COMPULSORY LICENSING AND COVID-19: The Good, the Bad and the Ugly

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In our previous article, we talked about the issues surrounding the proposal to waive off IP Rights. The question has the whole world polarised, with opponents asking why waive off IP rights when we have provisions for voluntary and compulsory licensing?

What is compulsory licensing

A patent accords monopoly to the owner to produce and distribute a patented product as they see fit and to keep other parties from doing the same. Compulsory licensing provisions empowers the government to grant such rights to parties other than the patentee, without the consent of the patentee. Alternatively, the government may use the patent itself. All nations that are a party to the TRIPS Agreement are required to provide for compulsory licensing.

The Indian Government can, as per the provisions of the Indian patent Act, revoke patents to meet public interests and even issue compulsory licenses to meet the need of the hour. The Indian Government may also acquire and use patented inventions to address the concerns cited in the proposal.

Keeping in mind the many problems pertaining to production and procurement of vaccines, live-saving COVID-Drugs and medical equipments, proponents argue that the waiver would boost the production of the same.

The apparent GOOD of compulsory licensing

Opponents of the waiver have suggested compulsory licensing as a good measure to solve all problems of manufacturing, procurement and distribution of COVID-19 vaccines, drugs and medical equipment.

It is argued that instead of revoking the rights of the pharmaceutical corporations all together, the rights may be temporarily “shared” to meet the current global requirements. And it does seem to be a win-win situation for all involved – stakeholders’ interests are protected by not depriving them of rights that they have put substantial money and effort into’ whereas the public health is safeguarded by ensuring increased production and supply of the required vaccines, etc., by allowing other parties to take part in the supply and production chain.

While the public health and safety is of utmost concern at the moment, it becomes imperative to safeguard the interests of the pharmaceutical industries. The Covid-19 vaccines and the mutations are being continuously studied presently. Depending on possible future variations, vaccine compositions may have to be altered to increase efficacy. All of this requires substantial investments in terms of R&D. Deprive the ones conducting these R&D from the benefits (namely patent rights) and it definitely affects how they decide to proceed with the on going research.

Why compulsory licensing may be a BAD idea

Compulsory licensing, while seemingly the ideal concept on paper, has its own flaws when executed as a tool.

Issuing compulsory licenses would only be feasible if the government has a generic producer ready to manufacture sufficient quantities of generics. Such a producer must be technologically equipped to quickly make cost-efficient alternatives. If the manufacturer cannot meet the requirements efficiently, the compulsory license stands squandered. Most developing members and the LDCs backing the waiver lack the necessary technology and technological know-how to take up vaccine and other drugs productions.

It is imperative to note that India is not the only country seeking such a waiver. Therefore, the constant arguments that India can resort to acquisition of patent rights or issue compulsory licensing, while logical, aren’t necessarily practical in view of the backing of the waiver by over 120 nations, many of which lack the facilities to set up production units if compulsory licensing plays out.

Another setback of compulsory licensing is protection of trade secrets. As per Article 39 of the TRIPS agreements, members are required to protect trade secrets “against unfair commercial use.” Even if compulsory licenses were to be issued, trade secrets would still have to be protected. Often, trade secrets include data which are crucial for quickly reverse engineering and producing the emergency health and medicinal products that are presently required.

Further, the proponents argue that the process of compulsory licensing is complicated.

The UGLY Truth

The developed countries, most of which initially opposed the waiver, look down on compulsory licensing.

In fact, many countries who were staunch opponents of compulsory licensing have changed their stance and have resorted to compulsory licensing to address the current needs. Other domestic legislative measures have been taken for the same. One wonders why.

In all essence, it boils down to voluntary/compulsory licensing vs total waiver of IP rights (albeit temporarily). Those opposing the waiver suggest that the already-present provisions of licensing are the right alternative. However, those backing the waiver have their reservations about licensing and presently, these reservations seem to be very sensible. Firstly, not all nations have the capacity to enter production to meet the needs, should licenses be issued. Further, in-license restrictions and drawbacks such as high royalties, limitations on the number of products/doses, etc. will continue to thwart the principal objective of the waiver, which is rapid production of large number of vaccine doses and other life-saving drugs within a short span to meet the global requirement.

It is still not clear how the members are going to arrive at an agreement, if they arrive at an agreement at all.

WTO decisions are almost always made unanimously. A TRIPS waiver would require the 3/4th consensus.

Further, while the reasoning behind the coalition’s move to waive off IP rights is understood and appreciated, the question still remains of the effectiveness of such a decision.

A waiver of IP rights would allow generic producers to obtain patented tech and know-how to create cheaper vaccines and drugs to meet the surging needs as soon as possible. However, it would definitely set back big pharmaceutical corporations from investing in future R&Ds, fearing similar outcomes. Alternatively, the corporations may try and set back such “losses” through pricing changes in other non-covid drugs and equipments.

Setting aside the move for waiver would save interests of small number of big corporations but affect the public at large adversely. In any event, either decision would be a double-edged sword.

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Best regards – Team InvnTree   

This work is licensed under a Creative Commons Attribution-Non Commercial 3.0 Unported License

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