flatten the curve, from going shopping to building 3D protectors, but not everything is as simple as it seems. In a world like healthcare, intellectual property is essential and the patent war is also being fought these days.”

The legitimate monopoly of a patent may be limited for reasons of public interest, so that its owners may be compelled to share the rights of use and exploitation with third parties, due to social functions ruled on patent law.

As the pandemic spreads, the clashes between patents, health care and ethics are intensifying. However, as in the Italian case, it seems that, for the moment, the idea of saving the situation is winning out no matter what”.

Fortunately, unethical practices are relentlessly counterbalanced by the solidarity spiral that has been shaking companies, laboratories and scientific entities for weeks.

When in the future, which we trust is very near, some effective medicine against the disease emerges – even if the WHO catalogues it as essential – it will be necessary to resort to compulsory licenses, under the appropriate supply and price conditions that make it accessible to the population all over the world.