1. International Intellectual Property Prof. Manheim Spring, 2007 Patent Compulsory Licensing Copyright © 2007

2. Spring, 2007IIP2 Compulsory Licenses - In General  Pros  Competition law: prevents monopoly  Limits patentee to reasonable (set) royalty  Social benefit: puts invention in use  Innovation: promotes further development  Cons  Forced technology transfer  can threaten patentee’s proprietary rights  No choice of partners  Royalty below market value  Discourages FDI

3. Spring, 2007IIP3 Problem 3-19  Facts  PhRMA develops vaccine at cost of $1B  Reduces infant mortality  Obtains patent in country R  Markets in R for $500/dose  Questions  Can R impose compulsory patent?  Immediately?  For one-time license fee of $15,000

4. Spring, 2007IIP4 Compulsory Licenses under Paris  Art. 5(A) Art. 5(A)  (2) Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work  (4) CL may not be applied for on the ground of failure to work [prior to the later of] 4 years from the date of filing.. or 3 years from the date of grant; it shall be refused if  the patentee justifies his inaction by legitimate reasons.  a compulsory license shall be non-exclusive and shall not be transferable … except with that part of the enterprise or goodwill which exploits such license.

5. Spring, 2007IIP5 Compulsory Licenses under TRIPs  TRIPs Art. 31  Where a Member allows for unauthorized use, including by government or 3rd parties, the following apply:  (a) authorization shall be considered on its individual merits;  (b) the user [must first make] efforts to obtain authorization on reasonable commercial terms which have not been successful within a reasonable period of time.  waived in cases of (i) national emergency, (ii) other circum- stances of extreme urgency or (iii) public non-commercial use  (c) the scope and duration of such use shall be limited to the purpose for which it was authorized  (d) such use shall be non-exclusive;  (e) such use shall be non-assignable, except with that part of the enterprise or goodwill which enjoys such use No blanket CLs Duty to Bargain

6. Spring, 2007IIP6 Compulsory Licenses under TRIPs  TRIPs Art. 31  (f) any such use shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use;  (g) authorization for such use [may] be terminated if and when the circumstances which led to it cease to exist  (h) the right holder shall be adequately compensated  (i) the legal validity of any decision relating to the authorization of such use shall be subject to [independent] judicial review  (k) Members are not obliged to apply the conditions set forth in subparagraphs(b) and (f) to remedy anti- competitive behavior Domestic CLs only Just compensation

7. Spring, 2007IIP7 Compulsory Licenses under TRIPs  TRIPs Art. 31  (l) where use is authorized to permit the exploitation of a patent (the second patent) which otherwise infringes another patent (the first patent), the following additional conditions shall apply:  (I) the invention claimed in the second patent shall involve an important technical advance of considerable economic significance in relation to the invention claimed in the first patent;  (ii) the owner of the first patent shall be entitled to a cross- license on reasonable terms to use the invention claimed in the second patent; and  (iii) the use authorized in respect of the first patent shall be non-assignable except with the assignment of the second patent.

8. Spring, 2007IIP8 Doha Declaration (WTO 2001)  Background  MNE Rx monopoly pricing in poor countries  To recoup development costs? (~$1b/new drug)  Dissatisfaction among developing countries for restrictions in Art. 31, re vital medicines  US petition against Brazil Art. 68 (WTO-DSB)  Art. 68: compulsory license in case of  Patent abuse (including exercise of market power)  Failure to work  Failure to satisfy market needs  Does Art. 68 violate TRIPs?

9. Spring, 2007IIP9 Doha Declaration (WTO 2001)  4th WTO Ministerial Conference (Doha, QA)4th WTO Ministerial Conference  “ TRIPs Agreement can and should be interpreted and implemented in a manner supportive of WTO members ’ right to protect public health and in particular, to promote access to medicines for all. ”  Flexibility to grant Compulsory Licenses  TRIPs should be read in light of objectives & principles  Freedom to grant CLs and terms for such licenses  Freedom to declare national emergency (public health)  Exhaustion of IP rights per national law  Delay by LDCs in implementing IP regime (2016) WTO statement

10. Spring, 2007IIP10 WTO General Council (2003)  Insufficiency of Compulsory Licenses  TRIPs Art. 31(f)  compulsory licenses “ shall be authorized predomi- nantly for the supply of the domestic market of the Member authorizing such use ”  Doha, ¶ 6  Some LDCs lack technology/capital to use CLs  TRIPs Council to report back to General Council  Implementation Decision (General Council 2003)  31(f) waived for Rx exports to LDC members  Conditions include distinctive packaging or format

11. Spring, 2007IIP11 Doha Declaration/Implementation  Why has no county invoked Doha?  Has the threat of CLs and Doha been sufficient to cause Pharma to reduce their Rx prices?  Is Doha a satisfactory solution?  What is the legal status of Doha?  Non-binding on members or DSB; persuasive?  Art 31bis [permanent waiver of 31(f)]  Proposed by WTO General Council  Not yet ratified by WTO members  Regulation No 816/2006/EC of the European Parliament and of the Council816/2006/EC